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(Adams et al., 2016; Orlitzky et al., 2017). Having a reasonable mix of gender or people with diverse backgrounds and skills in a sustainability committee enables a harmonious and/or collective efforts towards achieving sustainable growth and development. Sustainability is a collective objective and not an individual thing.
A varied group may bring a variety of viewpoints and experiences to the table, which can result in more original and imaginative solutions to sustainability-related problems. Furthermore, a diverse committee can also help to address the interests of different stakeholders (Deegan et al., 2011). For instance, having women on the committee can ensure that gender-related issues are considered in sustainability reporting (Adams et al., 2016). Moreover, including representatives from different departments within the organization, such as finance and human resources, can ensure that sustainability reporting is integrated into the overall business strategy (Bertels et al., 2013). Therefore, the study question is: how much does diversity on sustainability committees enhance the standard of banks’ sustainability reporting in South Africa and Nigeria? To obtain empirical evidence to address this question the following null hypothesis is formulated:
H0(3): Sustainability committee diversity has no significant effect on the sustainability reporting quality of banks in Nigeria and South Africa.
Furthermore, regularity with which sustainability committee meetings are held tend to solicit a substantial effect on sustainability reporting quality. According to a study conducted by the Global Reporting Initiative (GRI), organizations that display thoroughness and have sustainability committee meetings on a regular basis produce higher quality sustainability reports (Global Reporting Initiative, 2015). Consistency in holding regular meetings enables the committee to deliberate on new initiatives or improve on existing ones to drive forward the sustainable development agenda; etc.
The GRI recommends that companies hold sustainability committee meetings at least once per quarter to ensure regular review of sustainability performance and progress toward sustainability goals (Global Reporting Initiative, 2015). However, some companies may choose to hold meetings more or less frequently depending on their specific needs and circumstances (Sustainalytics, 2021).
Therefore, the research question is: to what degree do regular and well-structured sustainability committee meetings contribute to banks in Nigeria and South Africa producing high-quality sustainability reports that accurately reflect their sustainability performance and progress? This question is addressed by testing the null hypothesis:
H0(4): Sustainability committee’s diligence has no significant effect on the sustainability reporting quality of banks in Nigeria and South Africa.
Furthermore, it is believed that organizations with a sustainability committee in place are more likely to report on a broader range of sustainability issues and to disclose more detailed information than those without such a committee (KPMG, 2020). However, in the event of voluntary establishment of such a committee, its members are more likely to be negligent on sustainability issues, thereby making sustainability reports to be less reliable.
Thus, the research question is as follows: do the attributes of mandatorily established sustainability committees of banks in South Africa outperform those of voluntarily adopted sustainability committees of banks in Nigeria in terms of improving the quality of sustainability reports? The following null hypothesis is tested in order to determine the answer to the question:
H0(5): The true difference between the potential of sustainability committee attributes of banks in Nigeria and South Africa in inducing sustainability reporting quality is zero. The “potential of characteristics” here means the likelihood that the attributes of the ESG committees in Nigeria and South Africa influence the quality of their sustainability reporting; and whether the influence varies between the two countries.
There is no specific law in Nigeria and South Africa that requires banks to establish committees on sustainable development. However, in 2012, the Nigerian Bankers’ Committee approved the adoption of the Nigerian Sustainable Banking Principles (NSBP) by banks, discount houses, and development finance institutions. The NSBP aims to foster positive development impacts to society while protecting the environment and covers nine principles, including environmental and social risk management, financial inclusion, and reporting. In Ekiti State, Nigeria, the Sustainable Development Goals Law of 2019 establishes a committee to ensure that achieving Sustainable Development Goals is the guiding principle within all policy areas. In South Africa, there is voluntary guidance for JSE-listed companies on sustainability and climate-related disclosure that draws on existing international standards. The National Framework for Sustainable Development in South Africa provides the basis for integrating sustainability as a key component of the development discourse.
METHODOLOGY
The research covers a 10-year period from 2012 to 2021. This was a period of significant changes in sustainability reporting standards and regulations, as well as changes in the business environment in Nigeria and South Africa. All listed banks operating in Nigeria and South Africa, make up the study’s population. The study uses a purposive sampling technique, focusing on banks with sustainability committees. Table 1 shows details of the list of the purposive sample.
Moreover, data for the study is obtained from the MachameRatios database, a compilation of TalkData Associates, covering the study period. These include ESG disclosure, sustainability committee size, number of independent members, number of meetings, composition and diversity, expertise, and total assets.
The outcome variable of the study is sustainability reporting quality (SRQ). The GRI G4 sustainability reporting guidelines’ index of environmental, social, and governance disclosures serves as an indicator for it (Global Reporting Initiative, 2013). However, the sustainability committee attributes (size, independence, diversity, and diligence) constitute the independent variable. Sustainability committee size (SCSIZE) is determined by taking the total number of sustainability committee members (Maroun & Nasr, 2018); sustainability committee independence (SCINDEP) is calculated as number of independent directors on the sustainability committee divided by total membership (Cho et al., 2020); sustainability committee diversity (SCDIV) is expressed in terms of the number of females to the total number of sustainability committee members (Orlitzky et al., 2017); while sustainability committee diligence (SCDIL) is reflected by the frequency with which the committee meets per annum (Global Reporting Initiative, 2015; Sustainalytics, 2021). Thus, the study controls for the impact of company size (logarithm of total assets) on SRQ while analyzing the influence of sustainability committee
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