Vol. 5, No. 9, September 2024
E-ISSN: 2723-6692
P-ISSN: 2723-6595
http://jiss.publikasiindonesia.id/
Jurnal Indonesia Sosial Sains, Vol. 5, No. 9, September 2024 2163
KEYWORDS
ABSTRACT
Board Size; Independent
Commissioners Women
board of director; Financial
performance; Audit
Committee Sustainability
report disclosure; G20; SGD;
Environmental Performance;
PROPER Score
This study aims to analyze the effect of corporate governance on
sustainability report disclosure, with environmental performance
acting as a moderating variable. The analysis focuses on the role of
the board of directors, independent commissioners, audit
committees, and financial performance in influencing the quality of
sustainability reporting, particularly within the Indonesian context.
Environmental performance is measured using the PROPER scale.
The study utilizes data from the annual and sustainability reports of
20 companies in the basic materials and energy mining sectors listed
on the Indonesia Stock Exchange from 2018 to 2022, amounting to
100 observations. The data is processed using SPSS 23. The results
show that the presence of female directors significantly enhances
the quality of sustainability disclosures, as they tend to prioritize
social responsibility. Moreover, financial performance, as measured
by Return on Assets (ROA), positively affects sustainability
reporting, with companies in better financial health being more
transparent in their disclosures. Environmental performance, when
combined with strong independent oversight, further improves
reporting quality, reflecting the positive influence of independent
commissioners and sound financial governance. The study
concludes that environmental performance, as measured by the
PROPER scale, plays a significant role in improving sustainability
disclosures in Indonesia. It recommends that the Indonesian
government provide stronger support and clearer regulations to
help companies improve their sustainability practices and
contribute to the G20 agenda.
Attribution-ShareAlike 4.0 International (CC BY-SA 4.0)
Introduction
Global warming, pollution, and ecosystem extinction are sustainability issues facing the world.
Some of the sectors most affected by these environmental and social problems are the raw material
Impact of The Corporate Governance on Sustainability Report
Disclosure with Environmental Performance as A Moderation
Variable in Indonesia
Dewi Windary Rumaningsih, Toto Rusmanto
Universitas Bina Nusantara, Indonesia
Email: dewi.rumaningsih@binus.ac.id, trusmanto@binus.edu
Correspondence: dewi.rumaningsih@binus.ac.id*
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manufacturing sector and the energy sector (Subramaniam et al., 2023). It is one of the backgrounds
to the development of the 2030 Sustainable Development Agenda, the 13th Goal on Climate Change
Management, which is a global agenda adopted by all United Nations member states since 2015. This
implementation is beneficial for environmental sustainability in the future (United Nations,
Department of Economic and Social Affairs Sustainable Development) (Suharyono & Hs, 2023).
Indonesia is also very concerned about this global issue. One of the strategic goals and benefits
of the G20 is to be a strategic forum to discuss global issues such as global warming, pollution, global
health, and ecosystem extinction (Kemenkeu, 2022). In line with Indonesia's commitment as a G20
member, the Ministry of Habitat and Forestry has developed a program to raise environmental
management awareness (Jati et al., 2023). The program was created to provide an assessment of
environmental management compliance as well as the performance of an Environmentally Careful
Company. This program is called PROPER (Bramanti et al., 2021).
In addition to the PROPER Assessment, the indication that a company cares about management
and environmental performance aspects is to publish and explain the state of its company in a
sustainability report or sustainability report (Bramanti et al., 2021). In today's era, sustainability
reports are not only used as an indicator of the company's management and environmental
performance. However, they can also be used to provide non-financial information and company
strategy, as well as company operations that are very useful to investors (Cormier & Magnan, 2014;
Haque et al., 2018).
Data related to economic, environmental, and social aspects are the main concerns of corporate
stakeholders who are seeking transparency, and one of them is environmental management, waste,
and environmental performance (Akisik & Gal, 2011; Baboukardos, 2018; Chouaibi et al., 2021;
Murashima, 2020; Welbeck et al., 2017). Therefore, the Company must have a strategy in the
management of waste generated based on sustainability financial reporting in accordance with
Financial Services Authority Regulation No. 51/POJK.03/2017 on Sustainable Financial Applications
for Financial Services Institutions, Emittents, and Public Companies. A sustainability report is a report
announced to the public that displays the economic, financial, social, and environmental performance
of an LJK, issuer, and public company in conducting sustainable business based on the Global
Reporting Initiative (GRI) Standard (POJK, 51).
However, there is still a gap in the understanding of how corporate governance plays a role in
sustainability disclosure, especially when influenced by environmental performance. For example,
although some previous studies have examined the influence of corporate governance on
sustainability report disclosure, such as studies by Ben-Amar et al. (2017) and Chouaibi et al. (2022),
there are limited studies that specifically explore the moderating role of environmental performance
in the Indonesian context.
This study focuses on the effect of corporate governance including board size, female board of
directors, independent commissioners, financial performance, and audit committee on sustainability
report disclosure, considering environmental performance as a moderating variable. Although
various studies have explored the relationship between these factors, most studies were conducted
in Western countries with different governance structures (Bae et al., 2018; Mahmood et al., 2018;
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Masud et al., 2018). This research seeks to fill the literature gap by providing empirical evidence from
the Indonesian context, which has unique governance and sustainability policy characteristics.
A number of previous studies have found that corporate governance, such as gender diversity
in the board and audit committee structure, has a significant impact on the quality of sustainability
disclosures (Ben-Amar et al., 2017; García‐Sánchez et al., 2019). However, these studies have also
found that specific context, such as environmental performance and local regulations, can moderate
this relationship (Chapple & Humphrey, 2014; Chouaibi et al., 2021). Therefore, this study offers a novel
contribution by exploring how environmental performance, as measured through PROPER score in
Indonesia, moderates the effect of corporate governance on sustainability report disclosure.
The novelty of this study lies in exploring the moderating role of environmental performance
in the context of Indonesian companies listed on the Indonesia Stock Exchange, which differs from
previous studies that are more common in developed countries. By examining the role of this
moderating variable, this study not only provides a new perspective on the influence of corporate
governance on sustainability report disclosure but also highlights the importance of adapting more
specific sustainability policies to the local context, such as in Indonesia.
As such, this study not only contributes to the existing literature on the influence of corporate
governance and environmental performance on sustainability disclosure, but also offers guidance for
policy makers and companies in Indonesia to improve transparency and compliance with global
sustainability agendas such as the SDGs and G20.
Materials and Methods
The object of the research in this study is the size of the board of directors, the Board of
Directors Women, Independent Commissioners, Financial Performance, and Audit Committee on
Sustainability Report Disclosure with moderation variable, namely Environmental Performance. The
subject of the study used is the Annual financial report, which is secondary data, namely the data of
the annual financial report on the company of the primary material and energy sector in 2018 - 2022,
which is listed on the Indonesian Stock Exchange (Figure 1).
Figure 1. Research Framework
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Based on the following model of research, the study formulates the following hypothesis:
H1: The size of the Board of Directors has a positive impact on Sustainability Report Disclosure
H2: Women's Board of Directors Positive Influence on Sustainability Report Disclosure
H3: Independent Commissioners have a positive influence on sustainability report disclosure.
H4: Financial Performance Positive Impact on Sustainability Report Disclosure
H5: Audit Committee has a positive impact on sustainability report disclosure.
H6: Environmental Performance Moderates Board Size to Sustainability Report Disclosure
H7: Environmental Performance Moderates Women's Board of Directors Against Sustainability
Report Disclosure
H8: Environmental Performance Moderates Independent Commissioners Against Sustainability
Report Disclosure
H9: Environmental Performance Moderates Financial Performance to Sustainability Report
Disclosure
H10: Environmental Performance Moderates Audit Committee on Sustainability Report Disclosure
Table 1 Variable Operationalization
Variable
Description
Indicator
Reference
Sustainabilit
y Report
Disclosure
(Y)
Organizations that
publicly report the
impact of economic,
environmental, and
social activities
(Global Reporting
Initiative, 2016)
Based on scoring
level by García −
Sánchez et al (2019)
García-
Sánchez et al
(2019)
Board size
(X1)
A number of
directions per year.
(Ika et all, 2021)
Number of Board Size per
year
(Ika et all,
2021)
Women on
Board (X2)
Number of women's
boards per year.
Number of women sitting on
the board of directors.
Ben-Amar, W.,
Chang, M., &
McIlkenny, P.
(2017).
Independenc
e Director
(X3)
Number of
Independent Councils
per year.
Number of independent
directors on the board
Ben-Amar, W.,
Chang ., M., &
McIlkenny, P.
(2017).
Financial
Performance
(X4)
Liquidity Ratio
ROA = Net Income
Total Asset
Sonia and
Khafid (2020)
Audit
Committee
(X5)
The GCG bodies
responsible for
assisting in the
performance of the
duties and functions
of the manager of the
Commissioner (OJK
Regulation No.55/
PJOK.04/2015)
Number of the audit
committee
Khafid &
Mulyaningsih,
(2017)
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Variable
Description
Indicator
Reference
Environmen
tal
Performance
(EP)
Environmental
performance
measured using
PROPER SCORE
Gold; 5
Green: 4
Blue: 3
Red: 2
Black: 1
(Literature review)
Jati, K. W.,
Agustina, L.,
Ulupui, I. G. K.
A., & Respati,
D. K. (2023
The research obtained data from the BEI website and the official websites of the respective
companies. The secondary data used are the sustainability report and the annual report. Based on
purposive sampling, 20 companies were obtained with the following criteria: 1) Basic Material and
Energy Sector Companies listed on the Indonesian Stock Exchange. 2) Basic Materials and Energy
sector companies listed on the Indonesia Stock Exchange less than 2018. 3) Basic materials and
energy sector companies that publish their annual reports and complete Sustainability Reports in a
row – participated in the period 2018-2022.
In the end, 100 analytical data were obtained, which were then processed for hypothetical testing
using SPSS 23.
Result and Discussion
Table 1 Descriptive statistical analysis
N
Minimum
Maximum
Mean
Std. Deviation
Board size
(X1)
100
5
22
10,22
3,506
Women's
Board of
Directors
(X2)
100
0
3
73
0,851
Independent
Commissione
r (X3)
100
1
4
1,93
0,769
Financial
Performance
(X4)
100
-33
56
5,30
10,064
Audit
Committee
(X5)
100
1
6
1,93
0,769
Sustainabilit
y Report
Disclosure
(Y)
100
25
100
73,75
26,442
Environment
al
Performance
(Z)
100
1
5
2,03
1,403
Table 1 shows that the standard deviation for sustainability reporting, Board size, Board of
Directors, Women, Independent Commissioners, Financial Performance, audit committees, and
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environmental performance is smaller than the average, so it can be concluded that the data spread
is almost the same.
Table 2 Hypotheses testing
Coefficients
Model
Unstandardized Coefficients
Standardized
Coefficients
t
Sig.
B
Std. Error
Beta
1
(Constant)
47.827
11.261
4.247
.000
x1
1.331
.893
.176
1.491
result
Insignifica
nt
x2
7.167
2.931
.231
2.446
.016
Significant
x3
4.934
4.137
.143
1.192
.236
Insignifica
nt
x4
.721
.245
.274
2.944
.004
Significant
x5
-1.960
2.914
-.064
-.673
.503
Insignifica
nt
Coefficients
Model
Unstandardized
Coefficients
Standardized
Coefficients
t
Sig.
B
Std. Error
Beta
1
(Constant)
46.191
18.412
2.509
.014
x1
-1.011
1.570
-.134
-.644
.521
Insignificant
x2
4.972
5.846
.160
.851
.397
Insignificant
x3
22.927
8.712
.667
2.632
.010
Significant
x4
-.125
.498
-.048
-.251
.802
Insignificant
x5
-5.657
4.727
-.184
-1.197
.235
Insignificant
z
-1.220
9.106
-.065
-.134
.894
Insignificant
m1
.846
.673
.562
1.256
.213
Insignificant
m2
.661
2.356
.060
.281
.780
Insignificant
m3
-7.406
3.055
-.974
-2.424
.017
Significant
m4
.768
.382
.444
2.009
.048
Significant
m5
2.053
2.227
.380
.922
.359
Insignificant
a. Dependent Variable: y
Discussion
Board size does not have a significant effect on Sustainability Report Disclosure.
The board size variable above shows a result of 0.139 > 0.05, which indicates that the
hypothesis was rejected because the large board size had no significant influence on the disclosure of
sustainability report disclosures. This is because the size of the board of directors is more significant
and bigger, and the ideas are intended for the company's internal and complex decision-making. This
is in line with a study by Zeeshan Mahmood et al (2018) that found that the large size of the board of
directors does not have a significant impact on the disclosure of sustainability reports. However, it
should consist of women directors and CSR committees (CSRCs). In that case, it is better able to
monitor and control management decisions on sustainability issues (either economic, environmental,
or social) and produce better sustainability disclosures.
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Women's Board of Directors has a significant favourable influence on Sustainability Report
Disclosure.
The variable of the Women's Board of Directors showed a result of 0.016 < 0.05. This suggests
an accepted hypothesis because the women's board of directors had a significant favourable influence
on sustainability report disclosure due to the cautious thinking of all aspects and styles of leadership
that are very concerned with the social, economic, and environmental. This is in line with a study by
Chapple and Humphrey (2014) that revealed that women in top management and their influence on
decision-making always consider aspects of the future.
The Independent Commissioner has no significant influence on the Disclosure of
Sustainability Reports.
The Independent Commissioner variable showed a result of 0.236 > 0.05, which indicates that
the hypothesis was rejected because the independent commissioner had no significant influence on
the disclosure of the sustainability report, as the independent commissioner could not make a
decision and was only advising. The only decision that can be made is by the board of directors. This
is in line with a study by Dewi and Pitriasari (2019), which noted that independent commissioners
do not influence sustainability reporting because they are merely advisory.
Financial Performance Significantly Positive to Sustainability Report Disclosure
The Financial Performance variable proxy with ROA showed a result of 0.010 < 0.05. This
indicates an accepted hypothesis because financial performance has a significant positive impact on
the disclosure of sustainability report disclosures. This is because if the Company has good corporate
health, then the Company will be transparent in the submission of financial and non-financial reports.
This is in line with Sonia and Khafid, (2020) research; Financial Performance is measured by the
probability that a company has a function to determine a company's ability to pay its debts smoothly.
The ability of companies with high profits indicates that the entity is capable of managing its current
assets to the maximum. Moreover, this has a significant impact on the release of the sustainability
report.
The audit committee has no significant influence on Sustainability Report Disclosure.
The audit committee's variable showed a result of 0.503 > 0.05, which indicates that the
hypothesis was rejected because the auditing committee had no significant influence on the
disclosure of the sustainability report. After all, the auditor's committee was only concerned with the
internal company, and the audit committees were formed by an independent board of commissioners
who only contributed advice to the board of directors. This is in line with the Purnama and Handayani
study (2021) that reveals that the audit committee focuses only on the principle of good corporate
governance and has not maximized the sustainability aspect.
Environmental Performance Moderates Board Size to Sustainability Report Disclosure
Environmental performance shows a result of 0.213 > 0.05. This indicates that the hypothesis
was rejected because environmental performance failed to moderate the size of the board of directors
against the disclosure of the sustainability report.
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Environmental Performance Moderates Women's Board of Directors Against Sustainability
Report Disclosure
Environmental performance shows a result of 0.780 > 0.05, which suggests that the hypothesis
was rejected because environmental performance failed to moderate the women's board of directors
against the disclosure of sustainability reports. This is due to whether or not the government's
PROPER board of directors is inclined to take care of the external aspects of social and environmental
issues.
Environmental Performance Moderates Independent Commissioner to Sustainability Report
Disclosure
Environmental performance shows a result of 0.017 < 0.05. This suggests an accepted
hypothesis because a company with an independent commissioner will always provide insight into
good corporate governance and the sustainability of the company itself. The independent
Commissioner provides insight related to sustainability policy, namely the PROPER Score, which is
always encouraged by the government to participate in this program.
Environmental Performance Moderates Financial Performance to Sustainability Report
Disclosure
Environmental performance shows a result of 0.048 < 0.05. This suggests an accepted
hypothesis because a company that has a high profit then will race to comply with the government's
program PROPER. It also provides a good reflection of the company and a good image in a
transcendent way to reveal the sustainability report.
Environmental Performance Moderates Audit Committee on Sustainability Report Disclosure
Environmental performance showed a result of 0.359 > 0.05, so the hypothesis was rejected
because the audit committee focused only on the internal company and did not take into account the
incentive of the government to participate in the PROKER program and the board of directors that
could make decisions.
Conclusion
This study concludes that female board of directors and financial performance have a
significant positive influence on sustainability report disclosure, while board size, independent
commissioners, and audit committees show no significant influence. Environmental performance
proved to moderate the relationship between independent commissioners and financial performance
on sustainability report disclosure. This study recommends that companies in Indonesia increase
gender diversity in the board of directors and strengthen commitment to environmental performance
to improve transparency of sustainability reporting. However, this study has limitations, such as only
covering companies from the basic materials and energy sectors in Indonesia and not considering
other external factors that may affect sustainability report disclosure. Therefore, further research is
recommended to expand the coverage of industry sectors, consider external variables such as
government regulations or stakeholder pressure, and test this approach in various other country
contexts to provide more comprehensive insights.
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