The effect of environmental performance on sustainability reporting: A case of Indonesia

Abstract

Sustainability reporting reflects business contribution to sustainable development. Indonesia seeks to engage in sustainable development by assessing the companies using the PROPER scale. The study aims to determine whether environmental performance (assessed by the PROPER scale) affect sustainability reporting of companies in Indonesia. The research population includes companies listed on the Indonesia Stock Exchange that have published annual and sustainability reports within five consecutive years. This study employs WarpPLS to analyze data from 85 observations. The results show an increase in the disclosure of sustainability reports when the audit committee and the board of directors hold regular meetings. Companies without governance committees focus more on improving governance rather than disclosing sustainability reports. Environmental performance, when associated with the type of industry and governance committee, will increase sustainability reporting. However, a company with good environmental performance will make the audit committee and directors focus on other responsibilities because the community already understands that a company with a good PROPER rating properly manages its environmental impact and is aware of the importance of sustainable development. This study concludes that environmental performance measured by the PROPER scale positively affects sustainability reporting considering the type of industry, governance committee, audit committee, and board of directors of companies in Indonesia. The Indonesian government must support, facilitate, and encourage companies to achieve the gold category in the PROPER scale and promote higher disclosure of sustainability reports to contribute to sustainable development.