Like Parent, Like Subsidiary? On the Diffusion of Sustainability Reporting in Multinational Companies

This research investigates the determinants of sustainability reporting practices within multinational companies (MNCs) and their subsidiaries, focusing on the mediating role of MNC parents and the moderating impact of cultural distance and local isomorphism. We conducted a content analysis of the stand-alone sustainability reports of 187 MNCs and 332 subsidiaries over a decade (2011-2020), comparing 1594 subsidiary reports with 983 parent reports. A path analysis approach assessed the mediating role of MNC parents, while random effects panel models assessed the moderating effects of local isomorphism and cultural distance. The results indicate that MNC parents positively and significantly influence the adoption of sustainability reporting practices by their subsidiaries. However, the successful implementation of these practices is moderated by local institutional context and cultural distance. Subsidiary transparency was positively influenced by industry characteristics and effective local governance, while financial constraints and the degree of alignment with international standards played a complex role in reporting practices. Our research indicates that MNCs need to adjust their global approaches to fit into local environments and improve the transparency of subsidiaries by utilizing industry-specific tactics and robust local management. Policymakers need to prioritize enhancing local governance structures to improve sustainability reporting. This research contributes to the field of institutional theory by demonstrating how local isomorphism affects the dissemination of reporting practices within MNCs. Furthermore, it is one of the few recent studies to examine sustainability reports in-depth, analyzing their content and assessing the extent to which cultural distance affects the adoption of transparency practices global.