Foreign Board Composition and Sustainability Committee’s Impact on Carbon Emission Disclosure in Indonesian Listed Firms

Abstract

Purpose: The study examines how foreign board members and a sustainability committee affect carbon emission disclosure (CED) in Indonesian firms. The study posits that firms with governance structures comprising foreign directors and foreign commissioners, supported by a sustainability committee, are more likely to enhance their commitment to transparent CED information to the public.

Methods/Study design/Approach: The study employs unbalanced panel data from 2,893 firm-year observations of non-financial companies listed on the Indonesia Stock Exchange (IDX) over the 2014-2023 period. The hypotheses are tested using fixed-effects regression and moderation analysis. The data were obtained from official IDX publications and corporate websites.

Result/Findings: The findings indicate that the presence of foreign directors actually lowers the CED because they focus more on creating economic value than on voluntary disclosure, thereby making the monitoring of sustainability practices less effective. However, this negative effect can be transformed into a more positive one if the company has a sustainability committee, which acts as a governance mechanism to provide information, coordination, and monitoring, in line with agency theory, thereby helping foreign directors understand sustainability issues and mitigating their shortcomings in the Indonesian context.

Novelty/Originality/Value: Specific research examining the relationship between foreign directors, foreign commissioners, and sustainability committees on CED in Indonesia is still limited.