Sustainability Accounting and Reporting: A Dilution of Social Sustainability?
Sustainability accounting and reporting are used by companies to gather information and directly provide it to investors. While sustainability research and rating firms are criticized for their lack of transparency, accounting and reporting instruments aim to provide this information without an intermediary. Our analysis shows, however, that sustainability accounting and reporting instruments not only provide sustainability information regarding specific companies, but also interpret the concept of sustainability as it relates to their own missions. Furthermore, these instruments conceal their limited conceptualization of social sustainability. Their claim to directly provide investors with standardized non-financial information is misleading, presenting accounting and reporting results as hard facts instead of as highly subjective ones that reflect a narrow conceptualization of social sustainability. However, while accounting initiatives reduce the concept of social sustainability to a few quantitative measures, reporting initiatives combine quantitative and qualitative measures to provide more extensive information.
The financialization of sustainability by accounting and reporting initiatives has not only narrowed the interpretation of social sustainability for these actors, but could thereby influence the understanding of social sustainability in society at large. Financial market rationalities are spreading into other societal spheres—mediated by numbers and calculations as well established institutionalized signalers—and changing the understanding of previously established concepts like sustainability. As indicated by our study findings, one fifth of the comprehensive understanding of social sustainability could be lost if the interpretations offered by sustainability accounting and reporting initiatives become powerful enough to influence the general discourse and understanding of social sustainability.
Sustainability accounting and reporting initiatives provide an information infrastructure for sustainability investors and could support the further development of SI in mainstream financial markets. The growth of modern SI in recent decades is inseparably linked with an information infrastructure that ensures access to sustainability information about companies. However, the very designation of infrastructure implies a neutral provider rather than an interpreting actor; if interpretation is to remain part of the accounting and reporting process, this must be made clear to investors. So long as this information is not shared with investors, sustainability accounting and reporting does not accelerate the growth of SI, but rather leads only to further dilution of the meaning and impact of SI. Instead of asking whether ethical investment is ethical, one should instead ask whether sustainable investment dilutes true sustainability.