Epsilon Archive for Student Projects

Abstract

Corporate sustainability reporting has become increasingly important in the context of global efforts to address environmental, social, economic and governance (ESG) challenges. Companies utilize sustainability reporting to track and communicate their environmental and social impacts. This communication by use of sustainability reports is done in an effort to foster transparency, reliability and improved relationships with stakeholders like investors, customers, regulators and society at large. However, sustainability reporting presents some challenges that impact their effectiveness in communicating sustainability efforts. The key challenges facing sustainability reporting include lack of standardization, inconsistent measurement methods, poor data quality, limited visibility into supply chains, and difficulties in the comparability of data reported. The study aims to explore how companies use sustainability reporting to communicate, as well as to establish and maintain legitimacy in the eyes of society. It does this by employing a mixed-method approach. This involves a combined analysis of empirical information from a document analysis of sustainability reports from three Swedish companies across diverse sectors together with interviews with industry experts. The paper uses legitimacy theory as the overarching framework in understanding how companies use the reports to demonstrate their sustainability initiatives but also in exploring the interacting challenges facing sustainability reporting. The findings of the study show that companies communicate their sustainability efforts by how they select and define their materiality topics. It highlights challenges in the reporting of the full environmental impact as well as the varying methodologies across the reports, which hinders comparability. The study identifies underreported aspects in sustainability reporting. These aspects are; complexities of sustainable product development, missing data on supply value chain disclosures and regulatory influence on produced reports. The introduction of the Corporate Sustainability Reporting Directive (CSRD) is discussed in the study as a regulatory response to growing societal expectations for full impact disclosure as well as enhanced credibility and accountability in ESG reporting. In analysing both current approaches and challenges, the paper contributes to the ongoing discourse on enhancing transparency, consistency, and the overall effectiveness of sustainability reporting. Opportunities for further research are also identified, emphasizing the need for continuous learning in this rapidly changing landscape.