social and environmental accounting

  • Complexity European Sustainability Reporting Standards overwhelming

    The proposed ESG reporting standards presented by the EU last week are overwhelming. I advocate to limit reporting requirements to two metrics: profit and emission reductions.

    Last week, EFRAG published the first version of the European Sustainability Reporting Standards. The set of standards describes in detail the topics that companies report on and also obliges them to develop targets that define the company’s ambition.

    The ESG metrics are presented in 15 appendices spanning many hundreds of pages. About fifty metrics focus on every company in general and dozens of other metrics are industry-specific. The metrics are intended to ensure that firms on balance create social value to society.

    Research by George Miller from 1956 established that a human being can hold five to seven metrics simultaneously. In their April 2004 Nature publication, Edward Vogel and Maro Machizawa confirm this finding. The five versus fifty plus yardstick comparison presents us with a problem. Can company leaders and investors be expected to oversee fifty-plus -de facto hundreds of- metrics on their development and outcomes?

    Recent research on ESG metrics by Jurian Berg and colleagues shows that rating agencies differ widely on how the metrics add up to determine whether a company is performing favorably or unfavorably on ESG. Rajna Gibson Brandon and colleagues find that such confusion gives “green funds” reasons to make investments that would fail to meet the “green test”.

    As results on ESG metrics suggests it is unlikely for anyone to appreciate the full set of measures let alone that society agrees on what measures are relevant. Of course, employees can be appointed within the companies, each of whom controls part of the metrics from the system. However, the question is how these are related to each other? An example.

    Companies must report on non-recycled waste. Suppose we make an employee responsible for waste reduction. The employee goes to work and manages to reduce waste by 50 percent. However, the reduction does mean that from now on raw materials will have to come from the other side of the world, while they are now sourced from a nearby company. The reduction in waste then leads to an increase in scope 3 emissions because the goods have to be transported over thousands of kilometers instead of a few. In addition, it must then be determined whether there is a risk that the goods were produced by underpaid employees or by slaves.

    Every metric in the EFRAG system is connected to all other metrics which makes the system unfathomable and society would  therefore be better off to have one metric that captures all contributions and withdrawals from society by the organization. This metric exists in theory: Economic Profit. In practice, we come across this metric under the name of residual income and this metric differs from Economic profit because not all contributions or withdrawals from society are reflected in the metric in time or in full. For example, we do not see the social costs of pollution reflected in the price of kerosene. The profit that Shell reports to make on kerosene is incomplete and Shell’s scope 1 reporting should provide clarity in this. The question now is whether we are indeed better off with the reporting system that EFRAG wants to introduce?

    Given the fact that individual metrics are intertwined we seem to be getting out of hand with the reports proposed by EFRAG. We will soon be receiving extended ESG reports, but due to the combination of (1) the limited processing capacity of employees described by Miller and (2) the fact that all metrics are interrelated, it is highly questionable whether we can really make progress with the proposed level of detail. No one will be able to comprehend the full system metrics.

    In that context,  EFRAG had better come up with overarching criteria with which the firms can assure that it is on the right track of emission reduction. For example, one can imagine that a company is asked to indicate how the investments of 2022 at what time in percentage points compared to 2021 have resulted in a CO2 reduction. Companies could also be obliged to submit the same report on other pollutants. Such a system would lead not only to fewer metrics but also to more encompassing metrics that directly take issue with emissions for which reductions are essential.

    Finally, the question is whether Social and Governance have only taken into account the urgency of greenhouse gases in the system, should that perhaps be a priority and should we use S (license to operate according to the buyer and supplier) and G (for finance). The S and G already exist on a voluntary basis and it would be good to keep them. It really is enough if we use two measures, profit and emissions!

    Jan Bouwens

    Professor of accounting

    University of Amsterdam

    Research fellow at the University of Cambridge

  • Epitaph to Prof. Lúcia Lima Rodrigues

    We regret to inform that Professor Lúcia Lima Rodrigues passed away last Monday, October 3rd.

    Professor Lúcia Rodrigues was widely known to the academic community and an outstanding contributor. She held multiple roles in the European Accounting Association (EAA), including member of the Management Committee (2009-2012), member of the EAA Board (2009-2015), Book Review Editor, and a member of the Scientific Committee of multiple EAA Congresses. Besides these roles, Professor Lúcia Rodrigues was the Vice-President of the Portuguese Accounting Standards Setting Commission, the Representative of Portugal at the Accounting Regulatory Committee at the European Financial Reporting Advisory Group, a member of the Academic Panel of the European Financial Reporting Advisory Group and a member of the Stakeholders Reporting Committee of the European Accounting Association.

    As a researcher, Professor Lúcia Rodrigues was very well accomplished, having published in leading academic journals such as Accounting, Organizations and Society, Critical Perspectives on Accounting, Accounting, Auditing & Accountability Journal, Accounting History, The British Accounting Review, and Journal of Business Ethics.

    In Portugal, her birth country, she was a pioneer in accounting research, supervising multiple PhD theses, participating in academic juries, sharing her knowledge in seminars and conferences, and, overall, nurturing an infant community. Her impact and legacy are enormous and far reaching.

    She will always be remembered and sorely missed by those who met her.

    Sofia Lourenço, EAA national representative for Portugal

    On behalf of the Portuguese Accounting Research Community

  • When investors can talk to firms, is it a meaningful conversation? Evidence from investor postings on interactive platforms

    Understanding information dissemination and acquisition in capital markets has been a primary objective in accounting and finance research for decades. Given that obtaining publicly available information in capital markets is not an effortless exercise, a body of studies examine how market participants collect information through various channels. The internet is now the most important platform for market participants to collect information. However, information from the internet may be uninformative or even misleading because the internet is an unregulated platform with a vast number of anonymous users. Given the importance of information reliability, two stock exchanges in China, Shanghai Stock Exchange and Shenzhen Stock Exchange, each initiated an official online interactive platform for investors to have direct conversations with listed firms and, thus, obtain firm-specific information directly.


    These two platforms differ from common forms of social media in nontrivial ways. They were established and are operated and closely monitored by the two stock exchanges in China. Notably, the information that investors gather from the interactive platforms is generally more reliable than other information sources because firms take legal responsibility for their replies. In contrast, since conventional social media platforms are operated by large third-party companies with “light-touch” oversight, engagement through these social media may be more open to noise or inattention. In addition, firms’ participation in communicating with investors through the interactive platforms is ‘quasi-mandatory’. That is, although no sanctions are given to firms that fail to reply to investor posts, both stock exchanges closely monitor firms’ engagement in the interactive platforms and strongly encourage replies within two business days. Moreover, both stock exchanges grant ‘honours and awards’ to firms with excellent participation in the interactive platforms and the quality of firms’ replies is included in the exchange assessment of firms’ information disclosure. In contrast, while investors might ask questions on conventional social media about the information disseminated by a firm, the firm is not obligated to reply. Indeed, participating in general forms of social media is totally voluntary; that is, firms can choose when to communicate, which social media platforms to use, and what information to disseminate.


    Given the unique features of the platforms, we expect that their emergence is important for investors to collect information. We empirically investigate three research questions. Firstly, we test whether investors collect firm-specific information through the interactive platforms around earnings announcement dates. Secondly, we examine the interaction role between posting questions for a firm and searching online in information acquisition. Lastly, we investigate the economic implications associated with information acquisition via posting questions on the platforms.


    In a nutshell, our results reveal that posting volumes on the interactive platforms increase around earnings announcement dates, suggesting that investors acquire firm-specific information via the platforms. Furthermore, the positive relationship between posting volumes and earnings announcements is more pronounced for firms with smaller Baidu search volumes. This suggests a substitution relationship in collecting information between asking listed firms questions directly and searching online. Finally, our evidence suggests that questions posted around earnings announcements accelerate the price discovery of earnings and attenuate post-earnings announcement drift and stock price synchronicity.


    Our study makes several contributions to the literature and has some implications for capital market participants. First, our study focuses on how investors use unique special purpose interactive platforms to acquire information, providing a demand-side story in the information communication between firms and investors, while prior studies on general social media platforms primarily focus on the supply side of firm-specific information. Second, since investors collect firm-specific information through the platforms, our results have implications for new proxies of investors’ information acquisition. Third, our study sheds meaningful light on the impact of new technologies on capital markets. Our study shows that providing special-purpose interactive platforms that allow, facilitate, and encourage investors to initiate communications with listed firms improves information transmission in capital markets. Indeed, this finding might have important implications for other capital markets, especially in emerging market settings that are characterized by large information asymmetry between listed firms and diffuse investor bases.


    This paper is forthcoming in the European Accounting Review –

  • Do women mind the non-GAAP? Board gender diversity and non-GAAP disclosure quality

    Managers often supplement their GAAP financial reporting with additional voluntary disclosures to provide investors with more tailored and sometimes nuanced insights into their firm’s performance. These disclosures of alternative earnings figures are commonly known as ‘non-GAAP’ earnings. Given that the quality of these disclosures varies, we ask what company governance characteristic(s) might guide an investor whether to trust non-GAAP earnings or not? We focus on board gender diversity. We draw insights from prior research to argue that board gender diversity increases monitoring of non-GAAP earnings, thus increasing the quality of these disclosures.

    We measure non-GAAP earnings quality by how consistently firms calculate their non-GAAP earnings across time (consistency), and how non-GAAP exclusions compare with their peer firms’ exclusions (comparability). From a standard setting perspective, the qualities of consistency and comparability are relevant and critical characteristics of financial reporting.

    Using a sample of Australian listed firms from 2013 to 2018, we find that the frequency of non-GAAP disclosures is high and has increased at a steady rate across the six years. Our multivariate analysis suggests that when firms have gender-diverse boards, their non-GAAP disclosures are more consistent and more comparable. Moreover, firms with more gender-diverse boards give less prominence to non-GAAP reporting. They are less likely to disclose non-GAAP earnings before GAAP earnings. Finally, aggressive non-GAAP disclosures, that is when non-GAAP earnings per share meets or beats the consensus forecast but GAAP earnings does not, are less pronounced when there is higher board gender diversity.

    Overall, our results indicate that in a lightly-regulated but developed market, a gender-diverse board can promote these key qualitative characteristics of non-GAAP reporting. Our insights about non-GAAP reporting corroborate the importance of internal control mechanisms associated with the board of directors. Our study provides insights to regulators on an important channel for improving non-GAAP disclosure quality, board gender diversity.

    This paper is forthcaoming at the European Accounting Review –


  • Update from the EAA Stakeholder Reporting Committee – Response to Exposure Draft ESRS 1 General principles Exposure Draft ESRS 2 General, strategy, governance and materiality assessment disclosure requirements.

    Posted by Peter Kajüter, on behalf of the EAA Stakeholder Reporting Committee

    On 29 April 2022, EFRAG launched a public consultation on 13 Draft EU Sustainability Reporting Standards (ESRS), with a deadline of 8 August 2022. This followed the Corporate Sustainability Reporting Directive (CSRD) proposal, and the letter from Commissioner McGuinness requiring EFRAG to provide Technical Advice to the European Commission in the form of fully prepared draft standards and/or draft amendments to ESRS. These EDs correspond to the first set of standards required under the CSRD proposal and cover the full range of sustainability matters: environment, social, governance and cross-cutting standards.

    The Stakeholder Reporting Committee focused their comments in the cross-cutting standards, Exposure Draft ESRS 1 General principles Exposure Draft ESRS 2 General, strategy, governance and materiality assessment disclosure requirements. The letter is attached to this blog..

     Our comments were mainly oriented towards the need to clarify the text of the EDs. Thus, we highlighted the convenience to have more consistency in terminology and avoid the use of words with several meanings. We also required more clarity about the rebuttable presumption, and about the materiality assessment. And we questioned the convenience to define the three horizons of analysis at sector–agnostic level.

  • Comment Letter for Exposure Drafts IFRS® Sustainability Disclosure Standards IFRS S1 and S2

    July 27, 2022

    International Sustainability Standards Board, IFRS Foundation

    Professor Charles H. Cho
    Dr. Blerita Korca
    Professor Joanna Krasodomska
    Professor Ian Thomson
    Professor Gunnar Rimmel

    Re: Exposure Drafts IFRS® Sustainability Disclosure Standards IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures

    Dear members of the International Sustainability Standards Board,

    We are a group of Professors of Accounting who have been researching in the field of sustainability accounting and reporting for many years – some of us for decades.

    Considering our research evidence-based and practice-based expertise in the field of sustainability accounting and reporting, we would like to offer several suggestions for the International Sustainability Standards Board (ISSB) to take into account when publishing the new IFRS Sustainability Disclosure Standards. We strongly believe that there are several critical aspects which need to be rethought, reconsidered and revised in order to provide disclosure standards that facilitate entities’ disclosure and address stakeholders’ needs. In this regard, some major issues are identified below.

    Materiality definition

    The definition of materiality in the exposure drafts has two major drawbacks as follows:

    • It is rather ambiguous and unclear whether it is defined as sector- or entity-specific. As such, entities will have to conduct materiality assessments on a regular basis which can be very costly. More precise guidance on how material aspects must be defined and reported on would facilitate disclosure and not burden entities with extra costs.
    • While the definition of materiality in the exposure drafts is ambiguous, it does refer to financial (and single) materiality, or the ‘outside-in’ perspective. The exposure drafts refer to disclosure on risks and opportunities that can arise from climate-related events. However, the exposure drafts completely neglect to address the impact that entities have on the outside environment with (because of) their operations, or the ‘inside-out’ perspective. By only providing reporting standards with a financial materiality perspective, the ISSB fails to capture the importance of sustainability reporting and its objective—that is, to help solve planetary In addition, it is important to note that climate-issues which are classified as material from an inside-out (impact) perspective can quickly become material also from an outside-in perspective. Thus, while the outside-in perspective is mainly concerned with risks impacting the value-creation in the short-term, the inside-out perspective instead captures more long-term impacts. Considering this dynamic nature of materiality, it is important that the ISSB goes beyond financial materiality and embraces both the inside-out and inside-in perspective (i.e., double materiality) in line with the approach adopted by EU and Global Reporting Initiative.

    We note that 31 of the 39 submissions from academics to the IFRS Foundation Trustees Consultation Paper on Sustainability Reporting (IFRS Foundation, 2020) did not agree with a financial materiality approach (Adams and Mueller, forthcoming). This is reinforced by the recent special issue of Accounting in Europe on the “Future of Corporate Reporting” and its editorial (Cho et al., 2022). To contribute to sustainable development, companies need to understand, manage and report their climate-related impacts transparently, trustworthy, and objectively. Without identification of material impacts on climate, companies will not be able to determine climate-related risks and impacts on their financial performance. A reporting framework that does not encourage companies to provide information on their climate-related impacts is therefore damaging to sustainable development – and, ironically, to their long-term financial success (Adams et al., 2021). From a long-time perspective, most sustainability matters will also have financial implications due to, for example, reputational risks.

    Therefore, we disagree with the objective established for S2, as it is not in line with the double materiality concept. Thus, the information provided as a result of its implementation would notenable users of general purpose financial reporting to assess the effects of climate-related risks and opportunities on enterprise value.” An enterprise must first identify its material sustainability impacts. Otherwise, assessing financially relevant climate-related risks and opportunities (or relevant to the enterprise value) will be incomplete.

    The literature review conducted by Adams et al. (2021) allowed identifying several benefits related to the application of double materiality, such as enhanced stakeholder engagement (Cooper and Morgan, 2013; Brown and Dillard, 2015; Puroila and Mäkelä, 2019), better investment decision making, improved financial performance (Khan et al., 2016), and more accurate analyst forecasts (Khan et al., 2016; Grewal et al., 2020; Martinez, 2016; van Heijningen, 2019). However, there are also problems and challenges when applying double materiality. Literature suggests that the materiality determination process is not adequately reported (Adams, 2004; Beske et al., 2020; Machado et al., 2021; Guix et al., 2018), and materiality assessment favors short-term financial interests (Puroila and Mäkelä, 2019). The materiality assessment process was found not to be included within the scope of sustainability assurance engagements (Borial et al., 2019), or the assurance was limited to data checking (Boiral and Heras-Saizarbitoria, 2020; Boiral et al., 2019; Farooq and De Villiers, 2019; Gürtürk and Hahn, 2016). These problems are due to the lack of experience in conducting materiality analysis and heterogeneity of materiality definitions, guidelines, and applications (Adams et al., 2021).

    We support the views which welcome the movement towards embracing double materiality and encourages the ISSB to reconsider its decision to focus on financial (and single) materiality only. To be used as a global baseline, IFRS S2 should be revised to integrate double materiality. As Baumüller and Sopp (2022) conclude, while perhaps being initially attractive for investors, financial materiality would do little to meet the needs of other information users. It would likely lead to omitting important sustainability impacts from sustainability reporting. This situation would harm the planet’s sustainability and all stakeholders, including investors. Therefore, we strongly suggest that the ISSB acknowledges that an entity’s financial sustainability is interdependent with the sustainability of the planet and society (see also Open letter about the Materiality Debate).

    The global baseline

    There are several issues with the exposure drafts which do not allow them to serve as the global baseline. The exposure drafts are not coherent with the direction of other international frameworks and regulations on several aspects as follows:

    • Materiality definition (again) – In various jurisdictions worldwide, the concept of double materiality is being used in sustainability reporting (e.g., Afolabi et al., 2022). The report from the International Platform on Sustainable Finance (2021) offers an overview of jurisdictions which have in place regulations following a double materiality perspective. Specifically, jurisdictions such as Brazil, the EU, Kenya, Norway, and Singapore have in place or are planning disclosure measures with a double materiality perspective (International Platform on Sustainable Finance, 2021). In this regard, the exposure drafts do not fit with jurisdictional requirements due to its financial materiality perspective and thus will not be of much use.
    • Carbon offsets – The impact of carbon offsetting on global climate systems is a contested field (IPCC, 2021) The impact very much depends on the type of offsetting and underlying measurement protocol (Environment Agency, 2021) and not all of the carbon offsets that can be purchased actually reduce global GHG emissions. However, the IFRS exposure drafts indicate instead that it is possible to use offsets as a strategy for reducing climate-related risks. This is in conflict for example with the draft European Sustainability Reporting Standards (ESRS), whichs refrain from using the term offsetting, but rather carbon credits. It is important that it is clearly noted in the IFRS exposure drafts that the offsetting and reduction of the GHG emissions are two different actions in target setting and that choosing one over the other can have a higher utility in mitigating climate change. Therefore, we recommend that offsetting not to be allowed as a strategy in setting targets as this means that entities might continue to emit while taking advantage of the largely unregulated carbon offset market. Furthermore, as Thomson and Charnock (2022) have pointed out, how to measure, and account for, carbon emissions is important to financial sector risk assessments (Coulson and Monks, 1999; Busch and Hoffmann, 2007; Bebbington and Larrinaga-González, 2008; Bebbington et al., 2020) and accountability, governance and regulatory dynamics (Macve and Chen, 2010; Gond and Piani, 2013; O’Sullivan and O’Dwyer, 2015).
    • Addressing the needs of stakeholders – Sustainable development requires a multi-stakeholder approach (Adams and Mueller, forthcoming). The IFRS exposure drafts in its current state do not take into account the needs of a broader group of stakeholders in sustainability reporting. While the focus of the IFRS exposure drafts is solely on investors, it is important to note that other stakeholders are not only interested in risks and opportunities that can arise from climate change but are also in the impact that entities have on climate change. The exposure drafts are not taking into account the needs of other stakeholders, besides users of “general purpose financial reporting.” However, this ignores the future financial impact that stakeholder can have on future financial value. It is worth reflecting on the standard definition of a stakeholder as an individual or institution with a vested interest in a company that can affect or be affected by that company’s decisions, operations or performance. It is the action of stakeholders that drives future financial performance. For example, consumers are an important source of a business financial value in the short, medium and long term and governments/regulators have a critical role in influencing the cost and taxation base of any business. Therefore, it is challenging to use the exposure drafts in its current state as the global baseline to satisfy the needs of various stakeholders as the crucial aspect of the inside-out perspective is not addressed at all.

     Scope 3 disclosures

    We support the disclosures on Scope 1, Scope 2, and Scope 3 and the use of the GHG Protocol for this purpose to ensure comparability and quality of the information provided.

    As acknowledged by the ISSB in question 9, the disclosure of Scope 3 GHG emissions is increasing in quality and becoming more common. However, it still presents several challenges. At the same time, Scope 3 emissions, also referred to as value chain emissions, often represent the majority of an organization’s total GHG emissions (Environmental Protection Agency, 2021). Research provides evidence that Scope 3 was and is still far less reported than Scope 1 and Scope 2 (Kolk et al., 2008; Tang and Demeritt, 2019). According to Kolk (2008), lower disclosure of Scope 3 is not surprising as under the GHG Protocol, quantifying these emissions is not required. Firms that provide information tend to only report on a few activities that fall under Scope 3 emissions. The most widely reported Scope 3 emissions are from employee business travel (Kolk, 2008). Similar results were obtained 11 years later by Tang and Demeritt (2019). Companies covered by the study were found to collect some data on Scope 3 emissions, typically associated with flights and business travel, which were relatively easy to manage compared with the full life cycle analysis that might be required to trace the emissions arising up and down the supply chain. The authors concluded that since these indirect Scope 3 emissions are not linked with any costs to the company, the reason for collecting them was reputational and related to participation in voluntary reporting schemes, such as CDP’s Climate Change Program, which rates companies more favorably if this additional information is reported. Therefore, we suggest implementing a phased approach with the requirement to provide Scope 1 and Scope 2 disclosures immediately and at least some more problematic Scope 3 disclosures with a delay. However, a study of S&P 500 GHG emissions over the period 2015-2019 identified that on average scope 1 and 2 emission only represented 23% of GHG emissions already disclosed by S&P 250 firms, with over 37% of GHG disclosures already including Scope 3 emissions (Thomson et al, 2021). This suggests that ISSB recommendations will result in a rollback in corporate disclosure practise..

    The use of SASB standards and TCFD recommendations

    According to the SASB website 1,411 (42%) of SASB reporting comes from the USA. Only 374 (11.7%) were from Europe (Value Reporting Foundation, 2022). In Europe, SASB Standards are not commonly applied and there is limited understanding of them.

    Appendix B, which is an integral part of the S2 is comprehensive and contains extensive and detailed disclosure requirements. The large number of metrics specified raises concerns about the potential difficulties related to S2 implementation and the cost-effectiveness of the reporting process.

    On the contrary, the TCFD recommendations are a globally recognized framework for climate-related reporting. As of October 2021, in addition to the support of dozens of regulators and supervisors, Brazil, the European Union, Hong Kong, Japan, New Zealand, Singapore, Switzerland, and the United Kingdom have announced requirements for domestic organizations to report in alignment with the TCFD recommendations (FSB, 2021). However, many countries have not decided to follow this path. Therefore, problems and costs related to the implementation of S2 would be different across countries.

    Prior research suggests that despite the issuance of the TCFD framework contributed to the increase in climate reporting from 2015 to 2018, its compliance with TCFD recommendations is poor, specifically concerning the core element of strategy (Bastien and Giordano-Spring, 2022).   Most of the disclosures were in voluntary sustainability reports, not the financial filings recommended by the TCFD. Similarly, Demaria and Rigot’s (2020) research results highlight disparities across TCFD areas and suggest that firms are less compliant with specific crucial recommendations of TCFD. O’Dwyer and Unerman’s (2020) study identified such specific challenges regarding using TCFD reporting practices as, e.g., understanding novel climate-related scenario planning, integrating climate risks into corporate-level risk management, determining the climate-related materiality, and aligning TCFD reporting with other corporate reporting frameworks.

    We understand the urgency related to the implementation of the S2. However, given the above, we suggest that the ISSB considers implementing a phased approach and allowing applying some requirements earlier and some with a delay. For example, disclosures involving scenario planning or some quantitative measures, as Scope 3 mentioned above, could be provided later, and qualitative information on corporate governance, risks, and opportunities may be disclosed earlier.


    Charles H. Cho, PhD, CPA
    Professor of Sustainability Accounting
    Erivan K. Haub Chair in Business & Sustainability
    Schulich School of Business, York University, Canada

    Blerita Korca, PhD
    Research Collaborator
    Department of Economics and Management, University of Trento, Italy

    Joanna Krasodomska, PhD
    Associate Professor
    Department of Financial Accounting, Cracow University of Economics, Poland

    Gunnar Rimmel, PhD
    Chair in Accounting & Corporate Reporting
    Director of The Henley Centre of Accounting Research & Practice (HARP)
    Henley Business School, University of Reading, United Kingdom

    Ian Thomson, PhD, CMA
    Professor of Accounting & Sustainability
    Director, Lloyds Banking Group Centre for Responsible Business
    Birmingham Business School, University of Birmingham, United Kingdom



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    Tang, D. and Demeritt, D. (2018). Climate change and mandatory carbon reporting: Impacts on business process and performance. Business Strategy and the Environment, 27(4), 437–455.

    Thomson, I. and Charnock, R. (2020). Engaging with the IPCC on climate finance: A call to action and platform for social and environmental accounting scholars. Social and Environmental Accountability Journal, 42(1-2), 1-10.

    Thomson, I. , Tuck, P., Channuntapipat, C., Charnock, R., O’Bonsu, N., and TyreeHageman, J. (2021). Net Zero Accounting for a Net Zero UK,

    Value Reporting Foundation. (2022). Global use of SASB Standards. Available at:

    Van Heijningen, K. (2019). The impact of ESG factor materiality on stock performance of firms. Working Paper. Available at Erasmus Platform for Sustainable Value Creation:

  • Time is (Not) Money: Incentive Effects of Granting Leisure Time

    Employees spend a considerable amount of their working time enjoying on-the-job leisure. This on-the-job leisure time costs companies billions of dollars due to the reduction in effective working time. The most significant portion of this on-the-job leisure time is the private consumption of the internet during work time, despite companies employing costly monitoring software against it.  While this demonstrates a management control problem, it can also function as a novel domain for bonuses.

    Considering the increasing preference for leisure time, and given that some working time is already used for private leisure, gifts of more off-the-job leisure time, as an informal management control that relies on signaling trust and kindness rather than restricting employee behavior, are an alternative worth exploring.

    I examine how the gift of an intentional reduction of working time affects employee work behavior compared to a cash gift. A real-effort laboratory experiment shows that a cash gift neither alters employees’ on-the-job leisure time nor performance. A gift of more off-the-job leisure time, however, does reduce the on-the-job leisure time of employees and increases their performance. An analysis of post-experimental survey responses to a trust game suggested that stronger reciprocity for leisure time gifts helps explain the higher performance levels for leisure time gifts compared to cash gifts.

    A follow-up vignette study among human resource (HR) professionals further provides external validity for these results. HR professionals anticipated that leisure time gifts would have a more positive impact on job satisfaction, organizational commitment, feelings of appreciation, and health than cash gifts. The majority of these factors also point to a positive reciprocal reaction when employees receive a leisure time gift, providing evidence consistent with the reciprocity evidence found in the lab experiment. HR professionals were also asked to evaluate how leisure time gifts versus cash gifts would influence employees’ on-the-job leisure time. The HR professionals expected a leisure time gift to reduce on-the-job leisure time significantly more than a cash gift, providing further external validity for the results of the lab experiment.

    Overall, the results of this study add a novel tool to the literature on management controls regarding how to mitigate the problem of increased on-the-job leisure time. Moreover, these results add to the behavioral literature on reciprocity. I add to this line of literature by demonstrating that employees strive to balance mental budgets by reacting reciprocally within the same domain of the initial gift. Overall, my study suggests that managers seeking to reduce problems caused by too much on-the-job leisure time may benefit from using leisure time gifts as part of their management control system.


    This paper is accepted for publication at the European Accoutning Review, and its link is:

  • Who cites us? Decomposing accounting impact factors

    by Jochen Pierk (Erasmus University Rotterdam)

    Once a year, typically end of June, Clarivate publishes the new journal impact factors. Despite some well-known shortcomings of such metrics (which I am not going to discuss in detail[1]), journal editors typically highlight the new impact factors on their websites and even advertise them on social media (when they increase). So what exactly are impact factors? Impact factors measure the number of citations in the current year of articles that were published in the two previous years (‘citable items’). For example, the 2021 impact factor is the average number of citations received in 2021 of all respective journal publications of 2019 and 2020. While impact factors are typically used only to provide an average citation count, the underlying data can also help us understand what drives impact factors, i.e., who cites accounting journals. Thus, it allows us to observe trends in the accounting landscape, and can help editors and accounting scholars identify their (academic) target audience, i.e., who is citing accounting research articles.[2]

    In this blog, I provide some empirical evidence on who cites accounting journals. I start the analyses by comparing the impact factors of 18 accounting journals with the highest 2021 impact factor over time (see Table 1 for the list of journals).[3] While this list obviously does not cover all potentially interesting journals, e.g., many journals with a focus on a specific topical area are missing, it covers at least a relevant set of journals for many scholars. Table 1 shows the impact factor separately for these 18 journals. In 2021, the Journal of Accounting and Economics (JAE) had the highest impact factor (7.29), followed by Critical Perspectives on Accounting (5.54), followed by The Accounting Review (5.18). In the previous year, JAE also ranked number one, followed by British Accounting Review. At the beginning of the sample period (2017/2018), the Journal of Accounting Research (JAR) had the highest impact factor, but while all other journals increased their impact factor to quite some extent, JAR’s has remained relatively stable over time. Many journals were even able to more than double their impact factor in the same time frame.

    A general observation is that purely based on impact factors, there is no clear distinction on what should constitute a so-called ‘top’ journal (top-3, top-5, … also a discussion I do not want to start here). However, one should keep in mind that, in contrast to rankings such as the SJR ranking, impact factors do not take into account any weighting regarding the influence/importance of the citing source. The current 6 highest ranked accounting journals (accessed July 6th 2022) in the SJR ranking are in descending order: JAE, JAR, TAR, RAST, CAR, and the Journal of the American Taxation Association (JATA). The current impact factor of JATA is 0.73. If someone is interested in decomposing these differences and understanding the ‘weighting’ of SJR (an iterative process), read this description.

    Next, I categorize the journals that cite accounting articles into several categories to better understand who cites accounting research and what drives the increase in impact factor: Self-citations (an article cites another article from the same journal), citations by the top 18 accounting journals without self-citations, other accounting journals (journal titles include ‘account’, ‘audit’, ‘tax’, ‘governance’, or ‘management control’), finance journals (journal titles include ‘finance’ or ‘financial’), and other journals. Figure 1 shows that all categories are increasingly citing the 18 accounting journals. For example, self-citations increased from 0.26 in 2017 to 0.42, which means that in 2021 the average journal article of 2019 and 2020 was cited 0.42 times by articles from the same journal. The citations within the 18 accounting journals increased similarly from 0.54 to 0.78. The relative importance of this category varies widely across journals. For example, some journals receive less than 10 percent of their citations from within the 18 journals in 2021 (AAAJ, A&F, IS), while others receive around or more than 30 percent of their citations from this category (AOS, CAR, JAE, JAR, TAR).

    Another interesting observation is that the category OTHER more than doubled between 2017 and 2021 and contributes the most to the 2021 impact factor (1.25 IF points out of 3.84 are attributable to this category), which means that citations from journals that do not have a primary focus on accounting are to a large extent responsible for the increase in impact factors in the last five years.

    To gain a deeper understanding of citations over time, Figure 2 visualizes the change in the importance of all non-18 accounting journals that cited the 18 accounting journals at least 200 times between 2017 and 2021, where the width of the bar leading to the center shows the importance of the respective journal. As one would expect, the chart includes ‘other’ accounting journals such as Auditing: A Journal of Practice and Theory (AJTP) and Meditari Accountancy Research (MEDI), or finance journals (Journal of Corporate Finance). However, the figure also shows that especially journals covering CSR and sustainability topics increasingly cite accounting journals (in light blue). For example, the impact factors of 2017 included around 32 citations from the journal Sustainability (SUST), which increased to 167 in 2021. Similarly, the Journal of Cleaner Production (JCP) and Business Strategy and the Environment (BSE) are increasingly citing the 18 accounting journals.

    In conclusion, impact factors of accounting journals have increased significantly in the past 5 years and the increase is to some extent attributable to citations from journals that cover CSR and sustainability topics. Topics such as disclosure of CSR, and sustainability and climate (change) topics in general receive more academic citations from non-accounting journals, thereby increasing their impact factors. For example, Bebbington and Unerman (2018, AAAJ) and Chen, Hung, and Wang (2018, JAE) cover CSR and sustainability topics and both papers counted 81 citations for the 2020 impact factor, far more citations than the third-highest citation count within the last 5 years (Nagar, Schoenfeld, and Wellman (2019) received 60 citations for the 2021 impact factor). Since determinants of CSR reporting are often similar to those of financial reporting (Christensen, Hail, and Leuz 2021), accounting research can (and does) play a crucial role in further studying this interdisciplinary topic.

    At face value, it seems that scholars outside of our field of accounting are more and more noticing our work. However, this might also partly be driven by accounting scholars publishing more in journals that do not have a primary accounting focus and then citing previous work in accounting. There might be good reasons for publishing outside of our ‘standard’ journals, e.g., increasing interdisciplinarity, but increasing pressure to publish might also incentivize opportunistic behavior to publish in journals with lower standards and easier review processes (in the worst case so-called predatory journals), which in turn could increase impact factors of accounting journals. To be clear: The analyses in this little essay do not allow for any conclusion in this respect nor do I imply that any of the mentioned journals are of low quality, but it is important to keep in mind what Impact Factors are and how they are used.



    Bebbington, Jan, and Jeffrey Unerman. 2018. “Achieving the United Nations Sustainable Development Goals: An Enabling Role for Accounting Research.” Accounting, Auditing & Accountability Journal 31 (1): 2–24.

    Chen, Yi-Chun, Mingyi Hung, and Yongxiang Wang. 2018. “The Effect of Mandatory CSR Disclosure on Firm Profitability and Social Externalities: Evidence from China.” Journal of Accounting and Economics 65 (1): 169–90.

    Christensen, Hans B., Luzi Hail, and Christian Leuz. 2021. “Mandatory CSR and Sustainability Reporting: Economic Analysis and Literature Review.” Review of Accounting Studies, July.

    Nagar, Venky, Jordan Schoenfeld, and Laura Wellman. 2019. “The Effect of Economic Policy Uncertainty on Investor Information Asymmetry and Management Disclosures.” Journal of Accounting and Economics 67 (1): 36–57.


    [1] In fact, Clarivate mentions that it ‘does not depend on the impact factor alone in assessing the usefulness of a journal, and neither should anyone else’ (, accessed July 7th, 2022).

    [2] Impact factors only measure academic citations, not the ‘impact’ research has on society.

    [3] The initial screening included the top 20 journals, but due to missing data on 2017, Accounting Forum and the Journal of Contemporary Accounting and Economics are not included.

  • Call for Nominations – Editor of European Accounting Review

    The term of the Editor of European Accounting Review, Beatriz Garcia Osma, runs through December 2023. It is the intent of the EAA Publications Committee to have the next Editor appointed by the end of 2022 to allow sufficient time for the transition. The new Editor will start accepting submissions to European Accounting Review as of 1 January 2024. The term of office as editor is four years. The new Editor is expected to guarantee the top quality of the journal as well as to play an active role in promoting its international visibility, including the use of social media.

    As articulated in the journal’s aims and scope, European Accounting Review is an international scholarly journal of the European Accounting Association (EAA). Devoted to the advancement of accounting knowledge, EAR provides a forum for the publication of high-quality accounting research manuscripts. The journal is proud of its European origins and the diversity of the European accounting research community. Conscious of these origins, European Accounting Review emphasizes openness and flexibility, not only regarding the substantive issues of accounting research, but also with respect to paradigms, methodologies and styles of conducting that research. European Accounting Review is global in scope and welcomes submissions relating to any country or region as long as their relevance to an international audience is clearly communicated.

    Specific qualifications for the editor of European Accounting Review include:

    • An internationally recognized scholar who has made significant contributions to accounting research.
    • Extensive experience as a reviewer and ideally some experience as an editorial board member or an (associate) editor.
    • A wide, international network that includes expertise in different paradigms and methodologies.
    • The ability to work in a constructive and timely way with authors, reviewers and the EAA’s Publications Committee.

    In keeping with the EAA’s Governance Guidelines, this call for nominations is the first stage in the selection process. At this stage, both self-nominations and nominations of others by current EAA members are welcomed. Please send your nominations via email to Baha Diyarov ( by 31 August 2022. Nominations should include a current curriculum vitae and a brief memo (no more than 150 words) describing your or your nominee’s relevant qualifications to the extent that they are not apparent from the CV.

    Following a review of nominations, eligible nominees will be asked to produce a statement outlining their intent for the development of the journal during their editorship and, whenever possible, an expression of support from their institutions. Finally, the Publications Committee will make a recommendation to the EAA Management Committee, which will appoint the new editor.

    For more information, please contact the chair of the EAA Publications Committee, Steven Young (

  • Management controls as creative resources in the co-creation of new products

    How do Management Controls (MCs) mediate and stimulate creative co-creation processes like new product development (NPD)?


    We address this question in our paper entitled “The Role of Management Controls in New Product Development: Codifying a Collective Source of Creativity” which has recently been published in European Accounting Review.


    Drawing on a field study of a German manufacturer undergoing a tremendous restructuring of its NPD process and adopting a knowledge codification perspective, we demonstrate how actors create multiple MCs that open different ‘spaces’ serving distinctive functions, while also being interrelated in the creative co-creation process of NPD.


    A ‘core MC’ creates space for recognizing, localizing, and developing new connections between items of knowledge, culminating in a new shared understanding of NPD, i.e., a synthesis


    A ‘supplementary MC’ stimulates actions and interactions on the micro-level that can challenge existing knowledge structures and cause-and-effect relationships, potentially resulting in the creation of an antithesis.


    Therefore, we elaborate on how MCs themselves can serve as a collective resource of creativity.


    Additionally, we add to the debate concerning the aspects determining the assessment of controls as enabling, arguing that the design characteristics of a single MC do not determine its enabling assessment, but rather it is the dynamic material nexus that MCs form and their fluid interplay that determine their assessment.


    Finally, our insights allow us to contribute to the relational view on knowledge objects such as MCs by evidencing a transition of an epistemic into a technical object caused by mutual interaction.



    This blog is based on this paper:
    Strauss, E., Malz, S., and Weber, J. (2022), “The Role of Management Controls in New Product Development: Codifying a Collective Source of Creativity”, DOI: 10.1080/09638180.2022.2082994

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