Sustainability reporting and external assurance: Evidence from UK listed firms

This paper develops and tests a model explaining why some companies obtain external assurance for their sustainability reports while others do not. Our model integrates rational choice and stakeholder theories, providing novel insights into the sustainability assurance literature. Data were collected via an online questionnaire from 105 UK-listed companies, and partial least squares structural equation modelling (PLS-SEM) was employed to test the proposed model. We found that decision makers’ perceived benefits of external assurance exert a direct positive effect, while perceived costs have a direct negative effect. Indirectly, external assurer independence and market competition positively influence the decision through perceived benefits, whereas adherence to sustainability reporting guidelines has an indirect negative effect. Additionally, institutional investors exert a direct positive impact on the decision to obtain assurance. Interestingly, when institutional investors demand external assurance, the influence of decision makers’ perceptions of benefits and costs appears to diminish. These findings advance understanding of the interplay between rational choice and stakeholder theories in shaping decisions to obtain sustainability assurance. The study also carries practical implications for academics, business decision makers, external sustainability assurance providers, and policymakers involved in the governance and oversight of sustainability reporting.