Unveiling the Significance: Sustainability and Environmental Disclosure in Saudi Arabia through Stakeholders’ Theory

Abstract

Our study investigates sustainability and environmental disclosure in Saudi Arabian accounting, focusing on stakeholder accountability. Employing content analysis and close reading, we examine disclosures in the annual reports of 18 companies from 2008 to 2018. Findings reveal limited disclosures, influenced by interpretations of Islam and government emphasis. Despite sector-specific attention to environmental issues, disclosures lack depth. The study offers insights into managerial motivations, highlighting divergent stakeholder priorities and moral obligations. Policy implications suggest mandatory regulations could enhance accountability and encourage comprehensive disclosures. The research underscores the significance of contextual understanding in shaping accounting practices, particularly in regions like Saudi Arabia. Regulatory changes could improve corporate reporting on environmental and sustainability matters, addressing societal needs more effectively.

Full text

Citation: Aladwey, L.M.A.; Alsudays,
R.A. Unveiling the Significance:
Sustainability and Environmental
Disclosure in Saudi Arabia through
Stakeholders’ Theory. Sustainability
2024,16, 3689. https://doi.org/
10.3390/su16093689
Academic Editor: Javier Andrades
Received: 25 March 2024
Revised: 15 April 2024
Accepted: 23 April 2024
Published: 28 April 2024
Copyright: © 2024 by the authors.
Licensee MDPI, Basel, Switzerland.
This article is an open access article
distributed under the terms and
conditions of the Creative Commons
Attribution (CC BY) license (https://
creativecommons.org/licenses/by/
4.0/).
sustainability
Article
Unveiling the Significance: Sustainability and Environmental
Disclosure in Saudi Arabia through Stakeholders’ Theory
Laila Mohamed Alshawadfy Aladwey 1, 2, * and Raghad Abdulkarim Alsudays 1
1Department of Accounting, Imam Mohammad Ibn Saud Islamic University (IMSIU),
Riyadh 11432, Saudi Arabia; rasadais@imamu.edu.sa
2Department of Accounting, Tanta University, Gharbia 31521, Egypt
*Correspondence: laladawi@imamu.edu.sa
Abstract: Our study investigates sustainability and environmental disclosure in Saudi Arabian
accounting, focusing on stakeholder accountability. Employing content analysis and close reading,
we examine disclosures in the annual reports of 18 companies from 2008 to 2018. Findings reveal
limited disclosures, influenced by interpretations of Islam and government emphasis. Despite
sector-specific attention to environmental issues, disclosures lack depth. The study offers insights
into managerial motivations, highlighting divergent stakeholder priorities and moral obligations.
Policy implications suggest mandatory regulations could enhance accountability and encourage
comprehensive disclosures. The research underscores the significance of contextual understanding in
shaping accounting practices, particularly in regions like Saudi Arabia. Regulatory changes could
improve corporate reporting on environmental and sustainability matters, addressing societal needs
more effectively.
Keywords: environmental disclosure; sustainability; stakeholder theory; Saudi Arabia; Saudi
government; Islam
1. Introduction
The world is facing increasing uncertainties in respect of a range of highly significant
environmental, economic, and social issues. The planet is experiencing a crisis that has
never been witnessed before in the form of climate change, which is a worldwide phe-
nomenon that threatens all humans and non-humans. Different global organisations, for
example, the United Nations Framework Convention on Climate Change (UNFCCC), have
repeatedly been urging people to change their habits and behaviours and promoting a
fundamental restructuring of societies so that global average temperatures increase by no
more than 1.5
◦
C. Also, the United Nations’ 17 Sustainable Development Goals, which
align with the 2030 Agenda for Sustainable Development, aim to provide peace and pros-
perity to all people and the Earth from the present to the future. The aims are to reduce
inequalities in health, education, and the economy, with a particular emphasis on address-
ing climate change and preserving the ocean. However, it is not only the environment
that is causing such heightened anxieties; there are also important social issues urgently
needing addressing. For example, poverty is one of the most critical social issues, and this
is related to both human rights and social justice. Additionally, many people not only lack
access to shelter and food, but they also lack access to clean water, which is a basic human
need. Environmental risks have grown in prominence in recent years and continue to
become ever more challenging [
1
,
2
]. The significant risks confronting the world have been
identified by a range of organisations. For example, the World Economic Forum (WEF)
has published a risk report annually since 2006, and in the 2020 WEF Global Risks Report
(prepared pre-COVID), there is clear anxiety regarding the environmental, economic, and
social risks we currently face [
3
]. The past five years have been the warmest on record
. . .
all
while citizens protest the political and economic conditions in their countries and voice
Sustainability 2024,16, 3689. https://doi.org/10.3390/su16093689 https://www.mdpi.com/journal/sustainability

Sustainability 2024,16, 3689 2 of 20
concerns about systems that exacerbate inequality. Indeed, the growing palpability of
shared economic, environmental, and societal risks signals that the horizon has shortened
for preventing—or even mitigating—some of the direst consequences of global risks [4].
Ref. [
3
] sets out how severe temperatures and rising CO
2
emissions are occurring
alongside massive losses in biodiversity and species protection; agricultural systems are
under strain; and pollution of the air and water is becoming an increasingly serious hazard
to human health and safety [
5
]. Because the environmental, social, and economic risks
facing the world are so severe and are interconnected, action is required by many different
actors to address them clearly. One of the most obvious actors is governments. Additionally,
however, it is now almost universally accepted that companies have responsibilities for
taking actions that go beyond working to maximise profits for shareholders and that these
might include responsibilities related to some or all of the above issues. Almost 70 years
ago, Ref. [
6
] argued that because business activities impact people’s lives in different ways,
they have social responsibilities [
7
,
8
]. Bowen’s early discussions of businesses, ethics, and
social responsibility led to wider debates in the 1960s as to what responsibilities businesses
may have, particularly in respect of the environment [
9
,
10
]. Companies are now expected
to act with respect for environmental and social issues and are not expected to focus
solely on economic aspects such as financial performance. In addition to being expected
to take relevant actions on environmental and social issues, there is also an expectation
that companies are accountable for their actions. This is to ensure they are transparent
in explaining what actions they have taken [
11
,
12
]. Refs. [
13
,
14
] explains that there is no
agreed definition of corporate accountability but suggests that it might be thought of as “the
ability of those affected by a corporation to hold corporations to account for their actions”
(p. 28, [
15
]). Thus, corporate accountability is typically understood as being founded on
the argument that companies are not solely responsible for their shareholders and that
there are other stakeholder groups to whom they are also accountable. Hence, Du Reitz
(2018) states that “in both research and practice, it is commonly assumed that reported
accounts enable accountability [
16
]. When organisations or individuals account for their
performance, their accounts allow external parties to monitor performance and demand
accountability.” (p. 587, [16]).
Saudi Arabia, the world’s 10th-largest emitter of carbon dioxide, expressed its appreci-
ation for the accomplishments of the G20 in finding sustainable solutions to environmental
challenges and strengthening efforts to tackle land degradation, a significant threat to
biodiversity, food security, and climate change adaptation. This acknowledgement was
made during the speech delivered by the Deputy Minister of Environment, Water, and
Agriculture for Environment, Dr. Osama Ibrahim Faqeeha, at the G20 environment and
climate ministers’ meeting held in New Delhi, India, in 2021.
In Islam, it is required of humankind that the Earth and the environment are well
cared for and protected. Hence, relatedly, the Quran declares: “That Home of the Hereafter
We shall grant to those who desire not high-handedness or evil on earth: and the end is
(best) for the virtuous” (Quran 28:83) to indicate that virtue is an obligation, and in terms
of the environment Islam is concerned with caring for, and protecting, the environment
and for ensuring there is a balance preserved whereby “all God’s creations are (kept)
. . .
in
equilibrium” (p. 76, [
17
,
18
]). In this regard, Islamic holism includes a concern for not only
the survival but also the well-being of future generations, and we are to act as trustees for
the environment [
17
,
18
]. According to [
19
], it is not permissible for one generation to enjoy
a monopoly on wealth gained from nature and God’s creations at the expense of future
generations. As a result, every Muslim who has given themselves to the creator is obligated
to respect and demonstrate a responsibility to the environment and to all the elements that
make up the environment [
20
,
21
]. Islam also warns against despoiling or mistreating the
environment; for example, contaminating or being destructive towards the environment is
prohibited by the Quran [
22
,
23
]. Therefore, to trace the efforts in the country to scale up the
kingdom’s climate action, it is vital to examine environmental disclosure practices prior
to the country’s efforts. As a result, this paper argues that it is appropriate to analyse the

Sustainability 2024,16, 3689 3 of 20
sustainability and environmental disclosure of Saudi companies from a stakeholder lens.
The teachings of Islam have a strong accord with the environment, and Saudi Arabia is a
highly religious country with Islam of the greatest importance.
This research contributes to the field of disclosure research by using Saudi Arabia as
the research base for examining environmental disclosure practices. Disclosure studies
conducted that examine Saudi Arabia’s scope are limited. By offering a very thorough
analysis and a detailed understanding of environmental disclosure practices with reference
to stakeholder and accountability in Saudi Arabia, this thesis addresses the second research
gap, which is a scarcity of publications on the country. In addition, this thesis fully takes
into account the contextual information and environment relevant to Saudi Arabia. Studies
of social and environmental disclosure in developing countries replicate prior work in
the Western literature while disregarding the richness of contextual information in their
country [
10
,
24
]. Thus, this research contributes to knowledge by incorporating contextual
factors relevant to Saudi Arabia into the examination of environmental and sustainability
disclosure practices. By combining a content analysis with a close reading of the disclosures,
this research differs from the usual disclosure research in developing countries while also
contributing to the growing body of knowledge in the Western disclosure literature. The
principal objective of this paper is to investigate environmental disclosure practices in the
context of Saudi Arabia. More specifically, the objectives of studying the environmental
disclosures for a sample of large Saudi companies are to investigate who the companies are
being most accountable to and to understand what contextual factors are influencing the
managers in respect of their disclosure choices. Consistent with these objectives, the aim of
the paper is to answer the following questions: RQ1. Who are the primary stakeholders the
companies are accountable to?; RQ2. What contextual factors are influencing the companies
to prioritise these stakeholders?
The remainder of this paper is structured as follows. Following this introduction, the
next section discussed a Literature Review and Stakeholder Theory. This is followed by the
Research Methodology section. In the final two sections, we discuss the results and present
our conclusions.
2. Literature Review
There have been an extensive range of disclosure studies published that examine
environmental issues [
25
,
26
]. In the Saudi context, disclosure studies conducted that
examine Saudi Arabia’s scope are limited. The empirical works undertaken by [
27
–
29
]
analysed the disclosure practices of voluntary social and environmental information based
on a single theory [
28
,
29
]. Refs. [
27
,
30
] used legitimacy theory to examine the corporate
social and environmental disclosure practices of 166 listed companies for the year 2013 [
28
].
The content analysis findings revealed that human resources and community information
were the most commonly mentioned categories in corporate annual reports. This study’s
findings show that satisfying public expectations compelled Saudi-listed companies to
disclose social and environmental information as a way of securing their legitimacy. In
another study that embraced a single theory, Ref. [
29
] reviewed annual reports of companies
operating in the banking industry from 2011–2014 [
29
]. The study applied stakeholder
theory as a theoretical underpinning to investigate voluntary social and environmental
information disclosure practices. The findings support the view that particular stakeholders
can demand social and environmental disclosure more than others. The study found that
companies in the banking industry were more responsive to employees’ demands by
disclosing more employee category information.
Another group of Saudi studies provides theoretical explanations of voluntary social
and environmental disclosure from multiple theoretical perspectives. For example, the
study of [
31
,
32
] examined the level of voluntary social and environmental disclosure using
multiple theories, including legitimacy and stakeholder theories. From a stakeholder
theory perspective, their findings concluded that the government is a key stakeholder with

Sustainability 2024,16, 3689 4 of 20
influential power over corporate social and environmental disclosure [
31
]. However, the
legitimacy theory was described in general but had no link to the study’s findings.
Refs. [
33
–
35
] also applied legitimacy and stakeholder in addition to other theories.
Both studies investigated the level of voluntary social and environmental disclosure in
Saudi annual reports. The findings from both studies showed that Saudi companies
operating in sensitive industries, such as oil and energy companies, disclosed information
related to the environment more than social information, which is consistent with the
legitimation perspective [
33
,
34
]. This conclusion was also supported in empirical work
undertaken by [
36
]; his content analysis results revealed that companies operating in a
sensitive industry, such as telecommunication companies, tend to disclose more social
and environmental information in order to seek their legitimacy and avoid any threat.
He found that the oil and utilities industries in Saudi Arabia also disclosed social and
environmental information more than other industries due to their large-scale adverse
effects on the environment and local population [36].
However, the general approach of the above studies contributed to the ambiguity of
the usefulness of a theoretical perspective to interpret voluntary social and environmental
disclosure practices in Saudi firms. Saudi prior studies discussed above typically employ
multiple theoretical perspectives, such as legitimacy and stakeholder theories, without
justifying their research support. Consequently, prior Saudi studies lack a clear explanation
of how multiple theoretical perspectives combined in their study are framing the research
and contributing to the understanding of voluntary social and environmental disclosure
practices. Therefore, there is a gap in the extant literature. Thus, the paper aims to apply
stakeholder theory to explain sustainability and environmental disclosure in Saudi Arabia.
The value of our paper evolved from the notion that, according to a report of the Gen-
eral Authority for Statistics (GAStat) published in 2018 (https://www.stats.gov.sa/sites/
default/files/sustainable_development_goals_sdgs_in_ksa_-en.pdf, accessed on 24 April
2024), Saudi Arabia is fully committed to achieving the SDGs and aligning national plans
accordingly in line with Saudi Vision 2030. The vision (https://www.my.gov.sa/wps/portal/
snp/content/SDGPortal/!ut/p/z0/04_Sj9CPykssy0xPLMnMz0vMAfIjo8zi_QxdDTwMTQz9
3YMt3AwCzXyMg1wMAw0NLA31g1Pz9AuyHRUBEXub1w!!/, accessed on 24 April 2024)
emphasises clean water and sanitation, affordable and clean energy, decent work and
economic growth, industry innovation and infrastructure, reducing inequalities, and sus-
tainable cities and communities. Collaboration between the public, private, and non-profit
sectors is central to this endeavour.
3. Stakeholder Theory
Stakeholder theory has been widely used in social and environmental accounting
studies, in which the principles of the theory have emerged from business ethics [
37
].
The primary assumption of stakeholder theory is that firms have responsibilities not only
towards their shareholders but also towards their stakeholders as their business operations
cause social and environmental harm [
38
–
40
]. Thus, it considers social issues (along with
maximising financial returns) that affect stakeholders in a more or less equal way [39–41].
The term ‘stakeholders’ originated in the 1960s, when the term was initially developed
by Ansoff (1965) [
42
,
43
], and increased usage occurred in 1984, after Freeman’s (1984)
definition of stakeholders was published. Freeman (1984, p. 46) [
40
,
44
] defines the term
‘stakeholders’ as “any identifiable group or individual who can affect the achievement of
an organization’s objectives”. In addition, Gray et al. (1995, p. 45) [
45
] define stakeholders
as “any human agency that can be influenced by, or can itself influence, the activities of the
organization”. In this regard, stakeholders are generally divided into two groups: (i) a group
of stakeholders who affect the company; and (ii) a group who are affected by the company’s
activities. The term, therefore, refers to the many interest groups that can affect or be affected
by the firm’s activities, such as investors, employees, customers, suppliers, the government,
competitors, pressure groups, the stock market, industry bodies, foreign governments, and
future generations [
45
]. Clarkson (1995) [
46
] further offers a somewhat narrow definition of

Sustainability 2024,16, 3689 5 of 20
stakeholders, in which he distinguishes between two groups of stakeholders: primary and
secondary. The first group consists of key persons or organisations such as shareholders,
government, employees, customers, investors, suppliers, and communities. The secondary
group consists of stakeholders who are affected by organisational activities but are not
directly involved in their operating activities, such as society and nature.
By looking at the definitions above, the similarity between those definitions of stake-
holders refers to the principle of corporate effect proposed by Evan and Freeman (1993).
The principle of corporate effect implies that almost ‘any group’ that can affect or is affected
by the firm is considered a ‘stakeholder’. Surprisingly, this principle (see [
45
,
47
]) confirms
that terrorists and competitors are potential stakeholders of the firm due to their ability to
significantly impact a firm’s activities [
40
,
46
]. This raised serious concerns over stakeholder
definitions that are based on the principle of corporate effect. As Ref. [
36
] argues, “stake-
holder theory should not be used to weave a basket big enough to hold the world’s misery”.
Therefore, defining stakeholders is not a simple task. For this reason, some researchers, for
instance [
48
], found that stakeholder definition or identification of stakeholders, in reality,
is unclear, despite a large body of literature that has made numerous attempts to define
and identify who are the stakeholders from those who are not. However, these attempts
caused disagreement in the literature on what constitutes a stakeholder [
49
]. As Stoney
and Winstanley state, “
. . .
there is considerable confusion arising from the multitude of
conflicting views [and]
. . .
failure to recognise and map this diversity has weakened rather
than strengthened the stakeholder concept” [49].
Therefore, different stakeholders’ definitions make it difficult to reach a general agree-
ment on who is a stakeholder [
50
]. However, while several studies suggest that the term
stakeholder suffers from vagueness and ambiguity [
2
,
51
]. Ref. [
18
] argue that different
definitions are generated to serve different purposes, and each definition focuses on at-
tributes that are relevant to the context of the study [
47
]. Stakeholders, from the principle
of corporate rights, are those to whom the company has a moral obligation and legitimate
relationship, regardless of whether the stakeholder is of human or non-human origin. This
definition was found by [52,53], in which the stakeholder is described as follows:
Whenever persons or groups of persons voluntarily accept the benefits of a mutually
beneficial scheme of cooperation requiring sacrifice or contribution on the part of the
participants and there exists the possibility of freeriding, obligations of fairness are created
among the participants in the cooperative scheme in proportion to the benefits accepted [
52
].
Refs. [
52
,
53
] proposed that the adopted definition of stakeholder includes individuals
or groups such as suppliers, the state, customers, employees, communities, local govern-
ment, investors, nature, and future generations. In that sense, it contrasts with earlier
versions of the stakeholder definitions, which exclude individuals or groups who do not
have a moral obligation or legitimate relationship with the company, even if they can affect
organisational activities such as competitors, terrorists, and media [51].
From a stakeholder definition, a firm exists within a complex network of relation-
ships between various stakeholder groups [
14
] and should therefore take the needs and
preferences of its stakeholders into account in decision making for reasons normative,
instrumental, or both [
39
,
49
]. To this extent, stakeholder theory has distinguished be-
tween different forms of stakeholder-company relationships through two branches (or
perspectives): an ethical branch and a managerial (instrumental) branch [54].
The normative perspective of stakeholder theory focuses on the company’s moral
and ethical obligations vis-a-vis its stakeholders and thus provides the answer to why
firms should consider their stakeholders’ interests other than shareholders. In particular,
it is argued that all stakeholders, without exception, have equal rights and interests. This
implies that the company should prioritise all stakeholders’ interests, especially when
conflicts arise between various stakeholder groups [
54
]. In contrast, the managerial (or
instrumental) perspective of stakeholder theory argues that it is unlikely a company can
meet the expectations of ‘all’ its stakeholders [
55
–
57
]. Therefore, companies may not
engage with all their stakeholders but rather respond to the ‘key’ stakeholders [
58
]. This

Sustainability 2024,16, 3689 6 of 20
perspective suggests that various stakeholder groups’ interests or goals often differ from
one another, implying that the company needs to satisfy the needs of its ‘key’ stakeholders
to maintain access to the resources necessary for its survival [
18
]. Mitchell et al. (1997)
developed the most commonly used model that explains how managers prioritise their
relationships with key stakeholders based on their perceived salience [
49
]. This model has
since been used regularly by practitioners and researchers, which is defined as “the degree
to which managers give priority to competing stakeholders’ claims” (p. 854, [
49
]). Mitchell
et al.’s (1997) stakeholder salience model assesses the importance of the stakeholders based
on three attributes: (i) power, which refers to a stakeholder’s ability to exert its influence on
the organisation; (ii) legitimacy, which represents the extent to which a stakeholder’s claims
conform to the norms and bounds of the wider society; and (iii) urgency, which implies
the degree to which the claims of a stakeholder demand immediate action [
59
]. In essence,
the stakeholder salience model suggests that companies tend to respond to stakeholders’
expectations with more salient (two or all attributes) than less salient stakeholders who
have one attribute [59,60].
According to the power attribute, prior literature defined stakeholder power as “the
ability of those who possess the power to bring about the outcomes they desire” (p. 3, [
61
]).
Ref. [
62
] also defined power as “the capacity to influence other individuals through asym-
metric control over valuable resources and the ability to administer rewards and punish-
ments.” (p. 112, [
63
]). Therefore, the power attribute is viewed as a stakeholder’s degree
to control corporate management, either by controlling the supply of critical resources
required by an organisation or by holding a principal position to reward or disregard
the actions of an organisation [
49
,
60
]. Thus, the more critical (powerful) stakeholders’
resources required by the firms, the greater the expectation that the stakeholder’s demand
will be met.
The legitimacy attribute, then, is used to explain the legitimacy of a stakeholder’s rela-
tionship with an organisation. Mitchell et al. (1997) argued that only legitimate stakeholders’
claims would be addressed by an organisation. However, it is argued that legitimate stake-
holders would not ‘always’ have a serious effect on the decisions and activities of the
organisation without power, but legitimate stakeholders could still gain power over time
and change the organisation’s actions [
60
]. The third attribute of stakeholder salience, ur-
gency, is related to “the degree to which stakeholder’s claims call for immediate attention”
(p. 687, [
49
]). This attribute, according to Mitchell et al. (1997), is characterised as time
sensitivity (issues that need immediate attention) and necessity (claims that are critical
and highly important). In other words, stakeholders with the urgency attribute can take
actions against the firm in their attempt to protect their interests, and such actions may
take different forms such as boycotts, divestments, regulations, and strikes [
64
]. However,
Mitchell et al. (1997) suggested that stakeholders were very likely unable to take immediate
action without possessing power. In this sense, urgency is often implicitly related to power.
Consequently, these attributes can play an essential role in the identification and
prioritisation of stakeholders. In addition, the salience of stakeholders can reflect the degree
to which environmental and sustainability disclosure claims are given priority. Moreover,
Mitchell et al. (1997) pointed out that different stakeholder groups’ salience can change over
time. Mitchell et al. (1997, p. 879) posit that “[
. . .
] stakeholders change in salience, requiring
different degrees and types of attention depending on their attributed possession of power,
legitimacy, and/or urgency, and that levels of these attributes (and thereby salience) can
vary from issue to issue and from time to time”. From this quotation, various activities
undertaken by organisations, including public disclosure, are likely to change depending
on different stakeholder expectations and salience to continue their ability and success. In
this paper, stakeholder analysis becomes relevant as it involves identifying key stakeholders
and their interests and assessing their influence and relationships with organisations.

Sustainability 2024,16, 3689 7 of 20
4. Methodology
In order to address the research questions, RQ1. Who are the primary stakeholders
the companies are accountable to? and RQ2. What contextual factors are influencing the
companies to prioritise these stakeholders?, this paper employs content analysis and a
close reading approach. According to [
65
], the technique of integrating multiple qualitative
methods potentially provides deep insights into individuals’ perspectives [
65
]. However,
whilst they commend integrating multiple qualitative methods, they contend that “content
analysis of annual reports together with semi-structured interviews” [
65
], p. 118 is not
commonly used in accounting studies [
65
]. Employing content analysis with close reading
can increase the credibility and validity of the findings of this study. Content analysis
is an exploratory research strategy used in this thesis to gather data on and analyse the
disclosure of eco-justice issues. This method can be employed to analyse environmental
disclosure by examining organisational documents, such as annual reports. Such a method
allows the researcher to identify to whom the companies appear to be seeking to be most
accountable by determining the sustainability and environmental issues that companies
disclose and do not disclose in their annual reports.
Content analysis is one of the most significant research techniques in the social sciences
and has long been utilised in accounting [
66
,
67
]. Ref. [
68
] defines content analysis as “a
research technique for the objective, systematic and quantitative description of the manifest
content of communication”. In addition, Holsti (1969, p. 14) [
69
] refers to this method as
“characteristics of message”. This method has been widely mobilised in the social and
environmental accounting literature to identify the characteristics of corporate social and
environmental disclosure [
11
,
62
]. Other studies have also employed content analysis to
track changes in organisational values over time through the organisation’s documents [
70
].
Content analysis is a method that can be either quantitative or qualitative [
71
]. Quantitative
content analysis measures the volume of disclosure, which indicates the significance of the
text [
45
,
72
], whereas qualitative content analysis focuses on the meaning and implications
of the disclosure context [
45
]. The analysis of environmental and sustainability issues in
this study does not only focus on quantitative aspects of environmental disclosures, such
as sentence counts, but also examines qualitative aspects of the disclosure to understand
their meanings and implications within the Saudi context.
The close reading methodology helps ensure the quality of the environmental disclo-
sures is considered and appropriately analysed. This is because the close reading method
requires the researcher to actively observe details within the text under investigation and
to be attentive to all characteristics that might usefully inform the researcher of interesting
or significant ideas pertaining to the disclosures as a precursor to the development of
themes and sub-themes for the different categories relevant to addressing the research
questions set out in the paper. Following an initial reading to familiarise the researcher
with the content and nature of the disclosures, then re-reading the disclosures several
times is vital to this methodology. This is to ensure sufficient attention is paid to whether
themes and sub-themes and stakeholders pertinent to the companies that are identified
during the re-readings are recurring (or even possibly negated) across the disclosures; this
is an important facet of assessing the quality of the disclosures. Further, attentiveness
and observation must be supplemented by interpretation, as this facilitates the researcher
in comprehending what is important in the disclosures and again assists in enabling the
researcher to assess the quality of the disclosures, particularly by making connections
across the different disclosures in respect of themes, sub-themes, and their connection to
the theories used in the research. Close reading also requires the researcher to be self-aware
and self-critical, particularly in respect of ensuring they avoid holding preconceptions
in advance of applying the method. Furthermore, the close reading technique assists in
interacting with an unclear text through discussion and discourse, as well as eliminating
the aspect that impacts the subjectivity of qualitative research. The companies chosen for
the study are all listed on the Saudi Stock Exchange (Tadawul), and the main criterion
for including a company in a sample was its size, as measured by market capitalisation.

Sustainability 2024,16, 3689 8 of 20
To obtain a representative sample, the 18 companies were chosen on the basis of the two
companies from each industry sector on the Stock Exchange with the largest market cap-
italization as of 2022. The companies chose to represent 9 of 16 industries on the Stock
Exchange; seven industries were excluded due to a lack of accessibility to the companies’
annual reports, as shown in Table 1below.
Table 1. The sample according to the industry ramifications.
Series Company’s Name Industry
1 Petro Rabigh Energy
2 Bahri
3 Sabic Materials
4 Ma’aden
5 Almarai Food and Beverage
6 Savola
7 Ncb Bank Banks
8 Al Rajhi
9 Kingdom Investment and Finance
10 Assir
11 Mid Gulf Insurance
12 Tawuniya
13 STC Telecom
14 Mobily
15 SEC Utilities
16 Gasco
17 Jabal Omar Real Estate
18 Makkah development
The focus on large companies in this paper is consistent with prior literature, which
links the level of voluntary corporate disclosures with the size of companies, indicating that
larger companies are more likely to make voluntary corporate disclosures than small- and
medium-sized companies [
11
]. Furthermore, as this sample consists of the largest Saudi
companies, it is expected that they are more liable for any change in voluntary disclosure
practices in Saudi Arabia. The companies chosen for the study would be the most useful
in capturing the data for several reasons identified by Gray et al. (1995) [
45
]: First, larger
companies are more likely to demonstrate examples of voluntary corporate disclosure than
an equivalent sample of medium or small companies; in terms of tracking trends, this sam-
ple is recommended for identifying innovations and capturing more voluntary disclosure
practices. Second, a sample of the largest companies will be more
comparable—on
size at
least—with the majority of other studies that sample from the largest companies. Finally,
obtaining the annual reports from the larger companies proves to be much more reliable
than for other samples.
This research proposes two categories to encompass environmental and sustainabil-
ity issues in Saudi Arabia. The process adopted for developing these categories and sub-
categories was therefore based on the prior content analysis literature (for
example, [45,59,65]
as shown below in Table 2.

Sustainability 2024,16, 3689 9 of 20
Table 2. Environmental and sustainability issues: categories and pillars.
Categories Pillars
Environment
•Air, water, noise, visual quality, and pollution, plus any attempts to identify, improve, or prevent.
•
Waste and recycling, including improvements in products, except in so far as it is part of the business (for
example, waste disposal or environmental technology).
•Any significant and potential negative impacts of operations on the environment.
•Energy saving and conservation.
•Use/development/exploration of new sources, efficiency, insulation, etc., except in so far as it is part of
the business (for example, oil exploration companies).
Sustainability
•Any mention of sustainability.
•Any mention of sustainable development.
According to Gray et al. (1995) [
45
], there are two primary ways for identifying
measurement in content analysis: the number of disclosures or the amount of disclosures.
The measurement units may include pages [
45
,
62
,
71
], words [
73
,
74
], or sentences [
75
].
Sentences were chosen as units of analysis in this thesis for two reasons. First, counting
the number of pages is an unreliable method since the number of pages can vary due
to different print sizes, column sizes, and page sizes. Second, measuring the amount of
disclosure by the number of words can be unreliable, as individual words have no meaning
to provide a sound basis for coding environmental and sustainability disclosures without a
sentence or sentences for context, and, therefore, a single word itself carries no meaning [
71
].
Consequently, this paper uses sentences to measure units of analysis “to provide complete,
reliable and meaningful data for further analysis” [45].
Each disclosure sentence identified through the content analysis was recorded on an
Excel working sheet. For each sentence, the Excel working sheet recorded the company, the
annual report year and page number, and the disclosure category.
This coding sheet enabled the researcher to calculate volumes of disclosure based on
the number of sentences. The volume of disclosure (numbers of sentences) was recorded
both for each category and for the sub-categories. The data this provided enabled the
researcher to identify the categories where there were relatively high volumes and the
categories where there were relatively low volumes of disclosures. This also enabled the
researcher to identify environmental and sustainability disclosure patterns (for example,
significant rises or falls in the number of disclosures for the 11 categories over the period
2008–2018.
The researcher then, through close reading, identified the primary stakeholders the
companies appeared to be accountable to and how the disclosures appeared to be operating
as a legitimating device in respect of the stakeholders identified. (RQ1). Close reading
is a method whereby the researcher examines text in a detailed and sustained manner.
The purpose is to comprehend the meaning of the text by being alert to the wording of
sentences and phrases. As well as being alert to phrases or nuances in the sentences
that might assist in revealing stakeholder accountability and legitimacy, the close reading
approach also enabled the researcher to identify the contextual factors motivating the
companies to prioritise these stakeholders (RQ2).
Close reading of the environmental and sustainability sentences, therefore, facili-
tated the researcher in carefully analysing the disclosures in detail and in interpreting
their significance.
5. Analysis and Discussion of Environmental and Sustainability Disclosures
These two categories are interconnected in that they both concern the disclosures the
companies have made in respect of the stewardship of natural resources, including the
allocation of natural resources within the current generation and between the current and
future generations. The Environmental category comprises references to any issues related

Sustainability 2024,16, 3689 10 of 20
to the environment, such as air pollution, water management, noise, waste, and recycling,
plus any attempts to identify, improve, or prevent these issues. The Sustainability category
encompasses references to the concept of stewardship and the responsible management of
resource use. Because they are interrelated, it is logical to consider these two categories and
to investigate what factors may be causing these disclosures concurrently.
5.1. Overall Analysis
As can be seen from Table 1below, there are a total of 880 disclosures across the
eleven-year period for the combined Environmental and Sustainability categories in the
companies’ annual reports. This is a relatively low number of disclosures, equating to
an average of only 3.6 disclosures per year per company and accounting for 15.5% of
all disclosures. Table 3shows that the number of disclosures within the Environmental
category is 9.9% of the total disclosures, whilst the Sustainability disclosures account
for 5.6% of the total disclosures. Prima facie, this appears to suggest that providing
Environmental and Sustainability disclosures is not a high priority for the companies. The
causes of the relatively low numbers of disclosures in the Environmental and Sustainability
categories are discussed in the following sub-sections.
Table 3. Environmental and Sustainability disclosures for sample companies.
Disclosure Category % of Total Disclosures Number of Disclosure Sentence
Environmental 9.9% 561
Sustainability 5.6% 319
Total 15.5% 880
5.2. Environmental and Sustainability Disclosures: The Lack of Government Focus on Meeting
Environmental Challenges
To identify the key stakeholders, it is important to understand the key contextual
factors that may have influenced the companies in terms of their accountability to stake-
holders. This provides a deeper understanding of the contextual factors relevant to Saudi
Arabia in relation to the companies’ disclosures by examining evidence from the companies’
annual reports. Saudi Arabia is considered to be an Islamic monarchy where the Al-Ulama
have a stake in the political structure and functioning of the state [
76
]. Islam originated
in the kingdom and the identity of the kingdom, is inextricably connected with Islam.
Two of Islam’s three holy mosques are located in the country, and, hence, Saudi Arabia
is of fundamental importance to Islamic thought and practice in the region and a central
reference point for the conservative implementation of Islamic Sharia.
As Saudi Arabia is an Islamic country, the King must act in accordance with Sharia
laws (Sharia law guides all aspects of Muslim life, including daily routines, familial and
religious obligations, and financial dealings), which are derived primarily from the Qur’an
(the Qur’an is the book of God that explains Allah’s commands [
77
]) and Sunnah (Sunnah
refers either to the Prophet Mohammad or to the sum of his teaching), which clarifies
and confirms the Qur’an’s commands and values [
77
,
78
]. Scholars have stressed the
significance of this link between religion and government in the Saudi context. This link
has deep historical roots, with, for example, Ibn Qayyim al-Jawziyya (d. 1350) arguing
seven centuries ago that politics is part of religion since Islamic government is needed to
protect religious values [
79
]. This idea of government protecting religious values is that the
role of the ruler, ‘the King’, is to enforce the shari‘a and to require proper moral behaviour
on the part of his subjects, who, in turn, should respond with appropriate obedience. Thus,
the ruling hegemony of Saudi Arabia is divided between the ‘Al-Ulama’ (religious scholars),
who are the authorities in matters of jurisprudence, and the King (as the political ruler),
who consults the Al-Ulama.
The political structure in Saudi Arabia is that the Second Principal Authority in the
Saudi legal system is the Council of Senior Al-Ulama. The King seeks the opinions of
the Al-Ulama to ensure his decisions and actions will not contradict Sharia law. Thus,

Sustainability 2024,16, 3689 11 of 20
because the King consults the Al-Ulama, their interests are incorporated into legislation,
regulation, and government decision-making [
79
]. In this way, the Al-Ulama (Islamic
scholars) maintain a central role in preserving the religious identity of the kingdom in
the social and political spheres [
79
]. Some commentators have argued that Al-Ulama and
the King ‘balance’ one another, and this acts as an effective mechanism for guaranteeing
long-term stability [
78
,
79
]. However, this relationship between the King and Al-Ulama
has also led to Al-Ulama having significant power in the kingdom as a result of this form
of cooperation. The relationship between Islam and the government affects all aspects
of Saudi life, including business practices, political, cultural, and legal systems, and thus
plays an important role in how companies act towards a wide range of environmental and
sustainability issues.
Saudi Arabia has a predominantly arid desert landscape with few coastal areas and
mountain ranges, limited annual rainfall, and scarce groundwater reserves [
80
]. Despite
the country’s minimal natural resources, the national government’s agenda for protecting
the environment was limited during the period under investigation. Similarly, although
caring for nature and the Earth’s resources is an important part of Islam, many Muslim
countries are reluctant to impose Western concepts of environmentalism [
81
]. Therefore,
there were no specific environmental or sustainability initiatives developed by the religious
authorities in Saudi Arabia. The managerial stakeholder lens emphasises that companies
respond to the demands of their key stakeholders. Thus, the relative lack of attention to
environmental and sustainability matters in Saudi companies’ annual reports appears to
potentially stem from this lack of religious and Saudi government focus (and demand for
change) in respect of these two aspects.
The exploration for and exploitation of oil reserves commencing in 1938 transformed
not only the society and economy of Saudi Arabia but brought with it tremendous repercus-
sions on the physical environment. Unprecedented levels of socio-economic transformation
resulted in rapid industrialisation, inefficient use of resources, unplanned urbanisation,
and large-scale consumption patterns, resulting in a set of environmental issues [
80
,
82
].
The government’s main concern has, since 1938, however, been to introduce policies and
initiatives to support economic development, as well as to provide physical infrastructure
and public services and improve human capital development [
83
]. This preoccupation
with economic growth has appeared to overshadow government attention regarding the
environmental consequences of the country’s development and the responsibilities that
should accompany economic development.
This is not to suggest that the government wholly neglected to attend to environmental
concerns; rather, environmental and sustainability concerns were a much lower priority.
The rise in environmental demands in Saudi Arabia, which have been a result of major
demographic pressures and increased living standards in the mid-1980s, caused the govern-
ment to become uncertain about its ability to meet the needs of its population with limited
natural resources [
84
]. As a result, the government adopted a more positive attitude to-
wards the environment through their national development plans. Specifically, in addition
to the socioeconomic development goals, the second stage of the National Development
Plan (1985–2005) set out two goals with respect to the environment, although these were
very broad in nature. The first is to protect the national environment by preventing pollu-
tion and desertification of terrestrial, aquatic, and water resources; the second encourages
both individuals and institutions to show consideration towards the environment [82].
The Saudi government established these goals in the National Development Plan
primarily to encourage a limited number of industries to have greater environmental
awareness, although subsequently, some limited government initiatives occurred in respect
of environmental regulation relevant to companies. The industries that the government
identified as contributing to environmental issues such as CO
2
emissions, energy waste,
and water shortages include petroleum-based industries and industries characterised by the
extensive use of water and energy. Thus, there has been some emphasis by the government
on these industries.

Sustainability 2024,16, 3689 12 of 20
However, it is important to reiterate that these government regulations concerning
protecting the environment have not had the same prominence or importance as policy
initiatives that have been created to address social and economic issues such as improving
the quality of life within society and promoting education and skills development. Conse-
quently, the government’s efforts to resolve environmental problems are not comparable
to those made to address social and economic issues. This is mirrored in the companies’
disclosures and is observable when comparing Environmental and Sustainability disclo-
sures to other disclosures. The environmental issues facing the country received relatively
little consideration in government policies and initiatives, and the lower numbers of dis-
closures in the Environmental and Sustainability categories reflect this. Therefore, these
Environmental and Sustainability disclosures are meaningfully related to the stakeholders’
demands, particularly the government, with these disclosures appearing to be a function
of the companies following the government’s lead with their relative lack of focus on
environmental and sustainability matters. This gives the sense that companies are acting in
accordance with the government’s priorities to gain or maintain their legitimacy and thus
ensure their survival.
It is important to note that the Environmental and Sustainability disclosures are from
an industry perspective, which must be examined to interpret the disclosures. The next sec-
tion provides support for this assertion, explaining in greater detail the connection between
the government initiatives and the disclosures in those industries that are more environ-
mentally sensitive, namely, materials (It should be noted that the ‘Materials’ industry label
used by Saudi Arabia’s Stock Exchange includes companies engaged in petrochemicals,
mining, metal refining, and chemical products), utilities, and food and beverage. The other
industries (non-sensitive to the environment) played far less of a role in the kingdom’s
environmental activities and, hence, provided very few disclosures with respect to the
environment and sustainability.
5.3. Environmental and Sustainability Disclosures: An Analysis of the Disclosures from an
Industry Perspective
In the above discussion, it has been stated that the government has had a limited
focus on environmental issues and that this is restricted to encouraging a limited number
of industries to have greater environmental awareness. It is important to add to this
explanation as to why there are so few disclosures in the Environmental and Sustainability
categories by considering the disclosures from an industry standpoint, as shown in Table 4.
Table 4. Environmental and Sustainability disclosures per companies across industries.
Disclosure
Category Energy Financials Food and
Beverage Materials Real Estate Telecom Utilities Total
Environmental 28 14 80 232 9 6 192 561
Sustainability 0 35 79 189 0 10 6 319
Total 28 49 159 421 9 16 198 880
It is important to note that the three industries that are financial institutions and have a
heavily reliance on financial operations, namely banks, investment, finance, and insurance
industries, have been incorporated under one industry called financials, in order to obtain
better analysis and comparison to other industries. As can be seen from Table 2above, the
materials (421 sentences), utilities (198 sentences), and food and beverage (159 sentences)
industries are the leading Environmental and Sustainability disclosures. Traditionally, these
are industries that are more sensitive to environmental issues [
52
,
61
]. Table 2shows that
other industries that are non-sensitive to the environment—namely, financials, real estate,
telecom, and energy—provide minimal Environmental and Sustainability disclosures. This
observation regarding the companies in the materials, utilities, and food and beverage
industries having far greater numbers of disclosures is discussed further in the following
sub-section.

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5.4. Environmental and Sustainability Disclosures: Discussions in the Annual Reports for the
Materials and Utilities Industries
The Environmental and Sustainability disclosures provided in the annual reports are
noticeably dominated by industries that are under Saudi governmental encouragement to
be environmentally aware due to their sensitivity to environmental issues, namely, materi-
als, utilities, and food and beverage. The result is that these companies provide 88.4% of dis-
closures (778 of the total 880 disclosures) in the Environmental and
Sustainability categories.
This sub-section and the subsequent sub-section build on the discussions in the pre-
vious sub-section and argue that the companies operating in environmentally sensitive
industries provide Environmental and Sustainability disclosures in their annual reports as a
response to the Saudi government placing some greater attention on requesting companies
in these industries to be environmentally aware. Therefore, these companies are employing
a legitimising strategy and ensuring they meet the stakeholder’s expectations by disclosing
that they are not environmentally irresponsible (Lindblom, 1994 strategy). Again, it is
important to reiterate that these environmental initiatives in these industries have not had
the same importance or prominence as policy initiatives that have been created to address
social and economic issues. In our research, we would employ the term “the company” to
denote the companies we utilize.
The oil and petrochemical industries (contained within the ‘material’ industry) are
essential to the country’s economy, as Saudi Arabia is the world’s third-largest producer
of oil and possesses the world’s largest oil reserves. However, the oil and petrochemical
industries have contributed to major environmental problems in the country, such as
air, water, and soil pollution, climate change, and a rise in carbon footprint. According
to [
84
], the oil and petrochemical industries accounted for 90% of all CO
2
emissions in
the country. Furthermore, the oil and petrochemical industries not only impact climate
change and greenhouse gas emissions but also affect the environmental profile of the
country. Because of this, there have been ongoing critiques of the Saudi government for
not having sufficient focus on acting to meet the different challenges the world faces in
respect of the environment and sustainability [
83
]. As a response, the Saudi government
implemented a number of environmental policies and initiatives, such as Carbon Capture
and Storage (CCS) initiatives, as a way to regulate and raise environmental awareness in
the oil and petrochemical industries, thus improving the country’s negative environmental
profile. The government’s attention directed at this industry is a likely explanation why
the materials industry sector has the greatest number of disclosures (421 of the total 880
disclosures, which equates to nearly half of the total disclosures). Namely, this industry has
responded to the government’s attention to ensure it does not neglect being accountable
to this primary stakeholder. Furthermore, the environment and sustainability disclosures
provided by the materials industry sector are used as a legitimation tool to portray a picture
of growing awareness about the environment and sustainability and thus ensure its survival.
However, it needs to be reiterated that whilst there was some government emphasis on
environment and sustainability issues for this industry, it was still a limited government
emphasis compared to community and training and education. This is reflected in the
generalised nature of the disclosure. Thus, the companies in the materials industry are, for
example, explaining that they are compliant with regulations, as the following disclosure
examples illustrate.
Our exploration, mining, and operational activities are subject to various environmen-
tal regulations applicable in the Kingdom of Saudi Arabia. These regulations mandate,
among other things, the maintenance of air and water quality standards and land recla-
mation. Non-compliance with the applicable laws and regulations might result in the
imposition of fines and penalties by the regulatory authorities.
During the year, [the company] maintained its compliance with environmental reg-
ulations...Assessment of nitrogen oxide (NOx) emissions at its manufacturing affiliates
in Saudi Arabia was completed during the year and confirmed the plants as meeting the
emission-control standards set by the Royal Commission of Jubail and Yanbu.

Sustainability 2024,16, 3689 14 of 20
In addition to implementing some policies for oil and petrochemicals to reduce waste
and preserve the country’s energy, the Saudi government established the National Energy
Efficiency Programme to increase the adoption of clean energy and reduce the consumption
of non-renewable resources. Energy (It should be emphasised that the discussion of energy
efficiency initiatives does not pertain to the ‘Energy’ industry. The ‘Energy’ industry
sector comprises enterprises engaged in activities other than oil and gas extraction, such as
storage, transportation, and marketing. As a result, the companies in this industry sector
have not been impacted by the energy efficiency initiatives and provide very low numbers
of Environmental and Sustainability disclosures [
85
]) in Saudi Arabia, which involves
petroleum and natural gas production as well as electricity production and, therefore, the
materials and utilities (The utilities industry, according to Saudi Arabia’s Stock Exchange
industry classification, includes electricity, gas, and water producers’ companies. Therefore,
it is this industry sector that is impacted by the government’s energy efficiency initiatives
rather than the energy industry, as explained previously [
85
]) sectors are the two industries
where this has some impact, as they have a role to play in the kingdom’s Energy Efficiency
initiative. This is evident in the Environmental and Sustainability disclosures observable
in the disclosures for companies operating in the materials and utilities industries, which
demonstrate their general support for the government Energy Efficiency Programme, and
meet the expectations of the Saudi government, as shown in the example disclosures below:
The company aims to have a leading role in the field of environmental protection
throughout the Kingdom of Saudi Arabia by achieving compatibility with the updated
environmental standards issued by the General Authority of Meteorology and Environ-
mental Protection on 2/5/1435 AH
. . .
thereby increasing the production of clean energy
and reducing the consumption of non-renewable resources.
The company embraced the energy management system focus as a key enabler of active
positive contribution towards efforts to reduce global warming, improve the performance
of assets, and meet legislative requirements.
5.5. Environmental and Sustainability Disclosures: Water Scarcity Discussions in the Annual
Reports for the Materials and Food and Beverage Industries
The above sub-section has discussed how the attention of the Saudi government to
the oil and petrochemical industries, as well as the Saudi government’s focus on improving
energy efficiency, have motivated the Environmental and Sustainability disclosures. A
third area where the Saudi government has had some focus with regard to the environment
and sustainability is water scarcity. Water scarcity is particularly relevant to the materials
and food and beverage industries since water consumption is an important element of their
operations, and this is now discussed.
Water scarcity, which includes both water supply and water quality, is a significant
health predictor and is inextricably related to food security, sanitation, and hygiene [
86
]. In
Saudi Arabia, one of the largest arid countries in the world and classified by the United Na-
tions as a water-scarce nation, the incautious use of groundwater resources for agricultural,
industrial, and domestic purposes over a long period of time combined with an annual
increase in water demand has had a substantial impact on the availability and quality of
water resources [
27
,
86
]. This has meant that the risk of disease in the kingdom has increased
as a result of low water quality and availability. As a result, the Saudi government has
incorporated the issue of water scarcity into national agendas and initiatives to regulate
those industries that contribute to the extensive use of water in Saudi Arabia.
The industries affected are the food and beverage (Food and beverage industry in-
cludes agricultural companies that are involved in the conversion of raw agricultural
materials into consumer food and beverage products. Hence, water is of great significance
as it is a primary input to their production processes) and materials industries, and the need
is to ensure water is continuously available and conservation of water is important [
87
].
The Saudi government has taken some conservation measures in an attempt to reduce the
use of groundwater and to use desalinated seawater [
88
]. Water scarcity is evident in the

Sustainability 2024,16, 3689 15 of 20
disclosures of companies in these two industries in the Environmental and Sustainability
categories. In their annual reports, companies in the food and beverage and materials
industries state how water is an extremely valuable resource and the most important
environmental challenge facing the kingdom, as shown in the example disclosures below:
In Saudi Arabia, we face a challenging set of environmental factors, the most pressing
of which is water conservation. (MR annual report, 2015, p. 41, emphasis added).
Water is a scarce and valuable commodity throughout the kingdom.
Programmes for processed wastewater recycling are one of the conservation techniques
the Saudi government has introduced. Therefore, wastewater recycling has gained favour
in Saudi Arabia as an efficient way to curb demands on water resources and to help balance
both water and food security [
27
,
86
,
87
]. The companies state in their Environmental and
Sustainability disclosures that they employ wastewater recycling systems to overcome the
problem of water scarcity and make efficient use of water. This type of company initiative
is aligned with the government’s water conservation measures. This gives the sense that
companies are seeking to meet the government’s expectations regarding efforts to curb
demands on groundwater and desalinated seawater. Therefore, providing disclosures
regarding water scarcity can be understood as a legitimation strategy employed by Saudi
companies to demonstrate their support for the government’s strategic goals and meet
the expectations of the Saudi government regarding water conservation, as shown in the
example disclosures below:
[The company] has undertaken many initiatives to reduce water usage. This includes
importing 100% of the green fodder required to produce the [company] milk, which is
exported out of the kingdom.
The project is employing a wastewater treatment system (engineered natural system)
that will treat and recycle processed waste water, sanitary waste water, and storm water
back to operations.
5.6. Environmental and Sustainability Disclosures: Beyond Government Environmental Initiatives
In the previous sub-sections, it has been stated that the majority of the disclosures
in these two categories are located in the three industries where the Saudi government’s
attention has been focused. This is due to their having a more significant impact on the
environment when compared to the other industry sectors. The discussions in the Environ-
mental and Sustainability disclosures appear to be a function of the companies following
the government’s lead in this area. Namely, the Saudi government has undertaken some en-
vironmental initiatives, but they are relatively low-key, and the result is that the disclosures
are similarly modest.
There is, however, an additional comment that needs adding. Some companies op-
erating in these industries have provided a small number of Environmental and Sustain-
ability disclosures that show an awareness of the environment that goes beyond gov-
ernment requirements. The following disclosure, for example, clearly shows that the
company’s environmental programme to reduce its environmental footprint goes beyond
regulatory requirements:
We have strengthened our commitment to reduce [the company’s] environmental
footprint, shifting from a compliance-led programme to stewardship-based performance
through a programme that goes far beyond regulatory requirements.
The most likely reason for some companies stating they have gone beyond government
requirements is that they are seeking to demonstrate awareness of global environmental
initiatives and standards. However, it is noteworthy that the phrasing of these types of
disclosures is still in reference to how these environmental and sustainability programmes
are positioned in relation to Saudi government requirements. As a result, these companies
are still aware of the need to be accountable to their key stakeholders.

Sustainability 2024,16, 3689 16 of 20
6. Conclusions
In conclusion, this paper has argued that the two key stakeholders, namely Islamic
religion and the Saudi government, continue to be the two primary stakeholders for Envi-
ronmental and Sustainability disclosures. This is seen in the low number of Environmental
and Sustainability disclosures, which appear to be tied to the Saudi government’s relative
lack of attention to the environment and sustainability. Further, there has been a lack of
any pronouncements from Al-Ulama as to what is required by companies to address the
world’s environmental challenges. It is also important to note that the low numbers of
Environmental and Sustainability disclosures provided in the annual reports are dominated
by three industries that received some greater, albeit still limited, attention from the Saudi
government. These industries have a particular impact on the country’s environmental
profile. As a result, the low level of Environmental and Sustainability disclosures appears
to be a function of the companies following the government’s lead on the environment and
sustainability. Additionally, based on the evidence presented, it is possible to argue that the
underlying reason for the relatively low number of disclosures in the Environmental and
Sustainability categories can be explained by reference to the two primary stakeholders:
Islamic religion and the Saudi government. There has been a relative lack of government
policies and initiatives, coupled with a lack of pronouncements from religious leaders. For
example, the low numbers of Environmental disclosures appear to be connected to the
Saudi government’s relative lack of initiatives or pronouncements on the environment, and,
further, there is an absence of pronouncements from Al-Ulama as to what companies might
do to address the world’s environmental challenges. Hence, the relative lack of disclosures
on Environmental and Sustainability matters in Saudi companies’ annual reports appears
to potentially stem from the lack of government initiatives in this area and because of
religious opposition to enacting positive change in respect of the two disclosure aspects.
Clearly, companies do not want to be seen in these types of disclosures as contradicting
or opposing the stance of Al-Ulama and religious conservatives, and because government
reforms are limited, their accountability to this stakeholder can be satisfied through the
provision of a relatively small number of disclosures. For example, despite the country’s
minimal natural resources, the national government’s agenda for protecting the environ-
ment was limited during the period under investigation. Similarly, although caring for
nature and the Earth’s resources is an important part of Islam, many Muslim countries are
reluctant to impose Western concepts of environmentalism [
81
,
89
]. Therefore, there were
no specific environmental or sustainability initiatives developed by the religious authorities
in Saudi Arabia.
The study findings have a number of theoretical implications based on the research
conducted. This study extends prior disclosure studies in social and environmental account-
ing by investigating environmental and sustainability disclosure practices in a developing
economy context (i.e., Saudi Arabia). This has resulted in the construction of a framework
that explains the managerial motivations behind disclosure practices from a stakeholder
perspective. A central research finding is that the companies were primarily motivated by
the desire to be accountable to two key stakeholders, the Islamic religion and the Saudi gov-
ernment, with respect to their environmental and sustainability disclosures and to ensure
that they maintained their legitimacy in respect of these two stakeholders. The definitions
of stakeholders as set out according to Evan and Freeman’s (1993) [
90
] principle of corporate
effect state that almost ‘any group’ that can affect or is affected by the firm is considered a
‘stakeholder’, including investors, employees, customers, suppliers, government, competi-
tors, pressure groups, the stock market, industry bodies, foreign governments, and future
generations; however, surprisingly, this is not wholly applicable in the Saudi context. Based
on the evidence, Saudi companies prioritise stakeholders in this Saudi context differently
and in contrast to this listing of primary stakeholders [
40
,
45
]. Consequently, based on the
evidence in this paper, it needs to be acknowledged that, following the principle of corpo-
rate rights as set out by [
52
,
53
], stakeholders can include those to whom the company has a
moral obligation and legitimate relationship, regardless of whether the stakeholder is of

Sustainability 2024,16, 3689 17 of 20
human or non-human origin. For this research, the stakeholders are the Islamic religion and
the Saudi government. Further, this study expands accounting disclosure studies by using
a qualitative research technique to investigate Saudi companies’ reporting practices that
takes into account contextual factors. Accounting disclosure research has been criticised for
being primarily descriptive in nature, “for example, to test the effect of various firm charac-
teristics (size, financial performance, industry, etc.) on social and environmental disclosure
behaviour or performance
. . .
ignoring the rich contextual information in that country” [
91
].
This research has shown that explanations need to take into account the contextual features
driving environmental and sustainability disclosure practices, and this can be achieved by
employing a qualitative approach that uses multiple methods of data collection (content
analysis with close reading methodology). The implication here is that by using Saudi
Arabia as the research base for examining environmental and sustainability disclosure
practices, this research has identified the need to fully take into account the contextual
environment where the research is situated in order to support further understanding of
the accounting disclosure practices with regard to social and environmental information.
On the policy level, the research results indicate that the reasons for the lack of
environmental and sustainability disclosures are that, at present, companies are disclosing
what is sufficient to demonstrate they meet the government’s requirements. The findings
further indicated that companies would only feel it necessary to provide greater numbers of
disclosures in this area if it were made mandatory to disclose wider societal contributions.
Presumably, this is because moving from a voluntary to a mandatory requirement increases
the level of accountability the companies have to demonstrate. Therefore, if the government
were to consider enacting regulations that mandated eco-justice disclosures, this would
increase and improve the eco-justice disclosures provided in the companies’ annual reports.
7. Limitations and Future Research Suggestions
As with any research project, there are limitations and boundaries that have to be
placed around it. One limitation is with respect to the analysis of the corporate annual
reports. Despite the fact that the interpretation of the environmental and sustainability
information disclosed in the annual report was undertaken with great care utilising a
close reading technique, the conclusions drawn regarding the managerial motivations
for disclosing environmental and sustainability information in the annual reports may be
subjective. Subjectivity is a fundamental challenge in any research that is qualitative. In
addition, this paper offers new directions for further research, which can build on this
research. Further research that is worthy of exploration might involve an examination
of changes in respect of environmental and sustainability disclosures post-2018 in Saudi
companies’ annual reports. Therefore, future research could study the disclosure practices
of Saudi companies in the years after this paper to determine whether there is any noticeable
improvement or shift in the way companies disclose information about the environment and
sustainability. The paper has noted how Saudi Arabia is often seen from a one-dimensional
perspective, and future Saudi studies might give the reader of the research a more nuanced
understanding of the country and different aspects relevant to the Saudi context.
Author Contributions: Conceptualization, R.A.A.; Methodology, R.A.A.; Formal analysis, L.M.A.A.;
Data curation, L.M.A.A.; Writing original draft; R.A.A.; Review, L.M.A.A. and R.A.A.; Editing,
L.M.A.A. and R.A.A. All authors have read and agreed to the published version of the manuscript.
Funding: This research was funded by the Deanship of Scientific Research at Imam Mohammad Ibn
Saud Islamic University (IMSIU) (grant number IMSIU-RG23102).
Institutional Review Board Statement: Not applicable.
Informed Consent Statement: Not applicable.
Data Availability Statement: Data is unavailable due to privacy or ethical restrictions.
Conflicts of Interest: The authors declare no conflict of interest.

Sustainability 2024,16, 3689 18 of 20
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