Sustainability Reporting and Financial Performance in Pakistan’s Power Sector

Abstract

The concept of sustainability reporting has become a very important tool, which companies use to make the stakeholders learn about their environmental, social and governance (ESG) activities. The power sector is of special significance in the emergent economies like Pakistan because of the large footprint in relation to the environment, sensitivity in regulations, as well as contribution to national economic development. This paper assesses the connection between sustainability reporting and financial outcomes in the Pakistani power industry and how transparency in disclosure of sustainability practices impacts profitability, stock worth and efficiency in the operations of firms. Based on the stakeholder theory, legitimacy theory, and the signaling theory, the paper holds that sustainability reporting promotes investor confidence, minimizes information asymmetry, and corporate reputation, which subsequently has a positive impact on financial performance. The paper has described the changing regulatory environment in Pakistan, such as the SECP rules, and international reporting standards like GRI, and addressed examples of specific challenges faced by the sector, e.g., energy scarcity, environmental degradation, and inefficient governance. This research is relevant to the expanding literature on sustainability-performance nexus in developing economies, and offers policy implications applicable to regulators, managers, and investors through synthesis of existing empirical research and contextualization of the same in the context of the power industry in Pakistan.