The impact of sustainable reporting on financial performance of companies
Keywords:
Sustainable reporting, Financial performance, Large companies, Serbia
Abstract
Environmental, social and corporate governance reporting (ESG) or sustainable reporting can impact a company's performance through financial outcomes, risk management, and long-term sustainability. This paper aims to determine the relationship between sustainable reporting and the financial performance of companies. The sample consists of 60 large Serbian companies who are required according to law to report non-financial information in the field of sustainability. The observed time frame is from 2021 to 2023. The empirical section concentrates on utilizing the non-parametric Mann-Whitney U test in SPSS. The results showed that there is a statistically significant difference in the financial performance between companies that have separate sustainability reports published on Serbian and those that do not. However, there is no statistically significant difference in the financial performance between companies that include the sustainability report within their annual business report and those that do not. The results will indicate the need to improve an organization's commitment to sustainable development in order to achieve better financial performance that leads to long-term survival, growth, and development.
References
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Akuoko-Sarpong, T., Gyasi, S., T., & Affram, H. (2024). Sustainability Reporting and Financial Performance: Examine the Correlation between Sustainability Disclosures Financial Performance in Publicly Traded Companies. International Journal of Innovative Science and Research Technology, 9(9), 1041-1055. https://doi.org/10.38124/ijisrt/IJISRT24SEP485
Ameer, R., & Othman, R. (2012). Sustainability practices and corporate financial performance: A study based on the top global corporations. Journal of Business Ethics, 108(1), 61-79. Retrieved 20 June, 2024 from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2162195
Ameer, R., Othman, R. (2012). Sustainability Practices and Corporate Financial Performance: A Study Based on the Top Global Corporations. J. Bus Ethics, 108. 61-79, https://10.1007/s10551-011-1063-y
Aydogmus, M., Gulay, G., & Ergun, K. (2022). Impact of ESG performance on firm value and profitability. Borsa Istanbul Review, 22-S2, 119-127. https://doi.org/10.1016/j.bir.2022.11.006
Bag, S., & Omrane, A. (2020). Corporate Social Responsibility and Its Overall Effects on Financial Performance: Empirical Evidence from Indian Companies. Journal of African Business, https://doi.org/10.1080/15228916.2020.1826884
Burhan, A. H. N., & Rahmanti, W. (2012). The impact of sustainability reporting on company performance. Journal of Economics, Business, and Accountancy Ventura, 15(2), 257-272. https://doi.org/10.14414/jebav.v15i2.79
Business Registers Agency. (2024). Reports. Retrieved 25 July, 2024 from: https://www.apr.gov.rs/%d0%bf%d0%be%d1%87%d0%b5%d1%82%d0%bd%d0%b0.3.html
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Ching, H. Y., Gerab, F., & Toste, T. H. (2017). The quality of sustainability reports and corporate financial performance: Evidence from Brazilian listed companies. SAGE Open, 7(2), 215-244. https://doi.org/10.1177/2158244017712027
Coelho, R., Jayantilal, S., & Ferreira, J. J. (2023). The impact of social responsibility on corporate financial performance: A systematic literature review. Corporate Social Responsibility and Environmental Management, 30(4), 1535-1560. https://doi.org/10.1002/csr.2446
Darnall, N., Ji, H., Iwata, K., & Arimura, T. (2022). Do ESG reporting guidelines and verifications enhance firms’ information disclosure? Corporate Social Responsibility and Environmental Management, 29(5), 1214-1230. https://doi.org/10.1002/csr.2265
Egorova, A. A., Grishunin, S. V., & Karminsky, A. M. (2021). The Impact of ESG factors on the performance of Information Technology Companies. Procedia Computer Science, 199. 339-345. https://doi.org/10.1016/j.procs.2022.01.041
Ezeokafor, F. C., & Amahalu, N. N. (2019). Effect of sustainability reporting on corporate performance of quoted oil and gas firms in Nigeria. Journal of Global Accounting, 6(2), 217-228. Retrieved 11 July, 2024 from: https://journals.unizik.edu.ng/joga/article/view/2339?articlesBySimilarityPage=6
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Hafez, H., M. (2016). Corporate social responsibility and firm value: an empirical study of an emerging economy. Journal of Governance and Regulation, 5(4), 40-53. https://doi.org/10.22495/jgr_v5_i4_p3
Ilić, M., Saković, D. & Stanišić, M. (2019). Development of Company’s Creditworthiness Analysis Model Based on the Characteristics of the National Market. Industrija, 47(2), 7-25. https://doi.org/10.5937/industrija47-17666
Johansson, S., Karlsson, A., & Hagberg, C. (2015). The relationship between CSR and financial performance -A quantitative study examining Swedish publicly traded companies, 7, 51–58. Sweden: Linnaeus University
Kim, S., & Li, Z. (2021). Understanding the impact of ESG practices in corporate finance. Sustainability, 13(7). 3746. https://doi.org/10.3390/su13073746
Knežević, G., & Mijoković, M. (2017). Sustainability reporting of listed companies on the Belgrade stock exchange. In: Challenges in Modern Corporate Governance: book of proceedings (pp. 30-35). Belgrade: Singidunum University. https://doi.org/10.15308/finiz-2017-30-35
Knežević, G., Pavlović, V., & Stevanović, S. (2017). Izveštavanje o održivom razvoju-karakteristike, ograničenja i perspektiva u Republici Srbiji. Poslovna ekonomija, XI(I), 83-102. https://doi.org/10.5937/poseko11-13032
Kwaghfan, A. (2015). Impact of sustainability reporting on corporate performance of selected quoted companies in Nigeria. University of Nigeria. Nsukka, Nigeria.
Landi, G., & Sciarelli, M. (2019). Towards a more ethical market: the impact of ESG rating on corporate financial performance. Social Responsibility Journal, 15(1), 11-27. https://doi.org/10.1108/SRJ-11-2017-0254
Lech, A. (2013). Corporate Social Responsibility and Financial Performance. Theoretical and Empirical Aspects. Comparative Economic Research, 16, 49-62. https://doi.org/10.2478/cer-2013-0018
Malinić, D., & Milutinović, S. (2023). Investing in the SDGs and reporting by ESG metrics: the accounting perspectives. Ekonomika preduzeća, 71(1-2), 77-100. https://doi.org/10.5937/EKOPRE2302077M
Marinković, G. (2023). Environmental aspects of reporting of large-sized enterprises in Serbia. Ecologica, 30(111), 435-441. https://doi.org/10.18485/ecologica.2023.30.111.13
McWilliams, A., & Siegel, D. (2000). Corporate social responsibility and financial performance: correlation and misspecification. Strategic Management Journal, 21, 603–609. https://doi.org/10.1002/(SICI)1097-0266(200005)21:5<603::AID-SMJ101>3.0.CO;2-3
Mijoković, M., Knežević, G., & Mizdraković, V. (2020). Analysing the link between CSR reporting and financial performances variables of Belgrade Stock Exchange Companies. Teme, 44(4). 1369-1389. https://doi.org/10.22190/TEME190513081M
Munasinghe, M. A. T. K., & Kumara, D. C. U. (2013). Impact of disclosure of corporate social responsibility on corporate financial performances of plantations companies in Sri Lanka. Journal of Emerging Trends in Economics and Management Sciences, 4(3), 371-376.
Mutalib, Y., O., Iriabije, E., U., Okon, A., E., & Chijioke, O., E. (2020). Impact of Sustainability Reporting on Corporate Performance: Evidence from in Nigeria Stock Exchange (NSE). Journal of Mgt. Science & Entrepreneurship, 20(7), 345-367. Retrieved 12 July, 2024 from: https://www.hummingbirdpubng.com/wp-content/uploads/2020/10/HUJMSE_VOL20_NO7_JUNE2020_-26.pdf
Ngwakwe, C., C. (2008). Environmental Responsibility and Firm Performance: Evidence from Nigeria. International Journal of Business, Human and Social Sciences, 2(10), 1152-1159. https://doi.org/10.5281/zenodo.1079958
Official Gazette of RS. (2024). Accounting Law. Official Gazette of RS no. 73/2019 and 44/2021-other laws
Ostojić, I. (2023). Microfinance and sustainable development of MSMEs and entrepreneurs in Serbia. Industrija, 51(3/4), 89-102. https://doi.org/10.5937/industrija51-49411
Reddy, K., & Lucus, G. (2010). The effect of sustainability reporting on financial performance: An empirical study using listed companies. Journal of Asia Entrepreneurship and Sustainability, 6(2), 19-42. Retrieved 25 July, 2024 from https://hdl.handle.net/10289/7658
Todorov, P. (2024). Sustainable development of urban tourism in Kragujevac. Ekonomika, 70(3), 43-59. https://doi.org/10.5937/ekonomika2403043T
Uwalomwa, U., Obarakpo, T., Olubukola, R. U., Ozordi, E., Osariemen, A., Gbenedio, A., Eyitomi, O., & Simeon, T. (2018). Sustainability reporting and firm performance: A bi-directional approach. Academy of Strategic Management Journal, 17(3), 16-32
Vuković, B., Tica, T., & Jakšić, D. (2022). Sustainable Growth Rate Analysis in Eastern European Companies. Sustainability, 14, 10731. https://doi.org/10.3390/su141710731
Aggarwal, P. (2013). Sustainability reporting and its impact on corporate financial performance: A literature review. Indian Journal of Commerce and Management Studies, 4(3), 51-61. Retrieved 15 July, 2024 from: https://ijcms.in/index.php/ijcms/article/view/484
Akuoko-Sarpong, T., Gyasi, S., T., & Affram, H. (2024). Sustainability Reporting and Financial Performance: Examine the Correlation between Sustainability Disclosures Financial Performance in Publicly Traded Companies. International Journal of Innovative Science and Research Technology, 9(9), 1041-1055. https://doi.org/10.38124/ijisrt/IJISRT24SEP485
Ameer, R., & Othman, R. (2012). Sustainability practices and corporate financial performance: A study based on the top global corporations. Journal of Business Ethics, 108(1), 61-79. Retrieved 20 June, 2024 from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2162195
Ameer, R., Othman, R. (2012). Sustainability Practices and Corporate Financial Performance: A Study Based on the Top Global Corporations. J. Bus Ethics, 108. 61-79, https://10.1007/s10551-011-1063-y
Aydogmus, M., Gulay, G., & Ergun, K. (2022). Impact of ESG performance on firm value and profitability. Borsa Istanbul Review, 22-S2, 119-127. https://doi.org/10.1016/j.bir.2022.11.006
Bag, S., & Omrane, A. (2020). Corporate Social Responsibility and Its Overall Effects on Financial Performance: Empirical Evidence from Indian Companies. Journal of African Business, https://doi.org/10.1080/15228916.2020.1826884
Burhan, A. H. N., & Rahmanti, W. (2012). The impact of sustainability reporting on company performance. Journal of Economics, Business, and Accountancy Ventura, 15(2), 257-272. https://doi.org/10.14414/jebav.v15i2.79
Business Registers Agency. (2024). Reports. Retrieved 25 July, 2024 from: https://www.apr.gov.rs/%d0%bf%d0%be%d1%87%d0%b5%d1%82%d0%bd%d0%b0.3.html
Center of Contemporary Politics. (2020). Sustainability reporting of the 50 largest companies in Serbia, with a particular focus on ESG. Retrieved 1 July, 2024 from: https://centarsavremenepolitike.rs/biblioteka/izvestavanje-o-odrzivosti-50-najvecih-kompanija-u-srbiji/
Ching, H. Y., Gerab, F., & Toste, T. H. (2017). The quality of sustainability reports and corporate financial performance: Evidence from Brazilian listed companies. SAGE Open, 7(2), 215-244. https://doi.org/10.1177/2158244017712027
Coelho, R., Jayantilal, S., & Ferreira, J. J. (2023). The impact of social responsibility on corporate financial performance: A systematic literature review. Corporate Social Responsibility and Environmental Management, 30(4), 1535-1560. https://doi.org/10.1002/csr.2446
Darnall, N., Ji, H., Iwata, K., & Arimura, T. (2022). Do ESG reporting guidelines and verifications enhance firms’ information disclosure? Corporate Social Responsibility and Environmental Management, 29(5), 1214-1230. https://doi.org/10.1002/csr.2265
Egorova, A. A., Grishunin, S. V., & Karminsky, A. M. (2021). The Impact of ESG factors on the performance of Information Technology Companies. Procedia Computer Science, 199. 339-345. https://doi.org/10.1016/j.procs.2022.01.041
Ezeokafor, F. C., & Amahalu, N. N. (2019). Effect of sustainability reporting on corporate performance of quoted oil and gas firms in Nigeria. Journal of Global Accounting, 6(2), 217-228. Retrieved 11 July, 2024 from: https://journals.unizik.edu.ng/joga/article/view/2339?articlesBySimilarityPage=6
Field, A. (2009). Discovering Statistics using SPSS. London, Sage Publication.
Filipović, M., Radukić, S., & Bačanek, V. (2024). The importance of the EU strategic approach for progress towards the sustainable development goals. Economics of Sustainable Development, 8(1), 25-40. https://doi.org/10.5937/ESD2401025F
Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: Aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5, 210–233. https://doi.org/10.1080/20430795.2015.1118917
Hafez, H., M. (2016). Corporate social responsibility and firm value: an empirical study of an emerging economy. Journal of Governance and Regulation, 5(4), 40-53. https://doi.org/10.22495/jgr_v5_i4_p3
Ilić, M., Saković, D. & Stanišić, M. (2019). Development of Company’s Creditworthiness Analysis Model Based on the Characteristics of the National Market. Industrija, 47(2), 7-25. https://doi.org/10.5937/industrija47-17666
Johansson, S., Karlsson, A., & Hagberg, C. (2015). The relationship between CSR and financial performance -A quantitative study examining Swedish publicly traded companies, 7, 51–58. Sweden: Linnaeus University
Kim, S., & Li, Z. (2021). Understanding the impact of ESG practices in corporate finance. Sustainability, 13(7). 3746. https://doi.org/10.3390/su13073746
Knežević, G., & Mijoković, M. (2017). Sustainability reporting of listed companies on the Belgrade stock exchange. In: Challenges in Modern Corporate Governance: book of proceedings (pp. 30-35). Belgrade: Singidunum University. https://doi.org/10.15308/finiz-2017-30-35
Knežević, G., Pavlović, V., & Stevanović, S. (2017). Izveštavanje o održivom razvoju-karakteristike, ograničenja i perspektiva u Republici Srbiji. Poslovna ekonomija, XI(I), 83-102. https://doi.org/10.5937/poseko11-13032
Kwaghfan, A. (2015). Impact of sustainability reporting on corporate performance of selected quoted companies in Nigeria. University of Nigeria. Nsukka, Nigeria.
Landi, G., & Sciarelli, M. (2019). Towards a more ethical market: the impact of ESG rating on corporate financial performance. Social Responsibility Journal, 15(1), 11-27. https://doi.org/10.1108/SRJ-11-2017-0254
Lech, A. (2013). Corporate Social Responsibility and Financial Performance. Theoretical and Empirical Aspects. Comparative Economic Research, 16, 49-62. https://doi.org/10.2478/cer-2013-0018
Malinić, D., & Milutinović, S. (2023). Investing in the SDGs and reporting by ESG metrics: the accounting perspectives. Ekonomika preduzeća, 71(1-2), 77-100. https://doi.org/10.5937/EKOPRE2302077M
Marinković, G. (2023). Environmental aspects of reporting of large-sized enterprises in Serbia. Ecologica, 30(111), 435-441. https://doi.org/10.18485/ecologica.2023.30.111.13
McWilliams, A., & Siegel, D. (2000). Corporate social responsibility and financial performance: correlation and misspecification. Strategic Management Journal, 21, 603–609. https://doi.org/10.1002/(SICI)1097-0266(200005)21:5<603::AID-SMJ101>3.0.CO;2-3
Mijoković, M., Knežević, G., & Mizdraković, V. (2020). Analysing the link between CSR reporting and financial performances variables of Belgrade Stock Exchange Companies. Teme, 44(4). 1369-1389. https://doi.org/10.22190/TEME190513081M
Munasinghe, M. A. T. K., & Kumara, D. C. U. (2013). Impact of disclosure of corporate social responsibility on corporate financial performances of plantations companies in Sri Lanka. Journal of Emerging Trends in Economics and Management Sciences, 4(3), 371-376.
Mutalib, Y., O., Iriabije, E., U., Okon, A., E., & Chijioke, O., E. (2020). Impact of Sustainability Reporting on Corporate Performance: Evidence from in Nigeria Stock Exchange (NSE). Journal of Mgt. Science & Entrepreneurship, 20(7), 345-367. Retrieved 12 July, 2024 from: https://www.hummingbirdpubng.com/wp-content/uploads/2020/10/HUJMSE_VOL20_NO7_JUNE2020_-26.pdf
Ngwakwe, C., C. (2008). Environmental Responsibility and Firm Performance: Evidence from Nigeria. International Journal of Business, Human and Social Sciences, 2(10), 1152-1159. https://doi.org/10.5281/zenodo.1079958
Official Gazette of RS. (2024). Accounting Law. Official Gazette of RS no. 73/2019 and 44/2021-other laws
Ostojić, I. (2023). Microfinance and sustainable development of MSMEs and entrepreneurs in Serbia. Industrija, 51(3/4), 89-102. https://doi.org/10.5937/industrija51-49411
Reddy, K., & Lucus, G. (2010). The effect of sustainability reporting on financial performance: An empirical study using listed companies. Journal of Asia Entrepreneurship and Sustainability, 6(2), 19-42. Retrieved 25 July, 2024 from https://hdl.handle.net/10289/7658
Todorov, P. (2024). Sustainable development of urban tourism in Kragujevac. Ekonomika, 70(3), 43-59. https://doi.org/10.5937/ekonomika2403043T
Uwalomwa, U., Obarakpo, T., Olubukola, R. U., Ozordi, E., Osariemen, A., Gbenedio, A., Eyitomi, O., & Simeon, T. (2018). Sustainability reporting and firm performance: A bi-directional approach. Academy of Strategic Management Journal, 17(3), 16-32
Vuković, B., Tica, T., & Jakšić, D. (2022). Sustainable Growth Rate Analysis in Eastern European Companies. Sustainability, 14, 10731. https://doi.org/10.3390/su141710731