Influence of board characteristics on TBL reporting

• DOI: https://doi.org/10.1108/CG-06-2019-0187
• Pages: 765-780
• Date: 03 June 2020
• Published date: 03 June 2020
• Author: Sandira Nursimloo,Dinesh Ramdhony,Oren Mooneeapen
• Subject Matter: Corporate governance,Strategy

Inf‌luence of board characteristics on

TBL reporting

Sandira Nursimloo, Dinesh Ramdhony and Oren Mooneeapen

Abstract

Purpose –This paper aims to investigate the influence of board characteristics on triple bottom line

(TBL) reporting, both at aggregateand component level (environment, social and economic) for the top

50 companiesin New Zealand.

Design/methodology/approach –Content analysis is used to create reporting indexes for 2016 and

2017, which serve as proxy for TBL reporting. Regression analysis is then used to investigate the

associationbetween board characteristicsand TBL reporting, along with its separate components.

Findings –This paper finds significant positive associations of TBL with profitability and firm size;

environmentalbottom line with board size and profitability; socialbottom line with board size, profitability

and firm size; and economicbottom line (ECO) with firm size. A significant negative associationis found

betweenECO and leverage.

Practical implications –This study provides incentives for companies to adopt TBL reporting as the

findings show a positive association between the extent of reporting and profitability. This implies that

companies should improvetheir level of reporting while ensuring that voluntarydisclosures show a true

and fair viewto maintain a healthy relationship with theirstakeholders.

Originality/value –To the best of theauthors’ knowledge, this study is the firstattempt to investigate TBL

reporting along withits separate dimensions in the NZ context. It takes into accountrecent changes that

occurred in the corporate environment in New Zealand as well as new practices that emerged in the

world, especiallythe diffusion of the Global Reporting Initiativeand the International Integrating Reporting

CouncilFramework.

Keywords New Zealand, Environmental, Integrated reporting, Corporate governance, Determinants,

Board characteristics, Social, Economic, Triple bottom line, Reporting practices

Paper type Research paper

1. Introduction

In the dynamic business environment of today, the incorporation of sustainability in

corporate values and objectives has become mainstream. As such, there has been a

momentous shift in thinking with regard to improving the sustainability performance of

organisations. The concept of triple bottom line (TBL) stresses on measuring both financial

and non-financial performance of organisations. TBL emphasises on the interconnected

dimensions of profit, people and the planet. A bar stool can be used as an analogy for TBL

reporting. Each of its legs represents a bottom line, that is, profit, people and planet which

carry equal weight and receive equal benefit. When one of the legs or dimensions is

removed, the stool or business model will fall apart. It is thus essential to recognise that all

three bottom lines play a crucial rolein business and should always be kept in equilibrium.

TBL reporting is a departure from the traditional focus of companies in maximising their

economic or financial bottom line (Kent and Monem, 2008), and focusses on economic,

social and environmental sustainability. Just as its neighbour Australia, New Zealand(NZ) is

a key financial centre in the Asia-pacific region, and a developed country with sound

institutions and regulations. This study allows the determination of the extent of

Sandira Nursimloo,

Dinesh Ramdhony and

Oren Mooneeapen are all

based at University of

Mauritius, Reduit, Mauritius.

Received 24 June 2019

Revised 11 November 2019

8 January 2020

Accepted 24 February 2020

DOI 10.1108/CG-06-2019-0187 VOL. 20 NO. 5 2020, pp. 765-780, ©Emerald Publishing Limited, ISSN 1472-0701 jCORPORATE GOVERNANCE jPAGE 765

implementation of TBL reporting in NZ companies. Because the decision to disclose

information in the annual report emanates from the board (Muttakin and Subramaniam,

2015), this paper examines the influence of board characteristics on TBLreporting in NZ as

it is consequential to detect practices and strategies that will allow firms to meet present

needs without hindering their ability to meet the needs of future generations (Padin et al.,

2016). The paper does so by using the stakeholder theory as theoretical lens. Even though

other theories have been used in such a context, all of them are somehow associated with

the stakeholder theory (Duranand Rodrigo, 2018).

This study investigates the influence of board characteristics on TBL reporting, along with

its separate components, by the top 50 companies on the New Zealand Stock Exchange

(NZX). This study adds new insights and valuable information to the current literature in NZ

as it takes into account several variables, such as gender, that were not assessed

previously.

The New Zealand Business Council for Sustainable Development (NZBCSD), founded in

1999, was a catalyst for promoting the development of TBL reporting. Other promoters of

TBL reporting include the Ministry of Environment, the Institute of Chartered Accountants of

New Zealand and consultancy firms such as Deloitte, KPMG and PWC (Chapman and

Milne, 2003). It was expected that TBL reporting would gain consensus in the years

2000–2010. Many studies have been concentrating on the measurement of the extent and

quality of TBL disclosures in reports made by companies in New Zealand. For instance,

Chapman (2003) examined the most and the least disclosed information by companies in

the years 2001 and 2002. More recently, Dobbs and Van Staden (2016) examined the

possible motivations of companies to disclose social and environmental information, in

particular, the top 100 companies listed on the stock exchange in NZ.

Because only a few studies have targetedcompanies listed on the NZX, this paper will be a

valuable addition to the literature in NZ. This paucity may be partly linked to the fact that

companies in NZ are not that large. The farming and forestry industries are the main drivers

of the New Zealand economy (Collins et al.,2010). Many researchers have preferred

investigating sectors such as agriculture. For instance, De Silva and Forbes (2016) have

explained the level of engagement and sustainability practices that exist in the domain of

horticulture. In the same vein, motivations and drivers of sustainability practices have been

analysed in the wine industry, with a focus on the role of stakeholders and local institutions

(Gabzdylova et al.,2009). According to a report published in 2013, the NZ Governmenthas

aimed to achieve the goal of a sustainable country. However, in 2011, a survey conducted

by KPMG revealed that only 27% of the top 100 companies in NZ disclosed CSR

information (Dobbs and Van Staden (2016)). In a country where the majority of companies

are SMEs (more than 90%), examininglisted companies gives new insights into reporting at

that level. Also, the study takes two recent years as the basis and hence provides an

updated state of TBL reporting in NZ.

The originality of this research is discernible as it takes into account recent changes that

occurred in the corporate environment in New Zealand as well as new practices that

emerged in the world, especially with the diffusion of the Global Reporting Initiative and the

International Integrating Reporting Council Framework, in the past five years. In 2016, the

NZX successfully joined the Sustainable Stock Exchange Initiative (SSEI), which is a global

platform. It is expected that being linked to the SSEI will provide enhanced visibility to the

NZSX. As such, social and environmental disclosures will become more critical for NZ firms.

However, it is yet to be assessed whetherNZ firms have moved in that direction.

Furthermore, the NZX published the Corporate Governance Code. Recommendation 4.3

explains that: “Financial reporting should be balanced, clear and objective. An issuer

should provide non-financial disclosure at least annually, including considering material

exposure to environmental, economic and social sustainability risks and other key risks. It

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