Corporate Sustainability
Our scholars in this research cluster are committed to investigating the measurement and disclosure of corporate environmental and social performance. Our researchers delve into various aspects of this topic, including the factors that determine the quality of ESG ratings and sustainability reporting and disclosure. Our experts also explore the tangible impact that corporate sustainability disclosure can have on both financial and real outcomes. Through our research, we aim to advance understanding of the role that businesses can play in creating a more sustainable future and to support the development of effective policies and practices to promote sustainable business practices.
We highlight a selection of our faculty’s research into corporate sustainability below:
Corporate Disclosures for Green Supply Chains: Evidence from Scope 3 Emissions Disclosure
The paper sought to understand the role of corporate disclosures in greening supply chains – specifically, whether Scope 3 emissions disclosures can be used to reduce an organisation’s carbon emissions. Scope 3 emissions are those that are not produced by the organisation directly and are not the result of activities from assets that are either owned or controlled by them.
The results of Prof Yang’s study suggest that mandating the disclosure of Scope 3 emissions information will help to reduce the emissions of greenhouse gases.
Author(s): Holly Yang, Associate Professor of Accounting , Cho Young Jun, Associate Professor of Accounting , Kim Jungbae, Assistant Professor of Accounting , Yang Mengjie, PhD in Accounting student
Published in/Presented at: MIT Asia Conference in Accounting 2023
ESG Reporting Divergence
With the array of different reporting frameworks that are in use, there can be inconsistencies in certain reported information – for example, carbon-monoxide emissions are not reported under certain frameworks. Where certain disclosures are not mandated, companies can also choose what they want to disclose, which makes it difficult for users to compare these firms with their peers.
The study found that ESG reporting divergence results in more ESG-rating disagreements between rating providers like Sustainalytics, MSCI and Bloomberg. Additionally, this divergence increases the costs associated with processing ESG information and makes the information less useful to ESG-rating providers and fund managers.
Author(s): Cheng Qiang, Lee Kong Chian Chair Professor of Accounting, Lou Yun, Associate Professor of Accounting, Ms Yang Mengjie, PhD Accounting student
Published in/Presented at: MIT Asia Conference in Accounting 2023
Going Green: The Effect of Environmental Regulations on Firms
While there exists a belief that environmental regulations impose costs that drive down the productivity of regulated firms, previous research had argued that stricter environmental policies can lead to innovations and sustainable business practices that, in fact, reduce energy costs and operational efficiencies, especially in terms of long-term gains.
The findings from this study support this argument, showing that stricter environmental regulations are associated with an improvement in firm value. This improvement in value is a result of the introduction of green innovations, as well as the increased R&D performance of regulated firms.
Author(s): Grace Fan, Assistant Professor of Accounting, Singapore Management University, Xi Wu, Assistant Professor, University of California, Berkeley
Published in/Presented at: MIT Asia Conference in Accounting 2023
When Do Corporate Good Deeds Become a Burden? The Role of Corporate Social Responsibility Following Negative Events
This study investigates the differential roles of corporate social responsibility (CSR) in the context of negative events. By categorizing CSR and negative events by their respective stakeholder groups, primary and secondary stakeholders, the authors theorize and test differential impacts of CSR and their interaction effects with different types of negative events.
Author(s): Yoonseok Zang, Associate Professor of Accounting, Singapore Management University, Changhyun Kim, China Europe International Business School (CEIBS), Heli Wang, Lee Kong Chian School of Business, Singapore Management University, Kate Niu, China Europe International Business School (CEIBS)
Published in/Presented at: Journal of Business Ethics
The uneven benefits of CSR efforts
To determine the effect of sustainability-related activities on firm value, academics from SMU and INSEAD have embarked on a research project that effectively narrows the scope of CSR efforts to concrete and measurable environmental and social (E&S) activities; for example, redesigning factory processes to reuse water. By zooming in on observable improvements in future operating performance and stock returns, the researchers were able to quantify how E&S activities led to benefits for some – but not all – firms. Interestingly, the impact of E&S activities on future operating performance was largely dependent on company-specific factors such as the nature of assets owned by the business.
Author(s): Grace Fan, Assistant Professor of Accounting
Published in/Presented at: Research@SMU, SMU/NUS/NTU Accounting Research Conference 2021
Can High Quality Financial Audit Assurance Substitute for CSR Assurance? Evidence from Spillover Effects of Engaging Big N Auditors
We investigate the spillover effect of Big N financial auditors on client firms’ CSR disclosure quality. Using an international sample of firms from 34 countries over the period 2008-2018 and using a measure of CSR disclosure quality from Sustainalytics, an independent CSR research firm, we find strong evidence that Big N auditors are positively associated with CSR disclosure quality. In cross-sectional analysis, we find that the relation between Big N auditors and CSR disclosure quality is accentuated when the information environment is poorer and when the financial reporting environment and legal institutions are weaker. Finally, we document that firms with Big N auditors also exhibit better CSR performance. Our study extends the literature by showing that engaging Big N auditors has positive spillover effects that enhance both CSR disclosure quality and CSR performance.
Author(s): Jimmy Lee, Associate Professor of Accounting, Singapore Management University, Chee Yeow Lim, Associate Professor of Accounting, Singapore Management University, Gerald J. Lobo C.T. Bauer College of Business University of Houston, Yanping Xu Management School Jinan University
Published in/Presented at: Accounting Research Summer Camp