A multi-country comparison of sustainability disclosures: Evidence from France, Japan and South Africa

Abstract

Background: Integrated reporting (IR), specifically environmental, social and governance (ESG) reporting research, has grown rapidly over the past two decades. ESG disclosure has received attention from researchers and industries on a global scale. Different motives drive the voluntary element in non-financial disclosures, and although the legal systems may shape the way of doing things, the difference in integrated report quality (IRQ) between common and civil law countries remains an underdeveloped topic. Bringing law and finance together, this study uncovers differences in the quality of IR between countries operating under different legal systems, specifically focusing on ESG disclosures. Purpose: The study investigated whether there are differences in the quality of IR among common and civil law countries using the model developed by Malola and Maroun (2019). France and Japan represent civil law countries, while South Africa represents a common law country. Methodology: The study follows Malola and Maroun's (2019) methodology to measure the IRQ of the top 20 entities in France, Japan and South Africa that operate in the Basic Materials, Oil and Gas and Financial Services industries. Descriptive statistics were used to highlight the variations in IRQ scores and IRQ elements’ scores across the countries and industries. Inferential statistics were used to determine whether the differences in IRQ and IRQ elements between countries and industries are statistically different. Findings: Overall, the study’s findings suggest that the quality of ESG information disclosed in the integrated reports is not statistically different based on the jurisdiction’s legal system. The quality only differs when the comparison is done on an industry level. Implications: Standard setters and regulators must consider what contributes to the quality of integrated reports, taking into account each of the indicators and how they can be factored into new standards they are developing.