SUMMARY
This paper provides an empirical examination of the corporate social responsibility (CSR) assurance market in the United States. Various constituencies have found this market puzzling, as the level of assurance significantly lags international levels (Simnett et al. 2009; KPMG 2011). Results shed light on this enigma by demonstrating that, unlike their international counterparts, U.S. finance and utilities firms are not more likely (than firms in other industries) to obtain CSR assurance despite facing significant social and environmental risks. As these industries are highly regulated in the United States, regulatory oversight may be acting as a substitute for CSR assurance. We also find that highly leveraged firms are less likely to obtain CSR assurance, potentially due to stringent bank monitoring indirectly suppressing demand. Nonetheless, examining the capital market responses to CSR assurance makes the low demand even more puzzling. Specifically, CSR assurance is associated with lower cost of equity capital along with lower analyst forecast errors and dispersion. Furthermore, the reductions in cost-of-capital and forecast dispersion are significantly higher when CSR assurance is provided by an accounting firm. These results have implications for companies that are considering CSR assurance and accounting firms in developing and marketing their CSR assurance services.
SYNOPSIS
We report the results of a survey of 178 corporate responsibility officers designed to explore how accountants can add value to sustainability initiatives. Specifically, we examine how three areas of accounting expertise (risk identification and measurement, financial reporting, and independent review/assurance) contribute to the strategic integration of sustainability initiatives (cf. Porter and Kramer 2006; IIRC 2011). Our results indicate that accounting professionals are rarely involved in sustainability initiatives, but their involvement is highly associated with strategic integration. This finding suggests that increased involvement likely would provide significant benefits to organizations and their stakeholders. We use these and other important insights into a series of research questions for future accounting or interdisciplinary research in sustainability. These insights about accountants' ability to enhance the strategic integration of sustainability initiatives also should be of interest to accounting and consulting firms as they design and market their sustainability services.
Data Availability: Data are available upon request.
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