Center for Advancing Accounting

Seeking Quality in Voluntary ESG Reporting

• In Event: Sustainability Rerporting

Abstract

Corporate disclosures of Environmental, Social, and Governance (ESG) matters have increased dramatically over the last decade, but our understanding of the value of this non-financial information is still evolving. Some research suggests that voluntary ESG reporting is of poor quality and merely a mechanism for companies to inflate their reputations. This study explores the effectiveness of three solutions to improve the quality of non-financial disclosure – transparency, goal-setting, and external assurance – by studying their impacts on two different third-party evaluations of voluntary ESG reporting using a novel data set created by a content analysis of the non-financial disclosures for a random sample of US companies from 2013-2020. Our preliminary results generally support our empirical predictions that ESG ratings are improved when managers embrace the breadth of sustainability topics included in the GRI reporting framework, engage in sustainability goal-setting, and obtain external assurance for their disclosures.

Authors

• Megan Hess, Washington & Lee University

• Andrew Hess, Washington & Lee University