Determinants of corporate environmental reporting: the importance of environmental performance and assurance

Companies are increasingly held accountable for the impact of their decisions and activities on the environment. These developments have been associated with a heightened tendency for companies to publish a variety of information on environmental topics in corporate environmental or sustainability reports. This study explores relationship between the level and nature of voluntary corporate environmental reporting (CER) practices, multiple corporate environmental performance metrics and external assurance. For this reason, measures of greenhouse gas emissions, waste production and water consumption were quantified and a distinction was made between corporate environmental reports with or without external assurance for a sample of Dutch companies during the period 2009-2011. Our results show that greenhouse gas emissions and water consumption, and external assurance play a significant, incremental role in explaining the variation in the level and nature of CER. The results support the view that legitimacy plays an important role in companies' choices concerning environmental disclosure. At the same time, our descriptive statistics indicate that companies systematically disclose an incomplete picture of how their decisions and activities affect the environment. Our findings suggest a need to complement voluntary CER with mandatory requirements for sustainability reporting in combination with strong enforcement mechanisms to urge companies to become more accountable in terms of environmental performance.