Sustainability Disclosure Practices: A Study of Selected Chinese Companies

Introduction

Corporate reporting is a tool through which companies narrate the integrated financial and non-financial corporate performance and disseminate this information to various stakeholders. Earlier focus of corporate reporting was limited to the compliance of various statutes concentrating primarily on economic parameters only, but now it is extended to environmental and social performance as well. A justification is given by companies to the critical public with respect to utilization of societal resources and environmental responsibilities (Daub, 2007). Companies have realized that in the present information-based society, financial reporting alone is insufficient to the needs of shareholders, customers, communities, government, non-government organizations and other stakeholders. Companies’ responsibility extends not only towards the primary stakeholders, but also towards the secondary stakeholders (Freeman, 1984). Primary stakeholder refers to a group as ‘one without whose continuing participation the corporation cannot survive as a going concern’. The secondary groups are defined as ‘those who influence or affect, or are influenced or affected by the corporation, but they are not engaged in transactions with the corporation and are not essential for its survival’. Thus, the view based on stakeholder theory holds that companies have a responsibility that requires them to consider the interests of all parties affected by their actions (Carroll, 1996; Frederick, Post & Davis, 1992; Steiner & Steiner, 2000; Wilson, 2001).

This realization has put the companies on the path of sustainability reporting. The principal inspiration about this concept originated from the Brundtland Report of 1987. Brundtland Commission in its report Our Common Future (1987) significantly recognized the term sustainability. This report defines ‘sustainability’ as ‘the development which meets the needs of the present without compromising the ability of future generations to meet their needs’. Sustainability reporting can be regarded as a new trend in corporate reporting which integrates financial, environmental and social performance of the company into one report (KPMG, 2008; Quick, 2008; Zwetsloot & Marrewijk, 2004). It refers to the practice of measuring, disclosing and being accountable to internal and external stakeholders for organizational performance towards the goal of sustainable development (Global Reporting Initiative, 2006). Dow Jones Sustainability Index defines sustainability reporting as ‘a business approach that creates long term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments’ (Knoepfel, 2001). It is a way to enhance the transparency in order to satisfy different stakeholder needs (Erlandsson & Olinder, 2009). It further indicates a company’s commitment towards the stakeholders and environment. It also stresses on the efficient and effective allocation of resources (KPMG, 2008). But with sustainability reporting still a voluntary practice, it is considered as an unnecessary burden by the companies that increases their operational cost (McWilliams & Siegel, 2001). The cost incurred on such reporting is immediate while its benefits emerge gradually and are primarily intangible in nature (Evans, 2003).

However, divergent parts of the world have different perceptions with respect to sustainability reporting. Different governments and different regions or companies also have different drivers or priorities for sustainability reporting. For example, governments that are in receipt of international aid are sometimes required by donor organizations to report about their sustainability performance (Association of Chartered Certified Accountants, 2010). Moreover, the governments of Sweden and Russia have implemented requirements for the mandatory reporting of environmental issues by state-owned enterprises; UK government has introduced new requirements for companies listed on the London Stock Exchange and has made changes in the UK Company Act 2006 which will require the disclosure of information regarding human rights, diversity and greenhouse gas emissions. In India, The Companies Act (2013) has made it mandatory for Indian companies to spend 2 per cent of net profit on corporate social responsibility activities (Companies Bill, 2012, Ministry of Corporate Affairs).

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Table 1.

Sustainability Disclosure and Reporting in China

Government Level	Stock Exchanges (SE) & Indexes	Industry Associations	Other Standards’ Enforcers
China Securities Regulatory Commission (CSRC) amendments to the code of governance for listed companies Amendments to company law SASAC* policy on state owned enterprises CAITEC** CSR guidelines Shanghai Pudong Government guidelines CSR company awards	Shanghai SE mandatory disclosure of environmental information and corporate social responsibility (CSR) Shenzhen SE guidelines and CSR index Hong Kong SE ESG guide CSI corporate governance index Hang Seng corporate sustainability index	CNCA’s social compliance management system for the clothing industry China’s banking association CSR guidelines for financial institutions 11 national industrial federations and associations’ CSR guidelines	China Entrepreneur Club’s China green companies top 100 ranking A-share listed companies CSR report awards by Rankins CSR Ratings, Hexun.com and Det Norske Veritas (DNV) ACCA’s Hong Kong Awards for sustainable reporting

Source: Global reporting initiative (2013).

Notes: *State-owned Assets Supervision and Administration Commission.

**Chinese Academy of International Trade and Economic Cooperation.

With specific reference to China, the historical development of sustainability reporting practice suggests that during 1979 to late 1990s, China witnessed a complete negligence of sustainability, though the concept of sustainability emerged in early and mid-2000s and it gathered momentum till around 2010. Moreover, various initiatives have been taken by Chinese stock exchanges and government to promote this practice. Table 1 shows the various formal regulators and voluntary standard enforcers for sustainability disclosure in China.

With these efforts, there seems to be origin of some regulatory push and endeavour with respect to sustainability in China, though grossly it still remains voluntary in nature. However, there prevails a general lack of experience and awareness of reporting standards in China, as suggested by its ranking in the Human Development Index at 101st position (Human Development Report, 2013). China also suffers from problems related to massive population of 1.35 billion, high level of economic inequality suggested by income GINI coefficient of 42.5 (Human Development Report, 2013) and increasing production of greenhouse gases since 2005 (OECD, 2012). All these complexities are leading to the emergence of sustainability issues in the country.

Foregoing discussion shows that China, one of the major emerging economies among the Brazil, Russia, India and China (BRIC) nations, is facing a number of sustainability issues. Hence, it is desirable to study the sustainability reporting practices in China. Therefore, the present study is undertaken.

Review of Literature

In the contemporary era, reports that were earlier labelled as corporate social responsibility (CSR) or environmental reports are now repackaged as sustainability reports. In the light of sustainability reporting, a review of some empirical studies is presented in the following.

Roberts and Koeplin (2007) examined the status of sustainability reporting in Portuguese companies in terms of quality and quantity of disclosure in the global reporting initiative (GRI) reports. Five Portugal companies were listed on the GRI website on 14 July 2005 as GRI reporters were included in the sample. Content analysis was used and the results revealed that with respect to quality of disclosure, the Portuguese companies emphasized on social and economic reporting, more particularly social reporting, while environmental reporting was less stressed. As far as the quantity of disclosure was concerned, the study found that the length of the report varied from 5 pages to 124 pages. It was also indicated that the GRI reporting was in the initial stage in Portugal with a positive scope for future.

Guthrie and Farneti (2008) examined the extent and pattern of sustainability disclosure in seven Australian public sector organizations. These comprised of a federal department, a state department, three local government and two state public organizations which used G3 guidelines (2006) and sector supplement of public agencies (2005). Content analysis was done on annual and sustainability reports for the financial year 2005–2006. It was found that only 32 per cent of the GRI’s elements were used by the selected organizations and the Labour Practices category showed the highest disclosure of 54 per cent. The results showed that the GRI performance indicators were of two types—core (material to all) and additional (material to some but not all). Out of 54 core elements from GRI, on an average, the group used 35 per cent, whereas with regard to additional elements, that is, 27, only 25 per cent were used by the group. The GRI indicators were used by organizations in a fragmented way and the disclosures were generally narrative and non-monetary. Therefore, it clearly showed that public sector organizations were at infancy as far as sustainability disclosure was concerned.

Quick (2008) reviewed the quality of sustainability reporting in Germany by taking GRI guidelines as a benchmark for developing and applying a scoring model. The sample comprised of 26 companies, of which 18 were from the DAX30 and eight from MDAX. Reports that had been analyzed were of different time frames: three reports for the year 2000, four of 2001, two of 2001/2002, 16 of 2002 and one of 2002/2003 because all the companies did not publish the sustainability reports on annual basis and some integrated with financial reports. Content analysis was done and it was found that the average degree of achievement of the DAX30 companies (at 75 per cent) was higher than that of MDAX companies (at approximately 61 per cent). The quality of reporting practice with regard to social and environmental performance was moderate, but as far as economic performance was concerned, it was the lowest.

SIRAN, KLD and Social Investment Forum (2008) examined the current level of sustainability reporting in three sectors—energy, materials and telecommunications. He took up seven emerging market countries—Brazil, China, India, Russia, South Africa, South Korea and Taiwan—in order to find the leading and laggard sectors and countries. The sample comprised 75 companies which were selected considering top four companies by float-adjusted market cap from sandp/Industrial Finance Corporation of India (IFCI) index. The public disclosures were analyzed at the end of September 2007 by KLD Research. Descriptive analysis had been used to examine five sustainability questions regarding CSR disclosure, separate CSR section, publishing CSR report, reference to GRI and reporting on sustainability goals and benchmarks. The results on the overall basis stated that CSR disclosure was 87 per cent, separate CSR section 81 per cent, CSR report 51 per cent, GRI reference 27 per cent, and benchmark and goals 39 per cent. The findings also indicated that South Africa was the leading country in all five heads, while China lagged behind requiring maximum room for improvement. Energy was the best sector with respect to making any public disclosure of sustainability issues, providing a separate section on its website and/or annual report addressing sustainability issues. It also stood out in publishing a stand-alone sustainability report and reporting on sustainability goals and benchmarks. With respect to reporting, taking the reference of the GRI framework, the leader was material sector.

Perez and Sanchez (2009) reviewed the sustainability reporting by leading companies in the mining sector by studying 31 reports published between 2001 and 2006. The sample comprised of four companies selected on the basis of 2005 turnover from four different countries, namely, BHP Billiton (Australia), Anglo American (UK), Lafarge (France) and Cemex (Mexico). The disclosure of 62 assessment items was organized in six categories, namely, context and commitment, management, environmental, social and economic performance, economic performance, and accessibility and assurance. Content analysis was used and the results stated that the categories ‘Context & Commitment’ and ‘Social performance’ gave the best results; the categories “Accessibility & Assurance’ and ‘Economic performance’ gave the lowest scores, while the category ‘Environmental performance’ showed constant evolution. The findings also stated that the scores of Anglo and BHP were better than those of Cemex and Lafarge. Moreover, BHP was the only company which showed better results on a year-to-year comparison.

Huang and Wang (2010) investigated the content of sustainability reports and compared the different aspects, such as, economic, environmental, social, corporate governance, stakeholder engagement and philanthropy. The sample included 162 sustainability reports disclosed by 116 Chinese enterprises till the end of 2008. Content analysis was done and it was found that the reporting system of some companies had attained a higher level, when compared with majority of companies that needed improvement in many aspects. In Chinese sustainability reports, social topics were the most common in more than 96 per cent sustainability reports and economic information in more than 92 per cent reports, while the reports on environmental topics increased from 75 per cent till 2006 to 98 per cent in 2008. The results showed that the economic and environmental aspects of sustainability reports were quite consistent with international practice, while stakeholder engagement had shown great increase in 2006 and 2008, and philanthropy had emerged as an important issue in China’s sustainability reports. Moreover, the content of sustainability reports had a link with Chinese institutional background.

Li, Toppinen, Tuppura, Puumalainen and Hujala (2011) examined the current patterns of sustainability disclosure for the year 2006 including the most corresponding years, that is, 2005 and 2007 in the global forest industry. The sample comprised of 66 largest forest companies worldwide. Content analysis was performed as per GRI framework on 44 corporate responsibility or sustainability reports and 22 integrated annual reports. The results revealed that the most emphasized area was environmental responsibility followed by labour and employment responsibility and economic responsibility, while the human rights and social responsibility had received the least attention followed by product and service responsibility.

Preuss and Barkemeyer (2011) examined whether Russian companies set different CSR priorities through a tripartite comparison of the engagement of multinational enterprises from industrialized, transition and newly industrialized economies using GRI framework. The sample comprised 310 GRI G3 reports from ten countries, namely, Brazil, China (including Hong Kong), India, Russia, South Africa, South Korea, Australia, Canada, the UK and the USA, and were analyzed using descriptive statistics, Mann–Whitney test and Spearman’s rank order correlation. The findings revealed that newly industrialized country firms clearly outperformed developed countries in their coverage of GRI indicators. Indian companies had the highest coverage of 75.2 per cent followed by South Korea with 73.9 per cent coverage, while the lowest coverage was that of USA (43.8 per cent) and the UK (46 per cent). Russia occupied a middle position with 50.3 per cent score. Moreover, labour (66.4 per cent), economic (63.9 per cent) and environmental (58.3 per cent) indicators were addressed more than society (54.7 per cent), human rights (46.2 per cent) and product responsibility (38.2 per cent) indicators.

Faisal, Tower and Rusmin (2012) explored the sustainability reporting practices at the global level for the year 2009. The sample comprised of 125 firms from 24 countries. The sustainability disclosure index, according to GRI 2006 guidelines, was used and included 79 items from three main GRI-based categories—economic (9 items), environmental (30 items) and social (40 items). Scores were assigned as 0 for item not reported and 1 for the reported one. Content analysis was used and results revealed that the average level of sustainability disclosure was 61.9 per cent.

Need and Objectives of the Study

The empirical studies reviewed suggest that sustainability disclosure issues have gained the attention of many researchers working in this field all over the world. But with reference to China, only one study by Huang and Wang (2010) is exclusively available. However, the same has not followed any structured framework for gathering information on the issue of sustainability. In this light, the present study is undertaken to fill the research gap. Being one of the most powerful and fastest growing economies of the world, with its massive labour force and huge customer base, China has become a favourite destination for foreign direct investments and foreign institutional investments. However, on the flip side, it faces challenges in the form of population explosion, scarcity of resources and labour explosion. It is against this background that this study needs to be undertaken. These are the specific objectives of this article.

Database and Research Methodology

The universe of study comprises the largest companies from developing country, China, taken from its respective index, that is, SSE 50 companies from Shanghai stock exchange, ranked on the basis of market capitalization. Sustainability reports are not published by the companies on annual basis and some companies prefer to integrate these with financial reports only (Quick, 2008). Ruhnke and Gabriel (2013) also demonstrated that there is no uniformity in publication frequency of sustainability reports. So, the time frame for this study is 5 years, that is, from 2006–2007 to 2010–2011. The latest sustainability report published by the selected companies during this period would be considered for the analysis (see Ruhnke & Gabriel, 2013). The reason for the selecting period between 2006 and 2011 is because 2006 was the year when G3 guidelines on sustainability reporting (by GRI) were provided and 2011 was the year when the study was taken up. As a result of these filters, the actual sample size turned out to be, China–SSE 50 index, 19 companies. These companies have been divided into five industry groups (minimum of two companies in one category form an industry).

This study involves the usage of sustainability disclosure index based on the GRI framework as given by GRI’s G3 guidelines. For this study, performance indicators have been the only measure for their inclusion. Performance indicators are an integral part of the standard disclosures and form the basis of quantitative and qualitative information on economic, environmental and social performance categories. These indicators comprise of 79 items in the disclosure index given under GRI framework and all these items have been taken for observation. To measure the level of sustainability disclosure for sample companies, content analysis is performed on their respective reports. While doing content analysis, these 79 items, depicting performance indicators as outlined by disclosure index are rationed a maximum score of 2 each making the total possible score of 158 (79 × 2). Coding is undertaken manually and focused on the analysis of the GRI content index, which is necessary to be included in the sustainability report as per the GRI guidelines. The scoring is done as 2—indicator fully reported; 1—indicator partially reported and 0—indicator not reported. Cases where companies stated that a specific indicator was ‘not material’ are taken as 0, while ‘not applicable’ is considered NA and is excluded for this reason.

Descriptives have been applied to judge the extent of sustainability reporting among Chinese companies. One-way analysis of variance (ANOVA) is used for inter-category and inter-industry comparisons. Since Levene’s test did not satisfy the presumption, Brown–Forsythe and Welch tests were resorted to. Post hoc comparison is done using Games–Howell test. However, where assumptions of one-way ANOVA are not met, Kruskal–Wallis test (non-parametric) is applied. ¹

Results and Discussions

Extent of Sustainability Disclosure of Companies in China

The results of extent of sustainability disclosure of companies in China are presented in Table 2.

It can be seen from Table 2 that the total percentage sustainability disclosure score of leading Chinese companies is 31.25 per cent. In addition, their percentage disclosure score varies from 2.53 per cent to 66.46 per cent. Company-wise analysis suggests that Baosteel has the highest disclosure score of 66.46 per cent, followed by China Shenhua Energy (65.82 per cent) and then by Air China with 63.29 per cent score. Among these 19 companies, the lowest score of 2.53 per cent is shared by Bank of China and Citic Securities followed by China Merchants Bank with 5.06 per cent. Further, it is seen that only 19 companies out of SSE 50, that is, 38 per cent (19/50 × 100 = 38 per cent) are going for sustainability practices and disclosing information in separate sustainability reports. In addition, only three out of 19 corporate reports achieve a quality score of more than 50 per cent (Baosteel [66.46 per cent], China Shenhua Energy [65.82 per cent] and Air China [63.29 per cent]), indicating the preliminary stage of sustainability reporting practice in China. In addition, the total mean disclosure of 31.25 per cent is a quite low percentage. Further, the percentage disclosure score ranges from just 2.53 per cent to 66.46 per cent. As sustainability reporting is a voluntary practice, Chinese companies’ low score gives an impression that they do not seem to have realized the importance of sustenance in future.

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Table 2.

Sustainability Disclosure by Chinese Companies

Company	Industry	Industry Group	Total Mean Disclosure					Economic				Environmental				Social
			S	NAS	%S	Rank	MIG	S	NAS	%S	MIG	S	NAS	%S	MIG	S	NAS	%S	MIG
Sinopec	Oil & Gas	Oil & Gas	46	158	29.11	13	34.18	2	18	11.11	44.45	36	60	60	47.5	8	80	10	21.88
Petro China	Oil & Gas		62	158	39.24	6		14	18	77.78		21	60	35		27	80	33.75
Industrial & Commercial Bank of China	Finance	Finance	68	158	43.04	4	22.26	14	18	77.78	36.36	18	60	30	17.83	36	80	45	22.39
China CITIC Bank	Finance		60	140	42.86	5		12	18	66.67		18	44	40.91		30	78	38.46
Agricultural Bank of China	Finance		62	158	39.24	6		12	18	66.67		24	60	40		26	80	32.5
China Construction Bank	Finance		48	140	34.29	10		12	18	66.67		12	42	28.57		24	76	31.58
SPD Bank	Finance		52	158	32.91	11		12	18	66.67		12	60	20		28	80	35
Industrial Bank	Finance		48	158	30.38	12		10	18	55.56		12	60	20		26	80	32.5
Bank of Beijing	Finance		10	158	6.33	15		0	18	0		3	60	5		7	80	8.75
China Minsheng Bank	Finance		9	158	5.7	16		0	18	0		3	60	5		6	80	7.5
China Merchants Bank	Finance		8	158	5.06	17		0	18	0		4	60	6.67		4	80	5
Bank of China	Finance		4	158	2.53	18		0	18	0		0	60	0		4	80	5
CITIC Securities	Finance		4	158	2.53	18		0	18	0		0	60	0		4	80	5
Zijin Mining	Gold Mining	Metals & Mining	23	158	14.56	14	48.95	2	18	11.11	66.67	10	60	16.67	56.67	11	80	13.75	39.17
China Shenhua Energy	Metals & Mining		104	158	65.82	2		18	18	100		48	60	80		38	80	47.5
Baosteel	Steel		105	158	66.46	1		16	18	88.89		44	60	73.33		45	80	56.25
Air China	Flight Operations	Automobiles & Transport	100	158	63.29	3	50	14	18	77.78	77.89	24	60	40	27.5	62	80	77.5	60.75
China COSCO	Shipping & Logistics		58	158	36.71	8		14	18	78		9	60	15		35	80	44
China Unicom	Telecommunications	Others	56	158	35.44	9	35.54	16	18	88.89	88.89	10	60	16.67	16.67	30	80	37.5	37.5
		Mean			31.39					49.14				28.04				29.82

Source: Author’s calculations.

Note: S, score obtained; NAS, net applicable score; %S, percentage score; MIG, mean industry group.

The category-wise analysis shows that the economic category has the highest mean disclosure score of 49.14 followed by social and environmental category with 29.82 and 28.04 score respectively. The company-wise maximum disclosure is 100 per cent, 80 per cent and 77.5 per cent for all three categories, that is, economic, environmental and social, respectively. However, the minimum disclosure score is 0 per cent for economic and environmental categories respectively, while it is 5 per cent for the social category. In order to check if the difference in the mean disclosure scores of these categories is statistically significant, one-way ANOVA has been applied (see Table 3).

It can be observed from Table 3 that the value of F(3.330) is significant at 5 per cent level. Thus, statistically significant variation has been found in the mean disclosure scores of economic, environmental and social categories of information. Therefore, the null hypothesis H₀₁ has been rejected because there is no significant difference in the sustainability disclosure scores of economic, environmental and social indicators of Chinese companies. Furthermore, we see the results of post hoc test to see exactly which pairs of groups are significantly different. So, Games–Howell post hoc test was applied as the assumption of homogeneity of variance was not met. However, no significant difference was revealed among the categories (see Table 4).

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Table 3.

Results of One-Way ANOVA (Category-wise comparison)

	Sum of Squares	df	Mean Square	F	Sig.
Between Groups	5201.122	2	2600.561	3.300	0.044
Within groups	42553.354	54	788.025
Total	47754.476	56

Score

Source: Author’s calculations.

From the mean differences and results of one-way ANOVA, it is clear that the Chinese companies do give consideration to GRI categories while disclosing these in their sustainability reports, as economic indicators are the most reported ones. These indicators have direct impact on increasing the profitability of the company. No company goes for voluntary reporting as sustainability reporting, unless it fulfils their economic self-interest along with being philanthropic. GRI index covers nine indicators in economic category ranging from EC1 to EC9. These are the core indicators, that is, those indicators that are of interest to most stakeholders. Shareholders are the prime stakeholders of a company. So, the most common indicators reported by companies include retained earnings, revenues, investments and payments to providers of capital covered under EC1. Similarly, employees are the most productive assets of an organization that contribute economically; hence maximum disclosure exists with respect to employee benefits in terms of provident funds, pension and retirement benefit schemes of employees as required by EC3. Similarly, satisfying content EC6 indicates, local purchasing and local hiring is comparatively cheaper to companies. In addition, giving minimum wages is mandatory as required by EC5. Disclosing with respect to technological upgradation and clean energy makes firms strategically competitive as well as satisfy the requirements under EC2. However, EC8 that deals with disclosure relating to infrastructure development for public benefit does not generate any direct economic benefit and hence is reported the least. No such immediate quantifiable benefit exists for environmental and social indicators making sustainability reporting low for them.

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Table 4.

Results of Post-Hoc Comparisons (Category-wise Comparison)

Dependent Variable: Score

Games–Howell

(I) Category	(J) Category	Mean Difference (I–J)	Standard. Error	Sig.	95% Interval Lower Bound	Confidence Upper Bound
Economic	Environmental	21.09263	10.14553	0.111	–3.9083	46.0936
	Social	19.31789	9.76745	0.137	–4.8670	43.5028
Environmental	Economic	–21.09263	10.14553	0.111	–46.0936	3.9083
	Social	–1.77474	7.10740	0.966	–19.1638	15.6143
Social	Economic	–19.31789	9.76745	0.137	–43.5028	4.8670
	Environmental	1.77474	7.10740	0.966	–15.6143	19.1638

Source: Author’s calculations.

Perhaps, because there are 30 environmental items, that is, EN 1 to EN 30, to be reported by companies, and they are divided into nine groups—material, energy, water, biodiversity, emissions, effluents and waste, products and services, compliance and transport and overall. Additionally, the G3 social indicators include 40 disclosing items and these are segmented into four groups as subcategories, including labour practices and decent work, human rights performance consisting of society performance and product responsibility performance comprising 14, 9, 8 and 9 items, respectively. However, these items do not have a direct and significant economic value. Therefore, it seems that companies of an emerging economy, such as China, are more conscious of items bearing economic value as indicated by the highest score in the category.

In order to further analyze the sustainable disclosure practices in China, all 19 companies have been divided into five industry groups namely Automobiles & Transport, Oil & Gas, Metals & Mining, Finance and others. When comparing the percentage mean scores of these groups, we find that the Automobiles & Transport industry has the highest disclosure score of 50 per cent followed by Metals & Mining (48.95 per cent) and Others (35.54 per cent). However, the Finance sector has the least disclosure score of just 22.26 per cent. In addition, the category-wise disclosure scores of these industry groups show that the leading industry groups, that is, Automobiles & Transport is at 77.89 per cent, 27.5 per cent and 60.75 per cent, while Metals & Mining is at 66.67 per cent, 56.67 per cent and 39.17 per cent and Oil & Gas is at 44.45 per cent, 47.5 per cent and 21.88 per cent in all three categories, that is, economic, environmental and social, respectively. However, the least disclosing industry group in China, that is, Finance has 36.36 per cent, 17.83 per cent and 22.39 per cent score in three categories, respectively. Further, in order to see whether the difference in disclosure scores of various industry groups is significant or not, Kruskal–Wallis has been applied on these industries (see Table 5).

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Table 5.

Test Statistics^{i, ii} of Kruskal–Wallis Test

	Score
Chi-square Statistic	4.687
df	4
Asymp. Sig.	0.321

Source: Author’s calculations.

Notes: i—Kruskal–Wallis Test.

ii—Grouping Variable: Industry.

It can be observed from Table 5 that there is no statistically significant difference between the different categories (H[2] = 4.687, p = 0.321) indicating no statistically significant variation in the mean disclosure scores of various industry groups. Therefore, the null hypothesis H₀₂ has been accepted. Chinese companies do not give much consideration to these industries while disclosing these in their sustainability reports.

Further, industry-wise analysis reveals that the industry groups that lead the sustainability reporting disclosure score include Automobiles & Transport, Metals & Mining, while the Finance sector has the lowest sustainability score. Automobiles & Transport and Metals & Mining groups both are highly environmentally sensitive and have a heavy environmental footprint. Both these industries are considered dirty as these are energy intensive and environment damaging (Sahay, 2004). Yet, it is evident from these arguments that heavily polluting enterprises (manufacturing, e.g., Automobiles & Transport Sector and Metals & Mining) perform better than non-polluting enterprises (Service, e.g., Finance). Perhaps the reason is the legitimacy theory, according to which manufacturing companies are expected to disclose more social information concerning environmental and health and safety issues than companies belonging to other sectors in order to avoid public pressure and additional regulations (Faisal et al., 2012). On the other hand, Finance has the lowest score of 22.26 per cent, and this industry has the maximum number of companies in the sample, that is, 11. Perhaps, this low score is because many of the finance companies follow non-GRI guidelines, that is, the guidelines on CSR for banking financial institutions given by the China Banking Association (CBA), which recommend that every banking financial institution in China submit a sustainability report to the CBA every year stating how they are fulfilling their responsibilities. So, the disclosure as per GRI decreases because of different specifications. This industry is highly regulated and has a very high level of competition. Industry also deals with a unique and distinct commodity, that is, money. Perhaps, the product becomes more important than the sustainability disclosure scores leading to low levels of reporting on sustainability issues as per GRI.

Our results corroborate with Preuss and Barkemeyer (2011) who concluded that economic parameters are among the most reported categories with 63.9 per cent score. In addition, Huang and Wang (2010) revealed that the majority of Chinese reports needed improvement in sustainability disclosure. Even SIRAN et al. (2008) have emphasized that China had the maximum room for improvement, as it was the lowest in parameter named ‘Some Sustainability Disclosure’ at 75 per cent only. However, our results are contradictory to Roberts and Koeplin (2007) and Quick (2008) who found that the companies emphasized more on social parameters followed by economic aspects. The reason for such a contradictory finding seems to be due to them being undertaken in Portugal and Germany, respectively. These are developed countries in comparison to developing nations such as China. In addition, Li et al. (2011) found that the environmental parameters are reported the most. Moreover, SIRAN et al. (2008) hold a contradictory view as in the case of industry-wise analysis, where they revealed that sustainability reporting is better among the companies that belong to energy sector rather than consumer goods sector. The reason seems to be that this study was with reference to seven different countries.

Conclusion

From the above company-wise analysis, it is observed that in China, Baosteel has the highest disclosure score and category-wise analysis says that economic category is reported the most. Further, industry-wise analysis shows that Automobiles & Transport sector is the leader in sustainability reporting. However, we can conclude that sustainability reporting is not yet prominent in China, as the overall mean disclosure score is just 31.25 per cent. This low disclosure is perhaps because Chinese companies have yet not realized the advantages of these voluntary communications. They seem to consider the disclosure of this information as confidential leading to competitive disadvantage and high proprietary cost. This voluntary practice is rather taken as an unnecessary burden. As similar view is supported by Kolk, Hong and Van Dolen (2010), who observes that sustainability is considered as a distraction for Chinese companies, which are thought to better concentrate on ‘building their business’. So, looking at the portrait highlighted above, it is recommended that Chinese government should formulate more precise and defined guidance and implementation rules for sustainability reporting, which should be in accordance with the type, size and developmental stage of Chinese enterprises. Emerging economies like China must learn to capitalize their strengths and overcome the rising challenges. This can be done through wholehearted participation by companies in sustainability reporting practices and through implementation of some mandatory provisions in this field for its active adoption. However, growing media coverage, more publications and conferences on sustainability will hopefully help insert new thinking. In a nutshell, if the information needs of stakeholders are fulfilled, it will ultimately lead to the betterment of the companies.