Seminar – Sustainability reporting and the public good

In the face of grand societal challenges, companies are expected to balance the demands of capital providers with contributing to the public good. Sustainability reporting regulations worldwide increasingly require companies to disclose information that enables the evaluation of public good contributions. This proposal outlines a large-scale experiment designed to investigate the role of two fundamental features of sustainability reporting—disclosure reach (i.e., internal vs. external reporting) and measurement approach (i.e., cash input vs. output value)—in promoting corporate public good contributions. We hypothesize that the impact of sustainability reporting on public good contributions depends on whether disclosure reach and measurement approach increase trust and foster coordination both within and across firms. We expect public good contributions to increase when more information is disclosed for both internal and external reporting purposes. Furthermore, we predict that investors’ willingness to invest increases when provided with information on managerial actions regardless of the measurement approach. Finally, we hypothesize that the measurement approach used to report public good contributions affects managers’ decisions regarding dividend distributions to investors. Our findings will extend the literature on the role of financial and sustainability reporting by demonstrating how fundamental features of the accounting system can help address sustainability-related challenges.

REC M4.02