A double-edged sword: materiality classifications of sustainability topics
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View abstract on PubMed
Summary
This summary is machine-generated.Firms improved sustainability performance on topics deemed material by the Sustainability Accounting Standards Board (SASB), while worsening on non-material topics. This shift was driven by shareholder pressure and executive compensation linked to sustainability.
Area Of Science
- Corporate Sustainability
- Financial Reporting
- Environmental, Social, and Governance (ESG) Performance
Background
- The Sustainability Accounting Standards Board (SASB) categorizes sustainability issues as material or non-material for investors.
- Understanding how these classifications influence corporate behavior is crucial for assessing sustainability performance.
Purpose Of The Study
- To investigate whether and how SASB classifications impact U.S. firms' sustainability performance.
- To analyze the channels through which these changes occur.
Main Methods
- Utilized staggered release of SASB classifications (2013-2016) as a natural experiment.
- Measured corporate sustainability performance using RepRisk scores, reflecting ESG incidents.
Main Results
- RepRisk scores decreased for material sustainability topics post-SASB classification release.
- Scores increased for non-material sustainability topics, indicating a shift in focus.
- Firms adjusted internal policies to align with SASB classifications.
Conclusions
- Firms prioritize sustainability topics deemed material by SASB, potentially at the expense of non-material issues.
- Shareholder pressure and executive compensation incentives drive these changes in corporate sustainability focus.
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