COB Accounting Professors
Investigate Impacts of 'Words' versus 'Actions'
Due to rising social concerns with global warming and recent catastrophic events such as the BP oil spill, corporations are facing increased exposures regarding their environmental performance. Several organizations now provide listings or indexes that rank, rate, and categorize firms with respect to their environmental (and sometimes social) roles. Examples include the Dow Jones Sustainability Index (DJSI) and Newsweek magazine's annual ranking of the 'greenest companies in America'. Corporate management thus has an incentive to project a positive image of their company's environmental impacts and one way they can do this is through disclosure of information in corporate reports.
Dr. Den Patten and Dr. Ron Guidry, Accounting Professors in the College of Business, in a recent study with two other scholars, investigate whether corporations' use of disclosures about environmental impacts influences perceptions of their environmental reputations. Using data from the 2009 Newsweek rankings and disclosure metrics measuring disclosure in company financial and social responsibility reports, they find that both membership in the DJSI and differences in environmental reputation scores are negatively related to measures of companies' actual environmental performance. They argue this unexpected relation is potentially due to the corporations' use of disclosure in that findings also indicate that worse performing companies make significantly more extensive environmental disclosures and that the disclosure is found to be positively related with membership in the DJSI and the environmental reputation scores. They conclude that, unfortunately, words, not actions, appear to be driving corporate environmental assessments.
This work entitled 'Do actions speak louder than words? An empirical investigation of corporate environmental reputation'
appeared in the journalAccounting, Organizations and Society
, 2012, 37, 14-25.