SDG disclosures and business economic value creation: the role of governance and legitimacy in Malaysian public listed companies

Creating economic value is core to modern economies, as reflected at the macro level in Gross Domestic Product (GDP) growth, productivity improvements, capital efficiency, and inclusive development. Economic growth has been propelled by rapid industrialisation, globalisation and technological development. Nevertheless, this progress has been achieved at the expense of environmental degradation, biodiversity loss, depletion of natural resources, increased social inequality and climate change. These challenges highlighted the need to put sustainability on national and corporate agendas. The United Nations introduced the 2030 Agenda for Sustainable Development by positioning sustainability as a central driver of economic value creation. At the corporate level, holistically embedding the Sustainable Development Goals (SDGs) into the business model is increasingly integral to creating economic value. However, empirical evidence on how SDG disclosures influence economic value in Malaysian companies remains limited, prompting this investigation. This study examines the extent of SDG disclosures among Malaysian Publicly-Listed Companies (PLCs) and investigates their impact on business economic value creation. The study also aims to examine the moderating effect of governance and legitimisation factors on the causal relationship between SDG disclosures and business economic value creation. Using secondary data from Malaysian PLCs for the period 2022–2023, collected from the Refinitiv Eikon database, the study employed Partial Least Squares Structural Equation Modeling (PLS-SEM) to analyse the relationships among variables. A comprehensive SDG disclosure index is developed by aligning SDG indicators with established ESG frameworks to enhance measurement consistency and comparability. The findings reveal that overall SDG disclosures among Malaysian PLCs are moderate. The results identified a significant positive relationship between overall SDG disclosures and economic value creation among Malaysian PLCs, supporting the Resource-Based View (RBV). These findings confirm that SDG disclosures serve as a resource that enhances competitiveness and value creation when effectively integrated into core business strategy. Additionally, governance factors, particularly board gender diversity, board independence, and board size, demonstrated significant moderating effects. The findings reinforce Agency Theory, indicating that well-structured governance mechanisms can mitigate information asymmetry and align managerial behaviour with stakeholder interests. However, legitimisation factors do not significantly moderate the relationship. Overall, the empirical findings of this study make a meaningful contribution to the growing body of literature on corporate sustainability and the SDGs, particularly in the context of emerging markets. The findings also highlight the need for companies to move beyond compliance-oriented sustainability practices and adopt an approach to integrating SDG disclosure.