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Citation

Al-Shaer H, Albitar K & Hussainey K (2022) Creating Sustainability Reports that Matter: A Deeper Investigation of Factors behind the Narratives. Journal of Applied Accounting Research, 23 (3), pp. 738-763. https://doi.org/10.1108/JAAR-05-2021-0136

Abstract
Purpose This paper aims to provide a novel approach to examine sustainability report narratives by considering key features of these narratives including, forward-looking content, risk content, tone and sustainability-specific content. Design/methodology/approach Using a sample of UK firms' sustainability reports from 2014 to 2018, the authors capture the report content by compiling a collection of words using a computational linguistic technique that attempts to identify specific attributes of sustainability reports. Findings The findings show the main factors that determine the content of sustainability reports are: (1) external governance-related factors, including the voluntary adoption of sustainability reporting assurance, the choice of assurance provider, stakeholder engagement and ownership concentration; (2) internal governance factors, including board quality and the existence of a sustainability committee; and (3) reporting behaviour including the publication of standardised Global Reporting Initiative (GRI) sustainability reports and financial reporting quality. Research limitations/implications The authors limit our sample to companies operated in the UK. Future research can explore the results in other institutional contexts such as North America or Asia–Pacific where the governance of sustainability reporting and other factors determining the content of sustainability reports could be different. Also, it would be interesting to interview managers and other stakeholders to obtain their opinions with regard to sustainability reporting and assurance practices and to understand their opinions regarding the GRI guidelines and its appropriateness. This study combines different research streams to advance our understanding of sustainability disclosures and factors that determine sustainability narratives. Practical implications Corporate managers need to strengthen their internal and external governance mechanisms to enhance the comprehensiveness and credibility of sustainability reports and are encouraged to engage stakeholders in the sustainability reporting process. Policymakers can mandate the assurance of sustainability reports and establish reporting formats and standard words to control the tone of sustainability reports. Finally, researchers, professionals as well as policymakers need to monitor sustainable development goals and targets to increase awareness, knowledge and practices that can be operationalised to ensure a global society that can afford sustainable living. Originality/value To the best of our knowledge, no study has yet examined sustainability report narratives by considering key features of these reports, including forward-looking content, risk content, tone and sustainability-specific content.

Keywords
Sustainability reports; Narratives; Corporate governance

Journal
Journal of Applied Accounting Research: Volume 23, Issue 3