Does the transparency of sustainability reports matter? A quantitative assessment

Despite the recognized advantages of sustainability disclosure and transparency in reducing information asymmetries, the quality of sustainability reports often falls short. Measuring sustainability disclosure transparency is challenging due to its multidimensional nature, necessitating a comprehensive approach. Moreover, the impact of sustainability reporting transparency on firm performance remains ambiguous. Therefore, this study examines 177 reports from companies listed in the Dow Jones sustainability index (DJSI) World index, manually collecting information on transparency indicators and subdimensions. Grounded on the disclosure, clarity, and accuracy (DCA) framework introduced by Schnackenberg and Tomlinson, a factor analysis is conducted to construct the transparency index, followed by testing research hypotheses using a linear regression model via ordinary least squares (OLS). By providing a quantitative assessment of sustainability report transparency, this study investigates its influence on firm performance. Our findings support existing research linking firm performance to the transparency of sustainability reports. Surprisingly, contrary to expectations, our study reveals that increased transparency efforts are associated with lower firm performance.