Investigating determinants of adoption, quantity and quality of sustainability reports: Using systematic review

Objective: Since the late 1990s, sustainability reporting has become an important issue among academics and professional members, and the number of studies conducted in this field has increased greatly in recent years. However, due to the shortcomings of the primary studies (such as researchers' biase, sample size, differences in legal structures, etc.) and their contradictory findings, it is practically impossible to make a decision based on these findings, and more comprehensive studies are needed. The studies conducted on the determinants of sustainability reporting with slight differences in terms used such as motivations, incentives, determining factors, etc. are trying to identify the factors that lead to sustainability reporting in a company. However, the research literature is still quantitatively limited and no comprehensive review has been done regarding the latest developments. Therefore, the main goal of the present study is to comprehensively examine the factors affecting sustainability reports based on the results of previous studies. Considering that the research literature has shown that the factors affecting the adoption, quantity and quality of sustainability reports are different from each other, in this research the effect of each of the factors on the previously mentioned variables has been investigated separately.

Methods: The present research is an applied research and the paradigm of this research is the interpretive paradigm. In line with the research paradigm, the qualitative research methodology has been chosen, and among the qualitative research methods, the systematic review method has been used, and the content analysis method has been used to collect the research data. The research sample includes 49 articles published in business, management and accounting journals (Science Direct database) for the period of 2013-2022. The Prisma checklist was used to compile the review protocol and the CASP checklist was used to evaluate the quality of the studies in the sample.

Results: Most of the studies have been conducted in recent years and the samples examined in the research are mostly international samples. Most of the reviewed studies have considered all the sustainability dimensions, however, none of the studies have investigated the mutual relationships between the dimensions. The findings have shown that factors such as size, financial and non-financial performance, research and development, reputation and analysts coverage have a significant impact on the adoption, quantity and quality of sustainability reports. The research literature regarding other factors such as growth opportunities, stock liquidity, and financial leverage of the company has reached different results, and therefore these areas needs further investigations. As a secondary finding of the research, the effects of sustainability reporting have been investigated by analyzing the texts of the articles in the research sample. Reduction of cost of capital, reduction of information asymmetry, effective stakeholders management, effective management of resources, risk management, long-term profitability, improvement of information flow and improvement of competitive position are among the most important effects of sustainability reporting.

Conclusion: Among the companies that are committed to sustainability reporting, there is a high diversity regarding the amount of reporting. Published reports range from a few pages of disclosure under annual reports to extensive disclosures in separate sustainability reports. In many countries, due to the lack of comprehensive regulations regarding sustainability reporting, the majority of sustainability reports are currently voluntary, so understanding the factors that lead companies to participate in sustainability reporting has become an important question. The voluntary nature of sustainability reporting in many countries and the lack of development of reporting standards in some regions have led to differences in adoption, the quantinty of reporting and the quality of reports. The motivations of management in many companies are different, and the demands of the stakeholders and their awareness of sustainable performance are also different. For example, in one company, the relation of management compensation with sustainability report may lead to the adoption of reporting, and in another company, favorable performance in the field of sustainability issues and management's decision to maintain legitimacy and signal about its favorable performance are effective on sustainability reporting. Factors affecting reporting can be divided into two groups: internal factors and external factors. Some factors such as culture, industry, competition, country of origin and standardization in the field of reporting are not under the control of the company, while they have an impact on sustainability reporting. On the other hand, some factors are clearly related to the characteristics of the organization and the publication of the sustainability report is influenced by these factors. For example, larger companies have more available resources for reporting, because of the higher volume of operations, they have more discloseable issues, and because of visibility, stakeholders have more demand for the publication of sustainability reports. Therefore, research findings should be interpreted according to structural and cultural differences, legal requirements and other institutional contexts. The mentioned differences have been examined from different theoretical perspectives in the research literature. Researchers have used stakeholder theory, legitimacy theory, signaling theory, and institutional theory to explain the reporting differences. The most important value-creating value of the current research is the comprehensive identification of determinants of sustainability reporting using a systematic approach based on an international sample of studies. In addition to identifying the factors affecting sustainability reporting, the findings of this research indicate that using similar structures and patterns to evaluate sustainability performance in different conditions will not lead to correct results and the requirement to apply the same standards for all companies regardless of structural differences between them will not achieve effective results. Considering that the research literature in the field of sustainability reporting in Iran is in its initial stages and the legal requirements for reporting have not been formulated yet, the standard-setting authorities can use the findings of this research to establish appropriate reporting standards.