Double materiality and sustainability reporting: a qualitative study in a developing country

Iwan Suhardjo, Chris Akroyd, Astrid Rudyanto and Meiliana Suparman

Meditari Accountancy Research, 2025, vol. 34, issue 1, 90-114

Abstract: PurposeDouble materiality is crucial for assessing a company’s sustainability performance. This study aims to explore how Indonesian companies are addressing double materiality communicated in their sustainability reports. The authors do this by focusing on the internal interactions between accounting and sustainability teams, and external interactions with environmental, social and governance (ESG) rating agencies.Design/methodology/approachUsing stakeholder theory, this study reports on a qualitative study based on semistructured interviews with middle managers and executive-level managers as well as content analysis of company sustainability reports, annual reports and the company websites of eight listed Indonesian companies.FindingsThe findings indicate that Indonesian companies generally prioritize financial materiality. However, banking and environmentally sensitive industries show a balanced approach where powerful stakeholders exert stronger regulatory pressure. Through a stakeholder theory lens, the authors found that collaboration between accounting and sustainability functions remains limited to compliance activities, demonstrating companies’ tendency to prioritize salient financial stakeholders while marginalizing broader stakeholder concerns. A notable misalignment exists between companies’ materiality assessments and ESG ratings, reflecting divergent stakeholder prioritization approaches. This stakeholder power imbalance creates challenges to addressing double materiality as companies respond primarily to dominant stakeholders rather than addressing the broader stakeholder interests.Originality/valueThis study explores how double materiality is addressed in Indonesia, a developing country with mandatory sustainability reporting regulations. The authors analyze both internal organizational dynamics and external influences to provide insights into how double materiality issues are identified and prioritized across different stakeholder groups.

Keywords: Double materiality; Sustainability reporting; Sustainability performance; Stakeholder theory; Developing country; Indonesia (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:medarp:medar-11-2024-2738

DOI: 10.1108/MEDAR-11-2024-2738

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