Objective Sustainability Assessment in the Digital Economy: An Information Entropy Measure of Transparency in Corporate Sustainability Reporting

Abstract

The Internet is now a central enabler for sharing sustainability information. Yet, such enablement is complicated through an exponentially increasing array of information. What is lacking in the digital economy are objective and transparent mechanisms to provide reliable assessments of the published sustainability information in a timely and efficient manner. In addressing such limitation, this research proposes an objective automated mechanism for measuring transparency in sustainability reporting using an information entropy-based approach. Through text-mining methods and expert validation, the study built a sustainability dictionary corpus and then applied the corpus for objectively assessing the relative entropy between the probability distributions of words in the sustainability dictionary and those in corporate reports. To demonstrate its effectiveness, the mechanism was empirically applied to compare sustainability reporting of organizations in the energy sector. Here, the research effectively compared cartels with non-cartels by assessing the sustainability reports of major OPEC (Organization of the Petroleum Exporting Countries) and non-OPEC producers spanning a three-year period and found consistent differences in transparency between the two groups. The findings demonstrate likely normative transparency pressures on disaffiliated producers for which cartels may be immune. The automated mechanism holds important theoretical and practical contributions to the field of sustainability as it provides a rapid and objective means for textual analysis of sustainability information, thus promoting transparency in sustainability reporting in the rapidly evolving digital economy.

Digital Economy, Environmental Regulation and Corporate Green Technology Innovation: Evidence from China

“…With the development of the digital economy, the level of Internet technologies such as big data, the Internet of Things and 5G networks has been continuously improved. Therefore, high-level Internet technical support can provide an effective basic technical guarantee for CGTI [ 5 ]. The high-quality regional collaborative innovation capability can provide a strong development impetus for regional CGTI.…”

Sustainable Corporate Governance: The Impact Factors for Top Consulting Engineering Companies in Taiwan

“…Therefore, practical principles prohibit managers from working at both listed companies and their affiliated companies concurrently. A parent company and its affiliated companies should not hire the same managers due to problems with benefit transfer [25][26][27][28].…”

“…In conclusion, the aspects and number of questions asked in this questionnaire are as follows: protecting shareholders' rights and interests (6 questions), treating shareholders equitably (8 questions), strengthening the structure and operation of the board of directors (8 questions), increasing information transparency (8 questions), implementing corporate social responsibility (8 questions), and setting up a firewall (8 questions)-46 questions in total. The relationships between the variables and their corresponding hypothesis are based on the concept of structural equation modeling (SEM), the 9 hypotheses, and the literature review suggestions discussed in Section 2.3 [7,[25][26][27][28]. For example, in Figure 1, Hypothesis 1 suggests that PR has a position with CF, using questions PR1-PR6.…”

“…For example, in Figure 1, Hypothesis 1 suggests that PR has a position with CF, using questions PR1-PR6. All questions were mainly derived from the suggestions of the articles in the Corporate Governance Best Practice Principles for TWSE/TPEx Listed Companies [7] and partially from the references [25][26][27][28]. The full names for each question in the sequence are as follows: minute disclosure (PR1), director attendance (PR2), chairperson attendance (PR3), denied motion (PR4), no dividends to board directors (PR5), less than 50% of shares held by board directors (PR6), shareholder meetings as scheduled (TE1), agenda transparency for shareholder meetings (TE2), financial statement transparency for shareholder meetings (TE3), English agendas for shareholder meetings (TE4), English financial statement transparency for shareholder meetings (TE5), execution report for previous shareholder meetings (TE6), information obstacles (TE7), single shareholder weighted over 1/3 (TE8), female directors (SO1), extra directorships (SO2), auditing availability for the board (SO3), governance availability for the board (SO4), risk management availability for the board (SO5), performance availability for the board (SO6), training availability for the board (SO7), property management availability for the board (SO8), timely disclosure of financial statements (IT1), English financial statement availability (IT2), revised edition for financial statements (IT3), financial flaws in financial statements (IT4), industrial trend statements (IT5), disclosure for major shareholders (IT6), financial information disclosure on websites (IT7), investor conferences twice a year (IT8), corporate division for social responsibility (FC1), social responsibility plan setup (FC2), disclosure for social responsibility results (FC3), disclosure for promoting employees' welfare (FC4), disclosure of waste quantities (FC5), strategy for reducing waste (FC6), disclosure of interest avoidance (FC7), disclosure of illegal and unethical matters (FC8), firewall among all departments and divisions (CF1), avoidance of professional manager concurrence (CF2), regulation of directors' personal conduct (CF3), secrecy of business knowhow among all internal departments (CF4), avoidance of benefit transfer (CF5), firewall for subsidiary companies (CF6), reporting channel for misconduct (CF7), and protection for reporters (CF8).…”

Information Content Measurement of ESG Factors via Entropy and Its Impact on Society and Security

“…As each ESG pillar value reflects information that is being sent to the recipient, our research contributes to closing the existing knowledge gap between the digital economy's objective and transparent mechanisms to provide reliable assessments of the published sustainability information. Zakaria et al (2021) [10] compiled a sustainability dictionary corpus and implemented the corpus to objective assess the relative entropy between the probability distributions of words in the sustainability dictionary and those in corporate reports.…”