Businesses that are transparent in reporting their environmental practices perform better than those whose practices are more opaque, according to a new paper by Concordia University in Canada.
Researchers examined the driving forces behind 78 US firms’ disclosures of their environmental practices from 1997 to 2010. Michel Magnan, professor of accountancy at Concordia University’s John Molson School of Business, said many people remain sceptical of businesses and “will adopt a cynical perspective regarding what corporations choose to disclose”. With stakeholders paying more attention to environmental issues, Magnan said there was an added pressure on businesses to “come clean” on their environmental impact.
The researchers separated the firms into two groups based on public information, regulatory findings and the firms’ own disclosure reports.
They designated companies as ‘high or low performers’ compared to existing government regulations, meaning they respected guidelines on pollution and emissions.
According to the research, high- and low-performing companies adopted different patterns when disclosing environmental policies. High performers provided more information and hard data because they were doing well, but poor performers attempted to manage public perception of their impact without any specific data.
“Some firms will be more forthcoming early on,” said Magnan. “The costs will be less, and it shows they are operating in good faith.”