Materiality of Environmental and Social Reporting: Insights from Minority Stakeholders

Previous studies have found incomplete evidence of firms’ social and environmental accounting practices because they did not shed light on how the information needs of minority stakeholders were met. This study examined whether firms provide disclosures on environmental and social issues that are considered material by minority stakeholders. Specifically, the study sampled the views of these stakeholders on the materiality of the firms’ environmental and social disclosures. The study used both the Kruskal–Wallis test and Sample t-test to compare the information needs of these stakeholders with the reporting practices of sampled firms. The content analysis approach was used to extract relevant data from the annual and sustainability reports of thirty-five (35) Ghanaian listed firms from 2017 to 2018. The study further employed questionnaires to sample the views of 300 stakeholders on the environmental and social responsibility information that need to be reported by the firms. The study demonstrated that the stakeholders were interested in the social and environmental activities of firms. The evidence showed a statistically significant difference between the social and environmental information disclosed by the firms and what the stakeholders needed. Whilst the stakeholders needed more environmental and social disclosures, the companies reported less of those. The evidence further suggested that legitimacy theory drives the disclosure of environmental and social information by firms in Ghana. The firms must incorporate the views of the minority stakeholders when determining the materiality of information to disclose. The study demonstrated the extent to which firms were aware of and cared about what is significant to their stakeholders.