Bormann, Hombach, and Müller explore how decision-makers cope with such ambiguity about optimal reporting, building on the theoretical framework of A02 and the institutional characterizations of the reporting environment in A01. To that end, the project exploits the fundamentally new sources of ambiguity arising from the recent rise in sustainability reporting, allowing the “live” study of firms’ learning as it unfolds. This setting triggers firms’ learning, as they need to update their reporting practices to new reporting requirements and shifts in stakeholders’ information demand. Using survey, experimental, and archival methods, A07 will unravel the role of learning from internal and external sources for generating transparency in the presence of ambiguity.

• Research Question

  How do firms learn about making effective reporting decisions when facing novel regulatory requirements and stakeholder information demands?

• Research Motivation

  Transparency arises from senders’ and receivers’ decisions to generate, distribute, receive, and process information. To further explore these questions, we are refocusing our resources on the powerful setting of sustainability reporting. This politically charged setting features fundamentally new sources of ambiguity created by novel requirements, shifts in stakeholders’ information demand, as well as unresolved conceptual and implementation challenges. The staggered and ongoing implementation of new requirements for years to come uniquely enables the study of firms’ learning “live” as it unfolds. The CRC is crucial for exploiting this opportunity since it unites institutional expertise, which is key to navigating the complex field of sustainability reporting, and provides an established platform for communicating with practitioners, allowing access to novel field data.

• Research Program

  We envision three work packages that address firms’ learning from external and internal sources about sustainability reporting. In work package I, we will leverage the Sustainability Reporting Navigator (SRN), a public platform we built in preparatory work that maps the evolving landscape of sustainability reporting requirements, practices, and preferences. In particular, we will use the SRN to establish a measure of “reporting intelligence” – the degree to which firms are informed about the drivers of their reporting payoffs. In work package II, we will further leverage the SRN to provide experimental evidence on the ambiguity faced by firms and researchers about the economic consequences of sustainability reporting. In work package III, we will shift our focus to internal information sources, that is, the supply side of firms’ sustainability reporting. Specifically, we will explore how firms’ reporting is shaped by their IT systems and reporting consultants – two crucial elements of firms’ reporting infrastructure that can mitigate ambiguity about reporting payoffs.

• Research Contribution

  We want to further improve the understanding of the determinants of transparency, especially of the ambiguity that firms face in assessing the payoffs from reporting under new requirements and to non-traditional users. This ambiguity represents an important friction that can impair transparency by preventing firms from adapting (optimally) to changes in requirements and stakeholder information demand, thereby imposing substantial costs on firms, their stakeholders, and society at large. Empirical evidence on the sources of and variation in firms’ learning costs can help policymakers design cost-effective requirements that target firms with competitive learning advantages and positive spillovers.