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The purpose of this study is to empirically assess how institutional field and internal organizational process factors determine sustainability reporting based on new institutional theory and legitimacy theory. This study employed longitudinal and survey research design to actualize its objectives. Primary data was collected using questionnaire administered to companies to decipher the importance and performance of factors that determine sustainability reporting in Nigeria. Fifty four (54) corporate actors responded to the survey. Secondary data from annual reports, sustainability reports of companies and organizations were also used to actualize the research objectives in this study. Panel data regression techniques namely Fixed Effects estimation and Random Effects estimation in addition to Pooled Ordinary Least Squares regression was carried out on the secondary data collected from corporate reports. Based on the Hausman specification tests, the fixed effects model was more appropriate. The empirical results based on 2010 to 2014 data on sustainability reporting, institutional field factors and reporting process factors lend some support to the new institutional theory and legitimacy theory. The data analyses also showed that there was a statistical significant variation in sustainability reporting from year 2010 to 2014 in the sample companies. The study further revealed that the companies were influenced by the disclosure guidelines of the Nigerian Stock Exchange regulator (SEC), banking sector regulator introduced in 2011 and 2012 respectively. Results of the Fixed Effects model showed that Securities and Exchange Commission (SEC) code of corporate governance, Central Bank of Nigeria Sustainability Banking Principles, accounting firm affiliation and sustainability reporting. Also, stakeholder engagement had a significant positive relationship with sustainability reporting. From these findings, it can be concluded that stakeholder engagement is crucial for sustainability reporting. The implication of these findings is that companies should take their sustainability reporting through assurance in order to improve the reporting content. This has the potential of improving sustainability reporting, as well as adding value to the sustainability principles put in place by regulators. Companies should be monitored by regulators to ensure that disclosure requirements of the code of corporate governance and sustainable banking guidelines are properly implemented. Small and medium sized accounting firms should be equipped with relevant information on sustainability reporting to enable them offer advisory services to companies.

Key Words: Assurance; Accounting Firm; External Governance Bodies; Regulator; Stakeholder Engagement; Sustainability Reporting.





1.1 Background to the Study

The failures of companies such as Enron and Parmalat, among others have prompted questions about the adequacy of traditional financial reports in assessing corporate performance (Calitz et al., 2015). These unpleasant incidences are st irring demands from different governments, stock market regulators, media and academia, for increased corporate transparency and disclosure in order to assess performance in diverse areas that are potential sources of risk. Transparency and disclosure practices of companies are major determinants for successful corporate governance. According to Kocmanova et al. (2011), the practice of transparency and disclosure in companies highlight the importance of corporate governance in contributing to both corporate prosperity, and responsibility. However, Popa et al. (2009) note that corporate transparency and disclosures are more useful when sustainability reporting is incorporated along side. Sustainability reporting provides information that increases corporate transparency and accountability in economic, environmental, social and governance terms; it provides information not entirely captured in corporate financial statements such as statement of financial position, statement of comprehensive income and statement of cash flows.

Internationally, a study by an accounting firm - Klynveld Peat Marwick Goerdeler (2015) shows growing interest in corporate transparency, particularly with respect to sustainability reporting and disclosure. According to Gould (2011), sustainability reporting is necessary to equip stakeholders with information of an organization’s performance in tangible aspects. In 2011, the International Federation of Accountants (IFAC) developed a sustainability framework, enabling business organizations to incorporate sustainability issues in their business approach, process and reporting practices. The reporting aspect of IFAC’s sustainability framework involves providing audit and assurance on sustainability performance to enhance the credibility of sustainability reports, incorporating sustainability impacts in financial statements, and employing narrative reporting to capture sustainability information not included in financial statements.


In foreign contexts as United Kingdom, United States, and Australia, companies were found to engage in sustainability reporting (Klynveld Peat Marwick Goerdeler, 2011; Klynveld Peat Marwick Goerdeler, 2015). Also, Klynveld Peat Marwick Goerdeler (2011) and Klynveld Peat Marwick Goerdeler (2015) show that South African companies are taking the lead in the practice of sustainability reporting in the African continent; although, companies in Nigeria are also implementing this practice. However, because business organizations operate within different economic, environmental, social and government contexts, it is important to account for specific factors which influence the sustainability reporting for each company. A number of studies (Adams, 2002; Frost et al., 2005; Guthrie and Farneti, 2008; Kolk, 2008; Larrinaga-Gonzalez and Perez-Chamorro, 2008; Wild, 2008; Adams and Whelan, 2009; Bebbington et al.; 2009; Farneti and Guthrie, 2009; Dilling, 2010; Bennett et al., 2011; Farneti and Rammal, 2013; Gherardi et al., 2014; Peters and Romi, 2015; Thoradeniya et al., 2015) have been undertaken with respect to corporate sustainability reporting and disclosures in countries other than Nigeria.

Adams (2002) notes many factors that could influence social reporting of corporate organizations. These factors stem from internal and external organizational environment. In examining factors, which influence social reporting of corporate organizations, a study done by Frost et al. (2005) examine sustainability reporting of businesses trading on Australian Stock Exchange (ASX). Likewise, Guthrie and Farneti (2008) assess Australian public organizations’ compliance with Global Reporting Initiative (GRI) guidelines on sustainability reporting. Other studies include Kolk (2008), where the sustainability reporting practices of multinational organizations are examined, and Larrinaga-Gonzalez and Perez-Chamorro (2008), where it is argued that sustainability reporting practices of corporate businesses should take cognizance of their organizational structure. In the same vein, Adams and Whelan (2009) note that business organizations will engage in sustainability reporting when stakeholders create cognitive dissonance.

Further on factors which influence sustainability reporting, Bebbington et al. (2009) explore the influence of regulations, normative and cognitive pressures on organizations’ initiation of sustainability reporting. Farneti and Guthrie (2009) explore reasons for sustainability reporting by government organizations; Dilling


(2010) investigates common features of organizations which employ GRI guidelines for preparing the sustainability reports of their companies. Other studies such as that of Bennett et al. (2011) examine the extent of corporate sustainability reporting in the United Kingdom. Also, Farneti and Rammal (2013) examine the motives for sustainability reporting in the Italian Public Sector; and Thoradeniya et al. (2015) find empirical evidence that corporate actors often respond to forces within business organizations to create change that spur sustainability reporting.

In Nigeria, there are studies on environmental reporting, which convey information on environmental performance. Studies such as Owolabi (2001), Owolabi (2009) and Uwuigbe (2011) focus on environmental reporting in Nigeria. Environmental reporting is an earlier form of corporate reporting, which focuses on environmental policies, performance and management approaches to environmental protection, and environmental liabilities. Although, the need for sustainability reporting is becoming prominent in the corporate world, its history is incomplete without acknowledging the role of environmental reporting in creating awareness for corporate sustainability. Sustainability reporting on its part gives more detailed information about performance in the following areas amongst which are economic, environmental and social, governance, company policies and management approaches which influence sustainability performance. The difference between environmental reporting and sustainability reporting lies in their history and composition of the respective reports.

Sustainability reporting, therefore, contrasts environmental reporting which focuses on environmental performance in areas such as climate change, waste, water usage, environmental protection costs, environmental liabilities and greenhouse gas emissions (Beck et al., 2010). Sustainability reporting is also related to the Triple Bottom Line (TBL) concept; which Husillos et al. (2011) and Jackson et al. (2011) explain as an accounting performance measurement approach that goes beyond reporting financial information to report on an organization’s impact on the planet and people that dwell on it. The ‘planet’ and ‘people’ dimension of organizational performance is often given partial attention in business accounting. For instance, apart from recent approaches that incorporate social and environmental performance of organizations into corporate reports, value added statement were previously used


to report on a company’s generation of value and distribution of same to shareholders, employees, government and community. TBL reporting also seeks to convey a company’s financial, social and environmental performance.

In the Nigerian context, the response of companies to forces within its environment is yet to be ascertained. Also based on available literature on sustainability reporting in Nigeria, the perception of corporate actors of institutional pressures influencing sustainability reporting has not yet been examined, by researchers. There is also advocacy that sustainability reporting should reflect in internal organizational processes of companies to enhance its authenticity (Herschovis et al., 2009). These approaches to study sustainability reporting could increase its quantity and quality by reporting entities (Adams, 2002; Adams and Larrinaga-Gonzalez, 2007).

1.2 Statement of the Problem

Developments in businesses worldwide particularly in relation to sustainable development indicate the importance for companies to integrate sustainability aspects into their corporate reporting mechanism. The accountability side of companies is not complete without the reporting mechanism, hence the release of sustainability reports and inclusion of sustainability disclosures in corporate annual reports. The contents of sustainability reports either published as stand-alone reports or integrated into corporate annual reports in Nigerian companies have received some attention in recent years. Asaolu et al. (2011) observe that sustainability reporting is voluntarily practiced by multinational oil and gas companies in Nigeria; reporting was deficient as companies were not guided by any legislation on what to report.

The accountability that financial results of companies communicate is an important aspect of their transparency that cannot be ignored: but financial results alone cannot communicate a company’s social and environmental impacts. These impacts are redefining the meaning of business value. Therefore, in order to improve the content of sustainability reports, external pressures and organizational context have roles to play in the transformation process.

An unanswered question is how these factors can be assessed. There has not been much discussion on corporate sustainability reporting arising from conformity to


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