Does designing environmental sustainability disclosure quality measures make a difference?

Abstract

Assessing the quality of information disclosed by companies is a complex task. Accounting studies usually rely on analysing the content of corporate reports using measures to obtain a proxy for the information reported by companies. However, there is no consensus about the best design for these measures. The objective of the current paper is to investigate if there are significant differences in the results generated from seven alternative measures for assessing the quality of FTSE100 environmental sustainability reporting. Seven measures/indices have been used to assess disclosure quality. The three unidimensional measures include two “quantity measures” and one “scope measure” that measure the volume and width/coverage of information, respectively. Three compound measures are adopted from the literature, and the final measure is a multidimensional quality model, based on the results of a questionnaire ascertaining the perceptions of 86 preparers and 177 users of annual report (AR) and/stand‐alone corporate responsibility report (CRR). Although the results of the empirical analysis indicate that the measures are significantly correlated, the choice of a specific method can result in the very different ranking of companies. The evidence presented indicates that the choice of measure is of key importance.

Mandatory Nonfinancial Disclosure and Its Consequences on the Sustainability Reporting Quality of Italian and German Companies

“…Previous studies have successfully applied methods of content analysis to examine reporting practices in NFD [13,26,87,89,[113][114][115]. To avoid the risk of subjectivity that is typical in this methodology [23] (p. 418), the research adopted binary indicators, and applied consistent actions to guarantee the reliability of the analysis [26]. This methodological approach has previously been adopted to identify the quality of reporting in relation to matters such as the environment [22] and labor [116].…”

“…In this context, the concept of SRQ is clearly crucial, and was addressed in several studies [15][16][17][18]20,23,26]. One issue is that there is no unanimously accepted notion of "quality" in relation to disclosure [12,67]; in addition, it is recognized that the quantity of disclosure is not a good proxy for the quality of disclosure [2].…”

“…Alternative models developed by researchers focus on different aspects of the multiple dimensions of SRQ, and Helfaya and Whittington [26] found that different evaluation instruments affect rankings of companies based on SRQ despite the results of different evaluation scales being strictly correlated.…”

Opening up the firm: What explains participation and effort in voluntary carbon disclosure by global businesses? An analysis of internal firm factors and dynamics

“…The CDP continues to publish "A to D-" environmental performance scores. Helfaya and Whittington (2019) investigates if there are significant differences in the results generated from alternative measure for assessing the quality of environmental sustainability reporting by the FTSE100 companies. The authors find that the "quantity measures" and "scope measure" are significantly correlated but the choice of a specific method can result in different ranking of companies.…”

“…Similarly, Berthelot and Robert () develop a disclosure index using content‐analysis technique based on the Canadian Institute of Chartered Accountant (CICA) climate change disclosure recommendations for examining Canadian oil and gas firms. A recent study by Helfaya and Whittington () investigates if there are significant differences in the results generated from alternative measure for assessing the quality of environmental sustainability reporting by the FTSE100 companies. The authors find that the “quantity measures” and “scope measure” are significantly correlated but the choice of a specific method can result in different ranking of companies.…”