In today’s world, environmental and social issues have become central concerns for stakeholders alongside economic considerations. The primary aim of this study is to examine the impact of Sustainability Reporting (SR) on the Cost of Capital (COC) and to investigate the moderating role of Political Connections (PC) in this relationship within petrochemical companies listed on the Tehran Stock Exchange (TSE). From a purpose perspective, the study is developmental, and in terms of nature, it is descriptive-correlational. The statistical population comprises all petrochemical companies active in Iran’s capital market during 2018–2023 (1397–1402 in the Iranian calendar). After applying screening criteria, a final sample of 19 companies (108 firm-year observations) was selected. To test the hypotheses, a moderated multivariate regression model was employed using panel data with a fixed-effects approach. The findings indicate a significant negative relationship between the quality of SR and the COC, suggesting that increased transparency in sustainability disclosures reduces financing costs. Furthermore, the results reveal that PC moderate the strength of this relationship. Specifically, in firms with high levels of political influence and connections, the capital-cost-reducing effect of SR is attenuated, as access to political rents substitutes for the benefits of informational transparency.