The Role of ESG Committee on Indonesian Companies in Promoting Sustainable Practice to Creditors: Symbolic or Substantive?

This study investigates whether the presence of an ESG committee in promoting sustainable practices is symbolic or substantive to creditors when setting costs. With unbalanced panel data, the study used 1518 company-year observations from non-financial firms listed on the IDX period 2018 to 2023. The hypothesis testing of this study was conducted by using moderated regression analysis (MRA). Hypothesis testing using a fixed effects model indicates that ESG disclosure can significantly lower the cost of debt. The role of the ESG committee is to act as a quasi-moderator for the relationship between ESG disclosure and the cost of debt. While the presence of an ESG committee can significantly reduce the cost of debt, the committee itself weakens the relationship between ESG disclosure and the cost of debt. Therefore, these findings suggest that the role of the ESG committee in promoting ESG disclosure to creditors in determining the cost of debt is becoming more substantive, moving away from a merely symbolic role that focuses on maintaining the company’s reputation and strengthening substantive management to control governance risk. The results of this study are expected to contribute to formulating policies that strengthen the role of ESG committees in improving corporate governance and sustainability practices by providing stakeholders with important and relevant ESG disclosure information for investment and funding decisions.