Doctor Darren Hassan
Digital DBA, 2024
Business Science Institute
With organisations increasingly encouraging and incorporating Sustainability Reporting (SR), should it remain a purely optional and voluntary disclosure tool available for organisations seeking to highlight their combined social, environmental, and economic activities? Does the emphasis on SR risk pushing organisations towards greenwashing, rather than promoting honest, ethical business decisions?
Research impact(s)
One of the major concerns identified in my research is the inherent vagueness in the formulation of Social and Environmental measurements within the context of Sustainability Reporting. This ambiguity raises significant issues about which information stakeholders should have access to and how that information is justified. Without the development of more precise indicators of social and environmental capital, stakeholders are left struggling to gain a clear and accurate picture of an organisation’s true impact.
The study critically examines three principal frameworks - Triple Bottom Line (TBL), Environmental, Social, and Governance (ESG), and Total Value Framework (TVF) -, and identifies six major flaws and issues. Among these, (1) Greenwashing and selective disclosure emerge as prominent concerns. Companies often engage in (2) Global Spin, presenting their efforts in a more favourable light than reality warrants. Additionally, (3) inconsistencies in measurement across different frameworks make it difficult to establish a reliable baseline for assessing sustainability efforts. The (4) Knowing-Doing Gap, where organisations understand what needs to be done but fail to act accordingly, further exacerbates these challenges. Moreover, there is a noticeable (5) inconsistency in balancing the various aspects of sustainability, with some areas receiving disproportionate focus while others are neglected. Compounding these issues is the (6) lack of enforcement and compliance controls, which allows organisations to navigate SR with minimal accountability.
There was further evidence that Social and Environmental capital were difficult to quantify, and any attempts to do so were often vague and inconsistent.
Research foundations
My research is grounded in a thorough observation of the perceived gaps, limitations, and challenges within the broader concept of sustainability. Five ethical and moral concerns are highlighted, beginning with the (1) lack of clarity surrounding the term “sustainable.” The protection of this term is crucial, as its meaning is often diluted or misused. Furthermore, the (2) subjective nature of sustainability raises questions about whether a business’s primary focus should be on profits alone, or if it should also prioritise social and environmental considerations. The research also questions the (3) authority of ESG scores and similar metrics, probing whether these measures truly hold any weight in driving meaningful change. The issue of (4) consensus is another focal point: do all aspects of sustainability deserve equal attention, or should certain areas receive more or less focus? Finally, the (5) relevance of Sustainability Reporting for investors and stakeholders is scrutinised. Is SR merely a marketing tool, or does it genuinely contribute to a better understanding of a company’s ethical standing?
Research methodology
The methodology for this study involved a systematic review of the literature, combined with an analysis of survey data. The research focused on two primary questions. The first concerns greenwashing: (1) Can organisations be compelled to be more transparent and forthcoming when making claims in their sustainability reporting? If so, what measures would need to be implemented to ensure that organisations are held accountable with greater integrity? The second question addresses the knowing-doing problem: (2) What are the perceived barriers, restrictions, or hesitations that prevent organisations from turning their knowledge into action? Understanding these barriers is crucial for developing strategies that encourage organisations to move from intent to impactful action.
References
Christensen, H. B., Hail, L., & Leuz, C. (2019). Adoption of CSR and Sustainability Reporting Standards: Economic Analysis and Review. European Corporate Governance Institute-Finance Working Paper No. 623/2019.
Elkington, J. (1994). Towards the Sustainable Corporation: Win-Win-Win Business Strategies for Sustainable Development. California Management Review, 36(2), 90–100.
Kaplan, R. S., & Ramanna, K. (2021). How to Fix ESG Reporting. Harvard Business School Accounting & Management Unit Working Paper No. 22-005.
Stambaugh, R. F., & Taylor, L. A. Pastor, L., (2019). Sustainable Investing in Equilibrium (No. w26549). Journal of Financial Economics, forthcoming.
Key words: Sustainability, Sustainability Reporting, Greenwashing, Sustainability Reporting Tools, ESG
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