A follow up on Stakeholder Influence on a Company’s Public Reporting 

Participating in integrated reporting does not necessarily mean a company is sustainable. Integrated reporting- reporting that goes beyond traditional financial statements to include information about a company’s impact on the community and the environment- is only a means for a company to express their sustainability measures, although some companies who do voluntarily provide such information can misconstrue their actual practices.

Environmental Leader recently wrote an article on research conducted by a management professor at the University of Notre Dame, Sarv Devaraj, and a 2010 MBA graduate student at Notre Dame, Suvrat Dhanorkar, which compared the relationships between the statements companies made regarding “their beliefs and actions on the dimensions of sustainability” and the actual performance of these companies on these sustainability dimensions.

To measure such relationships, Devaraj and Dhanorkar correlated a company’s annual 10-K report and the statements they made regarding sustainability with the company’s greenhouse gas (GHG) emission intensity and their Newsweek rankings on sustainability. They found that “companies that actually tout their beliefs quite a bit are in fact the ones that are not performing as well on the sustainability dimensions.” There was an overall negative relationship between what a company said it believed in and their true standing on sustainability performance.

Devaraj announced that he was expanding his study to a longer timeframe, as the relationship between reporting and sustainability performance may become positive over a longer period of time for many companies He says that overall he wants his research to lead to a more “transparent (and) standard policy or procedure about reporting environmental disclosure so that the public and stakeholders can judge companies on equal footing.”

Reporting in a way that misinterprets a company’s actual sustainability measures and operations can only have a negative impact on that company’s image. When stakeholders request more information, it is best for companies to be upfront and honest.