Sustainability performance and reporting in Indonesian listed companies

Purpose This study aims to understand sustainability performance in Indonesia, which is a populous nation with abundant natural resources and mandatory sustainability reporting for listed companies, and a high level of corruption. By investigating the motivations and practices of Indonesian companies, they provide insights into how sustainability is interpreted and implemented. Design/methodology/approach A qualitative research approach, informed by stakeholder theory and legitimacy theory, was used. Semi-structured interviews with 27 managers from eight Indonesian listed companies and three managers from two large Indonesian institutional investors were carried out. Content analysis of company sustainability and annual reports was also conducted to triangulate the interview data. Findings This study shows that mandatory reporting in Indonesia does not automatically impact how companies address material issues due to a lack of regulatory detail. The study reveals that there is a hierarchy of relevant stakeholders with both institutional investors and lenders prioritizing financial materiality over impact materiality with institutional stakeholders driving sustainability in environmentally-sensitive industries. The findings also show that companies report on sustainability mainly for legitimacy purposes, which is driven by regulatory and institutional pressures. Environmentally-sensitive industries prioritize impact materiality due to heightened legitimacy risks. The institutional investors focus on “Ultimate Beneficial Ownership (UBO)” as a key governance mechanism while treating environment social and governance risk ratings mainly as supplementary information. Practical implications This study offers practical implications for institutional investors and regulators in developing economies. It highlights the need for clearer materiality guidance and stronger governance mechanisms, such as UBO transparency, to enhance sustainability performance in high-corruption environments like Indonesia. Originality/value This study reveals the influence that mandatory sustainability reporting has in Indonesia, showing that regulatory compliance does not necessarily lead to sustainability impact. The authors also show how institutional factors in developing economies shape double materiality implementation. The research exposes critical gaps in reporting practices, emphasizing the need for a context-specific approach to sustainability performance and reporting.