Corporate Governance and Sustainability Disclosure: An Empirical Analysis of Environmental Reporting Practices

Javed, Harris and Audi, Marc and Ali, Amjad (2026): Corporate Governance and Sustainability Disclosure: An Empirical Analysis of Environmental Reporting Practices.

Abstract

The rising worldwide concerns about climate change, environmental degradation, and sustainability issues have made environmental reporting more vital for corporate reporting systems. The study investigates how firm size and profitability, and corporate governance practices, impact the sustainability accounting and environmental reporting of listed companies. Panel data has been collected from 40 listed PSX companies from 2018 to 2025. The study applies panel regression to estimate the impact of independent variables on the dependent variable. The results show that organizational size hurts environmental reporting, because organizational size does not significantly determine sustainability disclosure practices. Environmental reporting shows a positive relationship with profitability, which remains statistically unproven because financial performance does not account for all differences in environmental disclosure. Environmental reporting shows a positive relationship with corporate governance, which holds statistical significance because governance structures play a vital role in promoting transparency and accountability, as well as sustainability disclosure. The study found that corporate governance stands as the primary element that determines environmental reporting for all companies in the selected sample. The findings show that strong governance mechanisms serve as a foundation that enables organizations to achieve higher levels of environmental transparency while maintaining their corporate accountability standards. The study expands the existing literature on sustainability accounting by delivering empirical results that explain the factors that determine environmental reporting while giving policymakers, regulators, and corporate executives valuable information about how to enhance sustainability disclosure practices.

• Item Type: MPRA Paper
• Language: English
• Keywords: Environmental Reporting, Corporate Governance, Sustainability Accounting, Firm Performance
• Subjects: M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M1 - Business Administration > M14 - Corporate Culture ; Diversity ; Social Responsibility; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M41 - Accounting; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q56 - Environment and Development ; Environment and Trade ; Sustainability ; Environmental Accounts and Accounting ; Environmental Equity ; Population Growth

References

Abbasi, U. Ali, A, & Audi, M. (2025). Advancing ESG Integration in Stock Market: A Sectoral Study of Sustainability Reporting in Pakistan. Policy Journal of Social Science Review, 3(5), 650–665.

Abdullah, U., Ali, A., & Rehman, A. (2025). International Financial Reporting Standards Adoption and Earnings Quality: Cross-Country Analysis. Journal for Current Sign, 3(3), 757–781.

Abela, M. (2022). A new direction? The “mainstreaming” of sustainability reporting. Sustainability accounting, management and policy journal, 13(6), 1261-1283.

Adams, C. A. (2015). The International Integrated Reporting Council: A call to action. Critical Perspectives on Accounting, 27, 23 - 28.

Ahmad, S., Audi, A., & Ali, A. (2025). Leaders Versus Laggards: ESG Performance, Valuation Premiums, and the Cost of Capital. Contemporary Journal of Social Science Review, 3(3), 1899-1935.

Akhter, F., Hossain, M. R., Elrehail, H., Rehman, S. U., & Almansour, B. (2023). Environmental disclosures and corporate attributes, from the lens of legitimacy theory: a longitudinal analysis on a developing country. European Journal of Management and Business Economics, 32(3), 342-369.

Ali, A., Haider, A., & Ismail, S. (2025). Climate Disclosure and Corporate Valuation: Evidence from S&P 500 Companies. Policy Journal of Social Science Review, 3(4), 645–658.

Ali, A., Iqbal, M. A. J., & Irfan, M. (2025). Strategic Corporate Social Responsibility and Financial Performance: Sectoral Evidence and Governance Implications. Journal of Business and Management Research, 4(2), 1053-1069.

Ali, A., Khamisa, M. A., & Rehman, A. (2025). Socioeconomic Determinants of Sustainable Development Goal Performance: A Global Perspective. Journal of Social Signs Review, 3(6), 296–318.

Ali, A., Khurram, M. H., & Alam, M. (2025). Green Finance and Sustainable Development Goals: Challenges and Opportunities in Developing Economies. Policy Journal of Social Science Review, 3(8), 364–382.

Ali, A., Usman, M., & Ahmad, K. (2025). Environmental Risks and Sovereign Credit Ratings: Evidence from Developed and Developing Economies. Competitive Research Journal Archive, 3(01), 356-370.

Alta’any, M., Tauringana, V., Zalata, A., & Achiro, L. O. (2026). Unpacking sustainability reporting dimensions: the impact of board characteristics. Journal of Financial Reporting and Accounting, 24(2), 1174-1195.

Aly, D. A. R. M., Hasan, A., Obioru, B., & Nakpodia, F. (2024). Corporate governance and environmental disclosure: a comparative analysis. Corporate Governance: The International Journal of Business in Society, 24(8), 210-236.

Arshad, R., Audi, M., & Ali, A. (2025). Environmental Disclosure and Financial Performance: Evidence from Environmentally Sensitive Sectors Across Global Markets. Policy Journal of Social Science Review, 3(8), 383–399.

Arshi, A., Ali, A., & Audi, M. (2025). Evaluating the Impact of Sustainability Reporting on Financial Performance: The Mediating Role of ESG Performance and the Moderating Role of Firm Size. Bulletin of Business and Economics (BBE), 14(2), 42-54.

Audi, M., & Yu, H. (2024). Strategic value creation through corporate social responsibility adoption for sustainable financial performance. Journal of Policy Options, 7(4), 14-21.

Batool, A., Ali, A., & Audi, M. (2025). Assessing the Impact of Sustainability Initiatives on Greenhouse Gas Emissions in Sweden and Finland. Annual Methodological Archive Research Review, 3(6), 150-176.

Belal, A. R. (2001). A study of corporate social disclosures in Bangladesh. Managerial Auditing Journal, 16(5), 274 - 289.

Belkaoui, A., and Karpik, P. (1989). Determinants of the corporate decision to disclose social information. Accounting, Auditing and Accountability Journal, 2(1), 36 - 51.

Campbell, D. (2004). A longitudinal and cross-sectional analysis of environmental disclosure in UK companies. Business Strategy and the Environment, 13(4), 255 - 271.

Chopra, S. S., Senadheera, S. S., Dissanayake, P. D., Withana, P. A., Chib, R., Rhee, J. H., & Ok, Y. S. (2024). Navigating the challenges of environmental, social, and governance (ESG) reporting: The path to broader sustainable development. Sustainability, 16(2), 606.

Clarkson, P. M., Li, Y., Richardson, G. D., & Vasvari, F. P. (2008). Revisiting the relation between environmental performance and environmental disclosure: An empirical analysis. Accounting, Organizations and Society, 33(4 - 5), 303 - 327.

Dechow, P. M. (2023). Understanding the sustainability reporting landscape and research opportunities in accounting. The Accounting Review, 98(5), 481-493.

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

DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147 - 160.

Ding, X., Appolloni, A., & Shahzad, M. (2022). Environmental administrative penalty, corporate environmental disclosures and the cost of debt. Journal of Cleaner Production, 332, 129919.

Efunniyi, C. P., Abhulimen, A. O., Obiki-Osafiele, A. N., Osundare, O. S., Agu, E. E., & Adeniran, I. A. (2024). Strengthening corporate governance and financial compliance: Enhancing accountability and transparency. Finance & Accounting Research Journal, 6(8), 1597-1616.

Elkington, J. (1997). Cannibals with forks: The triple bottom line of 21st century business. Oxford: Capstone Publishing.

Eyinade, W., Ezeilo, O. J., & Ogundeji, I. A. (2025). Financial risk management strategies and their influence on organizational stability. Finance & Accounting Research Journal, 7(6), 229-251.

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

Frost, G. R. (2007). The introduction of mandatory environmental reporting guidelines: Australian evidence. Abacus, 43(2), 190 - 216.

Gray, R. (2010). Is accounting for sustainability, and how would we know? Accounting, Organizations and Society, 35(1), 47 - 62.

Gray, R., Kouhy, R., and Lavers, S. (1995). Corporate social and environmental reporting. Accounting, Auditing and Accountability Journal, 8(2), 47 - 77.

Hackston, D., and Milne, M. (1996). Some determinants of social and environmental disclosures. Accounting, Auditing and Accountability Journal, 9(1), 77 - 108.

Ioannou, I., & Serafeim, G. (2014). The consequences of mandatory corporate sustainability reporting. Harvard Business School Research Working Paper.

Kayani, U. N., Gan, C., Rabbani, M. R., & Trichilli, Y. (2024). Is short-term firm performance an indicator of a sustainable financial performance? Empirical evidence. Studies in Economics and Finance, 41(3), 619-637.

L'Abate, V., Albergo, F., Comite, U., Vitolla, F., & Raimo, N. (2025). Beyond the Surface: Navigating Sustainability Disclosure in European Union Ports. Corporate Social Responsibility and Environmental Management, 32(4), 4604-4618.

Latip, M., Sharkawi, I., Mohamed, Z., & Kasron, N. (2022). The impact of external stakeholders’ pressures on the intention to adopt environmental management practices and the moderating effects of firm size. Journal of Small Business Strategy, 32(3), 45-66.

Longston, P., Ali, A., & Audi, A. (2025). Environmental, Social & Governance Disclosures and Corporate Financial Performance: Evidence from Selected Asian Economies. Pakistan Journal of Social Science Review, 4(1), 22–49.

Marano, V., Tashman, P., and Kostova, T. (2017). Escaping the iron cage: Liabilities of origin and CSR reporting of emerging market multinational enterprises. Journal of International Business Studies, 48(3), 386 - 408.

Mason, M. (2020). Transparency, accountability, and empowerment in sustainability governance: a conceptual review. Journal of Environmental Policy & Planning, 22(1), 98 - 111.

Monteiro, A. P., Pereira, C., & Barbosa, F. M. (2023). Environmental disclosure on mandatory and voluntary reporting of Portuguese listed firms: the role of environmental certification, lucratively and corporate governance. Meditari accountancy research, 31(3), 524-553.

Naeem, H. Ali, A., & Audi, M. (2025). The Impact of Financial Stability on Environmental Degradation: Mediating Role of Green Investment and Moderating Role of Environmental Awareness. Policy Journal of Social Science Review, 3(1), 448–469.

Nigri, G. & Del Baldo, M. (2018). Sustainability reporting and performance measurement systems: How do small-and medium-sized benefit corporations manage integration? Sustainability, 10(12), 44 - 99.

Owen, D. L. (2000). Recent developments in European social and environmental reporting and auditing practice. Business Ethics: A European Review, 9(1), 1 - 11.

Oyekale, P. J., Olaoye, S. A., & Nwaobia, A. N. (2022). Corporate governance and environmental sustainability disclosure in non-financial companies quoted in Nigeria. Journal of Finance and Accounting, 10(2), 121-131.

Porter, M. E., & Van der Linde, C. (1995). Toward a new conception of the environment-competitive relationship. Journal of Economic Perspectives, 9(4), 97 - 118.

Ratti, S., Arena, M., Azzone, G., & Dell'Agostino, L. (2025). Beyond Corporate Environmental Disclosure: Tangible Efforts or Greenwashing? The Case of Italian Non‐Financial Listed Companies. Sustainable Development, 33(5), 7694-7713.

Rusu, T. M., Odagiu, A., Pop, H., & Paulette, L. (2024). Sustainability performance reporting. Sustainability, 16(19), 8538.

Scarpellini, S. (2022). Social impacts of a circular business model: An approach from a sustainability accounting and reporting perspective. Corporate Social Responsibility and Environmental Management, 29(3), 646-656.

Schaltegger, S., Burritt, R., & Petersen, H. (2003). An introduction to corporate environmental management. Sheffield: Greenleaf Publishing.

Siddique, A., Ali, A., & Audi, M. (2025). Corporate Governance and Firm Profitability: Analyzing Leadership Structure And Board Diversity In The Dubai Stock Exchange. Contemporary Journal of Social Science Review, 3(2), 1166-1176.

Solomon, J. (2013). Corporate governance and accountability (4th ed.). Chichester: John Wiley & Sons.

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

Sultana, N., Zeya, F., Islam, K. Z., & Rodriguez, A. J. (2026). The role of total assets in financial performance: Evaluating econometrics and machine learning approaches. Journal of Corporate Accounting & Finance, 37(1), 204-215.

Ullah, R., & Wu, W. (2023). How green-friendly practices and environmental disclosure affect the technological capability of the firm. Environment, Development and Sustainability, 25(2), 1276-1300.

Wang, G., & Zhang, Q. (2023). Transparency, governance, and innovation: Unveiling the impact of environmental information disclosure on corporate value and green innovation capabilities. International Journal of Operations and Quantitative Management, 29(4), 54-70.

Wang, L. (2023). Unlocking the link between company attributes and sustainability accounting in shanghai: firm traits driving corporate transparency and stakeholder responsiveness. Frontiers in Environmental Science, 11, 1273445.

Wongsinhirun, N., Chatjuthamard, P., Denlertchaikul, N., Jiraporn, P., & Korphaibool, V. (2026). The Role of Green Corporate Finance in Enhancing Firm Resilience to Climate Change. Journal of Economic Surveys.

Xu, W., Li, M., & Xu, S. (2023). Unveiling the “Veil” of information disclosure: Sustainability reporting “greenwashing” and “shared value”. PloS one, 18(1), e0279904.