ROLE OF INTEGRATED REPORTING IN MALAYSIAN SHARIAH COMPLIANT FIRMS: SOME EVIDENCE OF GREENWASHING

The International Integrated Reporting Council has recommended firms present sustainability decision indicators in their Integrated Reporting (IR). IR is expected to facilitate the integration of sustainability issues into the firm’s financial reporting framework. The idea of sustainability is consistent with the underlying philosophy of Islam that emphasizes a deep feeling of kindness, holiness and practices, including respect and care for the environment and employees. This study has three objectives. Firstly, is to determine whether firms with poor (a) environmental, (b) social, and (c) economic, corporate performances are more prone to obfuscate sustainability disclosures (i.e. greenwashing) in their IR. Secondly, to understand whether firms that use such "obfuscation" techniques are associated with poor corporate governance quality. Thirdly, to examine whether environmentally sensitive industry firms are more likely to obfuscate sustainability disclosures in their IR. To empirically test the objectives, we will manually gather disclosure data from Malaysian Shariah-compliant listed firms’ IR reports for the year 2021. Data analysis includes a content analysis of the IR and multivariate regression models to determine the relationship between sustainability disclosure and environmental, social, economic, governance, and environmentally sensitive industries. Firm-level financial data will be gathered from the Bloomberg database. Based on Impression Management theory, we expect that the Malaysian Shariah-compliant IR adopters with weak environmental, social, and economic governance performance and environmentally sensitive industries are likely to have less Islamic sustainability performance in their IR reports than sustainability actions.