- 19 Aug 2011
- Working Paper Summaries
The Globalization of Corporate Environmental Disclosure: Accountability or Greenwashing?
Executive Summary — Between 2005 and 2008, the world saw a dramatic increase in corporate environmental reporting. Yet this transition toward greater transparency and accountability has occurred unevenly across countries and industries. Findings by professors Christopher Marquis and Michael W. Toffel provide the first systematic evidence of how the global environmental movement affects corporations' environmental management practices. Firms' use of symbolic compliance strategies, for instance, is affected by specific corporate characteristics and by institutional context. This study contributes to a larger body of research on the effects of global social movements and environmental reporting. Key concepts include:
- Marquis and Toffel study more than 4,600 large publicly traded companies headquartered in 46 countries.
- They first examine the extent to which environmental pressures from governments and civil society influence corporate environmental transparency.
- Greater environmental disclosure was exhibited by companies headquartered in countries whose governments are better connected to the global environmental movement via international environmental institutions, and whose citizens are more connected to globalization and are afforded greater civil liberties and political rights.
- They also identify factors associated with greenwashing, where corporations selectively disclose benign environmental impacts to create an impression of transparency and accountability, while masking their true environmental performance.
- Visible companies' tendency to selectively disclose was tempered when headquartered in countries whose governments were better connected to the global environmental movement, and whose citizens are more connected to global society and are afforded greater civil liberties and political rights.
Despite the increase in corporate environmental disclosure, there remains substantial heterogeneity in the extent to which corporations reveal their environmental impacts. To better understand this heterogeneity, we identify key country- and organization-level determinants of corporate environmental disclosure. We focus on institutional factors related to firms' global embeddedness to describe how external environmental pressures emanating from governments and civil society influence corporations environmental transparency. We also focus on the extent to which corporate environmental disclosure is symbolic and, in particular, what leads corporations to selectively disclose relatively benign environmental impacts to create an impression of transparency while masking their true environmental performance. We hypothesize that key organizational characteristics reflecting visibility, such as size and environmental impact, shape this type of symbolic compliance and that these relationships are moderated by institutional pressures. We test our hypotheses using a novel panel dataset of 4,646 public companies in many industries, headquartered in 46 countries during 2005-2008, when environmental disclosure increased among many global corporations. Controlling for a host of organizational, industry, and national characteristics, we find evidence to support most of our hypothesized relationships. Contributions to understanding the decoupling of globalization processes and how organizations respond to institutional change are discussed.