Material Sustainability Information Disclosure and Company Performance: The Moderating Role of Business Strategy

Objective The primary challenges of the 21st century, particularly resource scarcity and the efficient utilization of resources, have intensified global awareness of sustainability and its implications for sustainable development. Achieving sustainable development requires businesses to adopt strategies that integrate economic objectives with environmental and social dimensions. As critical pillars of society, companies significantly influence sustainable development initiatives; their collaboration is essential for meaningful progress. The implementation of sustainability initiatives serves as a precursor to the disclosure of sustainability information, enabling companies to reap the advantages of both implementation and disclosure processes. Therefore, this study aims to investigate the influence of material sustainability information disclosure on company performance, while also considering the moderating effect of business strategy. Methods This research adopts a descriptive-correlational approach with a focus on practical application. A library method was utilized to gather relevant information and establish theoretical foundations. Financial data were extracted using document mining techniques applied to audited financial statements, while sustainability information was obtained through content analysis and mapping from the companies' board of directors or sustainability reports. The statistical population comprises 102 companies listed on the Tehran Stock Exchange from 2018 to 2022. Results The findings indicate a strong and significant positive relationship between the transparency of material sustainability information disclosure and company performance. Furthermore, business strategy plays a moderating role in this relationship, strengthening the positive connection between sustainability disclosure and performance outcomes. Conclusion The manager's goal is to increase shareholder wealth. In addition to traditional financial investments, the manager can also make a new type of investment called investment in sustainable activities. That's why investors with a longer horizon prefer companies with a higher environmental, social, and governance (ESG) performance, while short-term investors prefer the opposite. The analysis demonstrates that companies engaging in extensive material sustainability information disclosure achieve superior performance and value compared to those with limited disclosures. By fostering transparency in their sustainability efforts, companies enhance their competitive advantage, leading to improved performance and increased value. Additionally, business strategy emerges as a crucial moderating factor in the relationship between material sustainability information disclosure and overall company performance. Firms that align their reporting of sustainability information with their operational strategies tend to outperform their peers. Notably, according to the Miles and Snow model, which categorizes business strategies as either defensive or offensive, the results suggest that companies employing aggressive strategies are more inclined to disclose material sustainability information than those with defensive strategies. It is also recommended that investors consider non-financial disclosures (sustainability) to evaluate the performance of the company, in addition to paying attention to financial disclosures, so that optimal investment is made, and resources are not wasted. This research contributes novel insights into the relationship between material sustainability information disclosure and firm performance, emphasizing the moderating influence of business strategy, particularly within the context of emerging markets—an area that warrants further exploration.