Follow Robert Facebook
Email Robert Email
Other
Mar 8, 2023

The ESG “Halo Effect”: Raising the Bar for Public Companies’ Commitment to Environmental and Social Change

Sponsored Content provided by Robert Burrus - Dean , Cameron School of Business - UNC-Wilmington

This piece was contributed by Dr. Kevin Hale and Dr. Steven Kaszak, Assistant Professors of Accounting within CSB.

To many the term ESG reporting is a foreign concept that holds little significance to their every day lives. But should the business world be paying more attention to ESG reporting data? To break it down, ESG reporting stands for environmental, social and governance reporting. Traditionally ESG reporting allows companies to identify and manage risk and opportunities related to their environmental and social impact.  This allows firms to build trust with stakeholders and hopefully draw in long-term investors. While an organization may create a corporate culture that empowers its employees to engage in socially responsible behaviors, it publishes an ESG report to communicate its performance to interested parties and to increase transparency.

The ESG information reported is dependent upon different organizational factors such as the company’s industry, size, and location.  For example, Live Oak Bank’s 2021 ESG report includes information regarding:

  • The amount of loans dedicated to renewable energy projects and CO2 emission saved. 
  • Their partnerships with six Wilmington-based diversity, equity, and inclusion programs.  This includes their loan volume dedicated to underrepresented communities.
  • The diversity of backgrounds for their Board of Directors.
In today’s world, where the public’s interest in companies’ commitments to the environment and equitable work practices is rapidly growing, ESG reporting may very well be moving from a voluntary practice to a required report. 

Other traditional financial reports for United States-based organization are mandatory and subject to strict regulatory scrutiny, reporting standards, and third-party attestation.  With several new SEC ESG disclosure requirements expected to be finalized in 2023, the voluntary nature of corporate ESG reporting is likely to come to an end in the not-too-distant future.  For example, one SEC proposal would require public companies to include certain climate-related disclosures such as information about their greenhouse gas emissions. 

As these mandated ESG metrics would be included in a company’s financial statements, they would be subject to an audit by an independent registered public accounting firm. Such an evolution in reporting requirements has led accounting firms to invest heavily in the development of their own ESG attestation methodologies. Companies are also competing over a scare talent pool of individuals with backgrounds in both accounting and ESG issues.  Some firms have begun to pull current staff from all financial service engagements to train these staff members in ESG assurance to become ESG specialists. 

Historically ESG data is used to highlight potential risks for a company; however, with this shift in ESG reporting research has shown that a corporate commitment to ESG initiatives leads to a plethora of positive firm outcomes.  Literature has also documented ESG performance to influence firm decision-making. For example, firms engaging in ESG activities are less likely to engage in tax avoidance. Likewise, there have been numerous accounts of the ESG “halo effect” – a strong company commitment to ESG practices leads to greater perceptions of the company.

In essence, while ESG reporting is often perceived to be risk-focused, perhaps equal consideration should be afforded to the opportunities in this changing landscape.

Other Posts from Robert Burrus

Uncwgradprogram 300x250
Ico insights

INSIGHTS

SPONSORS' CONTENT
Screenshot2022 01 06at338 162234623

Food is the Foundation for Prosperous Communities

Girard Newkirk - Genesis Block
Web awstaffpic2020 1 132245438

The 2024 Luncheon for Literacy featuring Special Guest Jason Mott

Alesha Edison Westbrook - Cape Fear Literacy Council
Cfss headshots parker robert webversion 21422121214

The Latest Solar Scams and What You Can Do to Help Stop Them

Robert Parker - Cape Fear Solar Systems

Trending News

Conservation Group Signs $8M Deal To Buy The Point On Topsail Island

Audrey Elsberry - Mar 26, 2024

Rezoning Could Bring 123 Townhomes To Growing Leland Corridor

Emma Dill - Mar 25, 2024

N.C. Ports Officials React To Baltimore Bridge Collapse

Audrey Elsberry - Mar 26, 2024

Engineering Firm Hires Four Employees

Staff Reports - Mar 26, 2024

National Organization Bestows Top Award On Cape Fear Professional Women In Building

Staff Reports - Mar 26, 2024

In The Current Issue

Topsail-area Realtors Share Updates

Pender County Realtors recently shared updates about the coastal market at an event hosted by the Wilmington-Cape Fear Home Builders Associa...


Park Progress

The planning for Pender Commerce Park began in the early 2000s when the county wanted to create an economic driver on its largely rural west...


Berries, A Battlefield And More In Pender

The N.C. Blueberry Festival, founded in 2003, is one of several events in Pender County that have drawn more attention over the years....

Book On Business

The 2024 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2023 Power Breakfast: Major Developments