Materiality, stakeholder engagement disclosure, and corporate governance: Critical elements for the quality of sustainability reporting

The aim of this paper is to investigates whether the level of materiality, stakeholder engagement, and corporate governance disclosure enhance the quality of sustainability reporting. The quality measured the by four indexed information dimensions: relative quantity disclosure, density, accuracy, and management orientation. A quantitative content analysis was undertaken on 172 sustainability reports of non-financial Indonesian companies from 2016 to 2020. The hypothesis were tested using a panel data approach. The regression test showed that the level of materiality, stakeholder engagement, and corporate governance disclosure does not lead to the improvement of sustainability reporting quality. Further analysis on each quality dimension found that materiality disclosure has a significant positive effect on the relative quantity disclosure and has no significant effect on companies' density, accuracy, and management orientation of companies. On the other hand, stakeholder engagement and corporate governance disclosure have no significant effect on the quality index, which is consistent with the main test. These results indicate that materiality disclosure has become one of the crucial aspect for companies that significantly increasing their disclosure intention. Furthermore, companies should pay more attention to the quality of information disclosed in materiality disclosures. Finally, government must evaluate the regulation that can encourage companies to present information relevant to sustainability, which can improve the sustainability reporting quality.