By Charles Cho, PhD, Professor of Social and Environmental Accounting, Head of Accounting and Management Control Department, Director of the Centre of Excellence for Management & Society, ESSEC Business School.
By kind permission of ESSEC Knowledge
Today, talk of “sustainability” is everywhere, from the corporate boardroom to the global stage. The term pops up in most corporate communications materials, in quarterly and annual reports, and is increasingly the subject of stand-alone sustainability reports which document the economic, environmental, social, and governance performance of firms. But what does all this talk really say about the social and environmental impacts of businesses? Will it really help the world move towards a less unsustainable future?
Despite a substantial body of existing research on the subject, it is still very difficult for the experts to answer this question.
Of course, there is a wide recognition that a significant gap exists between what sustainability reports say, and what corporations actually do. However, some researchers have argued that these reports can still have a positive impact because they help make corporations more accountable and transparent about their social and environmental impacts. Others researchers, meanwhile, argue that they will only have a limited impact since reports tend to be narrow in scope and disingenuous.
To get to the bottom of this debate, ESSEC Professor Charles Cho, and co-authors Matias Laine (University of Tampere), Robin Roberts (University of Central Florida), and Michelle Rodrigue (Université Laval), propose a richer and more nuanced approach to the question in their paper “Organized Hypocrisy, Organizational Façades, and Sustainability Reporting”, published in Accounting, Organizations and Society.
Their analysis looks deeper into why corporations tend to say one thing and do another – but more importantly, whether this hypocrisy can have a positive effect on firm environmental and social performance.
Explaining the gap between talk and practice
Why do corporations say one thing in their sustainability report, and do another? Professor Cho argues that many organizations simply have no choice. They must be hypocritical and convey a false image in order to respond to the various conflicting stakeholder demands to which they are subjected.
“Organizations face contradictory societal and institutional pressures”, he explains. “For example, while society, environmental lobby groups, and other external stakeholders might push a major oil company to invest more in environmental safeguards and support local communities, shareholders generally focus on the (financial) bottom line, regardless of its environmental or social implications. This requires organizations to act hypocritically and develop public façades that differ from the day-to-day activities of the company.”
He calls this ‘organized hypocrisy’ – a situation where firms have no choice but to say one thing, and do another to bend to the various institutional pressures they face. Many researchers believe that in this existing paradigm, the gap between what companies say and do will likely never close. However, seen in a more positive light, this kind of hypocrisy may actually be giving corporations the flexibility to manage conflicting stakeholder demands, until these demands begin to align.
‘Organized hypocrisy’ could be a good thing…
“Some argue that discrepancies between corporate talk and practice might actually be beneficial and should therefore be tolerated,” says Professor Cho. “For example, this kind of aspirational talk can serve as an avenue through which organizations stay motivated in their exploration of a less unsustainable future.”
“Our research acknowledges that many sustainability reports are likely to overreach in their claims. However, they may also report honestly on the implementation of corporate social responsibility plans that will differentiate said firm from other corporations in their industry. And at the very least, we believe that studying organizational façades and organized hypocrisy help us acknowledge and incorporate how the prevailing economic system and conflicting stakeholder demands constrain the action choices of individual corporations.”
…but it’s also hampering change
To dampen the optimism, it is important to remember that global environmental indicators have shown a constant decline in the state of the natural environment, despite the corporate world’s more frequent talk of “sustainability”.
“Our research suggests that within the currently prevailing societal and institutional context, the prospects that sustainability reports will develop into concrete and quantitative positive environmental impacts remains slim,” he continues. “And while some argue that more reporting regulation might be the solution, sustainability reporting standards may institutionalize the use of organizational hypocrisy and façades.
The role that sustainability disclosures can play in any transition toward a less unsustainable society remains unclear. However, engagement-based case studies can be useful in providing further insights on this matter. Engaging with organizations and interacting with actors inside them may help researchers gain more detailed views on how talk, decisions and actions are designed and executed in an organizational setting.”
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