Credible disclosure or mere puffery? Empirical evidence on the voluntary use of sustainability disclosure standards

Abstract

In this paper, we examine companies’ voluntary adoption of sustainability disclosure standards developed by the Sustainability Accounting Standards Board (SASB). Specifically, we study which company characteristics help explain the use of SASB standards and examine whether voluntary use is associated with sustainability-related activities and market-based outcomes. We find that peer behavior, sustainability-focused institutional ownership, company size and performance, and sustainability-related governance factors are key determinants associated with SASB adoption. Moreover, SASB adoption appears to be a highly persistent and progressively comprehensive disclosure choice that is significantly associated with stronger sustainability performance, such as lower greenhouse gas emissions and lower pollution levels, particularly when the SASB standards identify those issues as financially material topics. Finally, SASB adoption is associated with greater price informativeness, suggesting that investors get additional firm-specific information from companies' adoption of the standards.

Keywords: sustainability reporting standards; Sustainability Accounting Standards Board (SASB); environmental, social, and corporate governance (ESG) issues; voluntary disclosure