RELATIONSHIP BETWEEN SUSTAINABILITY REPORTING AND FINANCIAL PERFORMANCE

Abstract

The purpose of this study is to investigate the complex link that exists between sustainability reporting and financial performance. More specifically, the study focusses on the impacts that transparent environmental, social, and governance (ESG) disclosures have on the economic results of a corporation.  In light of the fact that stakeholders on a worldwide scale are increasingly demanding responsibility from corporations that extends beyond profit measurements, sustainability reporting has emerged as an indispensable instrument for establishing trust, strengthening reputation, and managing risks.  The purpose of this study is to determine whether or whether businesses who implement comprehensive sustainability reporting frameworks, such as the Global Reporting Initiative (GRI) or integrated reporting, enjoy improvements in financial performance measures such as return on assets (ROA), return on equity (ROE), and market valuation.  This study indicates that there is a positive association between strong sustainability practices and long-term financial advantages. This correlation is discovered through a review of current empirical evidence and case studies that were conducted across a variety of industries.  Regulatory compliance, strategy alignment with environmental, social, and governance (ESG) goals, and stakeholder involvement are some of the factors that have been identified to have a mediating effect.  In its conclusion, the abstract emphasises that sustainability reporting is not only an exercise in compliance but rather a strategic asset that has the potential to generate innovation, operational efficiency, and competitive advantage, ultimately leading to an increase in total business value.