Bidirectional effects between organizational sustainability disclosure and risk

Sustainability reporting (SR) does not ensure the factual application of sustainable practices. It is possible that companies with risky practices increase their SR as a window dressing measure, but also that SR improves transparency and thus, decreases company risk.
 
This study explored the bidirectional relationship between SR and risk. The study investigated 59 listed companies from South Africa between 2012 and 2016. Environmental, social, and governmental scores were used to assess the effect of SR on total, systematic, and idiosyncratic risk. Analysis revealed that SR reduces systematic risk in subsequent periods.
 
Tentative evidence could be found that higher systematic risk leads to less disclosure on governance issues.
 
Managers benefit from these insights by better understanding how sustainable practices can improve the market's assessment of a company's systematic risk.
 
Investors can learn from this study which reporting strategies managers choose as a response to changing risk perceptions in the market.
Learn more about the study here

 

Impact of the project

  • Published in Journal of Cleaner Production (IF: 6.4)
  • Invited for further publication.
 
Researchers
Klarissa Lueg, associate professor
Research group: Center for Narratological Studies
Department: Department of Design and Communication