Drivers of sustainablity reporting quality among JSE listed firms in South Africa: a stakeholder perspective

Abstract

This study contributes towards the ever-growing research field of sustainability reporting within the broader context of integrated reporting. Sustainability reporting is the integration of the environmental, social and economic aspects of an organisation in the communication with stakeholders. South Africa’s Johannesburg Stock Exchange (JSE) has taken a leading role in the drive for integrated reporting. The aim of the study was to determine the quality of sustainability reporting for the JSE listed firms post the introduction of listing requirements for integrated reporting. Reports of good quality enable stakeholders to make sound decisions from the reported information. The study was limited to sustainability reporting for JSE listed firms. The theoretical lens for the study is the stakeholder theory developed by Freeman (1984). The study analyses perceptions of sustainability practitioners on quality of sustainability reporting for JSE listed firms for the period of 2009 to 2017. In this study, the focus was to gain rich insights from sustainability practitioners involved in the sustainability reporting value chain of JSE listed firms. This included report preparers, report assurance providers, report users and other report critical reviewers. The recordings of the semistructured interviews undertaken in this study were transcribed verbatim and analysed using a descriptive analysis technique called Tesch’s coding. The researcher reviewed the information, probed and summarised the main themes that emerged from the qualitative research. The study shows that there are no explicit mandatory requirements for integrated reporting and sustainability reporting for JSE listed firms, contrary to the perception of some scholars and practitioners. The publication of integrated and sustainability reports is, however, now business best practice for firms on the JSE. Admittedly, this is partly because of King Codes recommendations of South Africa that promotes integrated reporting. Sustainability reporting has been improving over a nine-year period, but this cannot be solely attributed to the listing requirements. Basic interventions such as listing requirements for integrated reporting on the JSE and the shareholder compacts on South Africa’s State-owned companies, although not explicitly mandatory, have contributed in promoting integrated and sustainability reporting in South Africa. There are many drivers of sustainability reporting for JSE listed firms. These can be categorised as internal and external drivers. The internal drivers can also be regarded as critical success factors for sustainability reporting quality for JSE listed firms. The study revealed the dominance of the two drivers of sustainability reporting, namely stakeholder demands and the role of leadership in shaping sustainability reporting in the South African context. The combination of the two drivers on sustainability reporting for JSE listed firms confirms the assumptions of the stakeholder theory. In the process of determining the trends in reporting and the actual drivers for improved quality in reporting, the cross-cutting theme that emerged was that different organisations are in different stages of their reporting journey. There are early adopters and late adopters. Organisations that choose to be involved in integrated reporting and sustainability reporting experience a real journey of reporting, hence various organisations are at different stages depending when and how they commenced their reporting journey. The researcher coined that process “sustainability reporting life stages”. The study further found that there are many determinants for quality of sustainability reporting for JSE listed firms. The sustainability practitioners perceive quality from the view of the Global Reporting Initiative and Integrated Reporting Council frameworks, thus confirming the entrenchment of the two frameworks in the South African context. The best option assurance mechanism in the form of the Combined Assurance Model was observable in the better reporting sectors on the JSE and State-owned companies. The critical paths for sustainability reporting have been provided, indicating the need for sustainability leadership and stakeholder inclusiveness.