The association between sustainability governance characteristics and the assurance of corporate sustainability reports

Gary F. Peters, Andrea M. Romi

Research output: Contribution to journalArticle

107 Scopus citations

Abstract

This study provides evidence on whether sustainability-oriented corporate governance mechanisms impact the voluntary assurance of corporate sustainability reports. Specifically, we consider the presence and characteristics of environmental committees on the Board of Directors and a Chief Sustainability Officer (CSO) among the management team. When examining assurance services, we make a distinction between those services performed by professional accountants, consultants, and internal auditors. We find that the presence of a CSO is positively associated with corporate sustainability report assurance services, and this association increases when the CSO has sustainability expertise. Supporting the position that some firms establish sustainability-related governance merely to conform to socially desired behavior, we find that only those environmental committees containing directors with related expertise influence the likelihood of adopting sustainability assurance. Presently, environmental committees with greater expertise appear to prefer the higher-quality assurance services of professional accounting firms. Expert CSOs, on the other hand, prefer assurance services from their peers with sustainability expertise, as evidenced by their choice to employ consultants. When analyzing firms’ environmental contextual characteristics, we find that firms employing a CSO and exhibiting poor environmental performance, relative to other firms in their industry, prefer to report sustainability results without assurance. While we do find that larger firms in the U.S. are significantly less likely to employ assurance, this result decreases over time. Further, we provide initial evidence that the value-relevance of sustainability assurance is increasing with time.

Original languageEnglish
Pages (from-to)163-198
Number of pages36
JournalAuditing
Volume34
Issue number1
DOIs
StatePublished - Feb 2015

Keywords

  • Assurance providers
  • Chief sustainability officers
  • Corporate governance
  • Environmental committees
  • Sustainability assurance
  • Sustainability assurance determinants

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