The Impact of Climate Risk on Corporate Water Disclosure: Evidence from Water Intensive Companies in Indonesia

This study examines the impact of climate-related risks—specifically, physical, regulatory, and reputational risks—on corporate water disclosure (CWD) in water-intensive industries in Indonesia, one of the countries most vulnerable to the impacts of climate change. Grounded in legitimacy theory, the research explores how companies enhance transparency in water management to maintain social acceptance amid external pressures. Using 780 firm-year observations from sustainability and annual reports covering 2021–2023, this study developed the CWD index based on three leading indicators: water efficiency targets, policies, and total water withdrawal. The regression results show that physical and reputational risks positively and significantly impact the level of water disclosure. Firms experiencing operational disruptions or reputational pressure tend to enhance their disclosure efforts to sustain legitimacy. On the other hand, regulatory risk shows a significant negative relationship with disclosure, suggesting that stringent regulations may lead to symbolic rather than substantive reporting. Company size was also found to be the strongest predictor of water disclosure, affirming that larger companies have greater capacity and pressure for sustainability reporting. This research provides a theoretical contribution by integrating the climate risk dimension into sustainability disclosure studies and a practical contribution for regulators. These findings highlight the need for incentive-based regulatory frameworks encouraging genuine corporate transparency and sustainable water management practices.