Tag Archives: GRI standards

This is an excerpt from one of my latest articles, published through Business Ethics, the Environment and Responsbility.

Suggested citation: Galeotti, R. M., Camilleri, M. A., Roberto, F., & Sepe, F. (2023). Stakeholder engagement disclosures in sustainability reports: Evidence from Italian food companies. Business Ethics, the Environment & Responsibility, Ahead-of-print, 1–20, https://doi.org/10.1111/beer.12642 

Abstract

More businesses are embedding stakeholder engagement (SE) practices in their corporate disclosures. This article explores the extent to which SE practices are featured in the sustainability reports (SRs) of 48 Italian food and beverage businesses, following the latest Global Reporting Initiative (GRI) standards. The researchers analyze the content of their SRs dated 2020 and 2021. They utilize a panel regression technique to examine the relationship between stakeholder engagement disclosures (SED) and corporate financial performance (CFP), and to investigate the mediating role of SR assurance. The results show a positive and significant relationship between SED and CFP. They also confirm that there is a moderating effect from SR assurance on this causal path. However, the findings reveal that SED in SRs of Italian food companies is still moderate. This contribution builds on the logic behind the stakeholder theory. It implies that there is scope for food companies to forge relationships with stakeholders. It indicates that it is in their interest to disclose material information about their SE practices in their SR and to organize third party assurance assessments in order to improve their legitimacy with stakeholders.

1 INTRODUCTION

The sustainability agenda has gained significant attention within the global food sector (Rueda et al., 2017), and it is becoming a growing concern among stakeholders (Al Hawaj & Buallay, 2022). The food industry is heavily reliant on natural and technological resources such as water, energy, chemicals, and fossil fuels, and therefore, has a substantial impact on the environment and the society (Buallay, 2020; Camilleri, 2021; Ramos et al., 2020). The actions of food manufacturers and retailers can significantly affect the health of individuals. Their ability to choose, process, package, transport, and promote sustainable food could have an impact on what people consume and on their overall well-being. As they interact directly with consumers, they are subject to intense scrutiny and requests for transparency. Stakeholders, including governmental institutions, consumers, and the global community, have called upon food companies to adopt more sustainable practices and to pay more attention to food sustainability (Friedrich et al., 2012; Troise et al., 2021). Very often, they are raising awareness about value creation opportunities to persuade them to engage in responsible production and consumption behaviors (Attanasio et al., 2021), and to forge relationships with marketplace stakeholders (Camilleri, 2020).

The interactions between firms and their external environment constitute a vital characteristic of a sustainable business model, owing to the unique value stream that stakeholder engagement (SE) can offer. In this context, sustainability disclosures can act as a catalyst to foster trust, enhance procedures and systems, promote the firm’s vision and strategy, decrease compliance expenses, and generate competitive advantages (Cardoni et al., 2022). Companies operating in the food sector are principally challenged in their efforts to deliver Sustainability Reports (SRs) that provide useful information to both internal and external stakeholders (D’Adamo, 2022). Research examining the role of sustainability reporting in enhancing firm performance in this sector is limited. Some studies suggest a positive relationship between strong sustainability reporting and return on assets (ROA) (Al Hawaj & Buallay, 2022), increased sales (Sen & Bhattacharya, 2001) or reduced cost of capital (Garzón-Jiménez & Zorio-Grima, 2022).

Given the complexity of the food sector, which is a typical multistakeholder context (Al Hawaj & Buallay, 2022), it is particularly relevant for food companies to ensure that their SRs provide accurate and thorough disclosures of their SE practices. SE is a complex and distinct activity that has emerged in the preparation of SRs (Greenwood, 2007) and it is crucial to reflect on the way it is conducted (Petruzzelli & Badia, 2023). The reporting entities cannot ignore their stakeholders’ relationships from their corporate disclosures. If they conceal any material information on this matter from their SR, they risk damaging their reputation and image (Ardiana, 2019; De Micco et al., 2021; Manetti, 2011; Miles & Ringham, 2020).

Academic research on SE is an evolving area of investigation due to the increasing scientific and professional interest in sustainability reporting issues (Camilleri, 2015; Stocker et al., 2020). Prior studies have indicated that many companies fail to provide complete disclosures of SE processes (Moratis & Brandt, 2017), and show an inadequate level of SE procedures (Petruzzelli & Badia, 2023; Venturelli et al., 2018). However, despite the significance of this subject, the number of empirical academic contributions on SE remains limited, making it important to further explore this topic. In such a context, several scholars are calling for further studies that seek to investigate how, why, where, and when firms are engaging with stakeholders. In addition, they are encouraging them to explore whether they are disclosing the details about their stakeholder relationships in their SRs (Gagné et al., 2022; Gao & Zhang, 2006; Hörisch et al., 2015).

The purpose of this article is twofold. The first one is to investigate the extent to which SE is featured in the SRs of 48 Italian unlisted food companies (that were relying on GRI’s new standards in the period 2020–2021), with the objective to verify their focus on SE disclosures (SED) process. The authors examine their SR’s content, in terms of the report preparers’ motivations and methods. They also verify whether they indicated specific stakeholders in their disclosures. This paper raises awareness on the role of SE in the sustainability reporting of food companies. It clarifies how and to what extent food companies are communicating directly with stakeholders, gathering feedback from them, and how explicitly they are involving them in the SR process. To this aim, the researchers developed an SE index composed of 7 categories and 21 items derived from prior literature on the topic and adapted from the latest Global Reporting Initiative (GRI) standards. The proposed index provides a systematic approach to examining the SE practices and activities disclosed by sample firms. Content analysis (a binary coding system) of GRI SRs was carried out to calculate the overall SED score. The second goal of this contribution is to investigate the relationship between SED and corporate financial performance (CFP). In addition, this research analyzes the moderating effects of SR assurance on SED-CFP causal link. Hence, this contribution addresses the following research questions:

• RQ1: What is the state and extent of SED in the SRs of food companies?
• RQ2: Is there a relationship between SED in SRs and CFP in the food industry? If there is, how and to what extent, is this relationship mediated by SR assurance?

This research explores the above-mentioned questions and provides insights on the SE processes of Italian Food companies. It builds on the Stakeholder Theory (ST; Freeman, 1984), as it seeks to explain whether SE processes are integrated in their SRs. The authors anticipate that the exploratory content analysis on the sample firms’ SRs indicate that the average level of SE is not significantly high in food companies in Italy, however, there is an increasing pattern of SED during the study period. While SE seems common practice, many firms are failing to provide the details on their stakeholder relationships in their SRs. The findings suggest that most of the engagement modes disclosed are unidirectional (level 1—Inform) with minimal emphasis on deep involvement strategies (level 3—Involve). Furthermore, only 32% of the sample seek assurance on the information disclosed.

Results from the panel data analysis provide evidence that there is a significant positive association between SED and CFP. Findings also show that SR assurance by accounting firms accentuates this effect. An extensive literature review suggests that this study, to the best of the authors’ knowledge, is the first to use food companies’ SRs to investigate the impact of SED on CFP introducing the interactive variable of SR third-party assurance, which adds new knowledge to SE and sustainability reporting literature from a specific industry in an advanced economy. Considering the maturity of Italian sustainability reporting and assurance practices (KPMG, 2022; Larrinaga et al., 2020) the Italian context is particularly relevant in explaining the interest of food companies into properly communicating SE activities in SRs. In these terms, this study contributes to a deeper understanding of the underexplored area of SE in a specific industry, highlighting the strategies used by Italian food companies to manage the SE communication process. Specifically, it provides insights to improve the framing of SED and gives evidence of the value relevance of SED and SR assurance for companies operating in the food sector. Therefore, this research sheds light on the advancement and enhancement of food company–stakeholder relations, particularly from the perspective of value co-creation. The findings will help managers identify key focus areas where they can improve the SED process aiming at creating shared value and foster mutually beneficial relationships with stakeholders.

The remainder of this study is structured as follows. The next section deals with the paper’s conceptual framework and hypotheses development. This is followed by the research design and methodology. Finally, the results, discussion, including recommendations, limitations, and hints for future research are presented.

Read further (this publication is available in its entirety, as it is an open-access article).