01 May 2013
by Robert G. Eccles, George Serafeim and Asun Cano-Escoriaza
Telefónica, one of the largest telecommunication companies in the world and headquartered in Spain, has been issuing a corporate sustainability report since 2002. In its 2011 Sustainability report, the company included a "materiality matrix," and was one of only five of the 97 companies in Spain that produced a sustainability report that year. The case describes the purpose of the materiality matrix, how it was developed, and the opportunities the company sees for improving it. Read more
15 Mar 2013
by Robert G. Eccles and Michael P. Krzus
The case describes the early commitment of a European pharmaceutical company, Novo Nordisk, to integrated reporting. Novo Nordisk is one of the pioneers of integrated reporting and it emerged out of its commitment to a "Triple Bottom Line approach to managing the company." The case describes the company's "Blueprint for Change Programme" designed to facilitate stakeholder engagement and communicate how the company delivered value to business and society. The case also provides an investor perspective on the company's integrated reporting efforts and its plans for how to improve it in the future. Read more
22 Feb 2013
by Robert G. Eccles, George Serafeim and Phillip Andrews
In 2011, the European Commission was deciding on how to best modify the existing European Union policy on corporate disclosure of environmental, social, and governance (ESG) information. Previous directives had recommended that European companies report ESG information, but now the EC was deciding if organizations should be required to disclose nonfinancial information. The EC had to determine what types of organizations would be required to disclose, which international framework would serve as a standard reporting guideline, and if ESG disclosure would be integrated with financial material in one annual report. This case outlines the history and trends of corporate social responsibility reporting to encourage a discussion around the decision points and implications of reporting regulations. Read more
20 Nov 2012
by Robert G. Eccles, George Serafeim and Pippa Armbrester
This case presents a 20-year history of the evolution of corporate governance and corporate reporting in South Africa starting in 1992 with a focus on the three King codes of corporate governance (King I in 1994, King II in 2000, and King III in 2009). From a reporting perspective these reforms culminated in the "apply to explain why not" mandate for integrated reporting by all companies listed on the Johannesburg Stock Exchange. This case presents a 20-year history of the evolution of corporate governance and corporate reporting in South Africa starting in 1992 with a focus on the three King codes of corporate governance (King I in 1994, King II in 2000, and King III in 2009). From a reporting perspective these reforms culminated in the "apply to explain why not" mandate for integrated reporting by all companies listed on the Johannesburg Stock Exchange. Read more
16 Mar 2012
by Michael W. Toffel, Robert G. Eccles and Casey Taylor
InterfaceRAISE is a sustainability management consulting firm created to leverage the capabilities of its parent company Interface Inc., a carpet manufacturer recognized as a global leader in corporate environmental sustainability. This case illustrates the challenges of turning an internal capability into a client‐facing revenue stream. This is made especially difficult by the fact that the parent company is a manufacturing firm and InterfaceRAISE is a professional service firm (consulting). InterfaceRAISE is not being staffed by a traditional consulting firm model, relying instead on the part‐time availability of employees in the parent company. At the time of the case, InterfaceRAISE was grappling to identify the appropriate business model for the type of consulting firm it wants to be, to determine what its client portfolio should look like, and to set its pricing structure. InterfaceRAISE needed to decide how to accelerate its growth while better achieving its three objectives: improving its clients' sustainability performance, enhancing its parent company's brand image and sales, and increasing operating profits. Read more
12 Mar 2012
by Robert G. Eccles, George Serafeim and Pippa Eccles
Hassina Sherjan was born in Afghanistan but grew up and was educated in the United States. A trip to Afghanistan when she was an adult inspired her to move back to her home country with two missions. The first was to educate young women through a non-profit organization she started called Aid Afghanistan for Education and a for-profit company, Boumi, that manufactures and distributes products for the home such as curtains, cushion covers, tea cozies, coasters, bedclothes, and bathroom accessories. The mission of Boumi is to create jobs in Afghanistan, especially for women, based on traditional Afghani designs and using only locally grown cotton. Sherjan wants to grow Boumi so that it can be a substantial, if not major, funding source for Aid Afghanistan for Education. In order to grow Boumi, Sherjan must confront a number of challenges including funding, finding and managing skilled workers, and getting distribution for Boumi products in major markets such as Europe and the United States. Read more
20 Dec 2011
by Robert G. Eccles, Amy C. Edmondson, Marco Iansiti and Akiko Kanno
Ricoh, the Japanese copier manufacturer, is committed to reducing its environmental impact to one-eighth of its 2000 levels by 2050. It has already introduced three stages of environmental awareness to its operations, and its recycled copier business broke even in 2006. The company developed environmental accounting methods and produces annual environmental and sustainability reports, but Ricoh is concerned that investors may not take these efforts into account. Read more
20 Dec 2011
by Robert G. Eccles, Beiting Cheng and Susan Thyne
In 2009, Southwest Airlines produced its first integrated annual report, the Southwest Airlines One Report, combing financial and nonfinancial performance information. This case examines Southwest's environmental and corporate social responsibility (CSR) reports produced in the two years preceding 2009 and follows the company's decision to transition to a new reporting format. Preparing for the 2010 report, the Southwest reporting team contemplates how to improve the One Report. The case also allows for debate on the future of integrated reporting, including its impact on internal management processes, integrated audits, and mandated nonfinancial reporting. Read more
31 May 2011
by Anette Mikes
Inspired by one of the few banks that successfully weathered the 2007-2009 credit crisis, the case illustrates risk management in a corporate finance business. Chief executive Alastair Dowes has to decide if the risk governance process is adequate to uncover mega-risks in the portfolio, based on reflections on the risk assessment and sanctioning of two $1 bn credit proposals. Students will be invited to assess and review the risks in the two proposals, and to arrive at a decision (whether Wellfleet should accept them or not). At the same time, students will learn that gray-area risk decisions and, in particular, risk-adjusted performance measurement can rarely be automated. Risk governance requires executives to strike a balance between risk modeling and qualitative business judgment - a holistic (rather than silo-based) view of risks. Read more
02 Apr 2007
by Paul M. Healy
Compares two companies in the information capture software industry. Asks students to analyze and compare the performance of two companies (one in the United Kingdom and the other in the United States) from the perspective of a buy-side analyst reporting to the manager of the firm's Global Technology Fund. The analyst must decide whether to recommend one or both stocks to the fund manager. Provides an opportunity to compare the differences in terminology, presentation of financial reports, and accounting methods for the U.S. and U.K. firms. Read more
All Accounting for Sustainability publications
01 Apr 2012
by Robert G. Eccles, Michael P. Krzus, Jean Rogers and George Serafeim
Even though the supply of sustainability information has increased considerably in the last decade, companies are still failing to disclose material information in a comparable format. We believe this has two downsides. On the one hand, companies are not adequately managing important business issues. On the other hand, risks to investors' portfolios, such as exposure to climate change, remain hidden. If this disclosure void continues to exist, the competitiveness of U.S. companies and its capital market will be at risk. While not a panacea, we believe that developing sector-specific guidelines on what sustainability issues are material to that sector and the Key Performance Indicators (KPIs) for reporting on them would significantly improve the ability of companies to report on their Environmental, Social and Governance (ESG) performance. Read more
01 Jan 2012
by Robert G. Eccles, Michael P. Krzus and Liv A. Watson
In the wake of the recent financial crisis, increasing the effectiveness of auditing has weighed heavily on the minds of those responsible for governance. When a business is profitable and paying healthy dividends to its stockholders, fraudulent activities and accounting irregularities can go unnoticed. However, when revenue and cash flow decline, internal costs and operations may be scrutinized more diligently, and discrepancies can emerge as a result. Effective Auditing for Corporates provides you with proactive advice to help you safeguard core value within a corporation and to ensure that auditing processes and key personnel meet the expectations of management, compliance, and stockholders alike. Aimed primarily at auditors (both external and internal), risk managers, accountants, CFOs, and consultants, Effective Auditing for Corporates covers the following: 1) compliance and the corporate audit, 2) fraud detection, 3) risk-based auditing, 4) the development of Sarbanes-Oxley, 5) cultural changes in external auditing, and 6) auditing management information systems. Read more
01 Nov 2011
by Robert G. Eccles and George Serafeim
This report examines the concept of integrated reporting and its current state of adoption around the globe. It also discusses the benefits to both companies and society and recommends ways boards can help their organizations accelerate the implementation of integrated reporting. Read more
01 Nov 2011
by Robert G. Eccles, Ioannis Ioannou and George Serafeim
We investigate the effect of a corporate culture of sustainability on multiple facets of corporate behavior and performance outcomes. Using a matched sample of 180 companies, we find that corporations that voluntarily adopted environmental and social policies by 1993—termed as High Sustainability companies—exhibit fundamentally different characteristics from a matched sample of firms that adopted almost none of these policies—termed as Low Sustainability companies. In particular, we find that the boards of directors of these companies are more likely to be responsible for sustainability and top executive incentives are more likely to be a function of sustainability metrics. Moreover, they are more likely to have organized procedures for stakeholder engagement, to be more long-term oriented, and to exhibit more measurement and disclosure of nonfinancial information. Finally, we provide evidence that High Sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance. The outperformance is stronger in sectors where the customers are individual consumers, companies compete on the basis of brands and reputation, and in sectors where companies' products significantly depend upon extracting large amounts of natural resources. Read more
01 Sep 2011
by Robert G. Eccles and George Serafeim
This chapter describes the concept of integrated reporting, provides a brief history of its development, reviews the current state of practice, presents a strategy for institutional change that will accelerate the adoption of integrated reporting in order to meet the five-year objective, and concludes with a call to the reader to do whatever he or she can to speed the adoption of integrated reporting. Read more
01 Sep 2011
by Robert G. Eccles, Michael P. Krzus and George Serafeim
Market interest in nonfinancial (e.g., Environmental, Social, and Governance [ESG]) information, including data produced by the Carbon Disclosure Project (CDP), is growing. Using data from Bloomberg we analyze this interest from a variety of different perspectives, and in doing so are able to provide a level of granularity about market interest in nonfinancial information that has not yet been provided. Read more
01 Sep 2011
by Karthik Ramanna
This paper provides an accounting-based conceptual framing of the phenomenon of corporate accountability reporting. Such reporting is seen as arising from a delegator's (e.g., a citizenry) demand to hold a delegate (e.g., shareholders) to account. When effective, corporate accountability reporting can internalize certain externalities into firms' resource-allocation decisions, although doing so will not always serve shareholders' interests. I leverage the positive accounting literature's current understanding of properties of financial reports to develop three hypotheses on corporate accountability reporting. I argue that an accountability reporting system is likely to be more useful to a delegator if it: (1) mitigates information advantages across delegates and delegators; (2) reports both stocks and flows in the measures of account; and (3) has a mutually agreeable due process to match across periods the actions of delegates and the outcomes of those actions. I show how the successive incidence of these properties in observed corporate accountability reports can be used to determine whether and how those reports create or destroy value for shareholders and other constituencies. Read more
22 Aug 2011
by Robert G. Eccles and Michael P. Krzus
This technical note traces the development of integrated reporting through published materials, research, and the formation of various committees. Readers will gain an understanding of how the topics of nonfinancial information, sustainable development, corporate disclosure, and integrated reporting, among others, overlap. Read more
09 May 2011
by Christopher Marquis and Michael W. Toffel
Under increased pressure to report environmental impacts, some firms selectively disclose relatively benign impacts, creating an impression of transparency while masking their true performance. What deters selective disclosure and leads firms to instead make disclosures more representative of their environmental performance? We hypothesize that selective disclosure, a novel symbolic strategy firms use to manage stakeholder perceptions, is mitigated by two forms of organizational visibility. Firms with greater domain-specific visibility have specific characteristics that make them especially vulnerable to stakeholder criticism and as a result are less prone to selective disclosure. In contrast, more generically visible firms are deterred from selectively disclosing only when they are subjected to civil society scrutiny. We test our hypotheses using a novel panel dataset of 4,484 public companies in many industries, headquartered in 38 countries, during 2005–2008, when environmental disclosure increased among global corporations. We find that domain-specific visibility mitigates selective disclosure, that it mitigates selective disclosure more so than generic visibility, and that generic visibility mitigates selective disclosure only in the presence of civil society scrutiny. This research contributes to understanding how corporations manage the symbolic use of information and how corporate behavior is influenced by civil society scrutiny embedded in institutional processes. Read more
01 Mar 2011
by Ioannis Ioannou and George Serafeim
We examine the effect of mandatory corporate sustainability reporting (MCSR) on several measures of social responsibility using both country and firm-level data. Using data for 58 countries, we show that after the adoption of MCSR laws and regulations, the social responsibility of business leaders increases and both sustainable development and employee training become a higher priority for companies. Moreover, for companies in countries with MCSR, corporate governance improves and on average, companies implement more ethical practices, bribery and corruption decrease, and managerial credibility increases. These effects are larger for countries with stronger law enforcement and more widespread assurance of sustainability reports. We complement the country-level analysis using environmental, social, and governance metrics at the firm-level in conjunction with a differences-in-differences research design, and we find that for the treatment group, energy as well as waste and water consumption significantly decline, while investments in employee training significantly increase after the adoption of MCSR laws and regulations. Read more
All Accounting for Sustainability publications