Materiality assessment: the case of Latin American listed companies

• Published in: Sustainability accounting, management and policy journal (Print) management and policy journal (Print), 2022-01, Vol.13 (1), p.88-113
• Main Authors: Sepúlveda-Alzate, Yully Marcela, García-Benau, María Antonia, Gómez-Villegas, Mauricio
• Format: Article
• Language: English
• Subjects: Accounting; Developing countries; Disclosure; Financial reporting; Industrialized nations; LDCs; Literature reviews; Materiality; Social responsibility; Stakeholders; Sustainability reporting
• ISSN: 2040-8021; 2040-803X
• DOI: 10.1108/SAMPJ-10-2020-0358

Purpose This paper aims to propose a measurement of the materiality of environmental, social and governance information (ESG) reported by listed companies belonging to sensitive industries in Colombia, Mexico, Brazil, Chile and Argentina. This analysis is carried out from the insights of stakeholder theory, legitimacy theory and institutional theory. The research questions addressed are: What type of information is considered as material by Latin American companies? Does this information respond to the environmental and social issues within the context of Latin American companies and the needs of their stakeholders? Design/methodology/approach A materiality index is developed from principal component analysis and factor analysis, which are multivariate analysis statistical techniques used in various fields to develop indices. The designed index examines materiality in the sustainability reports of 65 companies for 2017 and 67 companies for 2018. These firms belong to the energy, mining, chemical, construction, construction materials and public services industries in Colombia, Mexico, Chile, Argentina and Brazil. Findings The results show medium-high materiality indices, mostly in Chilean, Mexican and Colombian companies. In addition, issues such as water management, climate change and occupational health and safety are particularly interesting for companies. For the two years studied and from the perspective of material aspects for the company and its stakeholders, energy, mining and utilities (drinking water and sewage) sectors obtained the highest scores. This shows that the disclosure of ESG information is higher in industries related to the exploitation of natural resources that cause adverse effects on the environment such as extractive industries. Both the analysis presented in this paper and the materiality measurement developed, allow social responsibility managers to have a standard on the level of importance allotted to the different topics disclosed in sustainability reports. Additionally, this study provides a perspective of the material issues recognized by sensitive industries with great environmental impact. Similarly, an analysis of the issues considered material by stakeholders is provided. This allows such issues to be compared, identifying similarities and differences among the issues regarded as material by a company and its stakeholders. Practical implications The paper opens the debate is open as to whether the information disclosed r