Does greater transparency make companies more sustainable? New research suggests it certainly makes them more accountable.
A study published in the Journal of Management Studies shows that mandatory sustainability reporting has led to greater public scrutiny of businesses across Europe. By making company disclosures easier to compare, the rules have given journalists, NGOs and investors more tools to hold organisations to account.
Researchers analysed data from more than 1,500 companies between 2007 and 2018 and found that businesses required to disclose information about their environmental, social and governance (ESG) activities faced significantly more public accusations of irresponsible conduct.
According to lead author Julia Bartosch of Radboud University, this isn’t a sign that the rules have failed—it’s evidence that they’re working. More detailed reporting raises expectations, making it easier for stakeholders to identify gaps between companies’ sustainability ambitions and their actions.
The findings come as European policymakers consider easing reporting requirements to reduce administrative burdens. But the researchers argue that weaker, more voluntary rules are unlikely to benefit businesses in the long run, as they make it harder to distinguish genuine sustainability leaders from those making little more than green claims.
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