Readability in sustainability reporting before and after the financial crisis of 2008

Abstract: Problem: Sustainability reporting is becoming more and more of a standard business practice. However, during the financial crisis of 2008, many companies experienced hard times from an economic perspective. This could have led to a decrease, an increase or no effect on the level of readability in sustainability reporting. Ameer and Bakar (2010) concluded that Malaysian companies tend to obfuscate their sustainability communication by adjusting the readability. Purpose: The purpose of this study is to examine how readability and amount of disclosure in sustainability reporting changed in Sweden during the financial crisis of 2008. Method: The Flesch Reading Ease formula was used to estimate the level of readability and the amount of disclosure was measured in number of words. Two samples containing the same 34 large and publicly listed companies were examined for 2006 and 2010. Statistical tests, in terms of Wilcoxon signed-rank test and the matched pairs t-test, were applied to the data in order to determine whether a significant difference was present between the years. Theoretical framework: Readability, obfuscation, stakeholder theory and legitimacy theory are presented in the theoretical framework. Results: The mean Flesch Reading Ease ratings increased from 32,8 in 2006 to 34,1 in 2010, however there was no significant difference. The mean number of words increased from 2600 words in 2006 to 7205 words in 2010. This difference was statistically significant. Analysis: The results were interpreted in relation to the theoretical framework. Conclusion: Readability, measured in Flesch Reading Ease, did not change during the financial crisis of 2008, while the amount of disclosure increased. This implies that overall no obfuscation was present.