Double materiality is crucial for assessing a company’s sustainability performance. This study aims to explore how Indonesian companies are addressing double materiality communicated in their sustainability reports. The authors do this by focusing on the internal interactions between accounting and sustainability teams, and external interactions with environmental, social and governance (ESG) rating agencies.
Using stakeholder theory, this study reports on a qualitative study based on semistructured interviews with middle managers and executive-level managers as well as content analysis of company sustainability reports, annual reports and the company websites of eight listed Indonesian companies.
The findings indicate that Indonesian companies generally prioritize financial materiality. However, banking and environmentally sensitive industries show a balanced approach where powerful stakeholders exert stronger regulatory pressure. Through a stakeholder theory lens, the authors found that collaboration between accounting and sustainability functions remains limited to compliance activities, demonstrating companies’ tendency to prioritize salient financial stakeholders while marginalizing broader stakeholder concerns. A notable misalignment exists between companies’ materiality assessments and ESG ratings, reflecting divergent stakeholder prioritization approaches. This stakeholder power imbalance creates challenges to addressing double materiality as companies respond primarily to dominant stakeholders rather than addressing the broader stakeholder interests.
This study explores how double materiality is addressed in Indonesia, a developing country with mandatory sustainability reporting regulations. The authors analyze both internal organizational dynamics and external influences to provide insights into how double materiality issues are identified and prioritized across different stakeholder groups.
