Impact of Corporate Sustainability Reporting Practice on Corporate Performance: A Review of Literature

Stakeholder pressure on corporations to adopt sustainable practice has been a subject steering constant argument in recent times. The reason could be due to the awareness of the environmental impact and concern in preserving the planet. This study, through a literature review of prior studies, examined the impact of corporate sustainability reporting practice on corporate performance. Numerous researchers investigated this relationship in the past, but there is still a lack of consensus with regards to outcomes. Findings have been inconsistent and contradictory, varying from positive to a negative relationship, to statistically insignificant or mixed outcomes dependent on several factors such as cost exceeding benefits, shareholders perceiving sustainability initiative as a cost object, investors not valuing disclosure, firms using disclosure as legitimization tool for prestige, weak legislation, proxies used for measurement tool, country/ region of study, methodology, the period covered, industry sector covered and/or sample size. Our study reviewed 35 works of literature and found 13 studies with positive outcomes, 8 with significant negative outcomes, 5 with no significant relationship and 9 with mixed result. Overall, we concluded that it pays for corporations to adopt sustainable business practices as the benefit of adoption will span across the long term. Not denying the fact that companies would incur some huge costs in the short run at the time of investment, but the long-run benefits would far outweigh whatever cost they might have incurred. Hence, corporations are advised to start incorporating the sustainable practice into the management process and subsequently report on them to avoid legitimacy cost and to gain long-run competitive advantage. Future studies may conduct a systematic review to disaggregate the approaches, so as to examine the different dimensions of sustainability practice and provide a more concise and clear result.