The demand for reporting environmental sustainability and social responsibility: insight from Saudi Arabia corporate reports

Abstract

Purpose

In countries where disclosing and reporting matters on sustainability are optional, what are the drivers promoting voluntarily disclosing information related to social responsibility and environmental sustainability corporate environmental and social responsibility? Exploring drivers promoting the demand for voluntarily disclosing information related to social responsibility and environmental sustainability in Saudi Arabia, where regulatory and professional bodies have not mandated information on corporate environmental and social responsibility, motivates this study.

Design/methodology/approach

A total of 48 individuals voluntarily participated in the survey.

Findings

Findings reveal that creating a better social, ethical and mental image, building a public relations image for the company, improving stakeholder trust in the company, signaling to investors the company’s care for the earth to meet the ethical motivation of stakeholders, enhancing corporate social responsibility awareness and exhibiting surpasses the mere generation of profits, all derive such disclosure. Such disclosure also signifies the firm’s value as well as improves the overall firm’s economic performance.

Practical implications

Regulatory and professional bodies must issue and adopt reporting models for entities, principally private companies, whether publicly traded or not, of the content. Their reports should aim to inform users and stakeholders about fulfilling the social and environmental responsibilities of entities toward society and its members.

Social implications

Out of the drivers for the demand, perceptions of elders toward meeting ethical motivation of senior management significantly differ from that of younger.

Originality/value

Few studies have been attempted on drivers of the demand for reporting environmental sustainability and social responsibility in an environment where such reporting is not mandated. This study offers insight from Saudi Arabian corporate reports.

Citation

Al-Adeem, K.R. (2024), "The demand for reporting environmental sustainability and social responsibility: insight from Saudi Arabia corporate reports", Journal of Ethics in Entrepreneurship and Technology, Vol. 4 No. 1, pp. 73-99. https://doi.org/10.1108/JEET-06-2024-0013

1. Introduction

Accounting has emerged in response to business needs (Al-Adeem, 2017a, Chambers, 1960; Chatfield, 1977; Cowan, 1968; DR Scott, 1926; Hopwood, 1987; Littleton, 1966; Merino, 1993; Montgomery as cited in Nelson, 1949; Vatter, 1963). With the absence in accountancy of an established theoretical construction of its own [Al-Adeem, 2017a, 2017b, 2017c; 2019a, 2019b; 2019c; 2021a; Al-Adeem and Fogarty, 2010; Al-Hazzani and Al-Adeem, 2020; Brearey and Al-Adeem, 2019; Beaver, 2002; Belkaoui, 2004; Chatfield, 1977; Coetsee, 2010; Gaffikin, 1987; García, 2017; Ijiri, 1967; King, 2006; Lee, 2009; Statement on Accounting Theory and Theory Acceptance (SATTA) [1], 1977], accounting practitioners have developed accounting in response to real-world circumstances (Chambers, 1960: page 35).

The adaptive nature of accounting (Montgomery in the Foreword to Edward Peragallo’s Origin and Evolution of Double Entry Bookkeeping as cited in Nelson, 1949: 357) permits accounting professional bodies to extend the corporate reporting function of accounting to supply information businesses and society demand. An existing need for expanding corporate reporting to account for and report the impact of human actions and activities on the earth and its climate is emerging. The connection between humanities and the natural environment is vital to eliminate instantaneous environmental hitches such as air pollution or toxic waste (Olsen et al., 2018). De Villiers and Maroun (2018: page 2) asserted:

The emergence of different types of non-financial or environmental, social and governance (ESG) […] [footnote omitted] reporting can […] be seen as a practice driven by stakeholder demands and pressures, and a need for organizations to respond to these pressures by explaining their social and environmental impacts.

Events affecting precious and scarce resources may only be accounted for using the accounting transaction model if viewing the process of using them as a transactional arrangement between humans and nature. Næss (1973 as cited in Salgueiro, 2022: page 219) asserted a metaphysical claim proposing that:

Nature is not only a mere instrument but has a value in itself […] regardless of its usefulness to human beings […]. Nature already existed before the emergence of humans […]. An intrinsic value should be given to nature and to do that, we must look beyond our immediate interests and include the interests of other living beings and future generations in our ethical deliberations.

Commenting on such an assertion, Salgueiro (2022: page 223) stated:

But nature does not only have an intrinsic value. It also has an economic value. To conceal this is a naive utopia without practical effects. To that extent, a solution to the problem must involve the balance between considering the environment as having an intrinsic value and having an instrumental value.

Gleeson-White (2011: page 254) urged the need for accounting “for our transactions with the earth” to value our planet by assigning “a monetary value to oceans, air, forests, rivers, and wildernesses.” Such an urge is met with human failure “in doing environmental justice,” as our consumption “of life makes of natural resources compromises” (Salgueiro, 2022: page 215).

However, because counting for such a type of transaction is unattainable, reporting the corporate’s effects on its surroundings is a within-reach objective. Accounting professionals stand for the public interest. The accounting profession critically defines sustainable corporate models (Burnett et al., 2011). Professional accountants are capable of setting standards, developing models to report information and bringing their firms into line with the principles of sustainable development (Sorina-Geanina et al., 2018). “Professional accountants are directly related to the promotion of sustainable development initiatives at the corporate level” (Sorina-Geanina et al., 2018: page 121). Joining the Global Reporting Initiative (GRI), which is an acclaimed sustainability reporting standard-setting body to develop stakeholders-oriented reporting standards aimed at ensuring the disclosure of information that enables a conception of how reporting organizations impact social and environmental matters, the International Financial Reporting Standards (IFRS) Foundation has participated and engaged over numerous investor-oriented sustainability standard-setting bodies under the IFRS Foundation’s International Sustainability Standards Board (ISSB) (De Villiers et al., 2022). For example, integrated reporting (IR) balances the conventional financial report with an account of the businesses’ accomplishments as socially accountable beings (Aras and Williams, 2022).

The assumption that participants in capital markets demand information to rationalize their decision-making procedures gives value to accounting as an information system (Watts and Zimmerman [2], 1978, 1979, 1986; Hopwood, 1987) and stimulates the demand for such information. Organizations in such markets and their stakeholders are apprehensive about corporations’ values, mission, procedures and strategies concerning environmental and social issues (Simões et al., 2022; see also Forrester, 2020; Scheer, 2021). Perceived as a “strategy [which] promotes the idea that corporations ought to move beyond merely satisfying their direct financial interest” (Shariat and Khamseh, 2022: page 185), the corporate social responsibility (CSR) movement, among others, introduces “social change” (Mair and Marti, 2006: page 185). Another dimension of an organization is maintaining and sustaining sustainable corporate development, including environmental sustainability. “Sustainability has become a major topic in political and economic debates” (Wagner and Strobl, 2022: page 9) that “comes down to the kind of future we are leaving for the next generation.” [3] Sustainable growth has to do with humanity’s being and survival (Byrch et al., 2022). “[T]he use our way of life makes of natural resources compromises” (Salgueiro, 2022: page 215) and “the ability of future generations to meet their own needs” (World Commission on Environment and Development (WCED), 1987: page 8) characterize the ecological issue of lacking sustainability.

Social and environmental voluntary reporting is rising because of awareness of corporate responsibilities toward society and the environment (Boshnak, 2021). Not all aspects of sustainability are explored. Corporate aspects other than profitability, for instance, CSR, might not be successful because of omitting to take “into account the institutional conditions in which economic entities operate” (Kudłak, 2022: page 233). The triple bottom line and the GRI are inadequate states of affairs for organizations contributing to the sustainability of the earth’s ecology (Milne and Gray, 2013). To date, on the consumer side, no emotional development toward sustainable behavior has been established (Wagner and Strobl, 2022: page 10).

Unlike research in the Western world, research on sustainability in developing countries is underexplored (Wagner and Strobl, 2022). The need for exploring and describing the state of disclosing social responsibility information and environmental sustainability in such countries is present. “Descriptive investigations are the beginning of quantitative studies,” whose chief aim is to “allow describing, characterizing the phenomenon [,] or facts to be studied” (Ochoa-Pachas, 2021: page 2). Hence, this study contributes by offering insights into the demand for voluntary reporting of CSR and environmental sustainability in Saudi Arabia. In countries where disclosing and reporting matters on sustainability are optional, regulatory and professional bodies have to mandate corporate environmental and social responsibility information including Saudi Arabia.

The remainder of this paper is organized as follows. Section 2 reviews relevant literature. Section 3 describes the research method used for the data collection. Section 4 presents the findings. Section 5 discusses the research findings. Section 6 concludes that, out of the 24 items, the sample agrees on 18 items and strongly agrees on a single item. It is still to be determined whether the remaining five items derive voluntary reporting CSR and environmental sustainability. This section also offers implications, highlights limitations and suggests directions for future research.

2. Literature review

2.1 Disclosing and reporting corporate aspects besides profitability

Mindfulness of corporate responsibility besides profitability is a concept that has been previously thought up. Almost a century ago, Sheldon (1924 as cited in Boshnak, 2021: page 667) discussed for the first time the concept of social and environmental voluntary disclosure in a corporate context reflecting global awareness of the negative impact of corporation’s actions related to social and environmental issues. A stream of research on awareness and perception of CSR has existed for decades (e.g. At-Twaijri, 1988; Eilbirt and Parket, 1973; Holmes, 1976; Parket and Eilbirt, 1975).

Recently, research on sustainability and CSR has sparked researchers in Saudi Arabia (e.g. Aldosari, 2017; Ali et al., 2012; Alotaibi et al., 2019; Alsahlawi et al., 2021; Alshareef and Sandhu, 2015; Issa, 2017; Kurshid et al., 2013). Over the years, the widespread voluntary adoption of GRI guidelines/standards has facilitated the development of a common language for sustainability reporting (de Villiers et al., 2022). Reporting sustainability with assurance has turned out to be a universal phenomenon that is taking place in advanced and developing countries from one place to another worldwide (Junior et al., 2014).

While the rhetoric use of sustainability by business exists, critical examination and understanding contained by an extensive structure found a constricted disclosure, mainly focused on an economic and instrumental procedure to the natural environment (Milne et al., 2009). The need for information and for companies to explain their business models in more detail, in addition to the pressure for more transparent reporting, have grounded the development of sustainability accounting on a voluntary foundation (De Villiers and Maroun, 2018). In countries where the involvement of the government and the force of the institutional surroundings in welfare are smaller, the participation of private entities in providing social services is inordinate (Kudłak, 2022: page 234). On the other hand, the willingness of private actors to engage in voluntary activities declines in countries with a strong welfare state model, where the state takes a large share of the responsibility for ensuring society’s access to certain social services constructing an institutional and legal system that ensures the creation and distribution of these services and obligates economic entities to be part of this process (Kudłak, 2022: page 234).

Evidence reveals that reporting corporate sustainability promotes positive public relations (PR) rather than providing an eloquent accounting of the social and environmental effects of the company (Cho et al., 2012). A relationship between the institutional environment and firms’ involvement in CSR may shed light on the reasons for CSR implementation and the variances between countries and the world’s regions in this respect (Kudłak, 2022: page 247). For example, evaluating sustainability reporting assessment for verifiability purposes is attainable in Ukraine through auditors (Ismayilov et al., 2020: page 409). Recent research in Italy reveals that much attention has been paid to sustainability (Galli et al., 2022: page 43).

Environments influence human behavior, which incentivizes stakeholders to demand information about their corporation’s environment and its effects on the environment. For example, “the environment of the finance industry [might be] more conducive for unethical behavior, among others: a focus on money, a sense of power and wealth, competitiveness and impersonal, technical work” (Pitesa, 2015, pp. 344–369 as cited Kightley, 2022: page 108).

A sustainable report, which contains a set of non-financial information, is a component of innovation and an implementation involving preparation for organizations that participate in such a reporting process (Mariana Man and Bogeanu-Popa, 2020: page 13). Without consideration of its social, territorial, cultural, political and environmental settings, an enterprise cannot be apprehended and recognized (Martinuzzi and Schönherr, n.d.; Engert and Baumgartner, 2016; Engert et al., 2016; Schönborn et al., 2019 as cited in Fernández-Villarino and Domínguez-Gómez, 2022).

2.2 Need for reporting corporate social responsibility and environmental sustainability

Environmental sustainability has become a momentous tactic for firms to augment their competitive advantage and standing (Ammer et al., 2020). Sustainable corporations create values beyond environmental effects (Figge and Hahn, 2004). However, corporations’ insufficient resources to address every possible matter constrain their position toward reporting sustainability (Johnson et al., 2020). IR is a proposed model by the International Integrated Reporting Council (IIRC, 2021) with the awareness that corporations generate value via various arrangements of six “‘capitals’ namely financial, manufactured, intellectual, human, social and relationship, and natural” [4]. Analyzing the six capitals model proposed by IIRC, Aras and Williams (2022: page 17) argued that:

Integrative reporting means situating the company with respect to a significantly larger domain of responsibility than mere financial performance. Thus, to think integratively in order to report integratively, management will have to develop a narrative about the company that is far more comprehensive than previously.

Salgueiro (2022: 220) articulated that “[e]nvironmental and intergenerational concerns are crucial for thinking about how individuals should make decisions in the context of business because it is about deciding what kind of world, we want to live in.”

According to Milne et al. (2003), the World Business Council for Sustainable Development (WBCSD) has issued plentiful reports on business and sustainable development, responsibility and accountability and corporate reporting. WBCSD issued two reports in 1998, three in 2000, two in 2002 and one in 2005. The Report of the World Commission on Environment and Development: Our Common Future [5] (Report of the World Commission on Environment and Development: Our Common Future, 1987) defined sustainable development:

[as] development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It contains within it two key concepts: the concept of ‘needs’, in particular the essential needs of the world’s poor, to which overriding priority should be given; and the idea of limitations imposed by the state of technology and social organization on the environment’s ability to meet present and future needs [6].

Literature offers various definitions. For example, Khurshid et al. (2016: page 54) defined CSR as:

a concept about how enterprises bring the values and needs of their stakeholders i.e., investors, customers, employees, suppliers, and local communities. CSR covers […] community relationship[s], environmental problems, business ethics, and issues of human rights, i.e., […] [employee] welfare programs such as education and training programs along with safety measures of the workforce at [the] workplace.

Katz and Page (2010) offered another definition. They defined CSR:

as ‘[a]application of new considerations (responsibilities) to existing business models within an existing profit-making paradigm’, whereas social enterprise is seen as an entity that ‘takes those business models and applies them to unresolved social problems, partly by redefining that same paradigm from shareholder wealth creation to social wealth creation.

Ironically, the relationship between the institutional environment and the participation of enterprises in CSR may be an unconventional theoretical deliberation, which is dominant in the relevant literature, and may effectively enlighten researchers about variation in CSR implementation across countries and the world’s regions (Kudłak, 2022: page 247). Reviewed literature points toward a contradiction between traditional financial reporting and sustainability new models of regulatory reporting (Abousamak, 2020). In addition, “[t]he structured narrative of financial performance still dominates the unstructured narrative about social performance” (Aras and Williams, 2022: page 1). A need for an inclusive definition of the magnitude corporations achieving and reporting on their essential public interest duties still exists (Nickell and Roberts, 2014).

Manifestly, sustainability has market value relevance (Alharbi et al., 2021). Reporting sustainability is strategically significant to corporate disclosure (Higgins et al., 2015). “Therefore, it is important to investigate the impact and the challenges around CSR and IR” (Omri et al., 2022: page 385). Considering barriers to social responsibility application assists decision-makers and policy-makers in prioritizing and developing effective tactics to promote CSR implementation (Alotaibi et al., 2019).

Several factors such as “UNEP/Sustainability framework, the GRI, the ACCA awards and the ‘business case’ for measuring, managing and reporting organizations’ economic, social and environmental impacts” have expanded organizational practices to the extent that such practices became precariously chaotic with going forward “a just and sustainable world” (Milne and Gray, 2013: page 24). The concern is whether businesses attempt to use an agenda for sustainability to distance individuals far from an ecologically worthwhile future (Milne and Byrch, 2011). Remarkably, “the demands of growing the business, making increased profits, and securing the financial viability of the business and the recognition that they might come at the expense of the environment or social equity” might be to a large magnitude absent (Young and Tilley, 2006: page 24). Under the existing voluntary system, a company chooses what information and what quality of information to report, whom to dialog to and what they will talk about and whether or not to in reality put in practice and set policies it has devoted to (Hess, 2008: page 273). The hazard is that “businesses and their associated institutions have limited their ideas to issues about themselves” (Milne and Gray, 2013: page 24).

Exploring drivers for the demand for reporting social responsibility and environmental sustainability in the Saudi setting is a suitable and needed investigation. The economy of Saudi Arabia is growing, especially after launching the ambitious vision, Vision-2030. Sustainability and other related matters, such as CSR and perceiving corporations as citizens, are new concepts that may still need to be embedded in the business minds in Saudi Arabia in comparison to business minds in developed economies. The recent empirical finding revealed that the environmental dimension’s disclosure level is at most 3%. In comparison, the level of disclosure of the social element of sustainability is only 15% (Alqahtani and Habbash, 2024). Determining the drivers for the demand for reporting CSR and environmental sustainability in the Saudi economy contributes to our knowledge.

2.3 Reporting corporate social responsibility and environmental sustainability in Saudi Arabia

Annual corporate statements are deemed as the merely authorized source of information about companies’ performance in the Saudi capital market (Al-Razeen and Karbhari, 2004). The issuance of financial statements by publicly held corporations is regulated, standardized and mandatory in the Saudi capital market. Their contents are considered publicly available information. The Saudi capital market is assumed to perform at a weak form of efficiency [7] (Alabaas, 2008; Al-Salman, 2007; Alzahrani, 2010). Studies on the Saudi capital market have assumed such a level of efficiency (Al-Adeem, 2017d; Al-Adeem and Al-Sogair, 2019; Alshiban and Al-Adeem, 2022).

Governmental regulation in Saudi Arabia has paid close attention to corporations because of their significant role in the economy and the social contract, according to which citizens are confident investing their wealth and savings to establish corporations run by professional management who might not necessarily own them.

The Saudi Company Law was first issued in 1965. It was reissued in 2015 and 2022 [8]. In addition, the Corporate Governance Regulations were first issued in 2006 (Capital Market Authority (CMA), 2006). They were modified in 2009 and in 2015 [Capital Market Authority (CMA), 2009]. The New Corporate Governance Regulations were issued in 2017 [Capital Market Authority (CMA), 2017]. Later, the Corporate Governance Regulations were marginally amended on April 23, 2018 and on August 22, 2022 [9].

As practiced by Saudi Arabian companies, inquiries on CSR go back to at least as early as the 1980s. At-Twaijri (1988) [10] found that industrial and private service entities in Saudi Arabia neglect their social responsibilities even to their employees. At-Twaijri (1988) called for enhancing awareness of businesses’ social responsibility. Decades later, studies have explored awareness of CSR in the Saudi market (e.g. Khurshid et al., 2013; Khurshid et al., 2016). Companies in Saudi Arabia do not participate in CSR activities because either they do not have the required resources to do so or they do not have appropriate guidelines to act as such (Khurshid et al., 2016: page 60).

CSR in Saudi Arabia is deemed as a vital device to encourage the private sector to participate effectively in the growth of Saudi society (Gravem, 2010; Pillai, 2022: page 138) asserted:

The influence of cultural dynamics in an emerging market requires deeper appreciation and discernment […] the ripple effects of the externalization of negative impacts from emerging/developing market to developed markets and vice versa, is indicative of blurring boundaries and vulnerabilities of market actors, challenging the traditional […] [CSR] approach to stakeholders’ thinking. Hence, an inclusive socio-environmental stakeholder analysis approach is needed to facilitate strategic […] [CSR] and strengthen corporate resilience.

Generally, voluntary disclosure in emerging economies is low even after adopting IFRS (Boateng et al., 2022). The disclosure of non-financial publicly traded corporations is at a moderate level in Saudi Arabia (Abdulhaq and Muhamed, 2015; Alshiban and Al-Adeem, 2022; Alturki, 2014: page 85). In 2016, with an average, as low as 18.38%, voluntary disclosure in the Saudi capital market scored the lowest in the Arab region (Habbash et al., 2016). “UAE companies have significantly higher voluntary disclosure than Saudi companies, with an average of around 42 percent for UAE companies and 32 percent for Saudi companies.” (Al-Janadi et al., 2012).

Owing to new corporate governance regulations and IFRS implementation, corporate social and environmental voluntary disclosure has increased over time compared to previous studies to an average of 68% disclosure (Boshnak, 2021). Still, investors do not deliberate environmental disclosure when valuing the stocks listed in the Saudi capital market (Alsahlawi et al., 2021). While social responsibility practices have marginally impacted the dimensions of sustainable enlargement in the eastern region of Saudi Arabia, the substantial impact of social responsibility practices was inadequate on the social and voluntary side (Toney et al., 2021). Empirically, voluntary disclosure is missing primary substances of social and environmental information (Al-Janadi et al., 2012). While scoring 22%, Saudi corporate disclosure on sustainability is low compared to other aspects of public corporate disclosure (Alqahtani and Habbash, 2024).

Religion in Saudi Arabia is a major cultural component affecting the perception of CSR. Early studies in the Saudi market called for incorporating Islamic aspects in defining business social responsibility (At-Twaijri, 1988). There might, in the case of Saudi Arabia, “be a religious explanation for the emphasis on CSR as a developer of human and social capital. These kinds of efforts develop the society, and are thus in accordance with the concept of the Umma” (Graven, 2010: page 119). Conceptually, Khurshid et al. (2012) developed an Islamic Corporate Social Responsibility scale to explore CSR in a Saudi context. Empirically, research revealed that in Saudi Arabia individuals from the corporate world concur on the importance of disclosing CSR to distinguish between corporate givers to their community and those who do not (Aldosari, 2017).

3. Research method

Arguably, accounting research should turn from “a normative concern with what a sustainable organization ought to be and an active questioning of what sustainability means and how it might be achieved, to a positive analysis of what a ‘sustainable organization’ is […]” (Tregidga et al., 2018: page 294 emphases in original). While “[s]ustainable development has gained momentum with the Directive 2014 / 95/EU about non-financial reporting” (Santos and Rodrigues, 2022: page 76), Johnson et al. (2020) surveyed managers of US-based companies to explore their prioritizing sustainability issues. Issa (2017), Khurshid et al. (2012), Khurshid et al. (2013) and Khurshid et al. (2016) surveyed subjects on matters related to CSR.

This study is on disclosure in a country where reporting sustainability is optional. Environment, where literature on the corporate operation (Kudłak, 2022), performance and disclosure on a matter other than profitability needs originated, should be taken into account when designing an instrument for inquiring about the demand deriving reporting sustainability and social responsibility-related matters where regulatory and professional bodies do not require such disclosure.

The research instrument contains two categories of items. First, items that measure the extent to which ideals derive businesses toward implementing sustainability inventiveness. Empirically demonstrated, norms are crucial for adopting sustainability initiatives (Perez-Batres et al., 2010). The second category encompasses items that measure the bottom-line related interest, such as corporate image and increasing profitability of the business. All items have been developed from prior studies on sustainability and social responsibility (Appendix 1).

A Web-based questionnaire was developed to collect data needed to explore the deriving demand for reporting corporate sustainability. The items have been reviewed and judged by eight researchers. All of their comments have been incorporated into the survey. Then a pilot study was conducted, where nine accounting researchers with knowledge of research took it and shared their feedback to enhance the readability of the research instrument and eliminate possible confusion that may occur.

4. Research findings

4.1 Demographic data of the sample

A total of 48 individuals voluntarily participated in the survey. All of them are based in Saudi Arabia. Table 1 displays the demographic data of the sample.

One-third of the sample is female. Almost 92% of surveyed subjects are Saudis. Their ages are between less than 30 and over 60 years old. Approximately 58% of them are 35 years old or younger. The sampled subjects are well-educated. While almost 44% of them have undergraduate degrees, the rest of them have acquired higher education.

Almost 19% of the sample works as a sustainability manager. Those with management roles and board directors or committee roles are 27% and approximately 9%, respectively. Accountants and auditors represent 23% of the sample. Also, the same percentage represents those who work in other jobs.

A total of 85% of the sample works in companies. Out of the total sampled organizations, about 42% of the organizations are listed corporations. Around 44% of the organizations where the sampled subjects work are not listed companies. While nonprofit organizations represent 2%, government-related entities are 5% of the sample. Nearly 9% of the sampled individuals work in other types of organizations.

4.2 Drivers of the demand for reporting corporate social responsibility and environmental sustainability

Responses of the sampled subjects vary from strongly disagree to strongly agree. Based on the means of items, they are ranked as Table 2 displays. With a mean of 4.29, creating a better social and ethical image for the company is the strongest motivation deriving organizations to report CSR and environmental sustainability. The lowest of all possible drivers for the demand for reporting CSR and environmental sustainability is the concern to develop the society as per the concept of the Umma, with a mean of 2.96. The grand mean of all items is 3.62, which is deemed within the agreed category, as Table 3 suggests. Generally, the sample agrees on the drivers that the survey contains. Table 4 discusses which items the sample considers deriving the demand for reporting CSR and environmental sustainability and those that might not be deemed.

Table 3 displays the scores of the five-point Likert scale of the inquiry form and the five class intervals, which were calculated as follows: Class width = (maximum value–minimum value)/number of scale points (Al-Amri, 2011; Vipinosa, 2016). When using this formula, a class width of 0.80 is produced.

This class allows determining the direction of the overall insight of the sampled individuals for each item. Table 4 shows the direction of each item based on this class interval. Out of the 24 items, the sample agrees on 18 and strongly agrees on a single item. They are unsure whether the remaining five items drive voluntary CSR and environmental sustainability reporting in the Saudi market. The items can be grouped into six categories as follows.

4.2.1 Creating an image for the company.

Creating better social, ethical and mental images for the company is crucial for reporting CSR and environmental sustainability in Saudi Arabia. Building a PR image as a marketing strategy drives entities to voluntarily report CSR and environmental sustainability.

4.2.2 Singling company’s value and performance.

The sample agrees that voluntary reporting CSR and environmental sustainability signifies the firm’s value and improves the overall firm’s economic performance. The sampled individuals, however, are undecided about whether signifying the firm’s profitability and firm’s size are deriving motivation for reporting CSR and environmental sustainability.

4.2.3 Complying with legal and professional requirements.

Avoidance of possible legal responsibility originates the demand for reporting CSR and environmental sustainability. The IFRS requirements and the CMA’s guide for ESG reporting also create demand for reporting CSR and environmental sustainability in Saudi Arabia.

4.2.4 Demonstrating the performance of social role toward society.

Recognizing their social role in society, serving society and contributing to public affairs motivate Saudi Arabian entities to disclose their CSR and environmental sustainability activities. They also report CSR and environmental sustainability to enhance CSR awareness and to exhibit that surpasses the mere generation of profits.

4.2.5 Caring for stakeholders’ interests.

Entities in Saudi Arabia report CSR and environmental sustainability to improve stakeholder trust in the company, signal to investors the company’s care for the earth and meet stakeholders’ ethical motivation. The sampled individuals are ambivalent about whether meeting the ethical motivation of senior management and satisfying independent directors’ requirements for accountability to environmental practices drive entities in Saudi Arabia to report CSR and environmental sustainability.

4.2.5 Standing by Islamic values.

Sampled subjects agree that disclosing CSR and environmental sustainability is to demonstrate ethical principles and to comply with business social responsibility, which has an Islamic aspect. However, they are uncertain that such disclosure is motivated to develop the society in accordance with the concept of the Umma. This item scored the lowest with a mean of 2.96.

4.3 Further analysis

Unguided by a theory, one may assume that with age, a person views the world from a perspective with care for society and the environment. By looking at their ages, the sample is almost divided into two categories. While 58% are 35 years old or younger, the remaining are older than 35 years. The first group is coded (0), while the second is coded (1). After coding the age variable dichotomously, a t-test was performed to test whether the means for all items included in the study differed significantly.

Only one item differed significantly. Meeting the ethical motivation of senior management as a driver for disclosing CSR and environmental sustainability differed among sampled subjects. Perceptions of elders are significantly different, F (1, 46) = 3.738, p < 0.10. Elders report a higher mean of 3.65 compared to the mean of the group of younger participants (2.96) (Appendix 2 details the test).

5. Discussion

In business, performing a role toward society and becoming a good citizen are enforced through regulation or professional requirements or motivated by the contribution to the business’s bottom line. For example, disclosing non-financial information is deliberately left to the choice of executive management in Saudi Arabia (Alturki, 2014; Alshiban and Al-Adeem, 2022). Hence, “[t]he low disclosure level most likely relates to…[such] information is voluntary in nature, and no existing disciplines set out by the authoritative accounting and reporting bodies in Saudi Arabia to require public firms to display such information” (Alturki, 2014: page 85). “[M]andatory disclosure system […] [is] the best approach to meeting the demands of all…[related matters to corporate social reporting] in the long term” (Hess, 2008: page 274). The absence of requirements that mandate disclosing corporate social activities impacts reporting CSR and environmental sustainability. “[T]he relevance of mandatory financial reporting is increasingly challenged. Thus, firms need to improve their reporting system to reflect their ability to create value over time, enabling a more efficient and productive allocation of capital by fund providers” (Ali et al., 2022: page 385). Political climates impact organizations’ tendency toward CSR reporting (Antonini et al., 2021). Policymakers in Saudi Arabia should improve measurements of their regulatory and judicial systems to guard stakeholders’ interests (Alshareef and Sandhu, 2015).

Even with the absence of policy mandating the disclosure of corporate activities related to CSR and environmental sustainability, entities can still be incentivized to perform their social role and disclose it if returns are associated with such activities. Caring for CSR creates a better social image and contributes to corporate profitability (Issa, 2017; Khurshid et al., 2016; Khurshid et al., 2013). Graven (2010: page 117) articulated:

CSR is a way to legitimize a company’s business for the society it operates within, and especially for the authorities, this could be a valid explanation of the compliance between the CSR model of the authorities and the CSR efforts by companies in Saudi Arabia.

In addition, the absence of a mandatory policy for disclosing CSR and environmental sustainability in Saudi Arabia does not prevent entities from reporting their CSR and environmental sustainability activities. While entities in Saudi Arabia recognize their social role in society, they do not appear ethically or religiously driven to report CSR and environmental sustainability. Such a finding contradicts a prior conjecture (At-Twaijri, 1988; Graven, 2010: page 119). Once “environmental issues are connected to the moral obligations of the agents involved in the business activity,” ethical fundamentals for economic affairs can be established (Salgueiro, 2022: pp. 119–220).

Because corporate sustainability accounting and reporting are significant components of a knowledge-based economy, and as telling the “truth” about a company entails a comprehensive narrative about how a company adds “value” to these various “capitals” (Aras and Williams, 2022: page 17), Saudi Arabia’s knowledge economy should be developed in six aspects that are “human capital, innovation, information and communication technology (ICT), the economy, education, and employment.” Development in corporate reporting should accompany such a transformation (Nurunnabi, 2017).

Saudi Arabia has been transforming its economy toward a knowledge-based type of economy. Development in corporate reporting should accompany such a transformation. Corporate sustainability accounting and reporting are significant components of a knowledge-based economy.

The stream of research on corporate sustainability is virtually in its early stages. Importing approaches and developing a new frame of references for analysis are needed (Tregidga et al., 2018). An inquiry exploring sustainability awareness is also essential (Tregidga et al., 2018). Likewise, exploring drivers for reporting CSR and environmental sustainability in a market where reporting sustainability still needs to be mandated to contribute to our knowledge. Generally, research assists in amending the perception that the realization of “long-term economic prosperity and attaining environmental sustainability […] [are not] competing goals” (Burnett et al., 2011: pp. 12-13). Instead, they are complementary (Burnett et al., 2011).

6. Conclusions, implications, limitations and further research

Exploring drivers that generate the demand for voluntarily disclosing information related to social responsibility and environmental sustainability in Saudi Arabia, where information on corporate environmental and social responsibility has not been mandated by regulatory and professional bodies, stimulates this study. Surveying 48 subjects reveals that creating a better social, ethical and mental image, building PR image for the company, improving stakeholder trust in the company and signaling to investors the company’s care for the earth to meet the ethical motivation of stakeholders, enhancing CSR awareness and exhibiting surpasses the mere generation of profits, all derive voluntary disclosing CSR and environmental sustainability in the Saudi market. Such disclosure also signifies the firm’s value as well as improves the overall firm’s economic performance. Disclosure of CSR and environmental sustainability illustrates the social role in society to serve society and contribute to public affairs. Regulatory and professional requirements increase CSR and environmental sustainability reports. Disclosing CSR and environmental sustainability are probably not ethically or religiously driven in Saudi Arabia, as one might conjecture. Out of the drivers for such a demand, perceptions of elders toward meeting the ethical motivation of senior management significantly differ from those of younger ones.

Regulatory and professional bodies concerned with reporting and disclosure, particularly for publicly held companies, should rely on something other than the code of values businesses hold. Such bodies have a duty to issue and adopt reporting models for entities, principally private companies, whether publicly traded or not, of the content their reports should contain to inform users and stakeholders about fulfilling entities’ social and environmental responsibilities toward society and its members. Caring about the environment and society at large is to care about individuals. Aras and Williams (2022: page 17) articulate that “Individuals are nested within communities, which are nested within institutions, which are nested within societies, which are nested within a biosphere.”

This study is not free from limitations. The small sample size constrains the conclusion of the study. A large sample would have permitted using advanced statistical techniques, namely, structural equation modeling, that enable measuring latent contracts and conceptually model reporting, which enables simultaneously testing relationships among factors. Further research may overcome such a constraint by expanding the sample size. Using a survey in Arabic may contribute to increasing participation. In addition, offering participants economic incentives, such as rewarding them for their time, may increase the sample size.

Table 1.

Demographic data (n = 48)

	Frequency	%
Nationality
Non-Saudi	4	8.3
Saudi	44	91.7
Gender
Female	16	33.33
Male	32	66.67
Age
Less than 30 years	10	20.8
More than 30 years but less than 35 years	18	37.5
More than 35 years but less than 40 years	5	10.4
More than 40 years but less than 45 years	7	14.6
More than 45 years but less than 50 years	2	4.2
More than 50 years but less than 55 years	2	4.2
More than 55 years but less than 60 years	3	6.3
More than 60 years	1	2.1
Education
BSc	21	43.8
Master degree	23	47.9
PhD	4	8.3
Job
Sustainability manager	9	18.8
Management role	13	27.1
Board director/committee	4	8.3
Accountant/auditor	11	22.9
Other	11	22.9
Type of organization
A listed company in the Saudi stock market	20	41.7
Not a listed company in the Saudi stock market	21	43.8
Nonprofit organization	1	2.1
Government related entity	2	4.2
Other types of organizations	4	8.3

Source:

Author’s own work

Table 2.

Descriptive statistics (n = 48)

Statement	Mini	Max	Mean	SD	Rank
To create a better social and ethical image for the company	1	5	4.29	1.148	1
To enhance the mental image of the company	1	5	4.13	1.248	2
To positively impact firm’s value	1	5	4.10	1.115	3
To promote firm’s value	1	5	4.08	1.182	4
To build PR image as a marketing strategy	1	5	3.94	1.262	5
To signify firm’s leadership in the sector	1	5	3.88	1.196	6
To improve firm’s economic performance	1	5	3.77	1.096	7
To comply with the CMA’s guide for ESG reporting	1	5	3.73	1.198	8
To contribute to the public affairs	1	5	3.69	1.075	9
To improve stakeholder trust in the company	1	5	3.65	1.296	10
To demonstrate ethical principles	1	5	3.63	1.178	11
To enhance CSR awareness	1	5	3.60	1.198	12
To exhibit a role in society that surpasses the mere generation of profits	1	5	3.56	1.201	13
To correspond to the IFRS requirements on such disclosure	1	5	3.54	1.220	14
To serve society	1	5	3.54	1.271	15
To signal to investors the company’s care for the earth	1	5	3.52	1.130	16
To avoid possible legal responsibility	1	5	3.50	1.272	17
To meet ethical motivation of stakeholders	1	5	3.48	1.203	18
To comply with business social responsibility which has an Islamic aspect	1	5	3.48	1.321	19
To signify firm’s profitability	1	5	3.33	1.117	20
To meet ethical motivation of senior management	1	5	3.25	1.246	21
To satisfy and meet independent directors’ requirement for accountability to environmental practices	1	5	3.23	1.189	22
To signify firm’s size	1	5	3.00	1.288	23
To develop the society in accordance with the concept of the umma	1	5	2.96	1.254	24
Grand mean			3.62

Source:

Author’s own work

Table 3.

Class intervals

	Strongly disagree	Disagree	Do not know	Agree	Strongly agree
Five-point Likert scale	1	2	3	4	5
Class intervals	1–1.80	1.81–2.60	2.61–3.40	3.41–4.20	4.21–5

Source:

Al-Amri(2011)

Table 4.

Direction of questionnaire items (n = 48)

Statement	Strongly agree	Agree	Do not know	Disagree	Strongly disagree	Mean	Direction of the item	Rank
To create a better social and ethical image for the company	30	9	5	1	3	4.29	Strongly agree	1
To enhance the mental image of the company	27	9	7	1	4	4.13	Agree	2
To positively impact firm’s value	23	14	6	3	2	4.10	Agree	3
To promote firm’s value	25	10	7	4	2	4.08	Agree	4
To build PR image as a marketing strategy	20	16	6	1	5	3.94	Agree	5
To signify firm’s leadership in the sector	18	16	7	4	3	3.88	Agree	6
To improve firm’s economic performance	14	18	8	7	1	3.77	Agree	7
To comply with the CMA’s guide for ESG reporting	14	12	9	9	4	3.73	Agree	8
To contribute to the public affairs	11	20	10	5	2	3.69	Agree	9
To improve stakeholder trust in the company	14	17	9	2	6	3.65	Agree	10
To demonstrate ethical principles	13	16	9	8	2	3.63	Agree	11
To enhance CSR awareness	13	16	8	9	2	3.60	Agree	12
To exhibit a role in society that surpasses the mere generation of profits	11	18	10	5	4	3.56	Agree	13
To correspond to the IFRS requirements on such disclosure	12	15	12	5	4	3.54	Agree	14
To serve society	13	14	12	4	5	3.54	Agree	15
To signal to investors the company’s care for the earth	9	18	14	3	4	3.52	Agree	16
To avoid possible legal responsibility	14	11	11	9	3	3.50	Agree	17
To meet ethical motivation of stakeholders	10	17	11	6	4	3.48	Agree	18
To comply with business social responsibility which has an Islamic aspect	14	12	9	9	4	3.48	Agree	19
To signify firm’s profitability	8	12	20	4	4	3.33	Do not know	20
To meet ethical motivation of senior management	10	10	14	10	4	3.25	Do not know	21
To satisfy and meet independent directors’ requirement for accountability to environmental practices	8	12	15	9	4	3.23	Do not know	22
To signify firm’s size	8	8	15	10	7	3.00	Do not know	23
To develop the society in accordance with the concept of the umma	5	12	16	6	8	2.96	Do not know	24

Source: Author’s own work

Table A1.

Extracting drivers for the demand for sustainability reporting from literature

No.	Source	Statements after modification to best fit the study’s objective
			1	Aldosari (2017); Khurshid et al. (2016)	To create a better social and ethical image
2	Issa (2017); Khurshid et al. (2016); Khurshid et al. (2013)	To signify firm’s profitability
3	Issa (2017); Alturki (2014); Issa (2017)	To signify firm’s size
4	Touny et al. (2021)	To meet ethical motivation of senior management
5	Dr Muruy Alhabash from King Khalid University	To meet ethical motivation of stakeholders
6	Touny et al. (2021)	To enhance the mental image of the company
7	Boshnak (2021); Alshareef and Sandhu (2015)	To comply with the impact of CMA’s guide for ESG reporting
8	Boshnak(2021)	Correspond to the impact of IFRS implementation on such disclosure
9	Khurshid et al. (2016)	To serve society
10	Alsahlawi et al. (2021)	To signal to investors the company care for the earth
11	Ammer et al. (2020)	To positively impact firm’s value
12	Ammer et al., 2020)	To promote firm’s value
13	Ammer et al. (2020)	To improve stakeholder trust in the company
14	Ammer et al. (2020)	To satisfy and meet independent directors’ requirement for accountability to environmental practices
15	At-Twaijri (1988)	To comply with business social responsibility which has an Islamic aspect
16	Khurshid et al. (2013)	To enhance CSR awareness
17	Khurshid et al. (2013)	To improve firm’s economic performance
18	Khurshid et al. (2013)	To avoid possible legal responsibility
19	Khurshid et al. (2013)	To demonstrate ethical principles
20	Khurshid et al. (2013)	To contribute to the public affairs
21	Khurshid et al. (2013)	To exhibit a role in society that surpasses the mere generation of profits
22	Graven (2010)	To develop the society in accordance with the concept of the Umma
23	Dr Muruy Alhabash from King Khalid University	To build PR image as a market strategy
24	Dr Muruy Alhabash from King Khalid University	To signify firm’s leadership in the sector

Source:

Author’s own work

Table A2.

Comparing two groups of age in

Age category			To meet ethical motivation of senior management
0
Mean			2.96
N			28
SD			1.170
1
Mean			3.65
N			20
SD			1.268
Total
Mean			3.25
N			48
SD			1.246
To meet ethical motivation of senior management × age_category
	Sum of squares	df	Mean square	F	Sig.
Between groups	5.486	1	5.486	3.738	0.059
Within groups	67.514	46	1.468
Total	73.000	47

Source:

Author’s own work

Notes

1. The American Accounting Association formed the Committee on Concepts and Standards for Externals Financial Reports and instructed it to study the state of accounting theory.

2. It is important to stress that this claim does not support the methodology that Watts and Zimmerman have proposed, which has been under a serious attack since it was introduced (Al-Adeem, 2017b; 2019a; 2019b; 2019c; 2021a; 2021b; Al-Adeem and Fogarty, 2010; Avelé, 2014; Belkaoui 1996; Boland and Gordon, 1992; Chabrak, 2005; Chabrak and Burrowes, 2006; Chambers, 1993; Christenson, 1983; Collin, Tagesson, Andersson, Cato and Hansson, 2009; Demski, 1988; Hines, 1988; Kabalski, 2016; Kabir, 2010; Kaplan and Ruland, 1991; Lowe, Puxty and Laughlin, 1983; Major, 2017; Milne, 2002; Mouck, 1989, 1990, 1992; Ndjetcheu, 2012; Okcabol and Tinker 1990; Persson, 2016; Sinha, 2008; Srivastava and Baag, 2020; Sterling, 1990; Sy and Tinker, 2005. 2011; Tinker, 1988; Tinker, Merino and Neimark, 1982; Tinker and Puxty 1995; West, 2003; Whitley, 1988; Whittington, 1987; Williams, 1989, 2003, 2017). It has been argued recently that their proposed methodology might not be a proper accounting research methodology (Al-Adeem, 2021a).

3. A short brochure titled “What Is Sustainability” was prepared by the Office of Sustainability at the University of Alberta. The exact quote can be found in an article titled “The Three Pillars of Sustainability,” Retrieved https://magaliesbergbiosphere.org.za/promote-sustainability/(last visit 11/10/2022).

4. Published by the www.integratedreporting.org. As of August 2022, the IFRS Foundation assumed responsibility for the Integrated Reporting Framework. The IFRS Foundation’s (IASB and the ISSB will agree on how to build on and integrate the Integrated Reporting Framework into their standard-setting projects and requirements. Information is available: www.integratedreporting.org/wp-content/uploads/2022/08/IntegratedReportingFramework_081922.pdf (last accessed 11 November 2022).

5. For a review of this report, see Butlin (1989).

6. Retrieved. www.ask-force.org/web/Sustainability/Brundtland-Our-Common-Future-1987-2008.pdf

7. Only one study (Lamouchi, 2020) suggests that the Saudi capital market demonstrates evidence that does not support the Efficient Market Hypothesis.

8. Retrieved from www.mci.gov.sa/LawsRegulations/Projects/Pages/%D9%86%D8%B8%D8%A7%D9%85-%D8%A7%D9%84%D8%B4%D8%B1%D9%83%D8%A7%D8%AA.aspx#0 <last visit 16 November 2022>.

9. Retrieved https://cma.org.sa/en/RulesRegulations/Regulations/Documents/CorporateGovernanceRegulations.pdf [last visit 15 December 2022].

10. The study has referred to and cited literature published in English in research outlets in the West. This is probably because social responsibility was not streamed as a line of research in business and management literature in the Arabic language.