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THE Florentin Emil Tănasă, Marian Siminică, Florian Marcel Nuță: The Role of Sustainability
Reporting for Enhancing the Corporate Credibility. A Literature Review

This problem is empirically confirmed. Research has shown a weak correlation
between the quality of reporting and actual performance (Iatridis, 2013), or even a
negative correlation in polluting industries (Patten, 2002). This disconnect creates
skepticism among stakeholders (Skarmeas & Leonidou, 2013).

This is exactly the context reflected in recent practical data: the perception of 85% of
investors that misleading statements are on the rise (EY, 2024a) and the concern of
55% of financial leaders about the risk of greenwashing (EY, 2024b) are direct
symptoms of this credibility crisis that academic literature has been documenting for
over a decade.

2.3. Sustainability Audit as a Validation Mechanism
Logically, the solution proposed by the literature to combat information asymmetry
and greenwashing has been validation by an independent third party: sustainability
auditing (Simnett, Vanstraelen & Chua, 2009).

Early studies have focused on demonstrating whether assurance “matters”. The results
are largely positive. Research shows that assurance of sustainability reports:

• Increases perceived credibility: Financial analysts and investors (both professional
and non-professional) have more confidence in reports that have been independently
verified (Pflugrath, Eilifsen & Simnett, 2011; Hodge, Subramaniam & Stewart, 2009).

• Reduces the cost of capital: There is evidence that firms that voluntarily provide
ESG reporting benefit from a lower cost of capital (Dhaliwal et al., 2011; Dhaliwal et
al., 2012) and better analyst ratings (Casey & Grenier, 2015).

• Improves reporting quality: The audit indirectly contributes to the firms’ internal
data collection systems (Park & Brorson, 2005; Gillet-Monjarret, 2018), leading to
more comprehensive reporting.

Previous studies indicate that the market is divided between traditional audit firms
(the Big 4) and specialist engineering or environmental consultants (Ackers & Eccles,
2015). Others suggest that auditors affiliated with the accounting profession provide
a higher level of rigor and therefore greater credibility (Simnett et al., 2009), although
others dispute this, arguing that technical experts are better suited to assess non-
financial data (O'Dwyer, 2011).

3. RESEARCH METHODOLOGY
The approach goes in two ways, allowing the study to map, critically evaluate, and
synthesize the body of relevant research.

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