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1. Introduction
As sustainability is increasingly significant to economic development, corporate environmental and social responsibility have become an international trend, and this was accompanied with a lack of firms’ non-financial disclosure, such as environmental, social and governance (ESG) information and practice (Li et al., 2018). Recently, there is a growing demand for improving business reporting, with more focus on encouraging firms to provide more non-financial information (Lai et al., 2018). Sustainable development is not only related to corporate social responsibility (CSR) and accounting standards but also associated with customer satisfaction (Akisik and Gal, 2011). Previous research focuses on the effect of CSR on firm value or the concept of socially responsible investing and lacks the perspective of sustainability and integrated reporting (IR) (Kimbro and Cao, 2011; Li et al., 2019).
Environmental, social and governance disclosures (ESGDs) offer a more significant opportunity to understand firms’ non-financial reporting. Non-financial information can help corporate managers in the fulfilment of their strategic environmental objectives (Alewine and Stone, 2013). Furthermore, corporate ESGD appeared to be of imperative importance to both academics and practitioners. In addition to this, stakeholders began to raise questions about managers’ credentials in integrating ESG considerations (Husted and Sousa-Filho, 2018). According to the arguments of stakeholder and agency theories, firms have to adopt a more sustainable and long-term value view, as stakeholders are concerned about a company’s ESG factors to know where the firm invests and how the firm conducts business (Eccles et al., 2014; Atan et al., 2018). For instance, the environmental concerns of stakeholders might be related to natural environment protection, climate change and environmental impacts arising from a business operation.
Moreover, social factors, which are important to stakeholders, could be human rights, equality, diversity in the workplace and contribution to society. Further, concerns related to governance issues are ownership structure, board independence, minority shareholders’ rights, transparency and disclosure quality. Investors may have a preference for products that consider and reflect the relationship between their investments and ESG as challenging (Li et al., 2018). Further to this, by 2030, all firms are expected to disclose information related to their environmental and social effect according to the United Nations Sustainable Stock Exchange Initiative (Sustainable Stock Exchanges [SSE], 2015).
ESG is...