Making the grade: An analysis of sustainability reporting standards and Global Reporting Initiative adherence ratings

Sustainability reporting standards provide a systematic way for organizations to describe their environmental, social, and governance (ESG) initiatives to stakeholders. Unfortunately, even organizations that have voluntarily adopted reporting standards may fail to disclose material ESG information to relevant stakeholders. This study aims to investigate how the institutional environment influences an organization's adherence to the Global Reporting Initiative's sustainability reporting standards. Our analysis is based on a panel data sample of 4380 organizations that adopted Global Reporting Initiative's reporting guidelines from 2006 to 2015. Results of a generalized estimating equation model suggest that institutional norms and the pressure to achieve organizational legitimacy lead to relatively high adherence ratings for state-owned enterprises and public institutions, large organizations, publicly traded companies, and organizations that conduct external audits of their reports. Our study has multiple implications for researchers and policymakers. First, we answer calls for more large-scale, cross-country research on sustainability reporting standards. Second, we add to the literature on sustainability reporting by documenting how institutional factors affect the credibility and transparency of ESG information contained within sustainability reports. Third, for policymakers, we identify the types of organizations that are least likely to comply with reporting guidelines. Policymakers can use this information to target underachieving organizations.