In search of informational quality in sustainability reports: A longitudinal focus

Susanne ArvidssonPhD, Associate Professor

School of Economics and Management at Lund UniversitySusanne.arvidsson@fek.lu.se

+46 (0) 70 30 63 697

Presented at the National Accounting Conference, November, 24, 2017, Uppsala, Sweden

Work in progress. May not be quoted unless author’s permission

IntroductionToday, public awareness and commitment to sustainability is increasing and stakeholders are found to demand more information on how companies actually perform on the sustainability arena (Bondy et al. 2012; Thijssens et al. 2015). The sustainability report is argued to constitute this dialogue between a company and its stakeholders (Gray et al. 1995). Although the trend of providing sustainability reports is indeed increasing (KPMG, 2015) often as a means of providing accountability (Mori Junior et al. 2014), their informational quality has been questioned (see Radley Yeldar, 2012). There is a widespread critique or better yet scepticism against sustainability reports for being insufficient, lack credibility, a pr-invention, a green-washing activity or simply words not actions (Frankental, 2001; Milne et al. 2009; Moneva et al. 2006; O’Dwyer et al. 2005). Some of this critique is somewhat dated and also rests on findings from earlier studies on sustainability disclosure, which often are argued to include quite limited scope and without longitudinal focus (see Golob et al. 2013; Perez and Sanchez, 2009). Numerous initiatives have been taken to provide voluntary guidelines, frameworks and standards (United Nation Global Compact (UNGC), Global Reporting Initiative (GRI), AA1000) to help management teams to improve their disclosures on sustainability issues. However, there are still indications that the informational quality and value relevance of sustainability reports continue to be low even in settings where companies are mandated to provide sustainability disclosure in their reports (Chauvey et al. 2015; Larrinaga et al. 2002). This is critical, not the least in a financial-market perspective. A majority of stock-market actors regard sustainability information so difficult to assess and benchmark, that the usefulness of this information is reduced and not suitable for being included in investment analysis (Cho et al. 2015; Radley Yeldar, 2012). There is also indication that unstructured sustainability reports, which lack disclosing the value relevance of engaging in sustainability activities, are priced with a risk premium (Arvidsson, 2014). Overall this might impair the efficient allocation of capital on the financial markets. Not the least since sustainability information is attracting more focus in corporate reports (KPMG, 2015; Daub, 2007) and that the whole concept of sustainability is considered too ambiguous and obscure to be manageable in corporate disclosure (see Searcy and Buslovich, 2014). The critical theorists within the accounting community doubt that corporate sustainability accounting ever will be of much use (see Aras and Crowther, 2009; Gray, 2010; Gray and Milne, 2002; Welford, 1997). Undoubtedly, all of the above risk increasing information asymmetry (Akerlof, 1970) in the information flow between the company and its various

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stakeholders. In order to develop value relevant sustainability reports, which satisfy stakeholder needs and can be used to assess how companies perform on the sustainability arena and how this affects their value-creation process, there is a need to take a wide-ranging stance and to diagnose the informational quality of today’s sustainability reports.

Thus, grounded on the theories of legitimacy, stakeholder and information asymmetry, the objective of this paper is to provide a comprehensive analysis of how the extent, content and structure of sustainability disclosure have developed in annual reports from large listed Swedish companies. Influenced by the critique that there is a tendency in earlier studies on sustainability reporting to prefer a focus on new themes over extending and building on earlier findings (see Davis and Searcy, 2010; Gray et al. 1995), this study also includes themes that have been examined in earlier studies, thereby, enabling comparisons and insightful conclusions to be drawn regarding corporate-sustainability reporting. The following five sustainability themes are at focus: (i) overall sustainability information, (ii) objective(s) with engaging in sustainability activities, (iii) stakeholder relations, (iv) sustainability indicators and (v) voluntary-sustainability standards. Changes in quality are captured by extending the focus on extent and content to also examine structural dimensions of how sustainability information is presented (brief/long, general/elaborated, qualitative/quantitative, structured/unstructured). The selection of the largest companies is motivated not only due to their alleged position as first-adopters and trendsetters when it comes to overall corporate disclosure (see Artsberg, 1992) but also due to the notion that the impact on society grows with company size and that disclosures from the largest companies are best suited for sustainability analyses (see Stiller and Daub, 2007). Thus, this study focuses on sustainability reports from the 30 largest companies listed on the Stockholm Stock Exchange. The longitudinal focus (2008, 2013 and 2015) will enable trends and different development paths in sustainability reporting to be identified. Considering the notion that Swedish companies are precursors when it comes to corporate communication in general and sustainability reporting in specific (Cahan et al. 2016; KPMG, 2015; Lin and Edvinsson, 2008; Vandemaele et al. 2005), the findings pave the way for a discussion of both challenges and opportunities present in the quest of designing tomorrow’s sustainability reporting. Management teams and policy makers at both national and international level may find insights regarding how to develop value relevant sustainability reports of high informational quality by drawing on the multiple aspects focussed upon in this study.

The paper has the following structure. First, the theoretical and empirical foundations motivating the study are discussed. Thereafter, the methodology underlying this study is presented. Next, the results are presented and discussed, and finally some concluding remarks and suggestions for future studies are presented.

Theoretical and empirical foundation

The section starts with presenting the theoretical framework along with the underlying ideas of each of the included theories (legitimacy, stakeholder, information asymmetry) and their relation to the objective of the study. The section ends with a background to sustainability reporting and the sustainability report, as well as related research on sustainability disclosure in corporate reports.

Theoretical framework – Sustainability disclosure in the light of information asymmetry, legitimacy and stakeholder theory

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In their comprehensive review, Hahn and Kühnen (2013) come to the conclusion that the majority of research on sustainability disclosure does not refer to any theory at all and those that do, mostly refer to isolated theoretical reference points instead of holistically embracing different theoretical explanations. In line with this, Spence et al. (2010) find that those researchers that do adopt a theory primarily discuss it in general terms. This lack of a comprehensive theoretical reference point in research on sustainability disclosure was accentuated already by Hooghiemstra (2000). Reviewing previous literature reveals that the theories that often are adopted (or at least discussed) are stakeholder theory, legitimacy theory, institutional theory and asymmetric information (see Hahn and Kühnen, 2013; Hooghiemstra, 2000; Spence et al. 2010). In order to add to an enhanced understanding of how sustainability disclosure in annual reports has developed, the herein findings will be understood through the theoretical framework including three of the above theories namely legitimacy, stakeholder and information asymmetry. To some extent these theories are both interrelated and include overlapping perspectives (see Gray et al. 1995b; 1996).

The underlying idea of legitimacy theory is that a company needs to be granted legitimacy in the form of a social contract or a social licence to operate (Dowling and Pfeffer, 1975; Deegan, 2002). According to Hooghiemstra (2000) this implies that a company’s success or even survival is reliant on the extent that the company operates within the norms of society (Brown and Deegan, 1998). Thus, legitimacy theory suggests that no company has an inherent right to exist. Instead every business operation is subject to the acceptance (or non-acceptance) granted by society. Drawing on the ideas originating from Dowling and Pfeffer (1975), Hahn and Kühnen (2013) argue that this legitimacy is potentially threatened if society perceives that a company is not operating and conducting business in an acceptable manner. Legitimacy theory is often used to support the idea that sustainability disclosure is a means for a company to gain, maintain or repair legitimacy (see de Villiers and van Staden, 2006; O’Donovan, 2002). In this paper, providing sustainability disclosure is assumed to be an important means aimed at securing legitimacy. Thus, the objective of the paper (i.e. to examine longitudinal trends in sustainability disclosure in annual reports related to extent, content and structure) will be understood through the lenses of legitimacy theory.

Being perceived as legitimate in society and accordingly receive a social licence to operate is dependent on the perceptions of the company and its operations held by stakeholders. Stakeholder theory suggests that a company needs to take into account the perspectives and expectations of its various stakeholders and also be aware of shifts in these perspectives and expectations (Freeman, 1984). In line with this, the moral view of stakeholder theory proposes that those who are impacted by or impact a company’s operations also have the right to be informed and to demand certain levels of performance (see Freeman, 1984; Mitchell et al. 1997). Companies are found to provide accountability to their stakeholders (Mori Junior et al. 2014) by voluntarily report about their engagement in sustainability activities. Thus, sustainability disclosure is often seen as a dialogue between the company and its stakeholders (Gray et al. 1995a). Similar to this, Campbell et al. (2003) argue that sustainability disclosure can be regarded as a means to shape the perceived legitimacy of a company. Thus, besides being assumed as a means to secure legitimacy, sustainability disclosure is herein also assumed be a stakeholder dialogue aimed at enhancing stakeholder relations. Complementing the theoretical framework with the ideas underlying stakeholder theory will be fruitful in the process of interpreting and explaining the findings.

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Information asymmetry exists in situations where there is an asymmetric distribution of information between the parties involved (Akerlof, 1970). According to Hahn and Kühnen (2013), the sustainability performance of a company can be regarded as such asymmetric information since it is difficult for stakeholders outside the company to gain credible information on relevant aspects vital for assessing this performance. In line with their argument, it is assumed in this paper that companies might want to reduce this information asymmetry by proactively reporting on their sustainability-related activities in annual reports in order to secure legitimacy. Several studies confirm that a company, which provides sustainability disclosure, can decrease information asymmetries between itself and relevant stakeholders (see Montiel et al. 2012). In relation to this, recent studies ascertain a positive relationship between engaging in sustainability activities and financial performance (Cahan et al. 2016; Ramchander et al. 2012; Su et al. 2016) and a negative relationship with a company’s cost of equity (Dhaliwal et al. 2014). In this paper, sustainability disclosure is, besides being assumed to be an important means to secure legitimacy and a stakeholder dialogue, also supposed to be used as a critical means for decreasing asymmetric information by engaging in conveying credible information about its performance on the sustainability arena. Thus, in order to enhance the understanding of the findings, the ideas underlying asymmetric information are also included in the theoretical framework.

Sustainability reporting and the sustainability reportThis year marks the 30th anniversary of the Brundtland Report entitled “Our common future” (UNWCED, World Commission on Environment and Development, 1987). This report is often argued to be the starting point for acknowledging the need to place a stronger emphasis on sustainability in general and corporate social responsibility (CSR) in specific (Yadava & Sinha, 2016). Several are those emphasising that the increased awareness in society about environmental and social issues due to pressing global problems (e.g. climate change, human rights violations, natural disasters and scarcity of natural resources) actually has contributed to a transformation in the way companies are conducting business (Kolk and van Tulder, 2010; Seuring and Müller, 2008). Conley and Williams (2005, p. 1) refer to this as the corporate social responsibility movement and put forward it as “…one of the most striking developments in the business world over the last decade”. In the business world, sustainability reporting has become a means for openly communicating to its stakeholders about how the company is performing in the environmental and social arena. Although some countries have started to mandate companies either by law (e.g. Nouvelles Régulations Économiques #2001-420 in France) or through de facto mandatory requirements through listing regulations (e.g. the Code of Governance in South Africa 2009 (King III)) to provide sustainability disclosure in their corporate reports, it is primarily a reporting practice of voluntary nature (see Searcy and Buslovich, 2014). It is argued to be a dialogue between a company and its various stakeholders (Gray et al. 1995) and a means to provide accountability to them (Mori Junior et al. 2014) and, thereby, gain, maintain or repair legitimacy (see Deegan, 2002; de Villiers and van Staden, 2006; Dowling and Pfeffer, 1975; O’Donovan, 2002). In line with the notion of the sustainability report as a dialogue, the moral view of stakeholder theory suggests that stakeholders who are affected by a company’s business also have the right to be informed and to require certain levels of performance and conduct (see Freeman, 1984; Mitchell et al. 1997).

Although sustainability reporting often is addressed as a new reporting phenomenon, we saw the first wave of corporate accountability in the form of these reports where environmental and social impact were at focus already in in the 1970s in Europe and the US (Kolk, 2010:368). However, sustainability reporting soon thereafter lost momentum due to lack of

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institutionalisation (Kolk, 2005; Dierkes and Antal, 1986) and was only sporadically present in some industries and countries with companies particularly dedicated to the idea of sustainability reporting. Not until around the turn of the century did this reporting trend awaken in the aftermath of many corporate scandals related to environmental and social areas (see Arvidsson, 2010). This was also paired with the launch of the GRI, which provided reporting guidelines and structure for this information in corporate reports. Today, this reporting trend has more or less exploded especially among the largest listed companies. In 2015, over 90 per cent of the G250 companies (i.e. the top 250 companies listed on Fortunes Global 500 ranking) provide a sustainability report (KPMG, 2015). External stakeholders are found to be increasingly interested in companies’ sustainability efforts and conduct, which further amplify this reporting trend (Bondy et al. 2012; Thijssens et al. 2015).

There are a number of different definitions of sustainability reports (Daub, 2007). The World Business Council for Sustainable Development (WBCSD, 2002, p. 7) provides one illuminating definition of this report:

“…public reports by companies to provide internal and external stakeholders with a picture of corporate position and activities on economic, environmental and social dimensions. In short, such reports attempts to describe the company’s contribution towards sustainable development.”.

However, not all companies use the title ‘sustainability report’. Earlier research reveals that besides ‘sustainability report’, the following titles are often used: “corporate social responsibility report’, ‘corporate citizenship report’, ‘social report’, ‘social and community report’ and ‘responsibility report’ (Kolk, 2010; Owen et al. 2002). In their Canadian study, Roca and Searcy (2012) found that ‘sustainability report’ appears to have gained momentum as title for this type of report (43 per cent of 94 examined reports used this title). However, Searcy and Buslovich (2014:149) argue that the title of the report does not matter, the key is that the report “…contains qualitative and quantitative information of interest to stakeholders on the company’s key sustainability issues and initiatives.”.

Earlier research focused on sustainability in corporate reportsSustainability in the corporate world is an area that has attracted a lot of research attention (Cho et al. 2015; Parker, 2005; Patten, 2013). A recent review of topics in accounting journals reveals a significant focus on just sustainability research (Golob et al. 2013). The focus in sustainability research is either orientated towards the adoption process of sustainability reporting (as a practice) (Higgins et al. 2016; Kolk, 2010; Su et al. 2016) or towards the sustainability report per se (as the output from sustainability reporting) (Roca and Searcy, 2012; Yadava and Sinha, 2016). Both research orientations include several focuses and perspectives. The adoption process of sustainability reporting has been viewed from various perspectives (see Thorne et al. 2014) including stakeholder (Herremans et al. 2016; Thijssens et al. 2015), legitimacy (Cho and Patten, 2007; Larrinaga et al. 2002) and accountability (Solomon and Lewis, 2002:158), as well as, been examined with respect to e.g. firm characteristics (Prado-Lorenzo, 2009) and managerial characteristics (Thoradeniya et al. 2105). Research orientated towards the sustainability report per se1, which also rests on the above perspectives, traditionally use content analysis to evaluate the extent, content and structure/quality of sustainability disclosure (see Gray et al. 1995; Unerman, 2000). In these studies, reports from public listed companies are primarily at focus (see Guthrie and Abeysekera, 2006). While the annual report often has been (de Villiers and van Staden, 2011; Tewari, 2011) and still often is the report of choice when sustainability disclosure is at focus (Arvidsson, 2017; Chauvey et al. 2015), the increase of stand-alone sustainability reports has

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resulted in a greater focus on this report (Manetti, 2011; Yadava and Sinha, 2016). Reviewing earlier sustainability research reveals that an inclusion of both these reports often is missed, Chauvey et al. (2015) being a rare exception. This is argued to be a shortcoming due to limitations of comparability. According to a recent study, stakeholders view the sustainability report as the preferred source for sustainability information (Radley Yeldar, 2012). Searcy and Buslovich (2014) find that companies reveal that they disclose the same sustainability topics in the annual report as in the sustainability report. The level of detail is, however, argued to be different. While the annual report was considered (ibid:160) “…as a top-level document, the full CSR report is what articulates actual challenges.”. Since earlier research primarily focuses either on the annual report or the sustainability report, the validity of this statement has not been verified.

Since the reporting-based standard GRI (see Waddock, 2008) was launched in the late 1990 th

by the Coalition for Environmentally Responsible Economies (CERES) and UN Environment Programme (UNEP), it has on voluntary basis become a widely implemented standard in sustainability reports (Behnam and MacLean, 2011; Brown et al. 2009; Etzion and Ferraro, 2010). The extent and content of sustainability disclosure is often assessed with scoring techniques using GRI indicators (Roca and Searcy, 2012; Morhardt et al. 2002; Yadava and Sinha, 2016). Although there are a few recent studies, the length of sustainability reports has been scarcely examined in earlier research (Davis and Searcy, 2010). This is criticised since the actual extent of overall sustainability information in corporate reports provide a good overview of the importance assigned to these issues. While Roca and Searcy (2012) find that the length is between 40-45 pages in a non-mandatory setting, Chauvey et al. (2015) find that it increases from 37.82 in 2004 to 80.45 pages in 2010 when mandatory requirements are introduced. Studies examining the actual content in sustainability reports are often restricted to focusing on a specific theme in reports from a specific year e.g. stakeholder engagement (Herremans et al. 2016), sustainability-related KPIs (see Hansen and Schaltegger, 2016, GRI (see Boiral, 2013) or UN Global Compact (see Arevalo et al. 2013).

However, there are studies, which do include broader scopes in their analyses. Table 1 is an attempt to illustrate how studies on sustainability disclosure per se has been structured during the last decade. Table 1 is by no means an exhaustive summary of earlier research, instead it is an attempt to illustrate the variety of themes, reports, years, and countries at focus in earlier studies and, thereby, lend some credence to the alleged limitation as to enable comparisons between findings from different studies (see Davis and Searcy, 2010; Gray et al. 1995).

[Insert Table 1 about here]

A review of Table 1, also supports the arguments posed in literature that studies on sustainability disclosure rarely use the same checklist or focus on the same themes (Davis and Searcy, 2010); often apply a single-country focus (Perez and Sanchez, 2009); often limit their focus to one type of corporate report (Unerman, 2000; seldom examine overall sustainability disclosure in reports (Cho et al. 2007:643; Unerman, 2000); often lack a longitudinal focus (Perez and Sanchez, 2009). All of the above impair the comparison of findings over different time periods, between different reports, industries and countries. Furthermore, Table 1 highlights that studies on sustainability disclosure seldom build on the findings from earlier research but instead create new themes by using their own-developed checklists or scoring technique when extent, content and structure/quality are examined. One must, however, acknowledge that sustainability in the business world indeed offers intriguing research paths to embark on and that it is quite understandable that researchers do embark on them and feel

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inspired to unravel new themes. For a prosperous future of this research field, it is, though, of importance to create a detailed and nuanced map over the global landscape of sustainability reporting by starting to put the pieces of knowledge from all the meritorious studies together and not continue to create islands of dispersed knowledge.

Although, Arvidsson (2017), in her longitudinal and multi-aspect analysis of sustainability disclosure in annual reports finds a modest but positive development related to extent, content and structure in sustainability reports, a low informational quality was confirmed. Even though the findings of the studies included in Table 1 and their equivalents, of course, do vary, a common finding, regardless of whether a single aspect or multiple aspects are at focus, is a low informational quality (see e.g. Arvidsson, 2017; Chauvey et al. 2015; Kolk, 2008) where sustainability information often is found to be unstructured and kept general (see e.g. Arvidsson, 2017; Davis and Searcy, 2010; Kolk, 2008; Roca and Searcy, 2012). This supports the critique against the shortcomings with sustainability report proposed from both research community (Gray, 2010; Milne et al. 2009; O’Dwyer et al. 2005) and stakeholders like e.g. stock-market actors (see Arvidsson, 2014; Radley Yeldar, 2012). In common to the studies is also their suggestions for improvement of sustainability disclosure, which should be acknowledged in the on-going process of developing value-relevant sustainability reports of high informational quality.

Research design and empirical methodology

Motivation of research method

There are a number of methods that have been applied to analyse how companies report on sustainability e.g. disclosure studies based on content analysis (see Guthrie and Abeysekera, 2006; Perez and Sanchez, 2009), interview studies (Searcy and Buslovich, 2014; Vigneu et al. 2015) and questionnaire studies (Higgins et al. 2015; O’Dwyer et al. 2005; Thorne et al. 2014). The present study applies a disclosure-study methodology focused at the extent, content and structure in sustainability reports. With its focus on analysing the content in various corporate communication materials, this research method has a long history (see e.g. Barrett, 1976; Guthrie and Abeysekera, 2006; Singhvi and Desai, 1971). It is also confirmed to be the dominant research method for data collection in sustainability research of empirical nature (Parker, 2005, Tewari, 2011).

A shortcoming with earlier studies based on content analysis is the preference of using idiosyncratic methods (Chen and Bouvain, 2009; Einwiller et al. 2016; Graafland et al. 2004), where new unique checklists or new themes to focus on are developed instead of re-using or building on checklists and themes in previous research (Cho et al. 2015; Davis and Searcy, 2010; Gray et al. 1995). There is also often a lack of a longitudinal focus (Perez and Sanchez, 2009). Both to ignore to build on the findings in earlier research and to overlook longitudinal aspects (see Davis and Searcy, 2010; Gray et al. 1995) imply that the comparability and benchmarking perspectives are neglected (see Graafland et al. 2004). To overcome some of these alleged shortcomings, this study adopts a longitudinal focus on sustainability disclosure in sustainability reports and includes themes constructed after a review of aspects and themes that have been focused upon in previous research (see section ‘Sustainability themes’).

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Motivation and selection of companies, corporate report and time period

In this study the focus is on sustainability disclosure provided by the largest listed Swedish companies included in OMXS30 index. This index includes the 30 most traded shares at Stockholm Stock Exchange. The final list of companies, after adjusting for companies with a domicile outside Sweden or with more than one type of share in the index, includes 27 Swedish companies (see Appendix 1). The largest companies were selected not only due to their alleged position as first-adopters and trendsetters when corporate communication is concerned (see AAA, 1936; Artsberg, 1992) but also due to the argument that the impact on society grows with size and that disclosures from the largest companies are best suited for sustainability analyses (see Stiller and Daub, 2007). The selection of a Swedish setting is influenced by the notion that Swedish companies are in the lead when it comes to provide sustainability disclosure (see Cahan et al. 2016; KPMG, 2015).

The decision to focus on the sustainability report is motivated by the increasing trend in the business world to issue stand-alone sustainability reports (KPMG, 2015), which merits an inclusion of this report when sustainability disclosure is examined (see Daub, 2007). Already, Unerman (2000, p. 677) emphasised that an exclusive focus on annual reports “…risk capturing an incomplete picture of the amount of CSR companies are engaging in…”.

When shortcomings with sustainability research are discussed, a lack of longitudinal focus is often emphasised (Perez and Sanchez, 2009). Ignoring to build on the findings in earlier research (se section above) and to overlook longitudinal aspects (see Davis and Searcy, 2010; Gray et al. 1995) imply that the comparability and benchmarking perspectives are neglected (see Graafland et al. 2004). The objective of this paper to examine how sustainability disclosure has developed and examine trends related to extent, content and structure. Thus, a longitudinal focus is applied and reports from a seven-years period (2008, 2013 and 2015) are included in the analysis. The motivations underlying the selection of these years are: 2008 is often put forward as the year when we witnessed a substantial growth in the number of companies that included an increased focus on sustainability in their reports (see EY and the Boston College Center for Corporate Citizenship, 2013; KPMG, 2008), five years trends and patterns in sustainability disclosure resulted in questions being raised as to whether this “new” type of disclosure was just a passing fad (see e.g. Vinnari and Laine, 2013).2 Reports from the financial year 2015 were selected since they were the latest available during the data selection process.

Sustainability themes

An ambition with the present study is to provide a comprehensive analysis of the extent, content and structure of sustainability disclosure in Swedish sustainability reports, as well as, to capture trends and developing paths as to how this type of disclosure from large listed companies has developed. A shortcoming, which has been discussed in previous sections, is that research based on content analysis often has a tendency to ignore building on the findings in earlier research (see Cho et al. 2015; Davis and Searcy, 2010; Gray et al. 1995) often due to a preference of idiosyncratic methods and themes (Chen and Bouvain, 2009; Einwiller et al. 2016; Graafland et al. 2004). To acknowledge this limitation, the selection and construction of themes to be focused upon in this content-analysis study were influenced by the themes and aspects at focus in earlier content-analysis studies. The most influential studies were the following: Behnam and MacLean (2011), Chauvey et al. (2015), Davis and Searcy (2010),

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Manetti (2011), Manetti and Bellucci (2016); Mitchell et al. (1997), Morsing and Schultz (2006), Onkila et al. (2014), Perez and Sanchez (2009), Roca and Searcy (2012), Salzmann et al. (2005), Searcy and Buslowski (2014) and Tewari (2011). Also sustainability reporting guidelines and standards (e.g. AccountAbility, 2011; GRI, 2015; IIRC, 2013; SASB, 2014) were reviewed in this process. This resulted in the following five themes: (i) overall sustainability information, (ii) objectives with engaging in sustainability, (iii) stakeholder relations, (iv) sustainability indicators and (v) voluntary-sustainability standards.

Overall sustainability disclosure. This theme is focused on the number of pages covering sustainability issues in the report9 and its proportion of the report, how sustainability disclosure is structured in the report, as well as, if sustainability is at focus in the CEO letter, and if it is, what does the CEO focus upon and what is its proportion of the letter.Objective(s) with a company’s engagement in sustainability activities. This theme is focused on how companies communicate their objective(s) with this engagement. The objectives are classified as vague (lack a link to how the objective is related to the company and its business), one-liner (objectives formulated in the form of one-liners) or elaborated (includes a link to how the objective is related to the company and its business). There is also a focus on whether the objective(s) is related to the company’s value-creation process or not.Sustainability-related KPIs. This theme is focused on whether such KPIs are included in the report and if they are, how many and if they are qualitative or quantitative, related to targets and time frames (deadlines).Stakeholder relations. This theme is focused on if and how a company identifies and discusses its stakeholders. The “how” part includes a focus on identification, engagement/dialogue and materiality assessment.Voluntary-sustainability standards This theme is focused on how two of the most widely used voluntary-sustainability standards in sustainability disclosure (Behnam and MacLean, 2011; Vigneu et al, 2015), the principle-based standard UNGC and the reporting-based standard GRI, are applied and discussed in the reports.Table 2. The sustainability themes at focus in the analysing procedure

Approach to capture how sustainability information is presented (informational quality)Reviewing the sustainability literature reveals that it appears to be a quite delicate matter and far from settled which method to choose for measuring or better yet, capturing sustainability information in corporate reports. Chauvey et al. (2015) suggest that the objectives underlying the chosen methods in previous disclosure studies can be categorised as aiming to measure either changes in the extent of disclosure (space) or changes in quality (scope, breadth, informational quality assessment). While quality in disclosure studies often is assumed to be related to quantity (see Guthrie and Abeysekera, 2006; Unerman, 2000), the concept of quality is sometimes argued to include more complex factors than quantity (see Hammond and Miles, 2004). Scope and style of disclosure, as well as, range of issues reported on are put forward as such factors (ibid), while others argue that it is critical that analyses focus on whether disclosures are quantitative, descriptive, vague or immaterial (Hughes et al. 2001). Thomson and Bebbington (2005, p. 529) take this line of reasoning even further when they urge researchers using disclosure-study methodology to move ”…towards a more qualitative understanding of what reporters are actually saying (both explicitly and implicitly). This suggests that a more careful and sophisticated reading of accounts is necessary.”

Influenced by the above arguments and researchers’ suggestions on how content analysis can be enhanced, the present study sets out to examine both changes in extent and content of sustainability information in sustainability reports, as well as, aims at capturing changes in quality by focusing on structural dimensions of how this information is presented. In line with the method used in Manetti (2011), attention is paid both to the presence of a section related to a specific sustainability theme and to the intrinsic characteristics of what has been

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discussed in the section and how it has been discussed. Thus, the study aims at capturing changes in informational quality by adding a focus on how sustainability information is presented (see Chauvey et al. 2015). This approach is of explorative character and the weaknesses with this type of classifications are acknowledged by the author and the interpretation of findings should be carried out with carefulness. The information related to each of the above four sustainability themes is, thus, classified as brief/long (aspects on extent), general/elaborated and qualitative/quantitative (aspects on content) and unclear/clear (aspects on structure). Definitions of these classifications are presented below along with references to earlier studies that have used or proposed similar classifications and underlying definitions6:

Aspects on extent (inspired by the discussion in Unerman, 2000):-brief (information presented in short terms of just a couple of paragraphs/sentences)- long (information presented in long terms of full sections with several paragraphs)Aspects on content (see Hughes et al. 2001): - general7 (information limited to passing and general comments lacking a clear link to how it is related to the company and its business)- elaborated (information presented in elaborated terms with a clear link to how it is related to the company and its business) - qualitative (information presented qualitatively with e.g. measures and targets) - quantitative (information presented quantitatively, without e.g. measures and targets) Aspects on structure (see Chauvey et al. 2015; van der Laan Smith et al. 2005): - unclear (information presented without a clear disposition and without figures and tables)- clear8 (information presented with a clear disposition often complemented with figures and tables)

Design and test of coding procedureIn order to enhance both reliability and validity of the final analysis of the sustainability reports, the design and test of the coding procedure was carefully structured and managed. To define a list of detection and classification rules related to the above sustainability themes, six randomly selected sustainability reports (two reports from each of the three years examined, i.e. 2008, 2013 and 2015), were analysed. To gain insights as to what and how information was communicated and structured in a report, the whole of the report was read before it was analysed in this first step. Note that the analysis is focused on the whole part of the sustainability report. When all six reports were analysed, the outcome was a list of detection and classification rules. In the next step, the detection and classification rules were tested in a pilot study.

In order to solve any ambiguity and unclearness in the coding procedure, a pilot test of the coding procedure was conducted. To further enhance stringency of the coding, two independent senior researchers in the field of sustainability accounting and reporting were involved in this pilot test. They individually performed analyses on two randomly selected reports from each of the three years at focus in the study. Their coding results were then compared to the author’s. These comparisons revealed only small differences. The Krippendorff intercoder reliability test (see Krippendorff et al. 2004) was performance and Krippendorff’s alpha was between .79-.85, which is viewed an acceptable level (see Neuendorf, 2002; Riffe et al. 2005). The differences in coding results were discussed and appropriate means were taken to enhance the final list of detection and classification rules in order to improve quality of the analysing procedure.

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Empirical results [Note: To be elaborated]

In this section the empirical results are presented along with a discussion related to findings in earlier studies. The section is structured around the above five themes at focus in the analysis. However, first some details related to the sample companies and disclosure study are presented.

Disclosure study

The disclosure study includes sustainability reports from the 27 Swedish companies included in OMXS30 index at Stockholm Stock Exchange (see Appendix 1). The companies come from eight different GICS categories, basic materials (3), consumer goods (3), consumer services (2), financials (5), health care (1), industrials (10), technology (1), and telecommunications (2). Reviewing Table 3, shows that 43 Swedish sustainability reports were examined and a total of 2 087 pages.

2008 2013 2015 TotalNumber of reports 14 17 12 43Number of pages 584 879 624 2 087Table 3. Summary information of examined sustainability reports

Theme I: Overall sustainability information

The analysis shows that 95 per cent of the sustainability reports actually also have the title ‘sustainability report’. This is in line with Roca and Searcy (2012) who find that ‘sustainability report’ is the most widely used title. However, in their analysis of reports from 2008, it was “only” 43 per cent that had the title ‘sustainability report’. Judging from the herein finding, the title ‘sustainability report’ appears to be quite established among the largest listed companies in Sweden, which is different compared to other country settings (Kolk, 2010; Owen et al. 2002) A development path for the sustainability report seems to be related to the use of sub-titles. The analysis reveals that in 2008 about 10 per cent of the companies used sub-titles like ‘conscious actions’ and ‘proof of progress’. In 2015, these subtitles have more or less disappeared.

Producing a sustainability report is not mandatory. While accounting legislation requires companies to produce an annual report, producing a sustainability report is (still) up to Swedish management teams to voluntarily decide. While all the sample companies provide annual reports for the examined years, the picture is a bit different when it comes to sustainability reports (see Table 4).

2008 2013 2015

Written stand-alone sustainability report (WSASR) 14 (51.9%) 17 (63.0%) 12 (44.4%)Integrated (annual +sustainability) 4 4 8Only web-based sustainability report (on line) 0 1 3No written sustainability report 9 5 4

27 27 27

11

Web-based sustainability site 27 (100%)

Sustainability report3 in total(no of pages)Average 42 49 45Median 33 45 37Minimum 13 13 4Maximum 127 92 130

Table 4. Demography of sustainability disclosure

Here we find some interesting reporting trends related to sustainability reports. The number of written stand-alone sustainability reports (WSASR) increase between 2008 and 2013. This is in line with the findings in Stiller and Daub (2007) that the number of sustainability reports increases from 2003 to 2005 in their Swiss sample. However, we see a sharp decrease between 2013 and 2015 from 63.0 per cent to only 44.4 per cent. This could support the notion in Burritt and Schaltegger (2010) that the sustainability report might only be a fad (if it is not a trend) and the findings of a reduction of stand-alone sustainability reports in certain settings (see e.g. de Villiers and van Staden, 2006; Vinnare and Laine, 2013). Meanwhile, we see that during the seven-years period more companies start to implement integrated reporting, i.e. they provide information about their sustainability and financial performance in an integrated manner in the annual report (Baboukardos and Rimmel, 2016; IIRC, 2013). The findings also reveal that more companies decide to only provide web-based sustainability reports (on-line)3. In 2015, 11.1 per cent of the sample companies only provided web-based sustainability reports (on-line). These two new reporting trends appear to substitute the WSASR. Thus, the herein findings indicate that it might be a too harsh conclusion to draw that the sustainability report is a mere fad. Even though the present analysis also confirms a decrease in WSASRs, there appear to be new reporting medias (integrated reporting and web-based sustainability reports) taking over the role of providing stakeholders with information of the company’s performance on the sustainability arena. Vinnare and Laine (2013) also reason that if it is not a fad, it might be explained by the fact that reporting practices change and more sustainability information is redirected into the annual report. It should also be noted that all of the companies had more or less sophisticated web-based sustainability sites in 2015, irrespectively of how they otherwise provided sustainability information. Thus, a gradual shift towards a web-based reporting practice related to sustainability can be noted during the seven-years period, which is in line with earlier studies (see de Villiers and van Staden, 20111; Isenmann, 2005).

A difference to annual reports (Arvidsson, 2017; Chauvey, 2015) is that the average number of pages in the sustainability report does not increase for every year, but is stable around 45 pages (in a span between 43 and 49 pages) over the examined seven-years period. This is a positive finding, not the least, considering that there has been a fear that sustainability reports are getting longer and longer and that this might make their content less manageable from a reader’s perspective (MacLean and Rebernak, 2007). This is in line with the findings in both Roca and Searcy (2012:107) and Davis and Searcy (2010) of the typical length of sustainability reports being between 40 and 45 pages. The average length of the Swedish sustainability reports, is, however, shorter then the length found by Chauvey et al (2015) in their French sample. While the length in the Swedish sample was more or less stable around an average of 45 pages during the seven-years period, their results showed an increase between 2004 and 2010 from an average of 37.82 pages to 80.45 pages. It should, however,

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be noted that French companies since 2001 have been required by law (Nouvelles Régulations Économiques #2001-420, NRE) to disclose sustainability in their financial reports. Although Chauvey et al (2015) confirm that the compliance with the law is low, this might explain part of the difference in the results.

Theme II: Objective(s) with engaging in sustainability activitiesWhile earlier research has been focused on examining the objectives with engaging in sustainability activities or with deciding to provide sustainability reports using surveys or interview-studies (Campbell, 2007; Kolk, 2010; Searcy, 2012; Solomon and Lewis, 2002; Thorne et al. 2014), if and how these objectives are communicated to the company’s various stakeholders via the sustainability report has not been at focusing. Analysing the sustainability reports soon reveals that there is not much focus on illuminating what objective(s) management teams have when they decide to engage in various sustainability activities. The sections, or better yet, few sentences devoted to this are brief and include general information. This diminutive focus on objectives is in line with the findings in Arvidsson (2017) on sustainability disclosure in annual reports. However, both these studies conclude that the way companies communicate their objective(s) with engaging in sustainability activities has undergone a certain sophistication over the seven-years period. Nevertheless, the findings herein strongly support the notion posed by Salzmann et al. (2005) that we still lack a clear and sufficient understanding of what objectives management teams have with engaging in sustainability activities. In 2008 the companies appear to struggle hard with formulating their objectives with engaging in these activities. Reviewing Table 5 shows that more than 3 out of 4 companies provide vague objectives like “stronger, lighter and more sustainable world” and “We seek to be good corporate citizens by focusing on our work and efforts in areas in which we believe we can provide benefits in contributing to sustainable development”. The rest (21.4 per cent) provide more elaborated objectives like “Our business operations shall be run in a way which is economically, socially and environmentally sustainable. With ‘sustainable’ we mean that the needs of both present and future generations must be fulfilled”. None of the companies quantify their objective. 14.2 per cent of the companies did relate, however in quite general terms (e.g. “the foundation for our value creation”), their objective(s) to the value creation of the company.

ObjectiveElaborated objectiveOne-linerVague objectiveQuantification of objectiveRelate to value-creation processAspects on extent (brief/long)Aspects on content (general/elaborated; quantitative/qualitative)Aspects on structure (unclear/clear)

21.4 %-

78.6 %No

14.2 %Brief

GeneralQualitative

Unclear

17.6 %35.3 %47.1 %

No23.5 %Brief

GeneralQualitative

Unclear

50.0 % -

50.0 %No

25.0 %Brief

GeneralQualitative

Unclear

Table 5. Results from the analysis of Theme II: Objective(s) with engaging in sustainability activities

In 2013, we see about the same proportion of companies with elaborated objectives (17.6 per cent). The difference compared to 2008 is the decrease in companies providing vague objectives (47.1 per cent compared to 78.6 per cent in 2008) and the increase in one-liners (from 0 per cent in 2008 to 35.3 per cent in 2013). There is still no quantification of objectives. There is a slight increase in the number of companies (from 14.2 to 23.5 per cent) relating its objective with engaging in sustainability activities to the value-creation process.

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A further sophistication appears in the sustainability reports from 2015, where 50.0 per cent of the companies now provide elaborated objectives motivating why they engage in sustainability activities. We find the other half of the companies at the opposite end, thus, they still provide quite vague objectives. This is a significant difference as to how objectives are communicated in annual reports in 2015 (see Arvidsson, 2017), where only 7.4 per cent of the companies provide such vague objectives. Thus, judging from this comparison, the sophistication has not come so far in the sustainability reports as in the annual reports at least not when objectives are concerned. However, more companies relate their objective to their value-creation process (25 per cent) in the sustainability report than in the annual reports where none of companies relate their objectives neither to value creation nor to the value chain. A quantification of objective is absent in both sustainability and annual reports (Arvidsson, 2017).

Theme III: Stakeholder relationsIn 2008, 76.9 per cent of the companies discuss stakeholders in their sustainability reports (see Table 6). Thus, there is more focus on stakeholders in the sustainability reports than in annual reports where 66.7 per cent of the companies included sections on stakeholders (see Arvidsson, 2017 in Table 1). This is true for all the examined years.

Stakeholder relationsFocused upon stakeholdersStakeholder-identification analysisStakeholder engagement/dialogueMateriality assessmentAspects on extent (brief/long)Aspects on content (general/elaborated; quantitative/qualitative)Aspects on structure (unclear/clear)

76.9 %No

42.9 %14.3 %Brief

GeneralQualitative

Unclear

82.3 %No

62.5 %81.3 %

Less briefLess generalQualitative

Less unclear

90.9 %8.3 %83.3 %91.7 %Long

ElaboratedQualitative

Less unclear

Table 6. Results from the analysis of Theme III: Stakeholder relations

A difference compared to the study on annual reports (ibid), is that the sections related to stakeholders in the sustainability reports undergo a sophistication during the seven-years period. While the sections are quite unstructured and the information general at the beginning of the period, the reports from 2013 and 2015 reveal improved structures and include less general and even quite elaborated information especially the sections related to stakeholder engagement/dialogue and materiality assessment. Only two companies use the definition ‘key/main’ stakeholders, while the rest only present their stakeholders without sorting or ranking them after importance (Freeman, 1984; Mitchell et al. 1997). The number of stakeholders put forward is quite high. A great majority of the companies lists six to seven stakeholders, one company even lists 10 stakeholders. This accentuates that there are many stakeholders “affected” by a company’s sustainability manner. Shareholders, customers and employees are the three stakeholders, which most companies include. The focus on customers and employees is similar to the findings in Tewari (2011) who analyse sustainability disclosure in annual reports from 2008/2009 (see Table 1). A remarkable difference compared to earlier studies is that almost half of the companies highlight stakeholder engagement or dialogue in the sustainability report. Although these sections are quite unstructured and often lack exemplifications, which is in line with the findings in Manetti (2011) of fragmented sections on stakeholder engagement, this was not even mentioned in any of the annual reports from 2008 (Arvidsson, 2017). 14.3 per cent of the sustainability reports from 2008 include a

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materiality assessment. These assessments range from being quite sophisticated to very general.

Turning to the sustainability reports from 2013, we see an increased focus on stakeholders. Now 82.3 per cent of the companies discuss stakeholders. The sections on stakeholders are still quite unstructured but the information is a bit less general than in 2008. Still the companies present long lists of their stakeholders without referring to them as ‘key/main’ or ranking them. Shareholders, customers and employees are still the three most included stakeholders. There is even more focus on stakeholder engagement and dialogue. 62.5 per cent of the companies put forward this as an important activity. While half of these companies elaborate quite a lot on which stakeholders they engage with and how the organise this engagement, the other half are quite brief in their presentations and do not provide much information on how they actually engage in stakeholder dialogue. The most notable difference between the reports from 2008 and 2013 is the huge increase in the proportion of companies including materiality assessments from 14.3 to 81.3 per cent. Also here half of the assessments are elaborated, while the other half is more general and unstructured. In annual reports from 2013, stakeholder engagement and materiality assessments were still more or less absent (Arvidsson, 2017), which is a finding relevant for future studies to explore further.

In 2015, 90.9 per cent of the companies focus on stakeholders in the sustainability reports (81.5 per cent in the annual report, see Table 1). The sections appear to have reached a more developed structure and are less fragmented and more focused. Even though the structure appears more developed, much of the information is still on the same ‘less general’-level as in 2013. The lists of stakeholders put forward are shorter. Now employees, customers and suppliers are the three stakeholders most often included. Thus, shareholders are not among top three any more, which can be worth noticing Two companies use the definition key stakeholders and one company even makes a quite sophisticated attempt to provide a stakeholder-identification analysis based on influence and interaction. The rest of the companies continue to list their stakeholders without any ranking order. Although some improvements appear to have started in 2015, the overall findings herein lend credence to the conclusion in Herremans et al (2016) of neglected stakeholder identification and further highlight the need for future sustainability disclosure to include this focus (Onkilia, 2014). Stakeholder engagement is discussed in eight out of ten sustainability reports, while materiality assessments are included in nine out of ten reports. The sections on stakeholder engagement are now quite sophisticated, where the companies include examples of dialogue activities directed to different stakeholders and also how the outcome of these engagement activities are incorporated in operations. In common to these sections is that the companies put forward that these dialogues or stakeholder surveys are recurring events of “…annual…” or at least “…semi-annual” character. The objective with these engagement activities appear primarily to be to provide various stakeholders with information about the achievements the company is doing on the sustainability arena and sometimes also to check that the company is focusing on the right things, e.g. gaining legitimacy (“…important to know the needs and wishes of our stakeholders”, “present the main sustainability areas…” “…provide key stakeholders with information on our sustainability activities”). Judging from how companies discuss their stakeholder-engagement activities, they seem to adopt a mix of stakeholder-information and stakeholder-response strategy (Morsing and Schultz, 2006). Thus, there appears to have been a development since 2008 when Manetti (2011) concluded that sustainability reports lacked objectives and details on stakeholder engagement. Judging from the herein results, stakeholder relations is a theme, which has undergone some enhancement in sustainability reports. Analysing the materiality assessments also show a gradual

15

enhancement over the seven-years period. Beginning in 2013, more than half of the companies now include detailed materiality assessments where it is often stated the purpose of the assessment, how sustainability criteria included in the assessments were chosen and how the outcome of the assessment is used in the company.

Theme IV: Sustainability indicatorsWhen sustainability reports are examined it appears evident that sustainability indicators are troublesome for most companies, especially the development of valid and reliable measures of sustainability (see Carroll, 2000). In 2008, only 14.2 per cent of the companies include sustainability indicators (in the area of energy efficiency) (see Table 7).

Sustainability indicatorsSustainability indicators in sustainability reportTarget/time frameRelate to value-creation processAspects on extent (brief/long)Aspects on content (general/elaborated; quantitative/qualitative)Aspects on structure (unclear/clear)

14.2 %NoNo

BriefGeneral

QuantitativeUnclear

17.6 %ad hoc

NoBrief

GeneralQuantitative

Unclear

16.7 %ad hoc

NoBrief

GeneralQuantitative

Unclear

Table 7. Results from the analysis of Theme IV: Sustainability indicators

In line with the study on annual reports (Arvidsson, 2017, see Table 1), these indicators are kept very general, are not firm specific and lack both targets/timeframes and a communicated relation to the company’s value creation. Even though the proportion of companies disclosing sustainability indicators indeed is very little and these sections appear quite unfinished, almost all sustainability reports from 2008, include a section focused on this area. Even though these sections often lack both indicators and a clear structure, it is unmistakable that companies either want or feel that they are expected to communicate that they are making efforts in this area. They do this often by a qualitative discussion without targets and time frames but with several highlights from the year. Below are three examples:

“The company is investing in the development of black pellets. This new bio-based product has the potential to replace fossil coal in many applications”

“We commissioned the world’s first gas-insulated switchgear with a new eco-efficient gas developed as an alternative to sulphur hexafluoride (SF8)”

“Our partnership with REFUNITE helps refugees reconnect with their love ones”

Not much has happened between 2008 and 2013 when sustainability indicators are concerned. 17.6 per cent of the companies include sustainability indicators. They are still not related to the company’s value-creation process. The structure of these sections is still quite unclear. A difference from 2008 is that more companies, although they seldom disclose indicators, discuss their sustainability achievements in relation to status, progress and outcome, thus, an ad hoc focus on targets/time frames. Still most focus is on highlights from the year.

In 2015, about the same proportion of companies include sustainability indicators (16.7 per cent). However, the sections are now a bit more structured with tables and summaries of

16

objectives/targets (although time frame is often still lacking). Even when this improvement is considered, the herein findings support the conclusion in Perez and Sanchez (2009) of the need for these sections to be significantly improved. The scepticism from stock-market actors towards the unfinished and unclear nature of these indicators appears well founded (Arvidsson, 2014; Radley Yeldar, 2012). Just like in the previous examined years, highlights from the year are the focus in this section. Thus, the structure of the section appears to be more developed, however, the information is still rather general. Ad hoc inclusion of target and time frame and still no relation to the value-creation process. According to Arvidsson (2011) management teams are not too interested in commenting on the relation between sustainability indicators and the value-creation process. In sum, it is problematic for an external stakeholder to value or assess the achievements made by a company. Overall the findings from the seven-years analysis of sustainability indicators in sustainability reports supports the argument in Arvidsson (2017) that Swedish companies do not yet provide effective sustainability disclosures. This is based on the notion that effective sustainability disclosures must include measureable goals and quantitative indicators that track sustainability performance (Epstein and Roy, 2001; MacLean and Rebernak, 2007; Searcy, 2012). Although there is a maigre focus on sustainability indicators for the whole seven-years period, there does not seem to be a unison view of which indicators to include. This is in line with the findings in Roca and Searcy (2012) of a diversity of indicators in sustainability reports from 2008 (see Table 1). Theme V: Voluntary-sustainability standardsThere is a modest, however, increasing trend among companies to put forward in the sustainability report that they are signatories to the UNGC (see Table 8). In 2008, 42.9 per cent of the companies did this. Five years (seven years) later 47.1 per cent (50.0 per cent) did this. The companies only briefly present their relationship with this principle-based standard. Only in two of the reports is a list of the principles related to UNGC included, otherwise the information is kept general lacking any firm-specific information of how these principles are affecting the business and its various operations. Both the amount of focus placed on UNGC and the brief and general nature of these sections are in line with how Swedish companies communicate UNGC in their annual reports (Arvidsson, 2017).

Voluntary-sustainability standardsUNGC (principle-based standard)Signatories to UNGCAspects on extent (brief/long)Aspects on content (general/elaborated; quantitative/qualitative)Aspects on structure (unclear/clear)GRI (reporting-based standard)Apply GRIInclude GRI indicatorsAspects on extent (brief/long)Aspects on content (general/elaborated; quantitative/qualitative)*

Aspects on structure (unclear/clear)

42.9 %Brief

GeneralQualitative

Unclear

50.6 %50.0 %Brief

General-

Unclear

47.1 %Brief

GeneralQualitative

Unclear

70.6 %91.7 %Brief

General-

Unclear

50.0 %Brief

GeneralQualitative

Unclear

75.0 %33.3 %Brief

General-

Unclear

Table 8. Results from the analysis of Theme V: Voluntary-sustainability standards

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*No classification of the content in the GRI sections is made related to quantitative/qualitative. Instead it is highlighted if the annual reports include GRI indicators (see Table 8). These GRI indicators are of both quantitative and qualitative nature.

While the increasing trend is modest for UNGC, there is a dramatic increase of companies communicating in their sustainability reports that they apply to GRI. In 2008, half of the companies communicated that they apply to GRI. In 2013, this figure rose to 70.6 per cent and in 2015 it was 75.0 per cent. These findings are in line with the survey from KPMG (2015:42), which found that 72 per cent of the G250 companies referred in their sustainability reports that they applied to GRI in 2015 and 74 per cent did it in 2013. Comparing the results to Arvidsson (2017) reveals that Swedish companies, for the whole seven-years period, refer more to GRI in the sustainability report than in the annual report.

While about half of the sustainability reports included a GRI index with indicators in 2008, 2013 was the year when almost every of the examined reports included this section. The inclusion of GRI indicators in the sustainability reports is more frequent than in both annual reports from Swedish companies (Arvidsson, 2017) and in sustainability reports from Canadian companies (Roca and Searcy, 2012). Although, there was a dramatic decrease in 2015 and only one third of the reports included a GRI index and indicators it is still at the same level as in the above two studies (see Table 1). There is a reference in some of the reports that the GRI index and indicators can be found in a separate document or on-line. In line with the findings in Roca and Searcy (2012) is that the indicators included in the reports are quite a mix. Thus, there does not appear to be an agreed upon set of indicators that are regarded to be especially motivated to focus upon. This is probably a drawback stemming from the voluntary nature of the reporting-based standard.

There is no correlation, for any of the examined years, between those stating that they are signatories to UNGC and the companies applying to GRI. In common to all the examined years and to the findings in Arvidsson (2017, see Table 1) is that the companies include only brief sections related to GRI and that the information in these sections is kept general and not elaborated on, which renders difficulties for stakeholders to assess how it actually affects a company to apply to GRI. The same is applicable for the UNGC.

Concluding remarksThe purpose of this paper was to provide a comprehensive analysis of multiple aspects related to how the extent, content and structure in sustainability reports from large listed Swedish companies de facto have developed during the last decade. First of all, there are positive trends related to extent, content and/or structure in more or less all the five sustainability themes at focus in the reports. Thus, Swedish companies appear to merit the epithet ‘good reporters of sustainability information’. However, some of these positive trends are in fact quite modest. Considering that the study focuses on sustainability reports from a seven-years period, it is somewhat disquieting that the progress has not been greater. Except for the theme ‘stakeholder relation’, the sections and the sustainability information per se are quite unstructured, brief and general. Thus, in line with earlier studies (Arvidsson, 2017; Chauvey et al, 2015; Kolk, 2008), the herein findings also indicate that there is room for improvements when it comes to the informational quality of sustainability reports.

The most elaborated and detailed theme is stakeholder relations. During the seven-years period, the companies appear to have directed much of their attention to enhance this section in the sustainability reports. Elaborated sections on stakeholder engagement and detailed materiality assessments are relatively common in the reports from the end of the examined

18

period. But also in this theme is the informational quality not all satisfying. Considering that a well-defined stakeholder-identification analysis is argued to be a vital foundation to build stakeholder relations upon (see Freeman, 1984; Mitchell et al, 1997), it is, however, problematic that this appears to either be a more or less neglected area or kept so general that it becomes irrelevant. This disappointed finding unfortunately supports the findings in earlier studies (Herremans et al. 2016; Onkilia, 2014). Thus, the findings underpin the notion that sustainability reports are somewhat fragmented in character. Not only does the enhancement (or lack of enhancement) differ between different themes, it also differs within a theme.

Comparing the sustainability reports soon reveals that every report more or less has its own emphasised focus and structure. There does not appear to be any consensus among companies on what sustainability information should be included in the report or how it should be presented and structured. This discrepancy in report structure and scope are in line with Davis and Searcy (2010) and suggests a lack of standards and expectations of what is considered a sustainability report. As an outsider it is paired with substantial difficulties to assess a company’s sustainability achievements from the information provided in the sustainability report. Comparing the achievements made by one company with the achievements made by an other company seems almost impossible. This lends credence to the findings in Radley Yeldar (2012:3) about capital-market stakeholders finding it difficult to assess and benchmark sustainability information the way it is presented in today’s reports. This is an important vein for future research to examine further, especially since the first reports based on EU’s directive for sustainability reporting (2014/95/EU ‘Directive on disclosure on non-financial and diversity information by certain large undertakings and groups’) will be published in 2018 covering the financial year 2017. Although this directive encourages companies to rely on recognized standards like GRI and UNGC these are still voluntary. Thus, the directive does not launch a special structure or format for how companies should provide this information in their reports. Instead it is up to the companies to interpret the directive and develop a suitable structure themselves. Considering that companies already today do rely on these standards and that the reports nonetheless exhibit such diversity in structure and scope, the prospects for better structured reports in the near future seems a bit daunting.

Searcy and Buslovich (2014) concluded in their interview-study that companies reveal that they disclose the same sustainability themes in the annual report as in the sustainability report. The level of detail is, however, argued to be different. The herein findings partly support this. The sustainability reports include more detailed information related to the theme stakeholder relations (more overall focus, elaborated sections on stakeholder engagement and materiality assessment) and to some extent also to the theme voluntary-sustainability standards, which attracts a little more focus than in the annual reports (see Arvidsson, 2017 in Table 1). The analysis of the other sustainability themes does not lend any support to the notion that there should be differences in level of detail between sustainability reports and annual reports.

Like all studies, the present study also suffers from certain limitations. Herein, extent, content and structure related to sustainability reports are only examined for the largest listed companies and, therefore, can the findings not be generalized to smaller companies. Similarly, the focus is on Swedish companies. According to several researchers, sustainability disclosure varies across regions (see e.g. Dhaliwal et al, 2012; Simnett et al, 2009) and different findings may appear in an other country setting. Thus, future studies might want to build further on the themes at focus herein but on a sample including smaller (non-listed) companies with a domicile outside Sweden. Additionally, a more detailed analysis of the use of web-based media for sustainability disclosure is outside the scope of this study. However, a gradual shift

19

towards a web-based reporting practice related to sustainability can be noted during the seven-years period. This is in line with earlier studies (see de Villiers and van Staden, 2011; Isenmann, 2005) and constitutes a relevant scope to include in future research on sustainability disclosure.

In sum, the present study confirms a need both for further national and international initiatives (e.g. standard setting, laws, regulation and assurance) aimed at foster informational quality improvements in sustainability reporting and also for a holistic approach when management teams develop their sustainability reports. In order for the sustainability report to constitute the so vital dialogue between a company and its stakeholders (Gray et al. 1995), it must be considered sufficient, credible and value relevant. First then, can this report really become useful in the decision-making processes of various stakeholders. Although, there seem to remain fairly much work before the search for informational quality in sustainability reports can be called of, the mission of developing sustainability reports of high informational quality is global, dynamic, enthusiastic and well worth the time and efforts involved. So, let us jointly continue this mission!

Notes1 Considering, the herein key foci on sustainability reports the continued review will concentrate on research with this orientation.2 Throughout the paper, sustainability report refers to the written stand-alone sustainability report

(WSASR).3 The focus of the present study is on the written stand-alone sustainability reports (WSASR).

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APPENDIX 1

Swedish companies included in the disclosure study

Company GICS codeABB IndustrialsAlfa Laval AB IndustrialsAssa Abloy AB IndustrialsAtlas Copco AB IndustrialsBoliden AB Basic MaterialsElectrolux AB Consumer GoodsEricsson AB TechnologyGetinge AB Health CareHennes & Mauritz AB Consumer ServicesInvestor AB FinancialsLundin Petroleum AB Basic MaterialsModern Times Group MTG AB Consumer ServicesNordea Bank AB FinancialsSandvik AB IndustrialsScania AB IndustrialsSecuritas AB IndustrialsSEB AB FinancialsSkanska AB IndustrialsSKF IndustrialsSSAB AB Basic MaterialsSCA AB Consumer GoodsSvenska Handelsbanken AB FinancialsSwedbank AB FinancialsSwedish Match AB Consumer GoodsTele2 AB TelecommunicationsTeliaSonera AB TelecommunicationsVolvo AB Industrials

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