26
R
2
get near to 1, it means that the regression model is precise or the independent variable can elaborate dependent variable.
b. Partial Regression Test T-Test The T-Test is used to determine whether the independent variable X in the
regression model partially has a significant effect on the dependent variable Y. If the significant T is more than 0,05 so H1,H2, or H3 is rejected. While if significant T
is less than 0,05 so H1,H2, or H3 is accepted. If H1,H2, and H3 are accepted means that there is a significant relationship between independent and dependent variables.
E. Variable Operation
1. Independent Variable There is only one independent variable in this research. The independent variable
is economic indicator in the sustainability report. In the sustainability repot, there are 30 environmental indicators table 3.2. The environment index for testing the
compliance of sustainability reporting by follow as formulation: Environment Index =
n k
x 100 Description :
n : the environment indicators performed by company k : total of environment indicators in sustainability report
2. Dependent Variable There are 3 dependent variables in this research. The dependent variable consist of:
27
a. Cost of Equity
Cost of equity shows the return that the stockholders require for their investment in a company. A firm‘s cost of equity represents the compensation that the market
demands in exchange for owning the asset and bearing the risk of ownership. b.
Cost of Debt Cost of debt is a part of the company‘s capital structure. The debt consists of
various bonds, loans and other forms of debt. This is a measure to determine the overall rate being paid by the company to use debt financing.
c. Cost of Capital WACC
WACC consists of cost of equity and cost of debt. WACC determines how a company can raise money as its source of funding.
Table 3.1 Operational Variable
Variable Measurement
Scale
Independent Variable: Environmental Indicators in
sustainability report .Environment Index
Ratio Dependent Variable:
Cost of equity CAPM
Ratio
Cost of Debt After-Tax cost of
debt Ratio
Cost of Capital
WACC
Ratio
28
The environment risk management data are taken from the sustainability reports of the company from 2009-2011. The following table presents the environment indicators of the
sustainability report.
Table 3.2 List of environmental indicators in Sustainability report
No Indicators
EN1 Materials used by weight or volume
EN2 Percentage of materials used that are recycled input materials
EN3 Direct energy consumption by primary energy source
EN4 Indirect energy consumption by primary source
EN5 Energy saved due to conservation and efficiency improvements
EN6 Initiatives to provide energy sufficient or renewable energy based products
and services, and reductions in energy requirements as a result of these initiatives
EN7 Initiatives to reduce indirect energy consumption and reductions achieved
EN8 Total water withdrawal by source
EN9 Water sources significantly affected by withdrawal of water
EN10 Percentage and total volume of water recycled and reused
EN11 Location and size of land owned, leased, managed in, or adjacent to protected
areas and areas of high biodiversity value outside protected areas EN12
Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside
protected areas
EN13 Habitats protected or restored
EN14 Strategies, current actions, and future plans for managing impacts on
biodiversity EN15
Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations, by level of extinction risk
EN16 Total direct and indirect greenhouse gas emissions by weight
EN17 Other relevant indirect greenhouse gas emissions by weight
EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved
EN19 Emissions of ozone depleting substances by weight
EN20 NO, SO, and other significant air emissions by type and weight
EN21 Total water discharge by quality and destination
EN22 Total weight of waste by type and disposal method
EN23 Total number and volume of significant pills
29
No Indicators
EN24 Weight of transported, imported, exported, or treated waste deemed
hazardous under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally
EN25 Identity, size, protected status, and biodiversity value of water bodies and
related habitats significantly affected by the reporting organization‘s discharges of water and runoff
EN26 Initiatives to mitigate environmental impacts of products and services, and
extent of impact mitigation EN27
Percentage of products sold and their packaging materials that are reclaimed by category
EN28 Monetary value of significant fines and total number of non-monetary
sanctions for non compliance with environmental laws and regulations EN29
Significant environmental impacts of transporting products and other goods and materials used for the organization‘s operations, and transporting
members of the workforce EN30
Total environmental protection expenditures and investments by type
In total there are 30 environmental disclosure. Score one 1 will be given for the disclosure environment indicator and score zero 0 for environment indicators which is
not disclosure.
30
CHAPTER IV FINDING AND ANALYSIS
A. General description of Research Object
This chapter presents and discusses the finding of the research conducted. The research is a descriptive study of environmental indicators in 42 sustainability reports which are compliant
with GRI G3. The cost of capital of the selected companies was compiled from the data from the annual reports of the companies listed in Indonesia Stock Exchange in the year of 2009-2011.
The period 2009-2011 is choosen in order to fulfill the requirements of the research method. The hypothesis is tested by the simple regression method. The selection of the sample is chosen by
criteria of population that have been explained in research methodology in the previous chapter. 1. Overview of selected companies
In 2009-2011, the companies that are listed in Indonesia Stock Exchange are 451 companies. The purposive sampling is used for choosing the samples. From the 451 companies
listed, there are only 14 companies which fulfill the criteria in the time series of 3 years. Therefore, in total there are 42 sustainability reports and 42 annual reports of the companies.
The reports are taken from the company‘s website. As an independent variable, environment risk management data are the environmental indicators in the sustainability report.
The sustainability reports are voluntarily reported by the companies. The 14 companies that present their reports are as follow:
