IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v13y2021i3p1054-d483855.html
   My bibliography  Save this article

Objective Sustainability Assessment in the Digital Economy: An Information Entropy Measure of Transparency in Corporate Sustainability Reporting

Author

Listed:
  • Mohammed Zakaria

    (Dietrich College of Humanities and Social Sciences, Carnegie Mellon University, Pittsburgh, PA 15289, USA)

  • Chadi Aoun

    (Dietrich College of Humanities and Social Sciences, Carnegie Mellon University, Pittsburgh, PA 15289, USA)

  • Divakaran Liginlal

    (Dietrich College of Humanities and Social Sciences & Heinz College of Information Systems, Carnegie Mellon University, Pittsburgh, PA 15289, USA)

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.

Suggested Citation

  • Mohammed Zakaria & Chadi Aoun & Divakaran Liginlal, 2021. "Objective Sustainability Assessment in the Digital Economy: An Information Entropy Measure of Transparency in Corporate Sustainability Reporting," Sustainability, MDPI, vol. 13(3), pages 1-18, January.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:3:p:1054-:d:483855
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/13/3/1054/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/13/3/1054/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Robert M. Bushman & Joseph D. Piotroski & Abbie J. Smith, 2004. "What Determines Corporate Transparency?," Journal of Accounting Research, Wiley Blackwell, vol. 42(2), pages 207-252, May.
    2. Nancy E. Landrum & Brian Ohsowski, 2018. "Identifying Worldviews on Corporate Sustainability: A Content Analysis of Corporate Sustainability Reports," Business Strategy and the Environment, Wiley Blackwell, vol. 27(1), pages 128-151, January.
    3. Magali Delmas & Vered Doctori Blass, 2010. "Measuring corporate environmental performance: the trade‐offs of sustainability ratings," Business Strategy and the Environment, Wiley Blackwell, vol. 19(4), pages 245-260, May.
    4. Dubbink, G.W. & Graafland, J.J. & Liederkerke, L., 2008. "CSR: Transparency and the role of intermediate organisations," MPRA Paper 17892, University Library of Munich, Germany.
    5. Nadine Székely & Jan vom Brocke, 2017. "What can we learn from corporate sustainability reporting? Deriving propositions for research and practice from over 9,500 corporate sustainability reports published between 1999 and 2015 using topic ," PLOS ONE, Public Library of Science, vol. 12(4), pages 1-27, April.
    6. Aaron K. Chatterji & David I. Levine & Michael W. Toffel, 2009. "How Well Do Social Ratings Actually Measure Corporate Social Responsibility?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(1), pages 125-169, March.
    7. Asimina Vasalou & Alastair J. Gill & Fadhila Mazanderani & Chrysanthi Papoutsi & Adam Joinson, 2011. "Privacy dictionary: A new resource for the automated content analysis of privacy," Journal of the Association for Information Science & Technology, Association for Information Science & Technology, vol. 62(11), pages 2095-2105, November.
    8. Tom Kuhlman & John Farrington, 2010. "What is Sustainability?," Sustainability, MDPI, vol. 2(11), pages 1-13, November.
    9. Asimina Vasalou & Alastair J. Gill & Fadhila Mazanderani & Chrysanthi Papoutsi & Adam Joinson, 2011. "Privacy dictionary: A new resource for the automated content analysis of privacy," Journal of the American Society for Information Science and Technology, Association for Information Science & Technology, vol. 62(11), pages 2095-2105, November.
    10. Sung-Ho Shin & Oh Kyoung Kwon & Xiao Ruan & Prem Chhetri & Paul Tae-Woo Lee & Shahrooz Shahparvari, 2018. "Analyzing Sustainability Literature in Maritime Studies with Text Mining," Sustainability, MDPI, vol. 10(10), pages 1-19, September.
    11. Dumitru Valentin-Florentin & Jinga Gabriel & Stănilă Oana Georgiana & Dumitru Mădălina, 2019. "The impact of the European Directive 2014/95/EU on the energy companies’ disclosures," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 13(1), pages 268-276, May.
    12. Lee, Ki-Hoon & Farzipoor Saen, Reza, 2012. "Measuring corporate sustainability management: A data envelopment analysis approach," International Journal of Production Economics, Elsevier, vol. 140(1), pages 219-226.
    13. Frank Figge & Tobias Hahn & Stefan Schaltegger & Marcus Wagner, 2002. "The Sustainability Balanced Scorecard – linking sustainability management to business strategy," Business Strategy and the Environment, Wiley Blackwell, vol. 11(5), pages 269-284, September.
    14. Higgins, Colin & Tang, Samuel & Stubbs, Wendy, 2020. "On managing hypocrisy: The transparency of sustainability reports," Journal of Business Research, Elsevier, vol. 114(C), pages 395-407.
    15. Ionica Oncioiu & Anca-Gabriela Petrescu & Florentina-Raluca Bîlcan & Marius Petrescu & Delia-Mioara Popescu & Elena Anghel, 2020. "Corporate Sustainability Reporting and Financial Performance," Sustainability, MDPI, vol. 12(10), pages 1-13, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hao, Xiaoli & Wen, Shufang & Xue, Yan & Wu, Haitao & Hao, Yu, 2023. "How to improve environment, resources and economic efficiency in the digital era?," Resources Policy, Elsevier, vol. 80(C).
    2. Jiaoning Zhang & Xiaoyu Ma & Jiamin Liu, 2022. "How Can the Digital Economy and Human Capital Improve City Sustainability," Sustainability, MDPI, vol. 14(23), pages 1-18, November.
    3. Jiayi Chen & Chaozhu Hu & Youxi Luo, 2024. "Regional Differences and Spatial-Temporal Evolution Characteristics of Digital Economy Development in the Yangtze River Economic Belt," Sustainability, MDPI, vol. 16(10), pages 1-18, May.
    4. Chenggang Wang & Tiansen Liu & Yue Zhu & Meng Lin & Wenhao Chang & Xinyu Wang & Dongrong Li & He Wang & Jinsol Yoo, 2022. "Digital Economy, Environmental Regulation and Corporate Green Technology Innovation: Evidence from China," IJERPH, MDPI, vol. 19(21), pages 1-18, October.
    5. Jieh-Haur Chen & Tien-Sheng Chou & Jui-Pin Wang & Hsi-Hsien Wei & Tzu-Han Yang, 2021. "Sustainable Corporate Governance: The Impact Factors for Top Consulting Engineering Companies in Taiwan," Sustainability, MDPI, vol. 13(14), pages 1-12, July.
    6. Albérico Travassos Rosário & Joana Carmo Dias, 2023. "The New Digital Economy and Sustainability: Challenges and Opportunities," Sustainability, MDPI, vol. 15(14), pages 1-23, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Olivier Boiral & Marie‐Christine Brotherton & Léo Rivaud & David Talbot, 2022. "Comparing the uncomparable? An investigation of car manufacturers' climate performance," Business Strategy and the Environment, Wiley Blackwell, vol. 31(5), pages 2213-2229, July.
    2. Thaís Vieira Nunhes & Enzo Viviani Garcia & Maximilian Espuny & Vitor Homem de Mello Santos & Raine Isaksson & Otávio José de Oliveira, 2021. "Where to Go with Corporate Sustainability? Opening Paths for Sustainable Businesses through the Collaboration between Universities, Governments, and Organizations," Sustainability, MDPI, vol. 13(3), pages 1-31, January.
    3. Samuel Drempetic & Christian Klein & Bernhard Zwergel, 2020. "The Influence of Firm Size on the ESG Score: Corporate Sustainability Ratings Under Review," Journal of Business Ethics, Springer, vol. 167(2), pages 333-360, November.
    4. Sebastian Utz, 2019. "Corporate scandals and the reliability of ESG assessments: evidence from an international sample," Review of Managerial Science, Springer, vol. 13(2), pages 483-511, April.
    5. Mario Morales-Parragué & Luis Araya-Castillo & Fidel Molina-Luque & Hugo Moraga-Flores, 2022. "Scientometric Analysis of Research on Corporate Social Responsibility," Sustainability, MDPI, vol. 14(4), pages 1-22, February.
    6. Trinks, Arjan & Ibikunle, Gbenga & Mulder, Machiel & Scholtens, Bert, 2017. "Greenhouse Gas Emissions Intensity and the Cost of Capital," Research Report 17017-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    7. Tai-Hsi Wu & Hsiang-Lin Chih & Mei-Chen Lin & Yi Hua Wu, 2020. "A Data Envelopment Analysis-Based Methodology Adopting Assurance Region Approach for Measuring Corporate Social Performance," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 148(3), pages 863-892, April.
    8. Emma Avetisyan & Kai Hockerts, 2017. "Consolidation of the ESG Rating Industry as an Enactment of Institutional Retrogression," Post-Print hal-01695693, HAL.
    9. Abagail McWilliams & Annaleena Parhankangas & Jason Coupet & Eric Welch & Darold T. Barnum, 2016. "Strategic Decision Making for the Triple Bottom Line," Business Strategy and the Environment, Wiley Blackwell, vol. 25(3), pages 193-204, March.
    10. Rzeznik, Aleksandra & Weiss-Hanley, Kathleen, 2021. "The Salience of ESG Ratings for Stock Pricing: Evidence From (Potentially) Confused Investors," CEPR Discussion Papers 16334, C.E.P.R. Discussion Papers.
    11. Jieun Chung & Charles H. Cho, 2018. "Current Trends within Social and Environmental Accounting Research: A Literature Review," Accounting Perspectives, John Wiley & Sons, vol. 17(2), pages 207-239, June.
    12. Zhou, Xi & Ying, Sammy Xiaoyan & You, Jiaxing & Wu, Huiying, 2024. "Like parent, like child: MNCs’ CSR and their foreign subsidiaries’ environmental footprint," Journal of Business Research, Elsevier, vol. 172(C).
    13. Kai Hockerts, 2015. "A Cognitive Perspective on the Business Case for Corporate Sustainability," Business Strategy and the Environment, Wiley Blackwell, vol. 24(2), pages 102-122, February.
    14. Tao, Hu & Zhuang, Shan & Xue, Rui & Cao, Wei & Tian, Jinfang & Shan, Yuli, 2022. "Environmental Finance: An Interdisciplinary Review," Technological Forecasting and Social Change, Elsevier, vol. 179(C).
    15. Najah Attig & Sean Cleary & Sadok Ghoul & Omrane Guedhami, 2014. "Corporate Legitimacy and Investment–Cash Flow Sensitivity," Journal of Business Ethics, Springer, vol. 121(2), pages 297-314, May.
    16. Botelho, Tatiana & Magrini, Alessandra & Schaeffer, Roberto, 2014. "Plumbing the depths: Utilizing O&G reserve profiles to develop forward-looking risk assessments for exploration and production activities," Energy Policy, Elsevier, vol. 69(C), pages 489-500.
    17. Najah Attig & Narjess Boubakri & Sadok El Ghoul & Omrane Guedham, "undated". "International Diversification and Corporate Social Responsibility," Finance Working Papers 12-11/2013, School of Business Administration, American University of Sharjah.
    18. Alfonso Del Giudice & Silvia Rigamonti, 2020. "Does Audit Improve the Quality of ESG Scores? Evidence from Corporate Misconduct," Sustainability, MDPI, vol. 12(14), pages 1-16, July.
    19. Zike Cao & Kai-Lung Hui & Hong Xu, 2018. "An Economic Analysis of Peer Disclosure in Online Social Communities," Information Systems Research, INFORMS, vol. 29(3), pages 546-566, September.
    20. Noushi Rahman & Corinne Post, 2012. "Measurement Issues in Environmental Corporate Social Responsibility (ECSR): Toward a Transparent, Reliable, and Construct Valid Instrument," Journal of Business Ethics, Springer, vol. 105(3), pages 307-319, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:13:y:2021:i:3:p:1054-:d:483855. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.