The Impact of Materiality on Sustainability Reporting and its Impact on Disclosure Quality “An Applied Study”

Abstract

Due to the perceived limitation under the application of the traditional concept of materiality as it has a deficiency in measuring non-financial items of sustainability reports. Therefore, a new measure that identifies and evaluates only those issues that are financially important to a company or a bank. The new material score allows to differentiate between companies. Now it can be now distinguished between companies who score highly on Environmental, Social and Governance (ESG) issues that are financially material to their business, from those who score highly an issue that are not financial material to their business. Purpose: The main purpose of the research is to determine The impact of Materiality on Sustainability reports and their impact on quality of disclosure. To achieve this goal, the researcher depends on different references to support the applied study. Applied Study: The applied part of this research is divided in two parts. The first part applied on a sample of EGX30 and it was selected 10 companies or banks out of 30 who is applied sustainability accounting. As conclusions from this part are not enough, the researcher supplemented it with questionnaire. The second part of the applied study includes: Some questionnaire opinions from Jurisdiction (some corporations listed in the Egyptian Security Market, Some Academics in Egyptian Universities and some professional accountants in the Egyptian accounting and auditing firms). This questionnaire was used to test the research hypotheses and to know the impact of materiality on quality of disclosure. Statistical Analysis: A multiple Linear Regression method has been applied to explore the effect of the independent variables on the dependent variables of the study then statistical package for the social sciences (SPSS) was used to analyze the data in this regard. Originality – Value: The researcher has been presented some results reflecting the impact of materiality on sustainability reporting and their impact on quality of disclosure: -There is a significant impact (either positive or negative ) for inventory , total expenses and total assets as financial indicators for materiality on Total revenues as a measurenment for Sustainability Reports and their impact on quality of disclosure: Based on the results of this study, it is recommended for the companies and banks regularly apply materiality during preparing sustainability reports. Those previously recommended actions and others will hopefully enable companies and banks avoid some problems such as lack of standardization, Lack of transparency and Lack of credible information.