Mandatory Sustainability Disclosure and Firm Profitability: Empirical Evidence from Nigeria’s Consumer Goods Firms

Mandatory Sustainability Disclosure and Firm Profitability: Empirical Evidence from Nigeria’s Consumer Goods Firms

Nnedu, Stanley Chinonso^1*; Okpanachi, Joshua²; Uwaleke, Uche³

¹Accounting Department, Veritas University, Abuja, Nigeria

²Accounting Department, Nigerian Defence Academy, Kaduna, Nigeria

³Accounting Department, Veritas University, Abuja, Nigeria

DOI: https://dx.doi.org/10.47772/IJRISS.2025.909000459

Received: 15 September 2025; Accepted: 22 September 2025; Published: 15 October 2025

ABSTRACT

Sustainability reporting has gained prominence in emerging economies as firms face increasing pressure to balance financial performance with economic, environmental, social, and governance (EESG) responsibilities. In Nigeria, the introduction of the Nigerian Exchange Group’s (NGX) mandatory disclosure guidelines in 2018 created a regulatory framework compelling listed firms to integrate sustainability practices into their reporting. However, evidence on the extent to which these disclosures enhance financial performance remains inconclusive, with studies reporting positive, negative, or insignificant effects. To address this gap, this study investigates the effect of economic (ECSR), environmental (EVSR), social (SOSR), and governance (GOSR) sustainability reporting on the financial performance of listed consumer goods firms in Nigeria, covering the period 2018–2024, which corresponds to the mandatory disclosure regime. Anchored on Legitimacy Theory and the Resource-Based View (RBV), the study employed an ex post facto research design. The population comprised 21 consumer goods firms listed on the NGX, of which 16 with complete data formed the sample, yielding 112 firm-year observations. Secondary data were extracted from annual reports and sustainability disclosures, with return on assets (ROA) as the dependent variable and ECSR, EVSR, SOSR, and GOSR as independent variables. Panel regression analysis was conducted, with diagnostic tests guiding the adoption of the Generalized Least Squares (GLS) random-effects estimator with cluster-robust errors. The results show that EVSR significantly improves ROA, SOSR exerts a negative effect, while ECSR and GOSR have no significant impact. The study recommends that firms strengthen environmental initiatives, strategically integrate social programs, and enhance the quality of economic and governance disclosures to maximize both legitimacy and financial outcomes.

Keywords: sustainability reporting, economic disclosure, social disclosure, environmental disclosure, governance reporting, financial performance

INTRODUCTION

Sustainability reporting has evolved into a strategic tool for enhancing corporate transparency and accountability, enabling firms to communicate how they integrate economic, environmental, social, and governance (EESG) considerations into business operations (IFRS, 2023; Cho et al., 2021). Across global markets, reporting frameworks such as the Global Reporting Initiative (GRI) and the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards underscore growing demands from regulators, investors, and civil society for firms to demonstrate responsible business practices alongside financial performance (Lozano & Huisingh, 2011; IFRS, 2023).

In Nigeria, the introduction of the Nigerian Exchange Group’s (NGX) Sustainability Disclosure Guidelines in 2018 marked a significant regulatory milestone by making EESG disclosures mandatory for all listed firms. The consumer goods sector, with its complex supply chains, environmental footprint, and social visibility, is especially subject to these regulations. However, empirical findings on the impact of sustainability reporting on firm financial performance remain inconclusive. Some studies document positive effects of environmental or governance reporting on profitability (Ibrahim et al., 2023; Nwekwo et al., 2025), while others reveal neutral or even negative relationships, particularly when disclosures are symbolic rather than substantive (Agbo & Ihotu, 2023; Omotoso et al., 2024).

A key limitation of prior studies is their fragmented approach. Most research investigates sustainability variables individually, often under GRI or ESG frameworks, without considering the aggregate effect of economic, environmental, social, and governance disclosures together as EESG. This disaggregated focus risks underestimating the cumulative impact of integrated sustainability practices on firm performance, especially in emerging economies where institutional enforcement and stakeholder pressures differ significantly from developed markets (Risal et al., 2023).

This study makes three key contributions to the sustainability reporting and financial performance literature. First, it advances theoretical understanding by examining the combined effect of all four EESG dimensions on firm performance, moving beyond prior studies that analyzed them in isolation. Drawing on Legitimacy Theory and the Resource-Based View, the study demonstrates how integrated sustainability reporting can simultaneously enhance organizational legitimacy and serve as a strategic resource for value creation. Second, it enriches empirical evidence from an emerging market context by focusing on Nigeria’s consumer goods sector, where mandatory sustainability disclosure requirements were introduced in 2018. The use of recent panel data from 2018–2024 under this regulatory regime provides timely insights into the financial implications of sustainability practices in a developing economy with evolving institutional pressures. Finally, the study offers practical implications for corporate managers, regulators, and investors by highlighting how comprehensive sustainability reporting can be designed and enforced to balance accountability, stakeholder trust, and financial performance.

OBJECTIVES OF THE STUDY

The main objective of this study is to examine the effect of sustainability reporting on the financial performance of listed consumer goods firms in Nigeria during the mandatory disclosure period of 2018–2024.

The specific objectives are to:

1. Determine the effect of economic sustainability reporting (ECSR) on the financial performance of listed consumer goods firms in Nigeria.
2. Examine the effect of environmental sustainability reporting (EVSR) on the financial performance of listed consumer goods firms in Nigeria.
3. Assess the effect of social sustainability reporting (SOSR) on the financial performance of listed consumer goods firms in Nigeria.
4. Evaluate the effect of governance sustainability reporting (GOSR) on the financial performance of listed consumer goods firms in Nigeria.

CONCEPTUAL REVIEW

Sustainability

Sustainability has evolved from a normative ideal to a strategic business imperative. It reflects the ability of firms to balance profitability with long-term social and environmental responsibility while maintaining effective governance structures (Lozano & Huisingh, 2011; IFRS, 2023). The concept is multidimensional, cutting across economic, environmental, social, and governance domains. These four dimensions represent not only reporting requirements but also performance indicators that shape stakeholder trust and competitive advantage (Cho et al., 2021).

Economic Sustainability

Economic sustainability underscores the capacity of firms to generate consistent financial returns while safeguarding long-term viability. In disclosure terms, it includes revenue growth, innovation, local economic contributions, and tax transparency (Soomiyol et al., 2024). Scholars argue that economic reporting signals corporate resilience and enhances investors’ ability to assess value creation (Ibrahim et al., 2023). However, critics caution that some firms inflate economic narratives in sustainability reports to maintain legitimacy without substantive performance improvement (Adebayo et al., 2024).

Environmental Sustainability

Environmental sustainability focuses on corporate practices that mitigate ecological harm and optimize resource efficiency. Key disclosures include waste management, emissions reduction, renewable energy use, and compliance with environmental regulations (Akorede et al., 2024). Empirical evidence in Nigeria suggests a nuanced effect: while proactive environmental disclosure can enhance efficiency and legitimacy, associated costs may reduce short-term profitability (Ibrahim et al., 2023). This tension highlights the ongoing debate over whether environmental practices constitute a strategic investment or a regulatory burden.

Social Sustainability

Social sustainability captures the firm’s responsibility to employees, consumers, and host communities. Disclosures typically cover occupational health and safety, employee relations, community development initiatives, and product responsibility (Etim et al., 2023; Nwekwo et al., 2025). Proponents argue that social disclosures strengthen reputation and stakeholder loyalty. However, evidence from Nigeria is inconsistent: some studies show reputational benefits, while others reveal negative effects where reporting is symbolic or fails to translate into tangible community impact (Akorede et al., 2024).

Governance Sustainability

Governance sustainability emphasizes accountability, transparency, and ethical management through robust corporate governance systems. Disclosures in this domain include board independence, gender diversity, anti-corruption policies, and shareholder rights (Cho et al., 2021). Nigerian evidence suggests that governance reporting has the most consistent positive relationship with financial performance, largely by improving investor confidence and reducing agency costs (Abdulrasheed & Aminu, 2024; Akorede et al., 2024). This makes governance a critical moderating factor in the overall impact of sustainability reporting.

Financial Performance

Financial performance is the extent to which a firm effectively uses its resources to generate returns and sustain operations. Common measures include profitability ratios (ROA, ROE), market-based measures (Tobin’s Q, stock returns), and value-added indicators (EVA) (Kaplan & Norton, 2004). Among these, Return on Assets (ROA) is widely regarded as a robust indicator because it reflects the efficiency with which firms deploy assets to generate net income (Etim et al., 2023; Nwekwo et al., 2025). In the Nigerian context, ROA is particularly relevant given the asset-intensive nature of consumer goods firms and the growing demand for performance indicators that integrate both financial and sustainability dimensions (Ibrahim et al., 2023; Soomiyol et al., 2024).

THEORETICAL FRAMEWORK

The relationship between sustainability reporting and firm performance has been explained through several theoretical lenses, of which Legitimacy Theory and the Resource-Based View (RBV) are most relevant to this study.

Legitimacy Theory posits that firms operate within a social contract, where survival depends on the extent to which organizational actions are perceived as legitimate by stakeholders (Suchman, 1995). Sustainability reporting serves as a legitimacy-seeking mechanism, enabling firms to demonstrate compliance with societal expectations, regulatory requirements, and ethical norms (Deegan, 2014). In the Nigerian context, the Nigerian Exchange Group’s (NGX) mandatory disclosure guidelines since 2018 represent an institutionalized expectation of legitimacy. By disclosing economic, environmental, social, and governance (EESG) activities, firms seek to align themselves with the values of stakeholders such as regulators, consumers, investors, and communities. However, the effectiveness of such disclosures in enhancing performance depends on whether they are substantive or symbolic. Substantive disclosures, particularly environmental and governance initiatives, can build trust, reduce reputational risk, and improve market acceptance, while symbolic disclosures may enhance compliance without delivering operational benefits.

In contrast, the Resource-Based View (RBV) emphasizes internal capabilities as sources of sustainable competitive advantage (Barney, 1991). From this perspective, sustainability initiatives can constitute strategic resources when they are valuable, rare, inimitable, and non-substitutable (VRIN). Environmental practices such as energy efficiency and waste reduction enhance cost savings and operational efficiency, while governance mechanisms such as board independence and diversity improve decision-making quality. Similarly, social and economic initiatives may strengthen employee loyalty, innovation capacity, and stakeholder relations, which collectively enhance firm performance. Disclosures serve as signals of these underlying resources and capabilities. However, the RBV also recognizes that not all resources yield immediate returns; for example, social initiatives may require long-term investment before translating into measurable financial performance.

Together, Legitimacy Theory and the RBV provide complementary perspectives. Legitimacy Theory explains why firms disclose sustainability information, to maintain societal approval and regulatory compliance, while the RBV clarifies how sustainability practices, when strategically integrated, can generate financial benefits. By applying these theories, this study assesses whether the four dimensions of sustainability reporting, economic, environmental, social, and governance, translate into improved financial performance (ROA) for listed consumer goods firms in Nigeria under the mandatory disclosure regime.

EMPIRICAL REVIEW

Nwekwo et al., (2025) investigated the effect of sustainability reporting on the financial performance of manufacturing firms in Nigeria. Their findings revealed a positive and significant relationship between sustainability disclosure and both return on assets (ROA) and return on equity (ROE). This suggests that when sustainability reporting is substantively implemented, it enhances operational efficiency and shareholder returns. Their results contrast with earlier evidence of weak or negative relationships, providing support for the view that sustainability disclosure can serve as a genuine driver of firm performance in developing economies.

Zhou et al., (2025) analyzed the effect of carbon disclosure quality on financial outcomes among Chinese A-share listed firms between 2017 and 2022. Using advanced text analytics to measure disclosure, they found that high-quality carbon reporting was positively associated with ROE, Tobin’s Q, and stock returns, while reducing volatility. These results highlight the strategic role of environmental disclosure as both a legitimacy tool and a resource that enhances financial stability and market confidence. The study underscores the importance of disclosure quality, a theme directly relevant to the Nigerian context, where sustainability reporting is mandatory but often criticized for being compliance-driven.

Akorede et al., (2024) examined governance and social sustainability reporting among listed manufacturing firms in Nigeria. Their study showed that governance disclosure had a significant positive effect on financial performance, while social disclosure was negatively associated with performance. These results suggest that while strong governance systems reduce agency costs and improve investor confidence, social initiatives may not yield immediate financial benefits when perceived as symbolic or poorly implemented. This dual outcome reflects the broader debate on the substantive versus symbolic value of sustainability disclosure.

Abdulrasheed and Aminu (2024) conducted a comparative study of consumer and industrial goods firms in Nigeria to assess the effect of sustainability reporting on financial performance. They reported that consumer goods firms were more socially transparent, while industrial goods firms disclosed more environmental information. However, sustainability reporting overall had no significant effect on performance proxies such as return on equity (ROE) and economic value added (EVA). This finding highlights the inconsistent results in prior studies and emphasizes the importance of sector-specific analysis, which the present paper undertakes by focusing exclusively on consumer goods firms.

Soomiyol et al., (2024) investigated the impact of sustainability reporting on the market performance of 17 listed consumer goods firms in Nigeria. Their findings revealed that economic reporting had a significant effect on share prices, whereas environmental and social reporting had no significant influence. This suggests that investors in the Nigerian market prioritize financial disclosures, while environmental and social dimensions remain undervalued or underreported. This pattern raises questions about whether disclosure under mandatory guidelines is substantive enough to influence broader measures of financial performance.

Ibrahim et al., (2023) explored the link between environmental reporting and financial performance in Nigerian industrial and consumer goods firms. Their study found that environmental disclosure overall had a positive effect on ROA, but sub-components such as employee health and product safety negatively affected profitability. This indicates that while environmental transparency can improve legitimacy and operational efficiency, certain disclosures may impose compliance costs that erode financial returns. The mixed results reinforce the need for disaggregated analysis of sustainability dimensions.

Risal et al., (2023) examined ESG disclosure and financial performance among 52 listed Indonesian firms from 2017 to 2021. They found that ESG disclosure had a significant negative effect on ROA, particularly among smaller firms, where compliance costs outweighed benefits. For larger firms, however, the effect was mitigated, highlighting the importance of resource capacity in determining the financial implications of sustainability reporting. This study demonstrates that disclosure outcomes are contingent on firm characteristics, a point especially relevant for Nigeria’s consumer goods sector.

Aiyesan (2023) investigated sustainability reporting and financial performance among Nigerian manufacturing firms. The study revealed that disclosures related to research and development (R&D) and employee relations were positively associated with firm performance, whereas community-related disclosures were weak or insignificant. This distinction suggests that internal-focused sustainability initiatives yield greater financial benefits compared to external-facing disclosures, which may not translate directly into operational efficiency. The findings further support the need to examine sustainability variables separately.

Srour (2022) analyzed the impact of ESG disclosure on financial performance and firm value among 61 Egyptian firms listed on the EGX100 between 2018 and 2021. The study reported an insignificant positive relationship between ESG disclosure and ROA but a significant positive effect on Tobin’s Q. Moreover, the COVID-19 pandemic weakened operational performance but did not erode the positive relationship with market value. These results highlight that while sustainability disclosure may not immediately improve efficiency-based measures such as ROA, it can positively shape investor perceptions and market performance.

Uwuigbe et al., (2019) provided one of the earliest Nigerian studies on sustainability disclosure and firm performance. Using a sample of listed firms, they found a positive but modest association between disclosure and performance measures. Their results underscored the emerging nature of sustainability reporting in Nigeria at the time and called for more robust studies, particularly under mandatory disclosure regimes. This paper responds to that call by focusing on the 2018–2024 period of compulsory reporting.

Gap in Literature

The reviewed studies collectively demonstrate that the effect of sustainability reporting on financial performance is neither uniform nor conclusive. Environmental disclosures often show positive associations with performance, while social disclosures are frequently negative or insignificant. Economic and governance disclosures reveal inconsistent results across contexts. Importantly, much of the existing Nigerian evidence has either examined individual sustainability dimensions under frameworks such as GRI or ESG or focused on voluntary disclosure periods. Very few studies have assessed the aggregate effect of economic, environmental, social, and governance (EESG) disclosures within the context of the mandatory disclosure regime introduced by the NGX in 2018, particularly for the consumer goods sector, which is highly visible and stakeholder-sensitive.

This study addresses that gap by investigating how integrated EESG sustainability reporting influences the financial performance of listed consumer goods firms in Nigeria between 2018 and 2024, thereby moving beyond fragmented analyses to provide holistic, context-specific evidence from an emerging economy.

METHODOLOGY

This study adopted an ex-post facto research design, which is appropriate since the variables of interest, sustainability reporting and financial performance, are historical and cannot be manipulated by the researcher. The design permits the use of secondary data to establish cause-and-effect relationships over time.

The population consisted of the 21 consumer goods firms listed on the Nigerian Exchange Group (NGX) as of 31 December 2023. These firms are of particular interest due to their socio-economic importance and obligation to comply with the NGX Sustainability Disclosure Guidelines introduced in 2018. Sixteen firms with complete data were purposively selected, resulting in a balanced panel covering the period 2018–2024. This timeframe coincides with the mandatory disclosure regime, thereby providing a natural setting for examining the effect of sustainability reporting on financial performance.

Data were sourced from annual reports, audited financial statements, and sustainability reports of the sampled firms. Content analysis was employed to score disclosures across the four sustainability dimensions, economic, environmental, social, and governance, based on the Global Reporting Initiative (GRI) framework and NGX guidelines. A binary scoring system (1 = disclosed, 0 = not disclosed) was applied, and the disclosure index for each dimension was computed as the ratio of actual scores to the maximum possible score, ensuring comparability across firms and years. Financial performance was proxied by return on assets (ROA), calculated as profit after tax divided by total assets, given its robustness as an indicator of managerial efficiency in resource utilization.

Table 1: Measurement of Variables

Source: Researcher’s tabulation

Panel regression analysis was employed to capture both cross-sectional and time-series variations in the data. Prior to estimation, diagnostic tests were conducted to validate model assumptions. The Breusch–Pagan/Cook–Weisberg test and White’s test were used to assess heteroskedasticity, while the Wooldridge test was employed to check for serial correlation. Multicollinearity was examined using the variance inflation factor (VIF). These diagnostics revealed evidence of heteroskedasticity and autocorrelation, justifying the use of cluster-robust standard errors.

Given the panel structure of the dataset and firm-specific heterogeneity, the Generalized Least Squares (GLS) random-effects estimator with cluster-robust standard errors was adopted as the most efficient estimation technique. This approach accounts for unobserved firm-level effects while producing unbiased and efficient parameter estimates. The study adapted the panel regression model of Umar and Mustapha (2021) to suit its context by disaggregating sustainability reporting into the four dimensions. The econometric model is specified as:

ROA_it = β_0it + β₁ECSR_it + β₂SOSR_it + β₃EVSR_it+ β₄GOSR_it+ ƹ_it

Where:

ROA = Return on Asset

ECSR = Economic Sustainability Reporting

SOSR = Social Sustainability Reporting

EVSR = Environmental Sustainability Reporting

GOSR = Governance Sustainability Reporting

β₀ = Regression intercept (constant)

β₁, β₂, β₃ = Coefficient of the main effects of sustainability disclosures

ƹ_it = Error Term

“i” and “t” represent the cross sections and time series respectively.

This methodological framework ensures that the study captures both firm-level heterogeneity and time dynamics while providing robust and reliable inferences on the relationship between sustainability reporting and financial performance of listed consumer goods firms in Nigeria.

DATA ANALYSIS AND DISCUSSION

Table2: Descriptive Statistics of Study Variables (2018–2024)

Source: STATA 17.0 Output

The descriptive statistics presented in Table 2 provide insights into the distribution of the study variables for the 16 listed consumer goods firms observed over seven years (2018–2024), yielding 112 firm-year observations.

Return on Assets (ROA) has a mean value of 5.5%, with a standard deviation of 16.8%. The negative minimum (-0.39) indicates that some firms experienced losses during the study period, while the maximum value (1.30) suggests exceptionally high profitability in certain years. The wide variation implies heterogeneous financial performance among the sampled firms.

Economic Sustainability Reporting (ECSR) has an average disclosure index of 24.1%, ranging from 8.3% to 58.3% (Table 2). This indicates relatively low but improving economic disclosure levels, with modest variation across firms. Environmental Sustainability Reporting (EVSR) records a mean of 24.4% with a broader spread (minimum = 4.2%; maximum = 66.7%), suggesting that environmental reporting is uneven and less developed, consistent with the literature that identifies environmental disclosure as a weaker dimension in developing economies.

Social Sustainability Reporting (SOSR) shows a mean of 35.9%, with scores ranging between 6.3% and 65.6%. The relatively higher mean compared to ECSR and EVSR suggests that firms are more inclined to disclose social initiatives, possibly to appeal to stakeholders such as employees, customers, and communities. Governance Sustainability Reporting (GOSR) has the highest mean disclosure (69.0%), with a narrow dispersion across firms (minimum = 25%; maximum = 95.8%) as reported in Table 2. This reflects stronger compliance with governance requirements, likely due to stricter regulatory oversight on corporate governance practices in Nigeria.

In summary, the descriptive results in Table 2 indicate that governance and social disclosures are more prevalent among listed consumer goods firms than economic and environmental disclosures. Financial performance, measured by ROA, is highly volatile, which provides a useful basis for testing whether sustainability disclosures contribute to firm performance.

Table 3: Correlation Matrix of Study Variables (2018–2024)

Source: STATA 17.0 Output

The correlation results in Table 3 reveal that Return on Assets (ROA) is positively but weakly correlated with Economic Sustainability Reporting (ECSR, r = 0.053) and Governance Sustainability Reporting (GOSR, r = 0.026). A stronger positive association is observed between ROA and Environmental Sustainability Reporting (EVSR, r = 0.205), suggesting that firms with higher levels of environmental disclosure tend to perform better financially. In contrast, ROA shows a negative correlation with Social Sustainability Reporting (SOSR, r = -0.177), implying that increased social disclosure may not directly enhance profitability in the short run.

Among the sustainability dimensions, ECSR is moderately correlated with SOSR (r = 0.446) and EVSR (r = 0.340), while EVSR is also positively correlated with SOSR (r = 0.337). These results indicate that firms that disclose in one sustainability dimension often disclose in others, reflecting integrated reporting tendencies. Notably, GOSR displays weak and negative correlations with both EVSR and SOSR, suggesting that governance disclosure practices may operate independently of environmental and social initiatives.

In general, the correlations are modest, with no coefficients approaching the threshold of 0.80, indicating the absence of multicollinearity concerns. This justifies the inclusion of all four sustainability disclosure dimensions in the regression model for further analysis.”

Table 4: Heteroskedasticity and Normality Tests

Source: STATA 17.0 Output

Table 5: Wooldridge Test for Autocorrelation in Panel Data

Source: STATA 17.0 Output

The diagnostic tests in Table 4 and Table 5 provide insight into the reliability of the regression estimates. The Breusch–Pagan/Cook–Weisberg test indicated heteroskedasticity (χ²(1) = 47.43, p < .001), whereas the White’s test and Cameron and Trivedi’s heteroskedasticity test both suggested homoskedasticity (χ²(14) = 13.07, p = .521). Moreover, the Cameron and Trivedi skewness (p = .256) and kurtosis (p = .279) tests confirmed that residuals were approximately normally distributed, while the joint test (p = .421) found no overall model misspecification.

The Wooldridge test for autocorrelation in panel data (Table 5) yielded F(1,15) = 8.59, p = .010, providing evidence of first-order autocorrelation. Taken together, the results suggest that although the model does not suffer from misspecification or serious normality violations, there is concern about heteroskedasticity and serial correlation. To address these issues, the study employed panel GLS random-effects regression with cluster-robust standard errors, which corrects for both heteroskedasticity and autocorrelation, ensuring consistent and reliable coefficient estimates.

Table 6: Variance Inflation Factor (VIF) Test for Multicollinearity

Source: STATA 17.0 Output

The results in Table 6 indicate that all explanatory variables have VIF values well below the commonly accepted threshold of 10 (and even the more conservative cutoff of 5), with a mean VIF of 1.28. This suggests that multicollinearity is not a concern in the model, and the explanatory variables (ECSR, EVSR, SOSR, and GOSR) are sufficiently independent to allow reliable estimation of their individual effects on financial performance. The tolerance values (1/VIF) also exceed 0.70, further confirming the absence of multicollinearity problems. Consequently, the model can proceed to regression estimation without concerns about inflated standard errors due to collinearity among predictors.

Table 7: Random-Effects GLS Regression

Model statistics: Wald χ²(4) = 10.20, p = .037; R² (within) = 0.070, R² (between) = 0.328, R² (overall) = 0.117. Estimation performed with random-effects GLS regression using cluster-robust standard errors (N = 112 firm-year observations; n = 16 firms; T = 7 years).

Source: STATA 17.0 Output

The regression results in Table 7 show that the explanatory power of the model is modest, with an overall R² of 11.7%. The Wald chi-square test (χ²(4) = 10.20, p = .037) indicates that the set of predictors jointly explains a statistically significant portion of the variation in firm performance, proxied by ROA.

Among the sustainability dimensions, environmental sustainability reporting (EVSR) has a positive and statistically significant effect on ROA (β = 0.298, p = .048). This suggests that firms with greater environmental disclosure tend to achieve higher profitability, supporting the argument that proactive environmental transparency enhances efficiency and legitimacy. Conversely, social sustainability reporting (SOSR) exerts a negative and significant influence on ROA (β = -0.474, p = .012), implying that increased social disclosures may impose costs that reduce short-term profitability, consistent with prior evidence that social initiatives often yield delayed rather than immediate financial benefits.

By contrast, economic sustainability reporting (ECSR) shows a positive but insignificant association with ROA (β = 0.090, p = .300), indicating that economic disclosures alone do not significantly improve firm profitability in the sample period. Similarly, governance sustainability reporting (GOSR) is unrelated to ROA (β = -0.008, p = .946), suggesting that governance disclosures, although prevalent, may be more compliance-driven and thus do not contribute directly to profitability.

In summary, the findings reveal that the financial performance of listed consumer goods firms in Nigeria during 2018–2024 is significantly influenced by environmental and social disclosures, but not by economic or governance reporting. This highlights the uneven impact of the four sustainability dimensions and underscores the need for firms to balance regulatory compliance with substantive, performance-enhancing disclosure practices.

DISCUSSION OF FINDINGS

The results reveal a mixed relationship between sustainability reporting and the financial performance of listed consumer goods firms in Nigeria. Specifically, environmental sustainability reporting (EVSR) is positively and significantly associated with return on assets (ROA), social sustainability reporting (SOSR) exerts a negative and significant effect, while economic sustainability reporting (ECSR) and governance sustainability reporting (GOSR) show no significant impact. These outcomes highlight the uneven financial implications of sustainability disclosure and reflect the complexity of the sustainability–performance nexus in an emerging economy under a mandatory disclosure regime.

The finding that EVSR positively influences ROA aligns with prior evidence suggesting that environmental disclosure creates tangible efficiency gains and enhances stakeholder trust. Ibrahim et al. (2023) reported similar results in Nigeria, while Zhou et al. (2025) demonstrated that carbon-related disclosures significantly improved both accounting and market-based performance in China. From a Resource-Based View (RBV) perspective, environmental initiatives such as energy efficiency and waste management represent strategic resources that reduce costs and improve asset utilization. From a legitimacy standpoint, firms that credibly disclose environmental practices strengthen their societal acceptance and regulatory compliance, thereby securing a competitive edge. The implication is that Nigerian consumer goods firms can enhance financial outcomes by embedding environmental sustainability into their operations and ensuring transparent reporting.

In contrast, SOSR exhibits a negative and significant relationship with ROA, suggesting that increased social disclosure reduces short-term profitability. This finding corroborates Akorede et al. (2024), who observed that social initiatives were costly for Nigerian manufacturing firms, and Aiyesan (2023), who reported that community-related disclosures often failed to yield financial benefits. Similarly, Etim et al. (2023) found that social reporting in healthcare firms exerted neutral or negative effects on profitability. These results imply that social initiatives may be resource-intensive, with benefits such as brand equity, employee loyalty, and community goodwill accruing only in the long term. Thus, while social disclosure enhances legitimacy, it may strain short-run financial performance unless initiatives are strategically integrated into the firm’s value chain. Managers should therefore align social sustainability programs with operational objectives, such as linking employee welfare to productivity or community engagement to supply chain resilience, so that disclosures reflect initiatives that yield both societal and financial value.

ECSR shows a positive but insignificant association with ROA. This finding is consistent with Abdulrasheed and Aminu (2024), who found no significant effect of aggregate sustainability disclosure on the financial performance of Nigerian consumer and industrial firms. One possible explanation is that economic disclosure often reports outcomes (e.g., tax payments, R&D spending) rather than influencing them directly, making its effect on asset efficiency less pronounced. While such disclosures may improve investor confidence and enhance a firm’s legitimacy, they may not immediately enhance profitability. The implication is that firms should present economic disclosures in a way that demonstrates their strategic value, for example by linking research and development reporting to innovation-driven cost savings or market expansion.

Similarly, GOSR demonstrates no significant impact on ROA, a result that diverges from Akorede et al. (2024), who found positive governance effects, but aligns with Srour (2022), who reported that ESG disclosures in Egypt were more strongly associated with market-based indicators than with accounting returns. The high mean level of governance disclosure among Nigerian consumer goods firms, as revealed in the descriptive statistics, suggests that compliance is already widespread, leaving limited variation to explain profitability differences. Moreover, governance disclosure may be more relevant for reducing agency costs and improving investor confidence than for generating immediate asset efficiency. The implication is that while governance disclosure enhances legitimacy, firms must go beyond compliance-driven reporting by embedding governance practices that strengthen board effectiveness, oversight, and strategic decision-making if financial benefits are to materialize.

Collectively, these findings demonstrate that not all dimensions of sustainability disclosure contribute equally to financial performance. Environmental disclosure enhances profitability, social disclosure constrains it in the short term, while economic and governance disclosures appear neutral. This asymmetry underscores the need for firms to pursue a balanced approach in which sustainability reporting is not only compliance-driven but also strategically integrated into operations. For policymakers, the results suggest that regulatory frameworks such as the NGX guidelines should place stronger emphasis on the quality and materiality of disclosures, particularly in environmental and social dimensions, to ensure that reporting translates into both legitimacy and performance.

CONCLUSION

This study examined the effect of economic, environmental, social, and governance sustainability reporting on the financial performance of listed consumer goods firms in Nigeria during the mandatory disclosure period of 2018–2024. The results show that environmental reporting significantly enhances profitability, social reporting reduces short-term financial performance, while economic and governance disclosures have no significant effects on return on assets (ROA). These findings demonstrate that the financial implications of sustainability reporting are uneven across dimensions and suggest that disclosure alone is insufficient to drive performance. Rather, the substance, quality, and strategic integration of sustainability practices determine whether disclosures translate into operational and financial benefits.

In conclusion, the study contributes to the sustainability–performance debate by providing evidence from an emerging economy under a mandatory disclosure regime. It highlights the importance of environmental initiatives as performance-enhancing, the short-term cost burden of social initiatives, and the limited direct effects of economic and governance disclosures on profitability. These insights are valuable for managers, investors, and policymakers seeking to align sustainability disclosure with both legitimacy and firm value creation.

RECOMMENDATIONS

1. Prioritize environmental sustainability initiatives: Firms should deepen investments in energy efficiency, waste management, and eco-friendly innovations, as these not only reduce operational costs but also enhance profitability. Transparent reporting of such initiatives strengthens both legitimacy and competitive advantage.
2. Integrate social programs into core business strategy: Since social disclosure currently imposes costs without immediate returns, firms should design social initiatives that generate business value. For example, employee welfare programs should be tied to productivity, and community projects should reinforce supply chain resilience and customer loyalty.
3. Enhance the quality of economic disclosures: Economic reporting should go beyond compliance to highlight strategic value creation. Firms should clearly demonstrate how tax contributions, R&D investments, and local economic impacts support long-term growth and competitiveness.
4. Move governance reporting from compliance to effectiveness: Governance disclosures should be backed by substantive practices such as strengthening board independence, improving gender and skills diversity, and enforcing anti-corruption policies. Embedding these practices can enhance decision-making quality and operational efficiency.
5. Strengthen regulatory frameworks for disclosure quality: Regulators such as the Nigeria Exchange Group (NGX) and the Financial Reporting Council should refine sustainability disclosure guidelines to emphasize materiality, comparability, and independent assurance. This will ensure that disclosures are substantive, reliable, and capable of informing investor decisions.

REFERENCES

1. Abdulrasheed, L., & Aminu, M. (2024). Sustainability reporting and financial performance of consumer and industrial goods firms in Nigeria: A comparative analysis. Journal of Sustainable Accounting and Management, 12(1), 44–59. https://doi.org/10.1108/JSAM-01-2024-011
2. Agbo, A., & Ihotu, G. J. (2023). Sustainability reporting and financial performance of listed environmentally-sensitive companies in Nigeria. European Journal of Accounting, Finance and Investment, 9(6), 1–14.
3. Aiyesan, O. A. (2023). Sustainability reporting and financial performance of listed manufacturing firms in Nigeria. African Journal of Accounting, Auditing and Finance, 12(3), 287–304. https://doi.org/10.1504/AJAAF.2023.132450
4. Akorede, O. O., Adegbie, F. F., & Akintoye, I. R. (2024). Corporate social and governance sustainability reporting and financial performance of manufacturing firms in Nigeria. Journal of Accounting and Taxation, 16(2), 45–57. https://doi.org/10.5897/JAT2023.0591
5. Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120. https://doi.org/10.1177/014920639101700108
6. Cho, C. H., Senn, J., & Sobkowiak, M. (2021). Sustainability at stake during COVID-19: Exploring the role of accounting in addressing environmental crises. Critical Perspectives on Accounting, 82, 102327. https://doi.org/10.1016/j.cpa.2021.102327
7. Deegan, C. (2014). An overview of legitimacy theory as applied within the social and environmental accounting literature. In J. Bebbington, J. Unerman, & B. O’Dwyer (Eds.), Sustainability accounting and accountability (2nd ed., pp. 248–272). Routledge. https://doi.org/10.4324/9781315850932
8. Etim, R. S., Uwah, U. E., & Okon, I. E. (2023). Sustainability disclosure and financial performance of listed healthcare firms in Nigeria. International Journal of Finance and Accounting Research, 9(1), 112–123. https://doi.org/10.11648/j.ijf.20230901.14
9. Greene, W. H. (2018). Econometric analysis (8th ed.). Pearson Education.
10. Ibrahim, M., Abubakar, S., & Ahmed, T. (2023). Environmental sustainability reporting and financial performance of listed firms in Nigeria. Journal of Business and Management Studies, 5(3), 101–115. https://doi.org/10.32996/jbms.2023.5.3.11
11. International Financial Reporting Standards (IFRS). (2023). IFRS Sustainability Disclosure Standards (IFRS S1 and IFRS S2). IFRS Foundation. https://www.ifrs.org/issued-standards/ifrs-sustainability-standards
12. Korolo, E. O., & Korolo, A. S. (2023). Corporate sustainability reporting and financial performance of deposit money banks in Nigeria. FUDMA Journal of Accounting and Finance Research (FUJAFR), 1(3), 75–86. https://doi.org/10.33003/fujafr-2023.v1i3.63.75-86
13. Lozano, R., & Huisingh, D. (2011). Inter-linking issues and dimensions in sustainability reporting. Journal of Cleaner Production, 19(2–3), 99–107. https://doi.org/10.1016/j.jclepro.2010.01.004
14. Nigerian Exchange Group (NGX). (2018). Sustainability disclosure guidelines. Nigerian Exchange Group. https://ngxgroup.com/wp-content/uploads/2018/01/NGX-Sustainability-Disclosure-Guidelines.pdf
15. Nwekwo, C. J., Okoro, E. A., & Eze, P. O. (2025). Sustainability disclosure and profitability of listed manufacturing firms in Nigeria. International Journal of Research and Innovation in Social Science, 9(4), 5755–5763. https://doi.org/10.47772/IJRISS.2025.9406
16. Okon Udomah, M., & Emenyi, D. E. O. (2023). Sustainability reporting and financial performance of selected cement firms in Nigeria. GPH-International Journal of Business Management, 6(8), 40–65.
17. Olaitan, O. O., & Azeez, L. A. (2025). Effect of sustainability reporting on financial performance of selected manufacturing companies in Nigeria. International Journal of Financial Research and Business Development, 7(7). https://doi.org/10.70382/mejfrbd.v7i7.022
18. Omotoso, A., Yusuf, M. A., & Idris, A. A. (2024). Effect of governance and social sustainability reporting on the financial performance of listed manufacturing firms in Nigeria. FUDMA Journal of Accounting and Finance Research (FUJAFR), 2(2), 133–142. https://doi.org/10.33003/fujafr-2024.v2i2.99.133-142
19. Risal, P., Sapkota, P., & Thapa, S. (2023). ESG disclosure and firm performance: Evidence from listed firms in Indonesia. Cogent Business & Management, 10(1), 2223451. https://doi.org/10.1080/23311975.2023.2223451
20. Soomiyol, I. A., Musa, H., & Yusuf, M. B. (2024). Economic sustainability reporting and corporate performance of Nigerian consumer goods firms. Journal of Sustainable Finance and Accounting, 6(1), 33–48. https://doi.org/10.47544/jsfa.2024.6104
21. Srour, I. (2022). ESG disclosure and firm value: Evidence from Egyptian listed companies. Future Business Journal, 8(1), 1–13. https://doi.org/10.1186/s43093-022-00129-y
22. Srour, I. (2022). ESG disclosure and firm value: Evidence from Egyptian listed companies. Future Business Journal, 8(1), 1–13. https://doi.org/10.1186/s43093-022-00129-y
23. Suchman, M. C. (1995). Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(3), 571–610. https://doi.org/10.5465/amr.1995.9508080331
24. Umar, M., & Mustapha, M. (2021). Sustainability reporting and firm performance of listed companies in Nigeria: A panel data analysis. Journal of Accounting and Financial Management, 7(4), 12–25. https://doi.org/10.5281/zenodo.5789432
25. Uwuigbe, U., Egbide, B., & Ayokunle, A. (2019). Corporate social responsibility disclosures and firm performance: Evidence from listed firms in Nigeria. Journal of Global Responsibility, 10(3), 287–301. https://doi.org/10.1108/JGR-01-2019-0012
26. Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data (2nd ed.). MIT Press.
27. Zhou, X., Li, Y., & Wang, Y. (2025). Carbon disclosure quality and firm performance: Evidence from Chinese listed companies. Sustainability, 17(4), 2157. https://doi.org/10.3390/su17042157