STAKEHOLDER ENGAGEMENT IN SUSTAINABILITY REPORTING IN INDONESIA

Abstract

This research aims to understand the ways the preparers of sustainability reports in Indonesia embed stakeholder engagement in sustainability reporting. This research seeks to understand the perceived role of stakeholder engagement in sustainability reporting and examines whether the report preparers decouple their stakeholder engagement disclosures from the actual practices. The neo-institutional theory is used to illuminate the companies’ non-conformity responses to institutional influences.

This research utilises mixed methods by deploying questionnaires, sustainability reports and semi-structured interviews. The questionnaire survey was analysed using descriptive statistics. The interviews were conducted face-to-face and analysed using thematic analysis. Content analysis of stakeholder engagement disclosures was also undertaken on the 2007 to 2018 sustainability reports issued by the companies participating in the interviews.

The findings of this research reveal that the report preparers attempt to embed stakeholder engagement in the companies’ sustainability reporting in response to coercive, normative and mimetic influences. However, stakeholder engagement is loosely embedded as a result of contextualising the Global Reporting Initiative (GRI)’s conception of stakeholder engagement into Indonesia’s local contexts. Stakeholder engagement is perceived as having important roles in mandatory corporate social responsibility (CSR) programmes and materiality assessment to define the report content. External stakeholders are engaged more inclusively in the former whereas internal stakeholders take control of the latter.

It is not evident that the report preparers in Indonesia decouple stakeholder engagement disclosures from practices. However, the ways in which the companies practise their stakeholder engagement (means) deviate from the goals of stakeholder engagement suggested by the GRI’s principles for defining the report content (ends), known as the means-ends decoupling. The report preparers in Indonesia accept the GRI’s concept by meeting the suggested indicators, but unintentionally overlook the GRI’s principles that are required to be implemented as a new institution, rather than intentionally avoiding them.

The main contribution of this research to the literature is that it provides insights into the need to embed stakeholder engagement in sustainability reporting in an integral way, including by translating the GRI’s global conception into local context. This research also provides insights into the presumption that ‘companies report the practice’ of stakeholder engagement in sustainability reporting—as suggested by the GRI and the extant literature. Just because the companies report the practice (means) by making reference to the GRI, it does not necessarily follow that the companies have conformed to the goals of stakeholder engagement suggested by the GRI’s principles for defining the report content (ends). Taking into full consideration Indonesia’s politicoeconomic, sociocultural and legal contexts, which can be dissimilar to other local contexts, this research contributes to an understanding of decoupling, especially the means-ends decoupling, which tends to be unintentional in the companies’ non-acquiescent response to institutional influences. The decoupling indicates that the report preparers consider the GRI’s stakeholder engagement indicators as technical prescriptions leading to box-ticking activities, rather than being thoroughly understood and implemented as a new institution. Besides, this research offers a practical contribution in that the companies’ sustainability reporting consultants could shepherd their clients’ stakeholder engagement, guided by the GRI standards (previously called guidelines), to go beyond merely meeting the GRI indicators and producing ‘nice to read’ sustainability reports.