An important implication of our findings is that voluntary
environmental disclosure appears to be an effective
tool for reputation risk management. However, while business
managers may see this as good news, proponents of
improved corporate environmental performance might
view it in a more negative light. As noted by Hopwood
(2009), it appears that many, particularly larger, companies
tend to channel their environmental disclosures more
toward discussion of strategies and policies than toward
providing meaningful performance information. To the
extent that this disclosure lessens the potential negative
effects of performance in the social and political arenas,
the disclosure may actually reduce the incentives companies
have for bettering their actual environmental performance
in the future. This would seem to be contrary to
the desires of society. Perhaps even more troubling, our results
appear to indicate that the DJSI, one of the most visible
proclaimed indicators of excellence in corporate
sustainability, is far more influenced by what companies
say (their environmental disclosure) than by what they
do (their environmental performance). Thus, like voluntary
disclosure, the DJSI may actually be hindering improved
future corporate environmental performance. Investigating
the relation between changes in either environmental reputation
or DJSI membership and subsequent environmental
performance would be a potentially interesting extension
of our study.
An important implication of our findings is that voluntary
environmental disclosure appears to be an effective
tool for reputation risk management. However, while business
managers may see this as good news, proponents of
improved corporate environmental performance might
view it in a more negative light. As noted by Hopwood
(2009), it appears that many, particularly larger, companies
tend to channel their environmental disclosures more
toward discussion of strategies and policies than toward
providing meaningful performance information. To the
extent that this disclosure lessens the potential negative
effects of performance in the social and political arenas,
the disclosure may actually reduce the incentives companies
have for bettering their actual environmental performance
in the future. This would seem to be contrary to
the desires of society. Perhaps even more troubling, our results
appear to indicate that the DJSI, one of the most visible
proclaimed indicators of excellence in corporate
sustainability, is far more influenced by what companies
say (their environmental disclosure) than by what they
do (their environmental performance). Thus, like voluntary
disclosure, the DJSI may actually be hindering improved
future corporate environmental performance. Investigating
the relation between changes in either environmental reputation
or DJSI membership and subsequent environmental
performance would be a potentially interesting extension
of our study.
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