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
Untitleddesign13 162533932

Who You Hire to Sell Your Business Might Be the Most Important Decision You Make

Tully Ryan - Murphy Business Sales
Jane

It’s Child’s Play

Jane Morrow - Smart Start of New Hanover County
Untitleddesign13

The Benefits of Choosing Local Partners in Construction

Jim Hundley - Thomas Construction Group

Trending News

New Retail, Office Hub To Open In Hampstead

Emma Dill - May 23, 2025

2025 Coastal Entrepreneur Of The Year Announced, Category Winners Recognized

Cece Nunn - May 22, 2025

Endowment Officials Offer Insights On Current Initiatives, Grant Plans

Rickie Houston - May 22, 2025

Pender Commerce Park Building Changes Hands For $23.5M

Emma Dill - May 22, 2025

Nest Realty Finds New Place To Roost In Carolina Beach

Cece Nunn - May 23, 2025

In The Current Issue

Meet The 2025 CEA Winners

Who would you invest $100,000 in? That’s a piece of advice given to the Coastal Entrepreneur Award judges as they make their picks....


CEA Minority/Woman-Owned Business: Cleaning Business Buoyed By Demand

Boats have lots of unique surfaces, nooks and crannies....


CEA Emerging Company Winner: A Patient Way To Boost Research

Synaptigen launched officially in December, taking its name from synaptogenesis, the process of forming new synapses....

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

2024 Power Breakfast: The Next Season