Mandatory Sustainability Disclosure and Firm Profitability: Empirical Evidence from Nigeria’s Consumer Goods Firms

Sustainability reporting has gained prominence in emerging economies as firms face increasing pressure to balance financial performance with economic, environmental, social, and governance (EESG) responsibilities. In Nigeria, the introduction of the Nigerian Exchange Group’s (NGX) mandatory disclosure guidelines in 2018 created a regulatory framework compelling listed firms to integrate sustainability practices into their reporting. However, evidence on the extent to which these disclosures enhance financial performance remains inconclusive, with studies reporting positive, negative, or insignificant effects. To address this gap, this study investigates the effect of economic (ECSR), environmental (EVSR), social (SOSR), and governance (GOSR) sustainability reporting on the financial performance of listed consumer goods firms in Nigeria, covering the period 2018–2024, which corresponds to the mandatory disclosure regime. Anchored on Legitimacy Theory and the Resource-Based View (RBV), the study employed an ex post facto research design. The population comprised 21 consumer goods firms listed on the NGX, of which 16 with complete data formed the sample, yielding 112 firm-year observations. Secondary data were extracted from annual reports and sustainability disclosures, with return on assets (ROA) as the dependent variable and ECSR, EVSR, SOSR, and GOSR as independent variables. Panel regression analysis was conducted, with diagnostic tests guiding the adoption of the Generalized Least Squares (GLS) random-effects estimator with cluster-robust errors. The results show that EVSR significantly improves ROA, SOSR exerts a negative effect, while ECSR and GOSR have no significant impact. The study recommends that firms strengthen environmental initiatives, strategically integrate social programs, and enhance the quality of economic and governance disclosures to maximize both legitimacy and financial outcomes.