Developing corporate reporting guidelines to inform stakeholders of companies' sustainability regarding pandemics

Abstract

The need for companies to operate in a sustainable manner for the benefit of all its stakeholders is widely advocated. Awareness have increased that the effects of companies’ operations are not merely limited to financial effects for shareholders, but are far-reaching: affecting the economy, environment, society and various other stakeholders. Furthermore, global pressing matters such as loss in biodiversity, climate change and inequality have increased stakeholders’ focus on sustainability. Sustainability involves both financial and non-financial matters, with non-financial matters comprising environmental, social and governance (ESG) matters. Companies’ disclosure would, consequently, be inappropriate if limited to financial matters focussed solely on the information needs of shareholders. Acknowledging the information needs of a wider range of stakeholders, companies are increasingly engaging in corporate social responsibility (CSR). CSR refers to a company’s commitment to society-related concerns and therefore how a company deals with social, environmental and economic matters, including the disclosure thereof. The Coronavirus Disease-2019 (COVID-19) reminded stakeholders of the pervasive effects that pandemics have on companies’ sustainability. COVID-19 resulted in millions of deaths globally, affecting companies’ workforce and therefore also its operations, the supply chain and ultimately, the economy. Over and above the pandemic itself, government-imposed interventions restricted the movement of goods and people and introduced other pandemic-managing measures such as the temporary closure of business, social distancing, screening and the wearing of personal protective equipment. Furthermore, the unprecedented nature of pandemics introduces uncertainty to companies as well as its stakeholders. Given that communication is key in reducing uncertainty, as well as the severe effects of pandemics on companies’ sustainability, pandemicrelated disclosure is vital. This study, therefore, sets out to develop corporate reporting guidelines to inform stakeholders of companies’ sustainability regarding pandemics. Grounded theory was applied to develop the guidelines through recurrent interplay of data collection and analysis, which allowed meaning to be derived. Underlaying data assisted the researcher to develop the guidelines in detail, resulting

in one overarching disclosure requirement and ten disclosure guidelines. These guidelines give companies detailed guidance on pandemic-related disclosure during current pandemics, but also regarding future pandemics. The outcomes of the research are presented in three articles. The first article determined the sustainability elements of companies that are affected by pandemics. This article employed a systematic review to investigate extant literature on the topic. From this article, it was clear that pandemics have pervasive effects on companies’ sustainability in all four components of sustainability, being financial, ESG. The pandemics’ effects were not merely negative, but companies also affected neutral changes and experienced positive effects. The second article analysed annual reports to determine the sustainability elements reported on by companies listed on the Johannesburg Stock Exchange (JSE) that are affected by pandemics. The findings of the first article were confirmed and the sustainability elements of companies that are affected by pandemics were elaborated on. Furthermore, though companies engaged in extensive emancipatory pandemic-related disclosure during COVID-19, this disclosure was found lacking prior to the pandemic, which may indicate companies’ unpreparedness for such risks. The third and final article set out the detailed developed corporate sustainability guidelines regarding pandemics. These guidelines were also evaluated and improved on by obtaining input from industry experts on sustainability from accounting firms. Overall, the corporate reporting guidelines were found to be detailed enough to provide companies with guidance regarding pandemic-related disclosure to inform stakeholders of companies’ sustainability regarding pandemics. The study contributes to the body of knowledge regarding the effect that pandemics have on companies’ sustainability. The study, furthermore, established detailed corporate reporting guidelines that may be used by companies in structuring pandemic-related disclosure. Specifically, the guidelines may be used proactively, acknowledging the possibility of future pandemics, as well as during current pandemics. Given the generalisability of the guidelines, it can be applied to any communicable disease and to any industry. These guidelines are unique and serves to formalise and standardise corporate pandemic-related reporting, providing noteworthy information regarding companies’ sustainability to stakeholders.