Sustainability Reporting and Financial Performance: Examine the Correlation between Sustainability Disclosures Financial Performance in Publicly Traded Companies

Sustainability reporting has increasingly gained prominence in academia and practice over the past few decades. With growing stakeholder expectations for companies to report on environmental, social, and governance issues, sustainability reporting allows companies to communicate non-financial impacts. While sustainability reporting aims to enhance accountability and transparency, questions remain regarding its influence on corporate financial performance. Some studies have found a positive correlation between sustainability reporting and financial metrics like profitability and share price, arguing reporting leads to more efficient resource management and risk mitigation. However, other research has found no significant relationship or negative impact, noting that reporting requirements incur costs that may outweigh benefits. This comprehensive review aims to provide an in-depth analysis of the existing literature on the correlation between sustainability disclosures and the financial performance of publicly traded companies. Relevant studies from various regions and sectors published between 1990 and 2023 will be reviewed. The methodologies applied, measurement variables, sample sizes, and time frames considered will be evaluated to understand the scope and limitations of each study. Key findings related to the direction and strength of the reported relationship between the two parameters will be summarized and compared. Moderating factors such as company size, industry, cultural context, and disclosure type will also be examined to determine their influence on research outcomes. The review will conclude by outlining existing knowledge gaps, inconsistencies in current empirical evidence, and areas that require further research.