The Relationship Between Materiality Disclosures and Characteristics of Sustainability Reporting: An Empirical Study of European Companies

Based on a sample of European companies subject to Directive 2014/95/EU, this study aims to investigate whether the disclosure of the materiality concept is influenced by sustainability reporting characteristics. The characteristics analyzed include the use of the Global Reporting Initiative (GRI) standards, the format used to present sustainability information, the adoption of the Sustainable Development Goals (SDGs), and the existence of a sustainability committee within the company’s governance structure. To achieve the proposed objective, a manual content analysis of the companies’ financial reports was conducted to collect data on materiality disclosures, reporting characteristics and other financial information. The relationship between materiality disclosure and sustainability reporting characteristics was analyzed using a multiple linear regression model and panel data estimation. The results show that using GRI standards, especially when sustainability information is presented in a separate sustainability report, adopting the SDGs, and having a sustainability committee in the corporate governance structure, have a positive effect on materiality disclosure. These findings suggest that materiality disclosure benefits from the existence of frameworks that help preparers of sustainability information to identify material issues. This finding highlights the importance of having sustainability reporting standards that provide clear guidance on the application of the concept.