The impact of sustainability reporting practices on financial performance from power and energy sector organisations in sri lanka

Abstract

Sustainability reporting integrates the organisation's economic, environmental and social performance towards achieving better financial performance and has become a contemporary issue due to the absence of a precise model or a rigid regulatory framework in this arena. The main objective of this study is to examine the impact of sustainability reporting practices on the financial performance of power and energy sector organisations in Sri Lanka. Another objective of this study was to determine the level of sustainability reporting practices in power and energy sector organisations. Sustainability disclosures were measured using social, economic, and environmental sustainability initiatives, and the company performance was measured through Return on Assets (ROA) and Sales Growth (SG). This study was based on ten power and energy companies listed in CSE in Sri Lanka and Government corporations in the power and utility sectors. The sustainability disclosures in the annual reports of the selected companies for the past nine years (2012-2020) were analysed. Accordingly, the author derived a disclosure index from the Global Reporting Initiative (GRI) guidelines, which consist of 91 parameters to evaluate the content of the reports of organisations in the power and energy sector. The analysis of the study's data has been done by employing the panel data analysis research technique. Descriptive statistics have been used to assess the level of sustainability reporting, and correlation matrix and panel data analyses were used to determine the impact of sustainability reporting on financial performance in power and energy sector organisations in Sri Lanka. Based on the research findings of the study, it was concluded that there is a negative association between the level of sustainability reporting and Return on Assets (ROA) as well as Sales Growth (SG). Finally, sustainability reporting disclosure does not affect a firm’s financial performance (ROA and Sales Growth) in power and energy sector organisations in Sri Lanka. It is recommended that future research can be further improved by using mixed research methods.