Audit Committee and ESG Disclosure: Advancing SDG for Sustainable Performance in State-Owned Enterprises

Objective: This study investigates the role of audit committees in enhancing ESG disclosure and fostering sustainable performance in State-Owned Enterprises in Indonesia. The research seeks address the unique governance challenges faced by state-owned firms, thereby bridging the gap in existing literature that primarily emphasizes private-sector entities. Theoretical Framework: The research utilizes legitimacy theory and stakeholder theory as its conceptual framework to highlight the impact of audit committee characteristics—independence, financial expertise, size, and meeting frequency—on the promotion of ESG practices. Method: The methodology for this research comprises A quantitative technique was employed, drawing on data from the financial and sustainability reports of 20 state-owned businesses listed on the Indonesia Stock Exchange (IDX) from 2018 to 2022. Structural Equation Modeling (PLS-SEM) was employed to assess the mediating effect of ESG disclosure on the relationship between governance systems and organizational performance. Result and Discussion: The results obtained revealed effective ESG disclosure acts as a critical link between certain audit committee attributes and corporate performance. While size and meeting frequency alone are insufficient, integrating expertise and independence into strategic governance practices is vital for achieving transparency and enhancing performance. Research Implication: The implication of this study to accounting research is both theoretical and empirical in nature. It theoretically enhances the comprehension of the audit committee's developing function in the context of sustainability. It empirically offers insights into the practices and issues encountered by SOEs in integrating ESG factors into their governance frameworks. This research promotes the awareness of how strong governance frameworks can promote sustainable performance and institutional integrity by aligning governance practices with the objectives of SDG 16, hence aiding global sustainability initiatives. Originality/Value: This research is crucial as it provides actionable insights for enhancing governance in state-owned firms, ensuring their alignment with sustainability objectives and strengthening public trust, particularly in developing countries.