Does Sustainability Reporting Impact Financial Performance? Evidence from the Largest Portuguese Companies

Abstract

This paper aims to assess whether the financial performance of companies that publish sustainability reports (SRs) differs from the financial performance of companies that do not publish SRs, considering a sample of 297 large Portuguese companies identified by Exame magazine. We used two methodological procedures. First, we conducted a univariate analysis to test the differences in financial performance according to the disclosure of SRs. Second, we conducted a multivariate analysis using multiple linear regression to explain financial performance in relation to the disclosure of SRs. Our findings indicate that the financial performance of companies that disclose SRs does not significantly differ from the financial performance of companies that do not disclose SRs. The results are robust to both methodological procedures, as well as to the sample split by sectors. The results highlight that few companies disclose SRs, despite existing regulations (e.g., the UN 2030 Agenda, the European Non-Financial Reporting Directive, and the Corporate Sustainability Reporting Directive). This finding has significant practical implications for regulatory bodies, companies, and investors, indicating the need for more effective approaches to sustainability reporting. Policymakers should encourage companies to adopt SRs as part of a long-term strategy, acknowledging that financial benefits may accrue over time.