Sustainability reporting and its role in enhancing the competitive advantage of Indonesian companies: A proposed model
List of Authors
  • Lailah Fujianti , Susilawati

Keyword
  • Sustainability reporting, competitive advantage, Indonesian companies, proposal model

Abstract
  • This article conceptually examines the role of sustainability reporting in enhancing the competitive advantage of companies in Indonesia. In the era of globalization and increasing awareness of the importance of sustainable development, companies are faced with demands to not only focus on financial performance, but also consider the social and environmental impacts of their operations. Sustainability reports are emerging as an important instrument that can assist companies in communicating their commitment to sustainable practices to stakeholders. Through an analysis of the literature and the Indonesian business context, this article explores the various ways in which sustainability reports can serve as a strategic tool. By adopting transparent and accountable reporting practices, companies can build legitimacy in the eyes of the public, enhance brand reputation, and attract the attention of investors who are increasingly concerned about sustainability issues. In addition, the article also discusses the challenges faced by companies in compiling effective sustainability reports as well as the implications of such reporting on competitiveness in the marketplace. Thus, this article provides a deep insight into how sustainability reporting is not just an obligation, but also a strategic asset that can drive companies towards sustainable competitive advantage.

Reference
  • 1. Almagtome, A., Khaghaany, M., & Önce, S. (2020). Corporate governance quality, stakeholders' pressure, and sustainable development: An integrated approach. International Journal of Mathematical Engineering and Management Sciences, 5(6).

    2. Al Hawaj, A. Y., & Buallay, A. M. (2022). A worldwide sectorial analysis of sustainability reporting and its impact on firm performance. Journal of Sustainable Finance & Investment, 12(1), 62-86.

    3. Atan, R., Alam, M. M., Said, J., & Zamri, M. (2018). The impacts of environmental, social, and governance factors on firm performance: A panel study of Malaysian companies. Management of Environmental Quality: An International Journal, 29(2), 182-194.

    4. Asia Pacific Resources International Holdings Ltd. (APRIL). (2020). Sustainability Report 2020. Retrieved from [URL of the report]

    5. Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-120.

    6. Braam, G. J., de Weerd, L. U., Hauck, M., & Huijbregts, M. A. (2016). Determinants of corporate environmental reporting: the importance of environmental performance and assurance. Journal of Cleaner Production, 129, 724-734.

    7. Benn, S., Edwards, M., & Williams, T. (2014). Organizational change for corporate sustainability. Routledge.

    8. Buallay, A., Fadel, S.M., Al-Ajmi, J.Y. and Saudagaran, S. (2020). Sustainability reporting and performance of MENA banks: is there a trade-off? Measuring Business Excellence, 24(2), 197-221.

    9. Carvajal, M., & Nadeem, M. (2023). Financially material sustainability reporting and firm performance in New Zealand. Meditari Accountancy Research, 31(4), 938-969.

    10. Cahyandito, M. F., & Ebinger, F. (2018). The effectiveness of sustainability reporting in Indonesia: A stakeholder view. Issues in Social and Environmental Accounting, 12(1), 1-20.

    11. Cho, C. H., & Patten, D. M. (2007). The role of environmental disclosures as tools of legitimacy: A research note. Accounting, Organizations and Society, 32(7-8), 639-647.

    12. Dangelico, R. M. (2016). Green product innovation: Where we are and where we are going. Business Strategy and the Environment, 25(8), 560-576.

    13. Deegan, C. (2002). Introduction: The legitimizing effect of social and environmental disclosures - a theoretical foundation. Accounting, Auditing & Accountability Journal, 15(3), 282-311.

    14. Dissanayake, D., Tilt, C., & Xydias-Lobo, M. (2016). Sustainability reporting by publicly listed companies in Sri Lanka. Journal of Cleaner Production, 129, 169-182.

    15. Djalante, R., Lassa, J., Setiamarga, D., Sudjatma, A., Indrawan, M., Haryanto, B., ... & Warsilah, H. (2021). Review and analysis of current responses to COVID-19 in Indonesia: Period of January to March 2020. Progress in Disaster Science, 6, 100091.

    16. Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835-2857.

    17. Faber, N., Jorna, R., & Van Engelen, J. O. (2005). The sustainability of "sustainability"-A study into the conceptual foundations of the notion of "sustainability". Journal of Environmental Assessment Policy and Management, 7(01), 1-33.

    18. Flammer, C., Hong, B., & Minor, D. (2019). Corporate governance and the rise of integrating corporate social responsibility criteria in executive compensation: Effectiveness and implications for firm outcomes. Strategic Management Journal, 40(7), 1097-1122.

    19. Freeman, R. E., Harrison, J. S., Wicks, A. C., Parmar, B. L., & De Colle, S. (2010). Stakeholder theory: The state of the art. Cambridge University Press.

    20. Freeman, R. E. (1984). Strategic management: A stakeholder approach. Pitman.

    21. Gatti, L., Seele, P., & Rademacher, L. (2019). Grey zone in - greenwash out. A review of greenwashing research and implications for the voluntary-mandatory transition of CSR. International Journal of Corporate Social Responsibility, 4(1), 1-15.

    22. Gunawan, J., & Tin, S. (2019). The development of corporate social responsibility in accounting research: evidence from Indonesia. Social Responsibility Journal, 15(5), 671-688.

    23. Hart, S. L. (1995). A natural-resource-based view of the firm. Academy of Management Review, 20(4), 986-1014.

    24. Hahn, R., & Lülfs, R. (2014). Legitimizing negative aspects in GRI-oriented sustainability reporting: A qualitative analysis of corporate disclosure strategies. Journal of Business Ethics, 123(3), 401-420.

    25. Herremans, I. M., Nazari, J. A., & Mahmoudian, F. (2016). Stakeholder relationships, engagement, and sustainability reporting. Journal of Business Ethics, 138(3), 417-435.

    26. Rauter, R., Jonker, J., & Baumgartner, R. J. (2017). Going one's own way: drivers in developing business models for sustainability. Journal of Cleaner Production, 140, 144-154.

    27. Torelli, R., Balluchi, F., & Lazzini, A. (2020). Materiality in sustainability reporting: A systematic literature review. Journal of Cleaner Production, 125237.

    28. Linnenluecke, M. K., & Griffiths, A. (2010). Corporate sustainability and organizational culture. Journal of World Business, 45(4), 357-366.

    29. Magrizos, S., Apospori, E., Carrigan, M., & Jones, R. (2021). Is CSR the panacea for employee engagement? A study of millennials in the banking industry. International Journal of Bank Marketing, 39(1), 132-154.

    30. Manetti, G., & Bellucci, M. (2016). The use of social media for engaging stakeholders in sustainability reporting. Accounting, Auditing & Accountability Journal, 29(6), 985-1011.

    31. McWilliams, A., & Siegel, D. S. (2011). Creating and capturing value: Strategic corporate social responsibility, resource-based theory, and sustainable competitive advantage. Journal of Management, 37(5), 1480-1495.

    32. Michelon, G., Pilonato, S., & Ricceri, F. (2015). CSR reporting practices and the quality of disclosure: An empirical analysis. Critical Perspectives on Accounting, 33, 59-78.

    33. Ng, A. C., & Rezaee, Z. (2015). Business sustainability performance and cost of equity capital. Journal of Corporate Finance, 34, 128-149.

    34. PwC Indonesia. (2020). Millennials in the Workplace: Reshaping the Future of Work in Indonesia. PwC Indonesia Report.

    35. Rahayu, M., Rasid, S. Z. A., & Basiruddin, R. (2020). The effects of environmental disclosure on financial performance in Indonesia. Polish Journal of Environmental Studies, 29(1), 1-11.

    36. Seguí-Mas, E., Vindel-Muñoz, A., & Polo-Garrido, F. (2018). Corporate social responsibility and sustainability reporting in the Spanish banking industry: The role of isomorphism in the disclosure of material aspects. Business Strategy & Development, 1(4), 298-310.

    37. Silva, S. (2021). Corporate contributions to the Sustainable Development Goals: An empirical analysis informed by legitimacy theory. Journal of Cleaner Production, 292, 125962.

    38. Simoni, L., Bini, L., & Bellucci, M. (2020). Effects of social, environmental, and institutional factors on sustainability report assurance: evidence from European countries. Meditari Accountancy Research, 28(6), 1059-1087.

    39. Suastha, R. D. (2018). The influence of sustainability report disclosure on firm value with investment opportunity set as moderating variable. Journal of Accounting and Strategic Finance, 1(1), 1-12.

    40. Suchman, M. C. (1995). Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(3), 571-610.

    41. Surroca, J., Tribó, J. A., & Waddock, S. (2010). Corporate responsibility and financial performance: The role of intangible resources. Strategic Management Journal, 31(5), 463-490.

    42. Sullivan, R., & Mackenzie, C. (2017). Responsible Investment: Guide to ESG Data Providers and Relevant Trends. The Journal of Sustainable Finance & Investment, 7(2), 131-143.

    43. Tarquinio, L., Raucci, D., & Benedetti, R. (2018). An investigation of global reporting initiative performance indicators in corporate sustainability reports: Greek, Italian and Spanish evidence. Sustainability, 10(4), 897.

    44. Tröster, R., & Hiete, M. (2018). Success of voluntary sustainability certification schemes - A comprehensive review. Journal of Cleaner Production, 196, 1034-1043.

    45. Yadava, R. N., & Sinha, B. (2016). Scoring sustainability reports using GRI 2011 guidelines for assessing environmental, economic, and social dimensions of leading public and private Indian companies. Journal of Business Ethics, 138(3), 549-558.

    46. Yu, H. C., Kuo, L., & Kao, M. F. (2017). The relationship between CSR disclosure and competitive advantage. Sustainability Accounting, Management and Policy Journal, 8(5), 547-570.

    47. Van Zanten, J. A., & van Tulder, R. (2018). Multinational enterprises and the Sustainable Development Goals: An institutional approach to corporate engagement. Journal of International Business Policy, 1(3), 208-233.

    48. Van der Waal, J. W., & Thijssens, T. (2020). Corporate involvement in sustainable development goals: Exploring the territory. Journal of Cleaner Production, 252, 119625.