IOIAP

• Ref.: PID2021-128333NB-I00
• Principal Investigator: Josep Bisbe / Petya Platikanova
• Research group: GREF
• Funding body: Generación de Conocimiento 2021 Ministerio Ciencia e Innovación
• Funding: 84.700,00 €
• Duration: 48 months

Summary: 

In recent years, we have witnessed an unprecedented interest in sustainability-related issues: governments, households, regulators, media, and corporations all face an increasing pressure to operate with social and environmental responsibility. Corporations are now required to meet competing demands from stakeholders with diverse sustainability-related needs. Starting from the common belief that corporate sustainability creates long-term value for all stakeholders, in this proposal we argue that sustainability practices, along with information flows regarding such practices, are shaped by internal management systems and by disclosure policies. We seek to develop and integrate inside-out and outside-in accounting perspectives on sustainability (Maas et al., 2016; Grewal and Serafeim, 2020), and so adopt a holistic accounting-based view of ESG management and reporting. Inside-out perspectives consider a performance improvement-oriented management view and focus on internal management processes and decisions regarding ESG practices, as well as on their implications. Outside-in perspectives on sustainability in contrast consider a disclosure-oriented view and focus on the ESG information publicly communicated to external stakeholders and its implications. The integration of both perspectives entails the examination of whether and how internal management processes and decisions regarding ESG practices and ESG public disclosure in corporate communications are associated.

The project is organised in three main parts. In Part 1, we adopt an inside-out perspective that focuses on management accounting practices. More specifically, we examine the conditions under which management control systems can contribute to improve internal decision-making around ESG performance and, hence, contribute to a more effective management of sustainability issues. We examine what are the broader-scope configurations of management control practices that companies use to manage different sustainability strategies. We further examine how top management teams use management control systems to deal with the complex information processing activities that result from the multiple and diverging objectives associated with sustainability.

In Part 2, we adopt an outside-in perspective from a financial accounting angle that focuses on the demand for sustainability information in corporate disclosure to external stakeholders and the effects of such disclosure. In this part, we examine how ESG practices are presented in corporate communication, with a focus on the use of alternative disclosure channels and the real effect of ESG disclosure on the ESG achievements. In this part, we are interested in financial analysts and their expectation regarding sustainability performance, creditors and their willingness to offer better lending conditions to ESG-intensive borrowers, and investors with their effect on compensation contracts.

Finally, in Part 3, we integrate the inside-out and outside-in perspectives with a close examination of the relationships between internal management control practices and external reporting on ESG-related topics. In this part, we explore a unique setting, where Spanish public and private companies disclose ESG indicators as mandated by accounting standards (i.e., non-financial disclosure required since 2018).