Environmental, Social, and Economic Sustainability: Do Big Companies in Indonesia Care?

Companies are the main actors that utilize Indonesia’s natural resources, the responsibility of maintaining surrounding conditions such as environmental, social, and economic is an absolute responsibility that cannot be avoided. This study aims to determine the motivation of management in providing accountability for its activities to stakeholders. Through the lens of stakeholder theory, it is expected to find out the management’s efforts in showing the public all its accountability activities. LQ45 companies are the largest companies that are fully trusted by various stakeholders to be the main attraction for research studies. The sustainability report prepared throughout 2019-2022 and research data analyzed using moderation regression analysis is expected to provide an overview of the company’s concern for the surrounding. The results show the environmental, social, and economic sustainability of large companies in Indonesia is captured in the report shows a weak level, their concern increases when the company experiences an increase in profits. Pressure from various company stakeholders does not necessarily increase their concerns. The company will be encouraged to disclose when the company experiences an increase in profitability. However, creditors provide the most dominant pressure to make companies open about their activities. Suggestions for future research can use other theoretical perspectives such as legitimacy and stewardship in seeing management’s concerns.


Introduction
The increasing number of disasters that occur in Indonesia (Figure 1), such as floods, landslides, and earthquakes, is undeniably one of the consequences of the exploitation of natural resources carried out by companies.Business actors in Indonesia must act not only on how to manage business for profit, but also must think about how ethical, social, and environmental considerations as a result of the company's operational activities.Environmental sustainability in Indonesia in particular and the world in general, is very dependent on the activities of humans who inhabit the earth, including companies.Companies are the main actors that utilize natural resources as raw materials for the production process, process, IOP Publishing doi:10.1088/1755-1315/1248/1/012007 2 and then create environmental damage through waste, both production waste and post-production waste [1].From the accounting side, one of the steps to capture the form of corporate responsibility in maintaining environmental sustainability is through financial reporting.

FIGURE 1. Number of Disaster Events in Indonesia
Source: National Disaster Management Agency (BNPB) Indonesia, 2021 The entity's concern for the demands of stakeholders as a form of accountability for all policies that have been implemented has led the company to publish a Sustainability Report (SR).According to Statement of Financial Accounting Standards (PSAK) Number 1, that entities can present separate from the financial statements in the form of environmental reports and value-added statements, especially for industries where environmental factors play an important role and for industries that consider employees as a group of report users who play an important role [2].Although sustainability report reporting is very useful for the survival of the company, it has not been responded positively by go-public companies in Indonesia.In practice, SR seems to have two functions for management, like two opposing blades.Through SR, management is motivated to gain legitimacy from stakeholders.Management needs recognition that it has worked well and has always maintained the sustainability of the planet.SR disclosure becomes a tool for management to achieve its personal interests, namely to gain trust.This is contrary to the real purpose of SR disclosure.
On the other hand, in accordance with stakeholder theory, management should voluntarily disclose information about the company's financial, social and environmental performance over and above mandatory requests from stakeholders to meet stakeholder expectations [3].[4] states that the real activity of the company is to seek stakeholder support, the greater the attribute of stakeholder power, the greater the company's efforts to adapt to meet the interests of its stakeholders.Disclosure of the company's social, economic, environmental conditions is considered a dialog between the company and stakeholders.As a reaction to stakeholder dialog, entities strive to meet the interests of both internal and external stakeholders by publishing more sustainable information [5], [6].Thus, based on the perspective of stakeholder theory, SR disclosure is a form of concern as well as a medium for conveying management information to stakeholders for information that stakeholders are unable to obtain directly within the company.Management will voluntarily provide complete, open, and quality information so that it becomes a useful entity for stakeholders.
This study tries to prove the motivation of management in providing information in SR disclosure related to information in terms of social, economic, and environmental matters from the perspective of stakeholder theory.This point of view is what distinguishes this research from previous studies.However, this study has not accommodated to examine different perspectives in terms of legitimacy theory.This limitation will be developed in future research.Stakeholder support will be realized if the negative impact on the social, economic, and environmental domains can not only be minimized but can have a real positive impact on stakeholders [7].Research on the impact of stakeholder power on the disclosure of sustainability reports prepared by companies has not been widely conducted, and still shows mixed research results.

Theoretical Basis and Hypothesis Development 2.1 Stakeholders Theory
Maintaining environmental sustainability is the company's responsibility to the universe and to stakeholders.Accounting as an extension of management, as a communication medium to show the company's accountability in contributing to maintaining environmental quality.The report that management can use to communicate is SR.Disclosing quality SR reports voluntarily without coercion and without ulterior motives is a form of the company upholding the existence of stakeholders.[3] states that with the publication of sustainability reports, companies can disclose complete information on their activities related to the influence on the state of society and the environment.Factors that influence sustainability reporting or non-financial reports are pressure from various stakeholders such as employees, customers, investors, and the environment [8].In addition, the company's obligation is to respond to the information needs of stakeholders [9]- [12].

Hypothesis Development
This research looks at which stakeholder priorities have power or power over the company referring to the statements [7], [13].According to [7], the order of the most important stakeholder groups is customers and government, then shareholders, employees, and finally the community.Meanwhile, [13] describes stakeholders who have power, namely the government, shareholders, creditors, and auditors.This study uses the power of the government, priority shareholders, and creditors as stakeholders who are able to influence the quality of sustainable report disclosure for companies.The Indonesian government has issued Law No 32 of 2009 concerning environmental protection and management.Through regulations made by the government, it binds companies to always be accountable for all policies taken, especially all policies that are directly related to the environment and society.[14] states that the government is part of the stakeholders who are considered to have the most influence on the company.[15], [16] mentioned that the existence of regulations from the government can help improve the quality of environmental reporting made by companies.[17]- [19] found that government orders on the disclosure of the impact of corporate activities make it easier for the government and stakeholders to pressure companies to carry out their social activities.H1: Government pressure will improve SR quality Priority shareholders are one of the stakeholders that provide important influence in every corporate policy making.Managers as agents who manage the company, have a tendency to give satisfaction to majority shareholders.[20] found that companies with widespread share ownership, not dominated by one party, will apply better sustainability reports to attract more investors.The smaller the percentage of majority shares, the higher the quality of report disclosure by the company.In line with the results of research [17] which found that when share ownership is dispersed, more monitoring is required, and companies will disclose more environmental information.According to stakeholder theory, companies will tend to disclose more information to reduce information imbalance.The more concentrated share ownership will reduce the information to be reported to stakeholders so as to reduce the cost of information disclosure.Concentrated ownership (ownership above 20% of outstanding shares), can hinder sustainability reporting because dominant shareholders already have access to relevant information [21].H2: The dominance of share ownership will reduce the quality of SR Other stakeholders who have the power to influence the quality of SR disclosure by the company are creditors.[22], [23] state that in addition to shareholders, creditors play an important role as part of the capital market stakeholders for the company.[14] states that managers are willing to disclose 4 information about corporate social activities in seeking and accommodating creditors.The more dependent the company is on debt; it will encourage the company to disclose more extensive sustainability information.On the other hand, when viewed from the creditor's side, if the company's performance has a negative impact on the environment and social conditions of the community, it will allow the company to face legal problems, which will certainly affect the interests of creditors.Creditors will tend to demand high integrity of the company, and demand that the company disclose more up-todate information about the company's social, economic, and environmental conditions, so that creditors can guard against opportunistic behaviour [14].If companies tend to be closed to disclosing information in the company, creditors are very likely to look for other alternatives and can withdraw from the company's stakeholder section.H3: Pressure from creditors will improve the quality of SR Sustainability Report emphasizes companies to consider each company's performance based on three different bottom lines (triple bottom line) consisting of profit, people, and planet.It aims to measure the company's performance from financial (economic), social and environmental aspects over a certain period of time.This study tries to add profitability variables as variables that can strengthen stakeholder pressure in influencing the quality of sustainable reporting made by companies.Profitability is the company's ability to generate profits from all activities carried out by the company.Pressure from stakeholders, both internal and external, reinforced by a higher level of profitability will increase the confidence of management to disclose all sustainability reports.Management is increasingly motivated to disclose sustainability reports at the end of each period, after knowing that management performance during one period has shown maximum results [10], [24]- [26].H4: Profitability is able to increase the role of government, majority shareholders, and creditors in improving the quality of SR.

Method
The object of this research is companies listed on LQ-45 throughout 2019-2022.The research data is obtained from the company's annual report which has been published on both the IDX official website and the company's official website.The dependent variable used is the quality of SR disclosure measured using the Sustainability Report Disclosure Index referring to the GRI Standard.The independent variable of government pressure is proxied by the percentage of share ownership by the government, the majority shareholder is measured by the percentage of majority share ownership, and pressure from creditors is measured by Debt-to-Equity Ratio (DER).While the moderating variable is profitability proxied by Return on Investment (ROI).The data that has been collected and meets the requirements to be tested is then analysed with descriptive analysis and moderation regression analysis.The theoretical equation in this study is shown as follows: SR = α + β1Gov + β2Share + β3Cr + β4Gov*Prof + β5Share*Prof + β6Cr*Prof + ε Note: Gov is government pressure, Share is majority shareholder, Cr is creditor pressure, and Prof is Profitability.

Descriptive Research Variables
Go-public companies included in LQ 45 for four consecutive years from 2019 to 2022, it is known that there are 15 companies that are not always listed in LQ45, so that there are 120 companies that can be used as units of analysis in the study.In the research data processing process, there are eleven units of analysis that have outlier data so that they must be removed in data processing, so that the unit of analysis used in hypothesis testing is 109 units of analysis.Descriptively, it is very surprising to know that in large companies in Indonesia there are still several companies that have not disclosed SR in their annual reports seen from the minimum SR value of 0.00 (Table 1).Although from this report it cannot be concluded that the company does not carry out activities that care about social, economic and environmental, SR reporting is an illustration of the delivery of management information to stakeholders.Based on the average SR value of 0.37, it shows that of the 87 disclosure items that should be conveyed in the SR, no half is disclosed in detail by management.In this study, a quality SR is an SR that presents all information data related to activities even though the activities requested in the GRI Standard are not or have not been carried out by the company.Table 1 shows that government ownership in LQ45 companies averages around 17% of total outstanding shares.The largest shareholding on average is 56%, this shows that share ownership in LQ45 companies in Indonesia is still centred on one party and not spread to all parties.Creditor pressure is still in the small category as evidenced by the average value of 1.9%, which means that third party ownership of the company's equity is still limited, the company's equity is still dominated by the owner.

Moderation Regression Analysis
This study uses a panel data regression model.Estimation is carried out to determine the most appropriate panel data regression model to conduct hypothesis testing.Based on the test results (Table 2) of the Common Effect Model (CEM), Fixed Effect Model (FEM) and Random Effect Model (REM), it can be concluded that the regression model used is REM.And the results of classical assumption testing, the research data is declared free from heteroscedasticity and multicollinearity disorders.The results of hypothesis testing, both directly and moderated by the profitability variable, are summarized in Table 3.The probability value for testing the effect of government pressure variable on the quality of SR disclosure shows 0.0884, which means that there is no effect of government pressure in improving the quality of SR disclosure by management (H1 is rejected).The percentage of share ownership by the government does not necessarily affect management policy in determining the extent of SR disclosure.Ten companies out of 30 companies or 33% of the object of research share ownership is partly owned by the government and some are State-Owned Enterprises (SOEs).In Indonesia, SOEs have the right to freely cooperate with the private sector for business development, so the presence of the government cannot directly influence all management decisions.Stakeholders' theory in this study is not supported because some of the companies included in the object of research are governmentowned companies.Without providing extensive disclosures in sustainability reports, the government will continue to provide support to SOEs.The results of this study are in line with the results of research 1248 (2023) 012007 IOP Publishing doi:10.1088/1755-1315/1248/1/0120076 [13], [27] which prove that the government proxied by government ownership does not have a significant influence on environmental disclosure.  1, it is known that the average share ownership of most research objects is above 50%.This shows that most of the companies listed in LQ45 have majority shareholders who have an interest in overseeing the company's operational activities and at the same time have the power to pressure the company to disclose financial reports completely and in detail.Table 3 shows a probability value of 0.037 which means that majority shareholders have a positive effect on SR disclosure (H2 is rejected).This study suspects that equal share ownership from various elements will pressure management to be more open in providing reporting is not statistically proven.Pressure from majority shareholders is proven to be effective in overseeing management performance including in the disclosure of financial statements.Companies have an awareness to disclose quality SR reports to their ultimate owners, with the hope that shareholders can obtain complete information on the economic, social and environmental policies of the company.SR disclosure is one way for management to fulfil the interests of shareholders to obtain complete information on the company.Shareholders can exert higher pressure by continuing to pay attention to the sustainability of companies with high levels of ownership concentration [28], [29].The results of [30] support previous theoretical evidence that the pressure exerted by the government and external stakeholders has a considerable influence in promoting sustainable reporting activities in the company.[31] states that managing relationships with stakeholders requires providing relevant information and involving stakeholders in the company's business activities, this is because the success of the business depends on stakeholders.SR is a medium for providing information from management whose preparation is affected by pressure from creditors, and it's reporting also has an impact on creditors' decision making.The results of this study show the influence of creditors on the quality of SR disclosure has a probability of 0.0079 smaller than 0.05 so that creditors are proven to pressure management to disclose SR (H3 accepted).Creditors have a high interest to cooperate with the company in achieving the company's goals, the success of the company shows the certainty of returning the loan for the debt that has been given.Creditors have a tendency to demand corporate integrity and transparency around business environmental activities and environmental management strategies [14], [24].
The results showed that profitability is able to moderate the influence of government pressure, majority shareholder pressure on SR disclosure (H4 accepted).However, it fails to moderate the effect of creditor pressure on SR disclosure.The high level of profitability increases stakeholders, namely the government and majority shareholders, to pressure management to disclose SR more widely and with higher quality.Companies that have high profitability are expected by the government and majority shareholders to disclose more detailed information on the company's responsibility for social and environmental life.Creditors as a third party that provides loans to companies, always demand companies to provide extensive disclosure of the company's narrative information.SR is generally influenced by several internal company factors including company size, profitability, ownership structure, listing effort, leverage, and auditor type [32], [33].

Conclusion
Transparent, complete SR disclosure is something that is expected to be obtained by stakeholders due to limited direct access to internal companies.Based on the results of the study, government support and majority shareholder pressure do not necessarily affect the improvement of SR reporting quality.However, in the condition of the company experiencing an increase in profitability, this creates motivation for management to submit more extensive and quality reporting.This has a different effect on creditor pressure, the results of the study prove that creditors put pressure on management to provide information related to the company's social, economic and environmental activities in the SR report.However, this condition will decrease when the company experiences an increase in profitability.Suggestions from this study are that the government and policy makers should provide an assessment of SR disclosure to improve SR transparency.and further research can use other perspectives based on theories that can be used such as legitimacy theory and stewardship theory.