Environmental social and governance (ESG) disclosure motives for environmentally sensitive industry: an emerging economy perspective

Abstract

Organizations disclose environmental, social, and governance (ESG) information for various reasons, including mandatory reporting regulations. However, for environmentally sensitive corporations, ESG disclosure is not only a regulatory obligation. It also has the potential to promote corporate reputation. This study aims to uncover the motivating factors behind ESG disclosures in an emerging economy. The research methodology employed in the study includes (i) systematically reviewing literature following the PRISMA protocol to identify ESG disclosure motives, (ii) integrating fuzzy set theory with interpretive structural modelling (FISM) for developing a structural hierarchical model to understand the interactions between the motives, (iii) applying a fuzzy Matrice d’impacts croisés multiplication appliquée á un classment (Fuzzy MICMAC) approach to categorize the motives. The FISM model shows that organizations primarily disclose ESG information in response to regulatory and stakeholders’ pressures. The results further highlight the role of corporate ‘greenwashing’ behaviour and ethical considerations in ESG. The findings recommend that feasible regulations are crucial in improving ESG reporting quantity and quality. This research is one of the very few examining the motives behind ESG disclosures and a ‘stepping-stone’ to implementing mandatory ESG disclosure regulations. Understanding ESG disclosure motives will enable policymakers to draft policies that promote greater sustainability commitment.