Unlocking financial performance through circular economy and sustainability reporting in the Indian real estate sector

Purpose The purpose of this study is to provide empirical evidence on the extent of sustainability reporting in the real estate sector in India and to examine study the influence of sustainability reporting on the financial performance of these companies. Design/methodology/approach The present study initially relied on a list of 64 companies from the S&P BSE Realty Index; however, six companies were excluded owing to data constraints and missing values for various variables included in the analysis. Thus, the sample comprised 58 companies. The study covered the three financial years 2021–2022, 2022–2023 and 2023–2024. The final number of annual observation was 174 for 58 companies. The interrelation between sustainability reporting on the one hand and financial performance on the other hand, along with certain control variables, was examined using a fixed-effects regression model. Findings The results from the regression analysis indicate that sustainability reporting has a significant positive effect on the financial performance of companies. Not only is the aggregate sustainability score important for improving financial performance; but five out of ten components that make up the sustainability reporting score also significantly influence financial performance. These include sustainability reports, initiatives on environmental conservation, pollution emission, GRI and social responsibility reports. Regarding the additional control variables included in the study, employment, age and turnover were found to have a significant positive influence on firms’ financial performance. On the other hand, the debt-equity ratio and the representation of women on the board of directors did not have a significant impact on overall financial performance. Practical implications This study fills a major research gap by exclusively examining the extent of sustainability reporting in the real estate sector, an area that has not previously been explored either at the regional or at the international level. Originality/value Previous national and international studies on sustainability reporting have taken up a cluster of industries falling under different sectors. The real estate sector has not been examined as a distinct industry despite the well-accepted notion that it is one of the major global contributors to pollution and emissions. The study investigates the overall and the individual effects of sustainability reporting indicators on the financial performance of the real estate companies.