The findings matter as sustainability reporting becomes a core benchmark for corporate transparency. Investors, regulators, and global markets increasingly rely on Environmental, Social, and Governance (ESG) disclosures to assess long-term business resilience. In Indonesia, sustainability reporting is mandatory for listed companies under Financial Services Authority (OJK) regulations. Yet compliance quality varies widely.
This study provides clear evidence that operational maturity, not merely corporate governance formality, plays the strongest role in determining reporting quality.
Why Sustainability Reporting Matters Now
Across global markets, sustainability reporting has moved from voluntary disclosure to strategic necessity. Frameworks such as the Global Reporting Initiative (GRI) and new international sustainability standards require companies to disclose measurable environmental and social data.
LQ45 companies represent Indonesia’s most liquid and highly capitalized firms. They are closely monitored by investors and regulators, making them a strong benchmark for evaluating sustainability disclosure practices.
Despite regulatory pressure and investor expectations, the study finds that not all structural governance features translate into better reporting outcomes.
How the Research Was Conducted
The research team from President University analyzed 20 companies included in the LQ45 index over a five-year period from 2019 to 2023. This produced 100 firm-year observations.
The Sustainability Reporting Score (SRS) was calculated using 15 selected indicators from the Global Reporting Initiative (GRI) standards, covering three core dimensions:
- Economic indicators (economic value generated, climate-related financial risks, anti-corruption policies)
- Environmental indicators (energy consumption, greenhouse gas emissions, waste management)
- Social indicators (employee training, governance diversity, community engagement)
Each company received a score based on whether it disclosed each indicator. The final SRS was calculated as the ratio of disclosed items to total expected items.
The study tested four main variables:
- Board characteristics (presence of at least one female director)
- Board size (number of board members)
- Firm age (years since establishment)
- Firm size (logarithm of total assets)
Panel data regression analysis was applied using a Fixed Effects Model to ensure reliable statistical results.
Key Findings
The results are clear and statistically robust:
- Firm age shows a positive and highly significant effect on Sustainability Reporting Score.
- Board characteristics show no significant effect.
- Board size shows no significant effect.
- Firm size has a positive but statistically insignificant relationship.
The statistical model explains approximately 54 percent of the variation in sustainability reporting quality.
The most important insight is that older companies disclose sustainability information more comprehensively than younger firms. Experience, institutional memory, and long-standing stakeholder relationships appear to strengthen reporting systems.
In contrast, simply having a larger board or including women on the board does not automatically improve sustainability disclosure quality in this dataset.
What This Means for Business and Policy
The findings shift attention from formal governance structures to operational maturity.
For corporate leaders, the study suggests that building strong internal systems over time is more important than symbolic governance changes. Sustainability reporting improves when companies develop stable procedures, compliance mechanisms, and long-term stakeholder engagement.
For investors, firm age may serve as an additional indicator when evaluating ESG transparency.
For policymakers, the results imply that regulatory frameworks should focus not only on compliance requirements but also on strengthening companies’ internal capabilities.
As the authors from President University conclude, internal operational dynamics and accumulated experience are more decisive than board composition in driving sustainability disclosure quality.
Broader Context: Governance vs. Maturity
Corporate governance theory often emphasizes board diversity and board size as drivers of transparency. Previous international studies suggest that gender diversity and independent boards can improve ESG disclosure.
However, this research on Indonesian LQ45 companies challenges that assumption. In this context, corporate maturity outweighs structural governance variables.
This does not mean governance is irrelevant. Rather, governance mechanisms alone may not be sufficient to guarantee high-quality sustainability reporting without institutional experience and internal readiness.
Limitations and Future Research
The study focuses on 20 LQ45 companies and does not include additional moderating variables such as profitability or market pressure. Future research may expand the sample size and incorporate mediating factors to deepen understanding of ESG disclosure dynamics in emerging markets.
Author Profiles
Adelyne – Researcher in accounting and sustainability reporting, Accounting Study Program, President University, Cikarang, Indonesia.
Andrianantenaina Hajanirina – Lecturer and researcher specializing in corporate governance and sustainability reporting, President University, Indonesia.
Irfa Ampri – Academic in financial accounting and capital market studies, President University.
Mila Austria Reyes – Lecturer and researcher in corporate governance and business management, President University.
0 Komentar