Abstract
The Internet is now a central enabler for sharing sustainability information. Yet, such enablement is complicated through an exponentially increasing array of information. What is lacking in the digital economy are objective and transparent mechanisms to provide reliable assessments of the published sustainability information in a timely and efficient manner. In addressing such limitation, this research proposes an objective automated mechanism for measuring transparency in sustainability reporting using an information entropy-based approach. Through text-mining methods and expert validation, the study built a sustainability dictionary corpus and then applied the corpus for objectively assessing the relative entropy between the probability distributions of words in the sustainability dictionary and those in corporate reports. To demonstrate its effectiveness, the mechanism was empirically applied to compare sustainability reporting of organizations in the energy sector. Here, the research effectively compared cartels with non-cartels by assessing the sustainability reports of major OPEC (Organization of the Petroleum Exporting Countries) and non-OPEC producers spanning a three-year period and found consistent differences in transparency between the two groups. The findings demonstrate likely normative transparency pressures on disaffiliated producers for which cartels may be immune. The automated mechanism holds important theoretical and practical contributions to the field of sustainability as it provides a rapid and objective means for textual analysis of sustainability information, thus promoting transparency in sustainability reporting in the rapidly evolving digital economy.
Highlights
Transparency is an essential pillar for sustainability, as evident in global multilateral environmental agreements
The study aims to answer the following research questions: (1) What is an effective measure of corporate transparency in sustainability reporting? and (2) How can this measure be applied to rate and compare the organizations in a specific industry sector? In answering these questions, this research study develops an information-theoretical measure of corporate transparency in sustainability reporting and illustrates the effectiveness of such measure by applying it in the energy industry to empirically compare transparency in sustainability reporting between OPEC (Organization of the Petroleum Exporting Countries) and non-OPEC producers based on historical data
Based on the established importance of transparency for achieving sustainability, a principle entrenched in international treaties (e.g., Paris Agreement 2015) and corporate best practices, this study aimed to address two key research questions: (1) What is an effective measure of corporate transparency in sustainability reporting? and (2) How can this measure be applied to rate and compare the organizations in a specific industry sector?
Summary
Transparency is an essential pillar for sustainability, as evident in global multilateral environmental agreements. Many corporations provide transparent information about their practices, some may omit or overload their sustainability reports with information that reduces the quality and clarity of their sustainable practices Such reports often become susceptible to a range of time-consuming subjective interpretations, often from casual commentators and “pseudo-experts,” limiting their reliability and relevance. This research study develops an information-theoretical measure of corporate transparency in sustainability reporting and illustrates the effectiveness of such measure by applying it in the energy industry to empirically compare transparency in sustainability reporting between OPEC (Organization of the Petroleum Exporting Countries) and non-OPEC producers based on historical data. The section reviews the extant literature related to transparency in sustainability reporting, corporate transparency measures, and text analytics based on information-theoretical approaches This is followed by a discussion of the research methodology. The paper concludes with a presentation of the contributions and limitations of this study, and future research avenues
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