This document analyzes the impacts of sustainability report content and standardization on firm reputation. It finds that: 1) Firms that report more sustainability activities are seen as more reputable, though reputation and legitimacy are not yet fully institutionalized. 2) Firms conforming to standards like the Global Reporting Initiative guidelines can improve their rankings on third-party sustainability indexes. 3) The amount of environmental information disclosed in reports is positively correlated with firm reputation, but most companies only discuss basic pollution prevention practices rather than more advanced strategies.

1. Legitimizing Corporate Sustainability Reporting: Impacts of Content and Standardization on Firm ReputationBen PuhlJuly 22, 2010

2. BackgroundEmpirical Environment and ApproachContent Analysis of Sustainability ReportsResults and DiscussionConclusionOverview

3. Compliance vs. Voluntary ReportingDevelopment of Voluntary Standards around SustainabilityMotivations for Sustainability ReportingEfficacy of ReportingCSR and Institutional TheoryBackground

4. Corporate reporting started in U.S. within financial fieldSpread to encompass environmental aspects Mandatory reporting in many countries including the UK, Canada, and JapanEnvironmental reporting in U.S. required under Regulation S-K, as well as TRI and EPCRACompliance vs. Voluntary Reporting

5. Move towards CSR – avenue to place emission dataGRI – standardize reporting for comparison. Development of Voluntary Standards around Sustainability

6. Motivations for Sustainability ReportingProConFurther relationships with stakeholdersRisk reductionProvide legitimacy and transparencyDevelop corporate imageExpensiveMarket demand may be weakHigher risk to companyBlackburn, 2007

7. MixedPositive relationship between reporting and financial performance (Stanwick and Stanwick, 2000)No correlation (New Economics Foundation, 2000)Only a ploy to deceive stakeholders (Gray, 2001)Positive correlation between stock price and sustainability index inclusion (Curran and Moran, 2007)No correlation (Moneva and Ortas, 2008)Efficacy of Reporting

8. Firms offering voluntary environmental reports has increased since the 1990’s (Kolk, 2005)Growth of CSR is concurrent with growth of rating/ranking schemes (Porter and Kramer, 2006)Too many schemes for cross-comparison (Brown et al., 2009)GRI created to provide unification (Willis, 2003)CSR and Institutional Theory

9. CSR and Institutional Theory

10. “The GRI has achieved a single, global guidance on sustainability reporting that just about everyone now believes in,” (Hussey et al., 2001)“Global Reporting Initiative is arguably the best known set of guidelines for producing such reports worldwide,” (Brown et al., 2009)GRI has become the de-facto standard for producing CSRCSR and Institutional Theory

11. GRI has attempted to promote Sustainable DevelopmentHart’s stages of Sustainable Development (1997)Pollution PreventionProduct StewardshipClean TechHart’s Corporate Greening Stages

12. GRI, DJSI, and NGR as Legitimacy and Reputational SignalsSampling SchemeEmpirical Environment and Approach

13. GRI – standardization and institutionalization provide legitimacy – still lacks comparisonsDJSI and NGR – provide relative standing outwardly to stakeholders via rankings/ratingsFavorable position can be a reputational benefitGRI, DJSI, and NGR as Legitimacy and Reputational Signals

14. H1: Firms reporting more sustainability activities are more reputableH2: Firms reporting more aggressive sustainability activities are more reputableH3: Firms conforming to legitimate CSR guidelines are more reputableHypotheses

15. 41 publically available CSR documents analyzedHierarchicalFortune 500 companiesSectors: Electronics, Retail, PetroChemicalDJSI inclusionPublished sustainability reportMatched control group of non-DJSI firms based on descending firm sizeSampling Scheme

16. Code Book DevelopmentData Environment for Quantitative AnalysisContent Analysis of Sustainability Reports

17. Content analysis good at finding themes in text (Bowman, 1978)Grounded Theory (Glaser and Strauss, 1967)Coding based on Hart’s Corporate Greening StagesPollution PreventionProduct StewardshipClean TechnologyCode Book Development

18. NVIVO 8 – transformed qualitative data (text) to quantitative data (coverage statistics)Coverage statistics aggregated in Excel and exported to SPSSAlso included firm-level and document statistics in SPSSFortune rank, DJSI inclusion, NGR rank, GRI use, page length, report year, etc.Data Environment for Quantitative Analysis

19. General statistics – mean, std. dev.Binomial Logistic Regression - DJSILinear Regression - NGRAnalytical Methods

20. Descriptive statisticsBinomial Logistic RegressionLinear RegressionResults and Discussion

21. Coverage – Pollution Prevention Breakout

22. Coverage – Product Stewardship Breakout

23. Descriptive Statistics for Firm Greening

24. Binomial Logistic Regression (n=41)Model Chi-Square = 13.832 (df = 7, sig. = .054). Model correctly categorizes 68% of companies.

25. Linear Regression (n=38)Adjusted R Sq. - .519,

26. Most discussions surround lowest-tier Pollution PreventionDJSI is a weak measure of reputationCSR content is related to third-party rankingAmount of env. info positively related to reputationUse of GRI guidelines can improve NGR rankingConclusions

27. Mixed results of hypothesesIndicates that reputation and legitimacy are not yet institutionalizedFuture research could expand to more recent CSR and broaden breadth of companies.Provide longitudinal example of changes and make more robust sampleTesting across different theoretical frameworksConclusions Cont.

28. BackgroundEmpirical Environment and ApproachContent Analysis of Sustainability ReportsResults and DiscussionConclusionReview

29. Thanks!Questions?