‘Mere Puffery’ or Credible Disclosure? The Real Effects of Adopting Voluntary ESG Disclosure Standards

Abstract

In this paper, we examine the factors associated with corporate adoption of voluntary disclosure standards for sustainability reporting and the consequences of such a commitment. Using data on companies’ voluntary adoption of sustainability standards developed by the Sustainability Accounting Standards Board (SASB), we find that peer behavior, sustainability-focused institutional ownership, company visibility, and performance are among the main determinants of SASB standards adoption. In terms of consequences, we find improvements in broader as well as more specific sustainability outcomes. Namely, we find that SASB standards adopters have fewer negative sustainability-related incidents and violations, higher sustainability ratings, lower Scope 1 emissions, lower toxic releases, and fewer work-related injuries. These results inform our understanding of the conditions under which voluntary sustainability standards are likely to be adopted by companies and the potential real effects of such voluntary adoption.

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