The Relationship between Sustainability Reporting and Financial Performance of Listed Companies in Sri Lanka

Abstract

Introduction :

In the modern business world, Sustainability Reporting (SR) is an essential but challenging subject which is considered to be important on a global scale (James, 2015). The concept of SR comprises of disclosure in three dimensions i.e. economic, environmental, and social. Therefore, SR can be referred to as a voluntary endeavor which involves publishing accounts that reflect economic, environment, and social performance of an organization (Isenmann & Kim, 2006). SR is the main platform of communicating the sustainability practices and corresponding impacts of a company to its stakeholders. Many developed countries disclose their sustainability practices (Dissanayake,Tilt and Xydias-Lobo, 2016).

On the contrary, there is a deficiency in sustainability reporting in developing countries. This is of special concern, since the majority of the world’s population is predominately from developing countries and they are facing their own social and environmental problems on their own (United Nations, 2013). Even in Sri Lanka, SR has received relatively poor consideration compared to other developing countries, due to SR not being a mandatory reporting requirement in Sri Lanka (Peiris and Anise, 2019). Most companies adopt GRI framework in the reporting structure. This helps companies to move from either social or environmental based perspectives on sustainability to a progressively integrated view. Furthermore, adopting the GRI framework promotes clarity, accuracy, usefulness and comparability in sustainability reporting (Dissanayake,Tilt and Xydias-Lobo, 2016).