On the drivers of sustainable development: empirical evidence from developed and emerging markets

Why do firms’ sustainability disclosure performance differ so much between firms and across countries? Which factors drive firm’s awareness of sustainable development and do these factors have different driving mechanisms between developed and emerging countries? We answer these questions using a panel data regression model on around 1500 companies from 20 developed countries and 20 emerging countries during the period from 2009 to 2019. Our empirical results reveal that both firm-level and country-level variables are important predictors for sustainable disclosure performance. In developed countries, most firm-level indicators show a significant and positive effect on Environmental, Social and Governance (ESG) disclosure scores. In emerging countries, only operating performance, measured by total revenues, and firm size have a positive impact on ESG disclosure, while high level of profitability is associated with low ESG score. On the country level, we find a significant relationship between all drivers and ESG scores in developed countries. However, in emerging markets, only economic, cultural (excepting uncertainty avoidance index) and technological factors are shown to impact significantly sustainable development.