Optics

From the abstract of “Corporate environmental sustainability disclosures and environmental risk: Alternative tests of socio-political theories“, by Michael Dobler (Faculty of Business and Economics, Technische Universität Dresden,
Dresden, Germany), Kaouthar Lajili and Daniel Zéghal (both of the Telfer School of Management, University of Ottawa), as published in the Journal of Accounting & Organizational Change, Vol. 11:3 (2015) pp.301-332:

Abstract

Purpose – This paper aims to propose and apply a novel risk-based approach to explore whethersocio-political theories explain the level of corporate environmental disclosures given inconclusive evidence on the relation between environmental disclosure and environmental performance.

Design/methodology/approach – Based on content analysis of corporate risk reporting, the paper develops measures of environmental risk to proxy for a firm’s exposure to public pressure in regard to environmental concerns that should be positively associated with the level of corporate environmental disclosures according to socio-political theories. Multiple regressions are used to test the predictions of socio-political theories for US Standards and Poor’s 500 constituents from polluting sectors.

Findings – The level of environmental disclosures is found to be positively associated with a firm’s environmental risk while unrelated to its environmental performance. The findings suggest that firms tend to provide higher levels of environmental disclosures in response to greater exposure to public pressure as depicted by broad environmental indicators…

Research limitations/implications – This study is limited to US firms in polluting sectors…

Practical implications – Findings are important to understand a firm’s incentives to disclose environmental information…

Basic point being that environmental disclosures are not reflective of environmental performance. Rather, such disclosures are driven by perceived public pressures, and would appear to be more alone the lines of image maintenance. Many thought that environomental disclosure would be reflective of superior or improved environmental performance: firms wanting to disclose “good news”, while poor environmental performers would be more inclined to less disclosure, to avoid drawing attention to their negative environmental impact. Instead, whether the news is good or bad, there will be image-maintenance exercises in response to public pressures, which have nothing to do with good or bad environmental performance in fact.

Assumption here is that environmental risk is associated with public pressure to contain same, and that therefore environmental risk may be used as a proxy for public pressure. Assumes a degree of public appreciation of the risk. If one then aims to minimize or change public perception of risk…

Could be more than limited to environmental disclosures. General disclosures of quality of life, at least in theory, and into perpetuity:

What risk is this…

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About brucelarochelle

Practising Lawyer and Part-Time University Instructor (Accounting, Commercial Law, Organizational Behaviour); Part-Time Federal Tribunal Member. Non-practising Chartered Professional Accountant (Chartered Accountant and Certified Management Accountant).
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