The failure of transparency as self-regulation

Abstract

Purpose This paper aims to examine the existence of a transparency gap between voluntary external sustainability reporting and internal sustainability performance of an organisation arising from the operationalisation of transparency as an instrumental tool. Design/methodology/approach This study combined an analysis of a firm’s sustainability report (secondary data) with a qualitative case study data (primary data comprising interviews, meetings and internal documents) to understand how the Global Reporting Initiative (GRI) sustainability reporting guidelines are applied in practice. Findings By comparing what is reported with a range of primary case study data, this study finds evidence of transparency gaps, particularly in terms of the quality of measurement of sustainability performance, the materiality of issues covered and the completeness of the report. This study posits that voluntary disclosures following the GRI guidelines (transparency technique) shape the external expression of acceptable corporate behaviour (transparency norm) that is nevertheless at odds with actual behaviour or performance. Practical implications The findings indicate the importance of mandatory sustainability reporting requirements that facilitate accountability to all key stakeholders and that are externally assured and enforced. Such requirements might take the form of standards that put boundaries on judgement and address material sustainable development impacts and that are accompanied by implementation guidance. Non-financial assurance practices must be developed to cover adherence to reporting principles and processes. Social implications Transparency gaps that result from voluntary disclosure guidelines or standards being used to imply a transparency norm may undermine accountability for the impacts of the organisation and hinder alignment of business models and corporate strategies with sustainable development. Originality/value The paper contributes to a theoretical understanding of transparency as a form of self-regulation and has implications for the further development of sustainability reporting standards.

Key aspects of sustainability reporting quality and the future of GRI

“…These examples may also suggest a key role of GRI in “setting standards in the public interest”. Leeson and Kuszewski (2023) support the discussion by Vigneau and Adams (2023) regarding the need to push stakeholder engagement to progress the quality of sustainability reporting. The difference is that while Vigneau and Adams (2023) refer to stakeholder engagement at the organisational level (e.g.…”

“…Leeson and Kuszewski (2023) support the discussion by Vigneau and Adams (2023) regarding the need to push stakeholder engagement to progress the quality of sustainability reporting. The difference is that while Vigneau and Adams (2023) refer to stakeholder engagement at the organisational level (e.g. taking stakeholders into account in the design of the materiality matrix and putting the results of this exercise into practice), as discussed above.…”

“…Overall, these two articles lead us to reflect on the key role that GRI could play in improving the quality of reporting in accordance with the GRI Reporting Principles such as comparability and materiality. The findings of these pieces, in particular the findings of Vigneau and Adams (2023), reveal the importance of addressing another important reporting topic: assurance. As Vigneau and Adams (2023) argue, both assurance and mandatory requirements are necessary to “facilitate accountability to all key stakeholders” and that “such requirements might take the form of standards that put boundaries on judgement and address material sustainable development impacts and that are accompanied by implementation guidance [… and …] assurance practices must be developed to cover adherence to reporting principles and processes”.…”

Evaluating the outcome effectiveness of the global reporting initiative transitions

“…Voluntary disclosures following the GRI framework may also shape an external expression of acceptable corporate behaviour (transparency norm) that is different from the actual behaviour or performance of the company (Vigneau and Adams, 2023). Studies have revealed a transparency gap between voluntary external sustainability reporting using the GRI framework and internal sustainability performance (Zharfpeykan and Akroyd, 2022; Vigneau and Adams, 2023). Specifically, companies may not integrate GRI issues that they consider to be material in their internal performance measurement systems and report them externally (also supported by our study) (Zharfpeykan and Akroyd, 2022).…”

“…Specifically, companies may not integrate GRI issues that they consider to be material in their internal performance measurement systems and report them externally (also supported by our study) (Zharfpeykan and Akroyd, 2022). Therefore, the selective nature of voluntary reporting plus the disengagement of these reports from real sustainable activities highlights the importance of imposing mandatory sustainability reporting requirements to enhance accountability for all stakeholders (Vigneau and Adams, 2023).…”