Examining Materiality in Sustainability Reporting: Evidence from GCC Countries

The objectives of issuing a balanced sustainability report (SR) are to increase corporate accountability and provide stakeholders with more transparency. This requires companies to provide disclosure over material social, environmental and economic issues. The Global Reporting Initiative (GRI) G4 guidelines attempt to achieve this by stressing the need for reporters to undertake a materiality assessment following four key steps: identifying, prioritising, validating and reviewing. Adopting such an approach ensures that reporters identify and disclose material issues in their SRs. This improves transparency and ultimately corporate accountability to stakeholders. However, there is scarce research investigating companies’ disclosure of the materiality assessment process within their SRs. To address this gap, this research analyses the SRs of 141 companies from the Gulf Cooperation Council (GCC) countries (including Bahrain, Kuwait, Oman, Qatar, Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE)) from 2013 to 2016. Institutional theory is the theoretical perspective that has adopted in this study. The research investigates three research interconnected research questions. The first research questions ask, “What disclosure, if any, is provided by GCC companies over their materiality assessment?”. The aim is to identify which GCC companies provide disclosure over their materiality assessment process in their SRs and which GCC companies do not provide this information. Provision of this information is important as it helps stakeholders to understand the process used by reporters in identifying material issues. The second research is “How has corporate disclosure over the materiality assessment changed from 2013 to 2016 amongst GCC companies?” The aim is to track, from 2013 to 2016, changes in corporate disclosure over the materiality assessment process since the introduction of the GRI G4 guidelines in 2013 and to evaluate how corporate disclosure over the materiality assessment process has changed. The third research question explores “How does the materiality assessment process adopted by companies, as disclosed within their SRs, compare against the requirements of the GRI guidelines?”. The aim is to compare the materiality assessment process as disclosed within the SRs of GCC companies against the requirements of the GRI guidelines. For this purpose, the study identifies three classifications; extensive, limited and nondisclosure by using the method of content analysis. Furthermore, the study evaluates if reporters disclose a materiality matrix (i.e. a graphical depiction of their materiality assessment process). The most significant findings of this research are the different level of disclosure materiality assessment process in the sample of GCC companies relates to the different institutional pressures. The extent of disclosing materiality assessment process over SRs in the sample of GCC companies has increased from 2013 to 2015. The UAE has achieved the highest number of SRs with disclosure on the materiality assessment process. This is followed by Qatar, KSA, Kuwait and Oman. Bahraini companies lag behind having only started to disclose on their materiality assessment process in 2015. Although adopting the GRI G4 guidelines have contributed to improvements in the disclosure of materiality assessment process in the sample GCC companies, around half of the sample GCC companies still did not disclose any information over the study period. SRs of the GCC sample companies with no materiality assessment disclosure can be difficult for stakeholders to understand as they become ambiguous and less transparent because of the possibility of omitting material issues. This study has practical and academic contributions. On the practical side, research results are considered valuable to companies or reporters who are interested in the materiality assessment approach. The research recommends that GCC companies improve their SRs by providing more disclosure of the process of a materiality assessment. On the academic side, the study builds on institutional theory to inspect the phenomenon of sustainability reporting with materiality assessment processes. Finally, since the research is limited in this area, the findings will contribute to extend the literature on understanding materiality assessment disclosure based on GRI guidelines