Assuring Sustainability: Enhancing Environmental, Social and Governance (ESG) Ratings in Top-40 Johannesburg Stock of Exchange Companies

Abstract

Sustainability reporting has become increasingly common as companies respond to stakeholders’ expectations, pressures, and criticisms demanding better information about the Environmental, Social and Governance (ESG) scores impacts of business activities. To build stakeholders’ confidence, firms are increasingly seeking independent third-party assurance on their sustainability reports. Despite this trend, little is known about the impact of assurance levels provided on the SRs on ESG performance of firms in South Africa. This paper focuses on exploring the effect of different assurance levels on ESG ratings for the top 40 Johannesburg Stock Exchange listed companies. A quantitative approach was used to establish the relationship between assurance levels on sustainability reports and sustainability performance measured using ESG scores. The sustainability performance was measured using ESG ratings from London Stock Exchange Group and Bloomberg rating agencies. Data was collected from reports of the firms listed at JSE for the financial years 2022 and 2023. The results establish a significant and positive relationship between the levels of assurance on SRs and ESG ratings of firms listed on the JSE. This study contributes to the literature by providing insights into the relationship between external assurance and the quality of ESG reports.