When it comes to sustainability, are companies walking the walk, or just talking?
The answer appears to be more talk, less walk, according to recent research by Sarv Devaraj, Notre Dame management professor, and Suvrat Dhanorkar, a 2010 graduate of the Notre Dame MBA program.
Their paper, “Do as I Say, Not as I Do—An Empirical Examination of the Relationship between Corporate Sustainability Beliefs and Performance,” related 24 key sustainability phrases in the 10K statements of Fortune 200 companies with actual performance measures.
Surprisingly, they found a negative relationship: Companies that used sustainability keywords most often in their 10K reports had higher GHG emissions and lower environmental rankings.
“One of the reasons for the negative finding could be that companies are including mentions of sustainability in their annual reports because the topic increasingly is important to investors, even though operational measures haven’t yielded actual performance results as yet,” said Devaraj.
Companies can expect closer scrutiny of their words and actions used in relation to their sustainability beliefs, added Devaraj. “I think what all of this is going to lead toward is a more transparent, more standard procedure for reporting environmental disclosures.”
Devaraj and Dhanorkar’s research recently won the prestigious “Best Environmental Issues Paper” out of 1,100 entries. The award is given by the International Conference of the Decision Sciences Institute (DSI).