The Effect of the Characteristics and Activities of the Board of Directors on Sustainable Development Goal (SDG) Disclosures: Empirical Evidence from Southeast Asia

Abstract

This study aimed to analyze the board of directors’ commitment to the Sustainable Development Goals (SDGs) by looking at the influence of the characteristics and activities of the board of directors and the existence of Corporate Social Responsibility (CSR) committees on disclosures regarding the SDGs. The directors’ characteristics that were analyzed in this research included the board size, the proportion of independent directors, the presence of female directors, and the presence of foreign directors. The activities analyzed included the number of board meetings held in one year and the percentage of directors in meetings. The context of this study was companies in five Southeast Asian countries—Indonesia, Malaysia, Singapore, Thailand, and the Philippines—during the 2016 and 2017 reporting years. This study was an initial research work aiming to empirically examine the effect of the board of directors on SDG disclosures in public companies from five countries in Southeast Asia. The study shows that the percentage of attendance of board directors’ meetings and the existence of CSR committees positively affected SDG disclosures. It also indicates that the presence of the board at the meeting can encourage more intensive SDG disclosures. Companies with a high commitment to sustainability, as shown by their forming of CSR committees, also tended to have a higher level of SDG disclosures.

1. Introduction

Sustainability first became a concern when the UN World Commission on Environment and Development (WCED) released what is known as the Brundtland Report in 1987. Brundtland and his colleagues found that sustainable development was a way to reconcile development and the issue of limitations of resources. Sustainable development is defined as development that fulfills the current generation’s needs without compromising those of future generations [1]. The Sustainable Development Goals (SDGs) are a set of goals that were adopted by 194 UN Member States in 2015 as a part of a new sustainability agenda to promote prosperity for all while protecting the planet. The SDGs, built on the success of the Millennium Development Goals (MDGs), aim to go further towards ending all forms of poverty, fighting inequalities, and tackling climate change while ensuring that no one is left behind. Each goal has a set of indicators, with 17 goals and 169 indicators expected to be achieved over the next 15 years. The purpose of the SDGs is to accelerate innovation as well as to improve economic growth and development on a scale that has never been seen before. They are thought to be worth at least USD 12 trillion a year in market opportunities, and it has been stated that they will produce up to 280 million new jobs in 2030 [2].

Sustainability issues have also come to be concerns of people in Southeast Asia. In Indonesia, the Financial Services Authority launched regulations in 2012 that require public companies to disclose sustainability information, whether integrated with an annual report or released in a standalone sustainability report. Similar regulations are also enforced in other countries. In Malaysia, Bursa Malaysia has required a sustainability report as a listing requirement since 2007. Singapore and the Philippines introduced the ‘comply or explain’ basis in sustainability reporting in their stock exchanges. The Stock Exchange of Thailand has also required listed companies to disclose CSR activities in a sustainability report or Form 56-1 since January 2014.

The SDGs will be realized if all sectors of society collaborate and work towards their achievement. The private sector and individual companies play an important role in achieving the SDG targets. The private sector plays an important role as a source of finance, a driver of innovation and development of technology, and a key engine of economic growth and jobs [2]. To participate and contribute to achieving the SDG agenda, companies can implement sustainable strategies and operate according to the SDG targets. Companies need to ensure that their business operations do not hinder this agenda. After implementing sustainable practices, companies can report their progress and results in working towards sustainability. By reporting its progress in its sustainable practices, a company can become part of a global movement [2]. All contributors can collectively accelerate the SDG agenda by reaching out to the entire sector and supply chain.

Recently, there has been a shift in views about the role of companies in the economy—from the traditional view that saw companies as profit-seeking agents for shareholders to a social paradigm that sees companies as world citizens that seek profits and have a positive impact on the social and environmental sphere. In carrying out companies’ social and environmental roles, and specifically to support the achievement of the SDG agenda, the role of the board of directors is very important because the company’s leadership largely determines the company’s sustainability strategy.

Based on the upper echelon theory introduced by Hambrick and Mason [3], differences in companies’ performance result from strategic decisions, and these decisions are affected by the characteristics and background of the management. Explanations regarding board characteristics are also supported by competency-based management theories that emphasize the importance of managers’ cognitive processes as the strategic factor that influences organizations’ performance [4,5,6]. Board characteristics also affect how companies decide their sustainability strategy and carry out sustainability reporting to provide better information to their stakeholders. Thus, the roles and responsibilities of the board of directors have become wider. They are not only held responsible to the owner of the fund, but also to various stakeholders.

Previous studies have documented mixed empirical evidence on how corporate governance and the board’s role affect the quality of disclosures. The board structure and characteristics play an important role in determining the implementation of corporate governance [7,8,9]. Some studies use attributes such as board size [10,11], gender diversity [12,13,14,15], CEO duality [11,14,16], the presence of independent directors [17], and the existence of a board supporting the committee for examining the impact of board governance quality on company disclosures. Although several previous studies have examined the impact of board governance on disclosures, specific research papers regarding sustainability disclosure issues are still scarce. In addition, the results of these studies are still mixed. Much of the research is carried out in the setting of one country, and mostly in developed countries. With the increasing concern about sustainability and the increasing pressure on companies to realize the common goals set out in the SDGs, the responsibilities of the board of directors have become even greater, and research in this area has become very important.

Research by Rosati and Faria [18,19] has examined the determinants of SDGs reporting. Rosati and Faria [18] focuses on the influence of organizational factors on the company’s decision to report on the SDGs. One of the factors studied is the diversity of the board as measured by gender and age. Their results suggest that early adoption of SDG reporting is associated with a higher share of female directors and a younger board of directors. Meanwhile, Rosati and Faria [19] examined the relationship between institutional factors and the company’s decision to report SDG Reporting. Their research shows that organizations reporting on the Sustainable Development Goals are more likely to be located in countries with higher levels of climate change vulnerability, national corporate social responsibility, corporate spending on higher education, and indulgence and individualism and with lower levels of market coordination, higher employment protection, power distance and long-term orientation.

This study examined the role of the board of directors in SDG disclosures based on companies’ sustainability reports. Specifically, this study examined the effects of the board size, percentage of independent directors, diversity of the board, citizenship and gender diversity, board activity, and the existence of CSR committees in the board structure on the disclosures about SDGs, as stated in the sustainability report. This study explored five Southeast Asian countries with the largest capital markets: Indonesia, Malaysia, Singapore, Thailand, and the Philippines.

This study contributes to the existing literature regarding sustainability disclosures by providing empirical evidence about the role of the board of directors as a strategic decision-maker in the company’s contribution to the achievement of the SDG targets. First, this study developed a system for evaluating SDG disclosures based on sustainability reports. Prior studies have mostly focused on examining the effect of governance on the quality of sustainability reporting. The mapping of disclosures concerning sustainable practices with the SDG objectives was conducted to see how far the company has contributed to the achievement of the SDG targets. Second, this study explored the board’s role using a more comprehensive proxy. The proxy included board parameters, such as board size; diversity; independence; and the presence or absence of CSR committees that assist with board assignments and board activities, measured by the number of board meetings that have taken place and the percentage of attendance. It was expected that by using a more comprehensive measure, the results of this study would provide a better picture of the relationship of the board with SDG disclosures. Third, we need to emphasize that this is an initial research work intended to empirically examine the board’s role in sustainability practices based on the SDG targets in public companies from five countries in Southeast Asia—namely, the Philippines, Indonesia, Malaysia, Singapore, and Thailand. Prior studies in this area have mainly focused on American and European countries. The choice to focus on countries in Southeast Asia was made because there has been increased interest in disclosures concerning sustainability practices in Southeast Asia, given evidence that there has been an increase in sustainability disclosures. The increase in disclosures concerning sustainability practices indicates that companies’ awareness of sustainable business practices has increased, reflecting their commitment to take responsibility for their sustainability practices.

This paper is organized as follows: the Section 1 is an introduction; the Section 2 reviews the literature and develops hypotheses; the Section 3 contains an explanation of the research methodology; the Section 4 includes a data analysis, where the findings of the study will be presented; and the Section 5 will present the conclusion, along with the implications of the research, its possible limitations, and suggestions for future studies.

2. Literature Review and Hypothesis Development

2.1. Theoretical Perspective and Previous Literature

Sustainability reporting is supported by stakeholder theory, which was introduced by Edward Freeman in 1984 as an evolution of shareholder theory, which highly favored the company owners (which include shareholders) [20]. Unlike shareholder theory, which sees any form of CSR activities as an indication of an agency problem where managers exercise their hidden agenda using shareholders’ money, Freeman [20] argued in their stakeholder theory proposal that a set of values is used to develop the company. However, such values must be shared with all company stakeholders, especially those directly affecting the company, to ensure continuity and success. Shareholder theory started to lose relevancy over time as the idea that managers’ sole purpose is to maximize the shareholders’ profit became less dominant. In this scenario, managers only focus on financial performance without noticing the environmental and social effects of the company’s business process. Such actions will, in the long run, result in shareholders’ losing their investment value. Stakeholder theory has become more relevant, as it includes other parties affected by the business process, with shareholders being but one of the stakeholders. However, as Phillips and Reichart [21] mentioned, stakeholder theory also contains some shortcomings, and it sometimes fails to identify legitimate stakeholders.

Stewardship theory also explains the sustainability reporting of a company through the directors’ point of view. Stout [22] explained that in the 1920s to early 1970s, directors in the USA and UK saw themselves as stewards of the company while performing their managerial functions. In The study implied that directors contributing to sustainability activities and reporting as being in their best interest to prove their worth. Agency theory also explains the role of directors in sustainability reporting. Jensen and Meckling [23] described it as a contractual relationship between principal and agent, with managers as agents who need to disclose sustainability information to reduce agency problems that could harm their principal interests [24].

Legitimacy theory is one of the theories that explains why companies should publish sustainability disclosures. Suchman [25] sees legitimation as a general perception or assumption that the activities of one entity are desirable, right, and in accordance with the norm systems, values, beliefs, and definitions built into social customs. This shows that legitimation is important for the existence and success of a company. Mahadeo et al. [26] divide legitimacy into pragmatic legitimacy, based on an organizations’ best interests, and moral legitimacy, based on doing what is right for society in general. Such classification will determine the amount and type of information disclosed. In this research, the SDGs can be identified as moral legitimacy, while companies that lie on the pragmatic side of legitimacy will only disclose information favored by their direct stakeholders.

This research is also supported by upper echelon theory, introduced by Hambrick [27], which explains differences in company performance due to strategic decisions. These decisions are affected by the characteristics and background of the management. Managements’ interpretations include experiences, values, and personalities. This study also argued that demographic characteristics cannot explain the actual psychological and social decision-making process. However, other studies, such as Boeker [28], found a positive link between executive demographic profile and strategies. Demographic characteristics such as international experience, functional background, and age are personal executive characteristics in the strategic decision-making process [29]. Such explanations also led this research to use demographic profiles to describe executive characteristics.

Explanations regarding board characteristics are also supported by competence-based management theory, which mentions the importance of managers’ cognitive process as a strategic factor that influences organizations’ performance [4,5]. This is caused by managers’ cognitive ability in managing resources for the organization to seek and use. This will also affect the sustainability reporting process, as an organization’s sustainability performance will be determined by the managers’ flexible cognitive ability [6]. Another theory that can be linked to board characteristics is resource-based theory. This theory states that the more diversified the company’s resources are, the more competitive the company will be [30]. However, the resources mentioned in this theory are not production factors but strategic resources in which board characteristics are included. The argument provided by resource-based theory is important in sustainability reporting, as the process includes stakeholder engagement that requires management to have the ability to determine legitimate stakeholders and truthfully disclose the effect of the business’s processes to the stakeholders.

A sustainability report is a set of comprehensive and diverse disclosures, including data on labor practice and relations, interactions with suppliers and consumers, community activities, social contributions, and the effect of products on consumers’ health and safety [31]. The report functions as legitimate evidence for companies with regard to their contribution to achieving sustainable development. The SDGs are used in this research. The SDGs are set to be achieved in 2030 to continue the Millennium Development Goals to reduce poverty by 2015. The SDGs, however, contain more extensive subject matter and put pressure on inclusiveness.

2.2. Hypothesis Development

2.2.1. Board Size

There are different opinions from previous studies concerning the differences in size between sustainability disclosures. Said et al. [32] found that having a larger board results in less effective direction, communication, and decision-making and the possibility of the board being controlled by the CEO, as well as referring to larger and negative directives on CSR. However, based on a resource-dependent perspective [33,34], the size and diversity of the board increase activities related to sustainable reporting, as each member of the board brings different perspectives, values, and ideas to the decision-making process of the company [35]. Meanwhile, from the point of view of stakeholder theory, a larger board of directors consists of different stakeholder groups who can ask for inclusiveness from various factors in the company’s sustainability reporting activities that are supported to improve the quality of corporate sustainability reports [36]. The complexity and diversity of the Southeast Asian population is the main consideration of this research to support the hypothesis that larger boards will have a higher level of SDG disclosures. The discussions above led us to the following hypothesis:

Hypothesis 1 (H1).

Board size has a positive association with Sustainable Development Goal (SDG) disclosures.

2.2.2. The Proportion of Independent Directors

According to agency theory, directors reduce agency costs through providing management supervision for shareholders’ best interests [37]. From the stakeholder theory perspective, independent directors increase governance mechanisms for independent directors to advocate for the company’s long-term economic, environmental, and social sustainability [36]. This is due to the lack of material ties with the position, which causes directors to exercise their duty to act in shareholders’ best interests in the long run, including improving sustainability performance. Amran [38] found no relation between independent directors and sustainability report quality in the Asia Pacific region. This research argues that the characteristics of independent directors will be beneficial in the SDGs reporting. This, therefore, led to the following hypothesis:

Hypothesis 2 (H2).

Directors’ independence has a positive association with Sustainable Development Goal (SDG) disclosures.

2.2.3. Presence of Female Directors

Female directors hold different views and attitudes compared with their male counterparts in terms of their values, personalities, communication patterns, leadership styles, and so forth. They also view organizational goals, objectives, and performance from a different perspective [39]. Female directors tend to be more sensitive to social responsibility behavior than male directors [40]. Glass et al. [41] find that gender diversity in a board of directors raises the company’s effectiveness in pursuing environmentally friendly strategies. Jizi [42] also stated that women on boards of directors bring new perspectives about energy efficiency, green building, and climate change policies. A higher percentage of women on the board of directors might positively influence the incorporation of new sustainability issues and perspectives in business [18]. Based on legitimacy theory, prior discussions about female directors show that female directors consider a company’s legitimacy to be more important. Upper echelon theory also supports the association of female directors and sustainability disclosures, stating that directors’ characteristics tend to determine their strategic decisions. From these discussions, we thus created a hypothesis that states:

Hypothesis 3. (H3).

The presence of female directors has a positive association with Sustainable Development Goal (SDG) disclosures.

2.2.4. Presence of Foreign Directors

Moneva and Llena [43] finds that the presence of foreign directors is linked with sustainability reporting. Studies by [44,45,46] also conclude that the presence of foreign directors is linked to companies’ CSR disclosures. CSR disclosures are often related to the disclosure of several sustainability issues that are topics related to the SDGs. For example, in disclosing CSR the company discloses CSR programs related to community development, which, of course, is related to the achievement of the SDG targets. The presence of foreign directors can contribute to unique skills and knowledge in stakeholder engagement, especially when the company operates internationally. This view follows resource-based theory, which considers diversity in strategic resources, including directors, as a competitive advantage. Therefore, the following hypothesis was formed:

Hypothesis 4 (H4).

The presence of foreign directors has a positive association with Sustainable Development Goal (SDGs) disclosures.

2.2.5. Board Activities

This research tries to add board activities as a factor that can influence sustainability reporting. The number of board meetings in a year and the attendance of directors at each meeting is added to measure board activities. Board meetings represent the time capacity that directors have for fulfilling their duties as directors [37]. The authors of [47] even mention that the most common problem limiting the board’s effectiveness is the lack of time allocated by directors to perform their duties. An adequate number of board meetings is required in order to make effective strategic decisions, one of which could be related to the company’s sustainability performance. A higher frequency of board meetings can also be used to reduce agency problems by increasing transparency. From the stewardship theory perspective, maintaining a high percentage of attendance in board meetings can also prove the value of board members’ position as stewards of a company. This argument led us to form these hypotheses:

Hypothesis 5 (H5).

The number of board meetings has a positive association with Sustainable Development Goal (SDG) disclosures.

Hypothesis 6 (H6).

The percentage of attendance in board meetings has a positive association with Sustainable Development Goal (SDG) disclosures.

2.2.6. CSR Committee

The presence of a CSR committee in a company is one of the most important factors contributing to a company’s success, as previous studies have stated [38,48]. The characteristics of a CSR committee include skills and knowledge in the CSR area, being responsible for suggesting regulations and strategies for the company’s CSR, ensuring the appropriateness of the CSR function and information system, and monitoring the sustainability reporting process [49]. Based on the agency theory perspective, the presence of a CSR committee can also reduce agency problems that may occur and CSR committee increases transparency by increasing information disclosure [49]. The arguments mentioned above generated the following hypothesis:

Hypothesis 7 (H7).

The presence of the CSR committee has a positive association with sustainable Development Goal (SDG) Disclosures.

3. Research Methodology

3.1. Data and Sample Selection

The population of this research were companies listed in the top 5 Southeast Asian countries (in terms of GDP), considering their similarities in geographical and sustainability practice adoption. The sample were non-financial companies listed in Bursa Efek Indonesia (IDX), Bursa Malaysia (MYX), the Singapore Exchange (SGX), the Philippine Stock Exchange (PSE), and the Stock Exchange of Thailand (SET) that published sustainability reports in 2016 and 2017. The years 2016–2017 were used in this study because these years were the initial years when the SDGs were implemented and the years in which companies began to include the issues related to the SDGs in their sustainability reporting. By using the early years of SDG disclosures as our period of observation, it was hoped that this research could explore boards’ commitment to SDG disclosures.

The sampling method used in this study was purposive sampling. Criteria that had to be fulfilled in determining the sample included:

• Non-financial public companies listed in the Indonesia Stock Exchange (IDX), Bursa Malaysia (MYX), Singapore Exchange (SGX), Philippine Stock Exchange (PSE), and Stock Exchange of Thailand (SET).
• Companies that published sustainability reports in 2016 and 2017 based on GRI. To measure SDG disclosures, this study used sustainability reports as a source of information.

Based on the sample selection criteria above,

Table 1. Sample by country and type of industry.

Number of Companies	Indonesia IDN	Malaysia MYS	The Philippines PHI	Singapore SGP	Thailand THA	Total
Number of observation in 2016	30	15	10	18	53	126
Number of Observation in 2017	33	18	7	23	58	139
Total Number of Observations	63	33	17	41	111	265
Number of companies from Sensitive Industry	81 observations (30.6%)
Number of companies from Non Sensitive Industry	184 observations (69.4%)
Total Number of Observations	265

describes the number of companies selected by country and type of industry that were classified as industries sensitive to sustainability issues and industries that were classified as not sensitive to sustainability issues. The sectors classified as sensitive industries in this study included mining, energy use, construction materials, and agriculture due to the environmental impact of business processes in these sectors. Meanwhile, cigarettes and the food and beverage industry were also classified as sensitive sectors due to the social and environmental impacts of the product from these two sectors. Other industries were classified as non-sensitive industries.

The data in this study were taken from the stock market sites of Indonesia (www.idx.co.id), Malaysia (www.bursamalaysia.com), the Philippines (www.pse.com.ph), Singapore (www.sgx.com), and Thailand (www.set.or.th), as well as from the web sites of each company. Other resources used in this study came from the GRI website (www.globalreporting.org) and Thomson Reuters EIKON.

3.2. Research Model

To test the hypotheses above, this study used an ordinary least square linear regression model. The dependent variable of this model was SDG disclosures and the independent variables were the characteristics of the board, the activity of the board, the existence of a CSR committee, and the control variables. Board characteristics were measured through several measures—namely, size, independence, gender, and nationality. Meanwhile, the activity of the board was measured by the number of meetings and the attendance of meetings. As control variables, this study included country-level control variables consisting of country-level governance and GDP per capita, as well as firm-level control variables consisting of profitability, company size, and industrial sector. This study did not use panel data analysis because the observation years were 2016–2017, with the SDGs being agreed in 2015 and effectively implemented in various countries since 2016. In addition, panel data analysis could not be used because many companies do not report their sustainability reports on an annual basis. However, to control for differences between years, this study included the control variable of year. The following was the research model used:

$$\begin{array}{cc}\hfill {\mathrm{SDGDISC}}_{\mathrm{i},\mathrm{t}}=& \alpha +{\beta }_1{\mathrm{BOARDSIZE}}_{\mathrm{i},\mathrm{t}}+{\beta }_2{\mathrm{BOARDIND}}_{\mathrm{i},\mathrm{t}}+{\beta }_3{\mathrm{BOARDGEN}}_{\mathrm{i},\mathrm{t}}+{\beta }_4{\mathrm{BOARDETNIC}}_{\mathrm{i},\mathrm{t}}\hfill \\ \hfill & \hspace{1em}+{\beta }_5{\mathrm{BOARDMEET}}_{\mathrm{i},\mathrm{t}}+{\beta }_6{\mathrm{ATTENDANCE}}_{\mathrm{i},\mathrm{t}}+{\beta }_7{\mathrm{CSRCOMM}}_{\mathrm{i},\mathrm{t}}+{\beta }_9{\mathrm{GOV}}_{\mathrm{i},\mathrm{t}}+{\beta }_{10}{\mathrm{GDPCAP}}_{\mathrm{i},\mathrm{t}}\hfill \\ \hfill & \hspace{1em}+{\beta }_{11}{\mathrm{ROA}}_{\mathrm{i},\mathrm{t}}+{\beta }_{12}{\mathrm{SIZE}}_{\mathrm{i},\mathrm{t}}+{\beta }_{13}{\mathrm{SECTOR}}_{\mathrm{i},\mathrm{t}}+{\beta }_8{\mathrm{YEAR}}_{\mathrm{i},\mathrm{t}}+{\epsilon }_{\mathrm{i},\mathrm{t}}\hfill \end{array}$$

(1)

where SDGDISC: SDG disclosures; BOARDSIZE: the number of directors on the board; BOARDIND: proportion of independent directors to the total number of directors; BOARDGEN: existence of female directors in the company; BOARDETNIC: existence of foreign directors in the company; BOARDMEET: the number of board meetings held in a year; ATTENDANCE: percentage of director attendance in board meetings; CSRCOMM: the existence of a CSR committee; GOV: score for government index in each country; GDPCAP: GPD per capita in each country; ROA: return on an asset in the company; SIZE: company size; SECTOR: industrial sector of each company; YEAR: dummy variable for reporting year; ε: error.

3.3. Operationalization of Variables

3.3.1. Dependent Variable: Sustainable Development Goal (SDG) Disclosures

A sustainability report is an organization’s practice for publicly reporting its economic, environmental, and social impacts, contributing, positively or negatively, towards sustainable development [50]. The SDG disclosures variable was measured using the SDG and GRI guidelines with the SDG Compass. This study classified the GRI index based on the 17 targets of the SDGs. A score of 1 was given to disclosures shown in the GRI index in sample companies’ sustainability reports, while a score of 0 was given when no disclosure is shown. A score of 1 was given if the company disclosed the SDGs for each target and a score of 0 was given if the company did not disclose. The scores of each target were then added up for a total of 17 targets. The total score was then divided by 17. Thus, the maximum SDGDISC variable value was 1 and the minimum was 0. To determine the SDG score for each target, this study mapped the GRI-based sustainability report disclosure to the SDG target based on the SDGs Compass. The SDG Compass, developed by GRI, the UN Global Compact, and the World Business Council for Sustainable Development (WBCSD), provides guidance to companies on how they can align their strategies as well as measure and manage their contribution to the realization of the SDGs (www.sdgcompass.org).

Table 2. Mapping SDG targets with sustainability issues based on GRI in the sustainability report.

SDGs	SDGs Target	Sustainability Issues Based on GRI on Sustainability Report
1	No Poverty	Economic Performance, Market Presence, Employment, Indirect Economic Impact, Local Communities
2	Zero Hunger	Indirect Economic Impact, Economic Performance, Rights of Indigenous Peoples, Local Communities
3	Good Health and Well Being	Indirect Economic Impact, Water and Effluents, Emissions, Occupational Health and Safety, Waste
4	Quality of Education	Training and Education, Local Communities
5	Gender Equality	Market Existence, Employment, Diversity and Equal Opportunity, Non-Discrimination. Training and Education, Economic Performance, Indirect Economic Impact
6	Clean Water and Sanitation	Water and Effluents, Waste, Biodiversity
7	Affordable and Clean Energy	Energy, Indirect Economic Impact, Economic Performance
8	Decent Work and Economic Growth	Market Presence, Employment, Occupational Health and Safety, Economic Performance, Indirect Economic Impact, Child Labor, Diversity and Equal Opportunities, Employment, Force or Complementary Labor, Training and Education, Energy, Freedom of Association and Collective Bargaining, Labor Management Relations, Materials. No discrimination.
9	Industry, Innovation, and Infrastructure	Economic Performance, Indirect Economic Impact
10	Reduced Inequality	Indirect Economic Impact, Market Presence, Diversity and Equal Opportunity
11	Sustainable Cities and Communities	Indirect Economic Impact
12	Responsible Consumption and Production	Procurement Practices, Energy, Water and Effluents, Emissions, Waste, Marketing and Labeling, Environmental Compliance, Materials, Customer Health and Safety
13	Climate Action	Energy, Emissions, Environmental Compliance, Waste, Environmental Compliance, Economic Performance
14	Life below Water	Water and Effluents, Biodiversity, Emissions, Waste, Environmental Compliance
15	Life on Land	Emissions, Waste, Biodiversity, Environmental Compliance, Biodiversity
16	Peace, Justice, and Strong Institutions	Anti-Corruption, Diversity and Equal Opportunity, Child Labor, Forced or Compulsory Labor, Environmental Compliance, Socio-Economic Compliance, Public Policy, Anti-Competitive Behavior, Non-Discrimination, Customer Privacy, Security Practices, Supplier Social Assessment
17	Partnership for the Goals	Indirect Economic Impact, Local Communities

Sources: www.sdgcompass.org.

shows the mapping of SDGs targets with sustainability disclosures based on GRI.

3.3.2. Independent Variables and Control Variables

The selection of independent variables was based on prior studies, such as [24,32,37,49,51]. The independent variables used in this study included the following board characteristics: the board size, proportion of independent directors, presence of female directors, presence of foreign directors, and presence of a CSR committee. Board activities included the following: number of the board meetings and percentage of directors attending the board meetings.

Control variables were also added to the research model to avoid returning a biased result. These variables included the company’s return on assets, the company’s size, World Government Indicators (WGI), GDP per capita of the sample country, and the industry sector of the sample company. The information on how each variable was measured is shown in

Table 3. Variable measurement.

Variables	Expected Sign	Measurement
BOARD SIZE	+	Number of board members
BOARDIND	+	Percentage of independent directors
BOARDGEN	+	Score 1 for at least one female member and 0 for no female member
BOARDETNIC	+	Score 1 for at least one foreigner member and 0 for no foreigner member
BOARDMEET	+	Number of the board meeting held in a year
ATTENDANCE	+	Percentage of directors’ attendance in each board meeting
CSRCOMM	+	Score 1 is given when there is a CSR committee present
ROA	+	Return on asset of the company
SIZE	+	Company size using EU company classification
GOV	+	World Government Indicators released by worldbank.org for each country
GDPCAP	+	GDP per capita for each country
SECTOR	+	Score 1 is given to industries that are considered sensitive to sustainability issues and 0 to those who are not
YEAR	+/−	Company’s reporting year, a dummy variable

.

4. Analysis of the Results

4.1. Descriptive Analysis

Table 4. Descriptive statistics.

Variable	Observation	Mean	Std. Dev.	Min	Max
YEAR	265	0.525	0.500	0.000	1.000
BODSIZE	265	1.103	3.229	5.000	24.000
BODIND	265	0.417	0.180	0.000	0.920
BODGEN	265	0.766	0.424	0.000	1.000
BODETNIC	265	0.181	0.386	0.000	1.000
BODMEET	265	8.132	4.110	2.000	25.000
ATTENDANCE	265	0.929	0.073	0.670	1.000
CSRCOMM	265	0.430	0.496	0.000	1.000
ROA	265	0.267	2.891	−0.420	47.100
SIZE	265	1.777	0.468	1.000	3.000
GOV	265	5.198	17.432	−60.710	89.030
GDPCAP	265	13,687.800	18,511.670	2950.910	57,714.300
SECTOR	265	0.306	0.462	0.000	1.000
SDGDISC	265	0.499	0.229	0.555	0.970

provides descriptive statistics of the variables. The average SDG disclosure level was 0.499, which indicates that the sustainability reporting year in the observation was nearly 50% aligned with the SDGs. The table also shows that out of 265 companies observed, 76.6% had female directors, but only 18.1% had foreign directors. It was also shown that only 43% of companies observed in this research had a CSR committee to oversee the sustainability reporting process.

4.2. Analysis of Sustainable Reporting According to SDGs

Figure 1 contains the information of the average score for the disclosures in each country. Thailand was the country with the highest average score for sustainability reports, with an average score of 0.570. The second highest score was the Philippines, with an average score of 0.505. Indonesia and Malaysia were the third and fourth countries, with average scores of 0.459 and 0.446. Singapore was, surprisingly, the country with the lowest average score, with an average score of only 0.412, even though Singapore’s high government indicators and GDP per capita are far superior to its neighboring countries. This might have been caused by the country’s industry sector, which is mostly focused on the financial sector, which was not included in this research.

To be able to see which SDGs were most disclosed by the companies, Figure 2 shows the average score of disclosure for each SDG target. Based on Figure 2, Goal 16, “Peace, Justice, and Strong Institutions”, saw the fewest disclosures. This may have been caused by the nature of the goal, which is more directly related to public sectors. Meanwhile, Goal 9, “Industry, Innovation, and Infrastructure”, saw the most disclosures, as this goal is closely related to the private sector. In addition to the disclosure of Goal 9, other disclosures that were widely disclosed by companies (with a disclosure value above 0.5) were the disclosures of Goal 2, Zero Hunger; Goal 4, Quality of Education; Goal 7, Affordable and Clean Energy; Goal 11, Sustainable Cities and Communities; and Goal 17, Partnership for the Goals.

Table 5. Correlation test result.

Variable	SDG DISC	BOD SIZE	BOD IND	BOD GEN	BOD ETNIC	BOD MEET	ATT	CSR COMM	ROA	SIZE	GOV	GDPCAP
SDGDISC	1.000	-	-	-	-	-	-	-	-	-	-	-
BODSIZE	0.053	1.000	-	-	-	-	-	-	-	-	-	-
BODIND	−0.068	−0.307	1.000	-	-	-	-	-	-	-	-	-
BODGEN	0.020 **	0.186	0.140	1.000	-	-	-	-	-	-	-	-
BODETNIC	−0.064	0.080	−0.207	−0.087	1.000	-	-	-	-	-	-	-
BODMEET	0.081	0.320	0.028	0.148	−0.244	1.000	-	-	-	-	-	-
ATTENDANCE	0.059 ***	−0.450	0.211	−0.038	0.060	−0.312 **	1.000	-	-	-	-	-
CSRCOMM	0.115 ***	−0.030	0.171	−0.024	−0.211	−0.063	0.117 **	1.000	-	-	-	-
ROA	−0.065	−0.079	0.049	−0.108	−0.019	−0.039	0.064	−0.055	1.000	-	-	-
SIZE	0.157 **	0.065	−0.289	0.023	−0.070	−0.004	0.032	0.006	−0.100 *	1.000	-	-
GOV	−0.173 *	−0.266	0.440	−0.063	−0.086	−0.205 ***	0.163 ***	0.049	0.131 **	−0.355 ***	1.000	-
GDPCAP	−0.163	−0.282	0.560	−0.032	−0.215	−0.215 ***	0.198 ***	0.069	0.143 **	−0.360 ***	0.843 ***	1.000

Note: *** = 1% significance level. ** = 5% significance level. * = 10% significance level.

contains the result of the correlation test performed in this research. No independent variables were found to correlate as much as 0.8 with another. This indicates that the independent variables do not have strong relationships, which may result in multicollinearity. Table 5 also shows that the SDGDISC variable was significantly related to the board gender, attendance, and the presence of a CSR committee. In addition, the results of the correlation test also show that size had a significant positive correlation with SDGDISC, while country-level governance had a significant negative relationship with SDGDISC.

The result of the regression analysis is shown in

Table 6. Regression test result.

Variable	Prediction	Coefficient	Std. Err.	Significance
BOARDSIZE	H1 (+)	0.003	0.005	0.308
BOARDIND	H2 (+)	0.007	0.103	0.467
BOARDGEN	H3 (+)	0.014	0.035	0.396
BOARDETNIC	H4 (+)	−0.045	0.042	0.144
BOARDMEET	H5 (+)	0.002	0.004	0.263
ATTENDANCE	H6 (+)	0.352	0.223	0.046 **
CSRCOMM	H7 (+)	0.051	0.030	0.058 *
ROA	+	−0.002	0.005	0.337
SIZE	+	0.042	0.033	0.096 *
GOV	+	−0.001	0.002	0.243
GDPCAP	+	0.000	0.000	0.302
SECTOR	+	0.061	0.032	0.036 **
YEAR	+/−	−0.002	0.021	0.230
Prob F (F-test) = 0.0434 R-Squared = 0.0853 N = 265

Note: ** = 5% significance level. * = 10% significance level.

. The multicollinearity test was carried out using the variance inflation factor (VIF) test and the heteroscedasticity test in accordance with Breusch Pagan/Godfrey. The results of the multicollinearity test show that the VIF value for all independent variables was below 10, which indicates that there was no multicollinearity between the independent variables. Meanwhile, the results of the heteroscedasticity test show that the value of Prob > chi2 was 0.250, which is greater than 0.05. These results indicate that the research model did not have a heteroscedasticity problem.

4.3. Regression Analysis

The result shows that the BOARDSIZE variable insignificantly affected SDG disclosures. Based on the result, Hypothesis 1 was rejected. The results of this study are inconsistent with those of studies by [49,51], which state that board size has a positive effect on the quality of sustainability reports. The results of this study also do not support the results of the research [36], which states that a larger number of boards will increase stakeholder engagement and improve the level of disclosures concerning the SDGs. This research contradicts resource-based theory, which considers the ability of boards to improve sustainability performance. The results of this study actually show that a large board size can lead to ineffective coordination, communication, and decision-making processes, meaning that the impact on the disclosure of the SDGs is insignificant.

Independent directors insignificantly affected the SDG disclosure level, contrary to the research of [51], which found a negative link between independent directors and sustainability reporting. Based on the result, Hypothesis 2 was rejected. This is consistent with the findings of [38]. They did not find a significant association between the quality of the sustainability report and the existence of independent directors, as independent directors were allegedly not very concerned about non-financial reporting, especially in countries with a traditional economy where company information was still based on reporting financial information. Other reasons could also include independent directors who fulfill regulatory requirements, resulting in a lack of roles for independent directors or independent directors’ voices being ruled out.

The existence of female directors also insignificantly affected the SDG disclosure level, so Hypothesis 3 was rejected. These results contradict those of previous studies [24,49,51], which found a significant positive association between the presence of female directors and the quality of sustainability reporting. This result also contradicts upper echelon theory, which assumes that the characteristics of directors, in which sex is included, are related to the strategic decisions taken. This could be caused by female directors in sample companies not prioritizing the company’s moral legitimacy or there being too few female directors to encourage disclosures of SDGs.

In addition, the existence of foreign directors was not a significant factor influencing SDG disclosures, so Hypothesis 4 was rejected. This result supports the research of [24] but is in contrast to resource-based theory. This could be due to number of foreign directors not being sufficient to improve SDGs disclosure.

The number of board of directors’ meetings in one year also showed an insignificant relationship with the SDG disclosure level. Thus, Hypothesis 5 was rejected. Previous studies examining the relevance of sustainability reporting to sustainability disclosures were [49], who found negative linkages not to be significant, and [37], who found a positive correlation that was significant at the 90% confidence level. Board meetings should influence strategic decision-making, including decisions related to sustainability and disclosure practices. However, strategic decisions can only be made if the percentage of board attendance is high. Therefore, a high frequency of board meetings may not affect strategic decision-making. Furthermore, a high frequency of meetings has not been able to describe in-depth discussions related to sustainability issues and SDGs in the meeting agenda. This is presumably because the board of directors’ meetings might include the discussion of matters that are not related to sustainability reporting, meaning that this does not show significance.

The directors’ attendance at board meetings and the presence of the CSR committee variable were positively related to SDG disclosures at a significance levels of 5% and 10%, respectively. The result shows that hypotheses 6 and 7 were accepted. It is probable that the percentage of directors’ attendance in meetings represents the stewardship of directors more than the number of meetings. Hu and Loh [37] stated that the directors’ meeting represented the time capacity possessed by the directors. A sufficient frequency of board meetings is required in order to make effective decisions, where one of the decisions might be about sustainability activities and disclosures. However, the board of directors can only influence the decisions if they are present, so the percentage of attendance will influence the strategic decisions made. This study indicates that a high percentage of attendance of directors’ meetings can encourage more intensive disclosure. This means that the higher the level of the Board of Directors’ activities, the more the company will disclose information about their efforts to achieve the SDGs. A higher percentage of attendance of board meetings can be used to reduce agency problems by increasing transparency.

The significant relation between the presence of a CSR committee and sustainability reporting is aligned with previous research by Fuente et al. and Mahmood and Orazalin [49,51]. This is also due to the function of the CSR committee, which involves strategy-making, arranging, monitoring, and evaluating CSR activities and reporting processes. The CSR committee is responsible for overseeing the company’s sustainability strategy and overseeing the sustainability reporting process. Still, the existence of CSR committees is not mandatory in some countries. With the establishment of a CSR committee, the company shows its commitment to the issue of sustainability. This committee is also tasked with ensuring that sustainability programs can run more effectively and efficiently and that they are reported transparently. This study indicates that companies that show a high commitment to sustainability by forming CSR committees will have a higher level of SDG disclosure.

From Table 6, it can also be seen that from all existing control variables, company size and the sensitivity to sustainability issues of the industrial sector have a positive and significant effect on sustainability issues, which is a control variable that had a positive and significant relationship with the dependent variable. The results concerning the sensitivity of the industrial sector contradict to [24], which included industry sensitivity to sustainability issues as a control variable and did not obtain significant results. This test indicates that companies in the five sample countries operating in industries sensitive to sustainability issues made more disclosures than companies that were not sensitive to sustainability issues. However, this result can also be due to regulations that require companies in certain sectors to carry out sustainability reporting, which is the case in Indonesia through the Corporate Performance Rating Program (PROPER). Meanwhile, the size results are consistent with [49], which shows that company size influences disclosure quality. This shows that large companies tend to make more disclosures and tend to adopt disclosure standards such as GRI.

The control variables ROA, GOV, and GDPCAP received insignificant results. According to [49,51], ROA does not significantly affect sustainability reporting. This may be due to the fact that profitability does not increase companies’ willingness to carry out voluntary disclosures. The insignificance of GOV may also be because the World Government Indicators are too wide to be used as a measurement of law and regulation enforcement in sample countries. Meanwhile, GDPCAP may not have obtained significant results because the nature of GDPCAP includes a country’s population, while sustainability issues are not a concern to non-stakeholders.

5. Conclusions

This study analyzed the effect of boards of directors on SDG disclosures. The result shows that the variables of directors’ attendance of board meetings and the presence of a CSR committee were positively related to SDG disclosures. It also indicates that the high frequency of directors’ meetings can encourage more intensive disclosures. The frequency of directors’ meetings can also be related to the directors’ commitments. Therefore, this study shows that with the higher commitment of the board of directors, the disclosures of companies relating to the SDGs were better.

The existence of CSR committees is something that is not mandatory in some countries. This study indicates that companies with a high commitment to sustainability, as shown by their forming CSR committees, had a higher level of SDG disclosure. Based on these results, the characteristics of the board of directors, such as the size of the board of directors, the percentage of independent directors, the presence of female directors, the presence of foreign directors, and the number of board meetings, did not have a significant relationship with SDG disclosures. Such a result may be caused by the fact that the board characteristics in Southeast Asian countries do not directly affect SDG disclosures. However, future research should focus on factors that directly affect SDG disclosures, such as the existence of a CSR committee.

This research has several implications for the development of science, sustainability practices, and regulations. For the development of science, this study implies that the board mechanism attached to the characteristics and activities of the board, in general, does not show a significant effect on sustainability disclosures. Future research on sustainability should focus more on the board’s functions or mechanisms that focus on sustainability activities, such as CSR committees. For companies, this research suggests that companies need to establish CSR committees in order to improve their quality of practices and sustainability disclosures. In addition, the level of attendance of board meetings should also be a concern for the company. For regulators, this research implies that regulators need to enhance the board’s effectiveness to improve corporate accountability.

The results of this study need to be interpreted carefully in consideration of several limitations. First, this study measured disclosures about SDGs based on the information presented in sustainability reports concerning the GRI index. Measurements were made according to whether the company disclosed information or not. This study did not measure quality but rather measured the level of disclosure. The limitation of this measurement is that it does not distinguish between companies that disclose a lot of information and companies that disclose little information for each of the SDG targets. This approach was taken because the measurement of the quality aspect is more subjective, and disclosing information about the SDGs is still at an early stage. Moreover, subjectivity in the assessment of the SDGs disclosure score was reduced by mapping the SDGs against the GRI cross-reference index. This study did not use an independent external coder to verify the measurement results. Further research can reduce the subjectivity of the measurement by using an independent coder. Second, this study measured gender diversity based on the presence of female directors in one company. The presence of only one board member can encourage better disclosure practices. Future studies should use the proportion of female directors out of the total number of directors to better represent the role of female directors. Third, this study assumed that information about the citizenship of the directors would be listed in annual reports in all the study sample countries. However, in practice, some countries do not require companies to list the citizenship of directors. In this study, if there was no citizenship information about a board it was considered to have no foreign citizenship. Fourth, this study used joint meetings between a board of directors and a board of commissioners to measure board meetings in Indonesian companies. However, executive functions and supervision exist in one body in a one-tier system, and there is no information about whether directors run separate meetings. Fifth, the number of companies used in this study was relatively small compared with the populations involved, and thus the power of tests (F-test and R square) was also quite low. Further research could enrich the results of this study by using not only quantitative methods but also qualitative methods, such as questionnaires, interviews, focus group discussions, and others. The use of these methods could enrich the analysis and add knowledge regarding the role of the board in disclosing data about the SDGs. Finally, the research observations used reports from 2016 and 2017. This resulted in the alignment of the company’s sustainability reports with the SDGs not being particularly strong, as the SDGs were only implemented in 2015.