Rethinking Sustainability Reporting with Reference to the Inflation Reduction Act

Abstract

This article explores the possible effects of the Inflation Reduction Act (IRA) on stand-alone corporate sustainability reporting and assurance on such reports. To this end, we use stakeholder theory to examine the potential impact of the IRA on sustainability reporting, which includes environmental, social, and governance indicators. It also explores the various ways of implementing measures to achieve high-quality sustainability reporting and guidelines for assurance of such reports. This article provides one of the first frameworks for organizations to initiate action on climate change.

Keywords

Inflation Reduction Act sustainability reporting assurance on sustainability reporting

Get full access to this article

View all access options for this article.

References

Akisik

Gal

(2017). The impact of corporate social responsibility and internal controls on stakeholders’ view of the firm and financial performance. Sustainability Accounting, Management and Policy Journal, 8(3), 246–280.

Association of Public and Land-Grant Universities. (2022). Analysis of the Inflation Reduction Act of 2022. https://www.aplu.org/wp-content/uploads/aplu-analysis-of-the-inflation-reduction-act-of-2022.pdf

Banerjee

S. B

. (2001). Corporate citizenship and indigenous stakeholders: Exploring a new dynamic of organisational–stakeholder relationships. Journal of Corporate Citizenship, 1, 39–55.

Barbanell

. (2022). A brief summary of the climate and energy provisions of the Inflation Reduction Act of 2022. https://www.wri.org/update/brief-summary-climate-and-energy-provisions-inflation-reduction-act-2022#:~:text=The%20Inflation%20Reduction%20Act%20(IRA,taken%20to%20address%20climate%20change

Barbier

E. B

. (2020). Greening the post-pandemic recovery in the G20. Environmental and Resource Economics, 76(4), 685–703.

Ben Ismail

Alcouffe

Galy

Ceulemans

(2021). The impact of international sustainability initiatives on Life Cycle Assessment voluntary disclosures: The case of France’s CAC40 listed companies. Journal of Cleaner Production, 282, 124456.

Bivens

. (2019). How to think about the job-creation potential of green investments: A boost to labor demand that will create some jobs, shift some others—and increase job-quality overall. Economics Policy Institute. https://www.epi.org/blog/how-to-think-about-the-job-creation-potential-of-green-investments-a-boost-to-labor-demand-that-will-create-some-jobs-shift-some-others-and-increase-job-quality-overall/

Bjørn

Bey

Georg

Røpke

Hauschild

M. Z.

(2017). Is Earth recognized as a finite system in corporate responsibility reporting? Journal of Cleaner Production, 163, 106–117.

Brown

M. A.

Ahmadi

(2019). Would a Green New Deal add or kill Jobs? Scientific American. https://www.scientificamerican.com/article/would-a-green-new-deal-add-or-kill-jobs1/

10.

Brown-Liburd

Zamora

V. L.

(2015). The role of corporate social responsibility (CSR) assurance in investors’ judgments when managerial pay is explicitly tied to CSR performance. Auditing: A Journal of Practice & Theory, 34(1), 75–96.

11.

Camilleri

M. A

. (2017). Corporate citizenship and social responsibility policies in the United States of America. Sustainability Accounting, Management and Policy Journal, 8(1), 77–93.

12.

Carbon Disclosure Project. (2023). CDP-ICLEI Track helps local governments and their cities report their environmental activities, track progress, understand their impact and take action. https://www.cdp.net/en/cities#66fe485a9a39e6f8c607a4c7fe857992

13.

Chen

C.-J.

Guo

R.-S.

Hsiao

Y.-C.

Chen

K.-L.

(2018). How business strategy in non-financial firms moderates the curvilinear effects of corporate social responsibility and irresponsibility on corporate financial performance. Journal of Business Research, 92, 154–167.

14.

Chiappetta Jabbour

C. J.

Seuring

Lopes de Sousa Jabbour

A. B.

Jugend

De Camargo Fiorini

Latan

Izeppi

W. C

. (2020). Stakeholders, innovative business models for the circular economy, and sustainable performance of firms in an emerging economy facing institutional voids. Journal of Environmental Management, 264, 110416.

15.

Cordeiro

J. J.

Galeazzo

Shaw

T. S.

Veliyath

Nandakumar

(2018). Ownership influences on corporate social responsibility in the Indian context. Asia Pacific Journal of Management, 35(4), 1107–1136.

16.

Correa-Garcia

J. A.

Garcia-Benau

M. A.

Garcia-Meca

(2020). Corporate governance and its implications for sustainability reporting quality in Latin American business groups. Journal of Cleaner Production, 260, 121142.

17.

Council on Environmental Quality. (2022). Climate and economic justice screening tool. https://screeningtool.geoplatform.gov/en/about#3/33.47/-97.5

18.

Council on Environmental Quality. (2023). The white house council on environmental quality. https://www.whitehouse.gov/ceq/

19.

Delbard

. (2008). CSR legislation in France and the European regulatory paradox: An analysis of EU CSR policy and sustainability reporting practice. Corporate Governance: The International Journal of Business in Society, 8(4), 397–405.

20.

del Mar Alonso-Almeida

Llach

Marimon

. (2014). A closer look at the ‘Global Reporting Initiative’ sustainability reporting as a tool to implement environmental and social policies: A worldwide sector analysis. Corporate Social Responsibility and Environmental Management, 21(6), 318–335.

21.

Department of Energy. (2023). The inflation reduction act drives significant emissions reductions and positions America to reach our climate goals. https://www.energy.gov/sites/default/files/2022-08/8.18%20InflationReductionAct_Factsheet_Final.pdf

22.

Dhaliwal

D. S.

Radhakrishnan

Tsang

Yang

Y. G.

(2012). Non-financial disclosure and analyst forecast accuracy: International evidence on corporate social responsibility disclosure. The Accounting Review, 87(3), 723–759.

23.

Donaldson

Preston

L. E.

(1995). The stakeholder theory of the corporation: Concepts, evidence, and implications. The Academy of Management Review, 20(1), 65–91.

24.

Dong

Zhang

(2019). Litigation risk and corporate voluntary disclosure: Evidence from two quasi-natural experiments. European Accounting Review, 28(5), 873–900.

25.

Dubbink

Graafland

Van Liedekerke

(2008). CSR, transparency and the role of intermediate organisations. Journal of Business Ethics, 82(2), 391–406.

26.

Eaton

. (2021). Approaches to energy transitions: Carbon pricing, managed decline, and/or green new deal? Geography Compass, 15(2), 1–11.

27.

Eckerd

Snider

(2017). Does the program manager matter? New public management and defense acquisition. The American Review of Public Administration, 47(1), 36–57.

28.

Einwiller

S. A.

Carroll

C. E.

(2020). Negative disclosures in corporate social responsibility reporting. Corporate Communications: An International Journal, 25(2), 319–337.

29.

Environmental Protection Agency. (2023). Inflation Reduction Act: Investing in America. https://www.epa.gov/inflation-reduction-act

30.

Falcioni

J. G

. (2022). Inside the Inflation Reduction Act. ASHRAE Journal, 64(10), 4.

31.

Farooq

M. B.

de Villiers

(2019). Understanding how managers institutionalise sustainability reporting. Accounting, Auditing & Accountability Journal, 32(5), 1240–1269.

32.

Forbes. (2020). Why you should care about sustainability. https://www.forbes.com/sites/forrester/2020/11/30/why-you-should-care-about-sustainability/?sh=6cf498c87d6a

33.

Franken

R. E.

Brown

D. J.

(1995). Why do people like competition? The motivation for winning, putting forth effort, improving one’s performance, performing well, being instrumental, and expressing forceful/aggressive behavior. Personality and Individual Differences, 19(2), 175–184.

34.

Galvin

Healy

(2020). The green new deal in the United States: What it is and how to pay for it. Energy Research & Social Science, 67, 101529.

35.

Giannarakis

Zafeiriou

Arabatzis

Partalidou

(2018). Determinants of corporate climate change disclosure for European firms. Corporate Social Responsibility and Environmental Management, 25(3), 281–294.

36.

Glicksman

R. L.

(2023). Protecting the public health with the Inflation Reduction Act — provisions affecting climate change and its health effects. The New England Journal of Medicine, 388(1), 84–88.

37.

Global Reporting Initiative. (2013). The external assurance of sustainability reporting.

38.

Greer

Turco

Wallace

(2022). CFOs create value for climate adaptation & resilience in agency operations. The Journal of Government Financial Management, 70(4), 26–31.

39.

Grosser

. (2009). Corporate social responsibility and gender equality: Women as stakeholders and the European Union sustainability strategy. Business Ethics: A European Review, 18(3), 290–307.

40.

Hąbek

Wolniak

(2016). Relationship between management practices and quality of CSR reports. Procedia-Social and Behavioral Sciences, 220, 115–123.

41.

Herremans

I. M.

Nazari

J. A.

Mahmoudian

(2016). Stakeholder relationships, engagement, and sustainability reporting. Journal of Business Ethics, 138(3), 417–435.

42.

Hopwood

A. G

. (2009). Accounting and the environment. Accounting, Organizations and Society, 34(3–4), 433–439.

43.

Hummel

Schlick

(2016). The relationship between sustainability performance and sustainability disclosure – Reconciling voluntary disclosure theory and legitimacy theory. Journal of Accounting and Public Policy, 35(5), 455–476.

44.

Idowu

S. O.

Papasolomou

(2007). Are the corporate social responsibility matters based on good intentions or false pretenses? An empirical study of the motivations behind the issuing of CSR reports by UK companies. Corporate Governance: The International Journal of Business in Society, 7(2), 136–147.

45.

Internal Revenue Service. (2023). Internal revenue service Inflation Reduction Act strategic operating plan FY2023 – 2031. https://www.irs.gov/pub/irs-pdf/p3744.pdf

46.

Y. G.

North

Liu

(2017). Staking reputation on stakeholders: How does stakeholders’ Facebook engagement help or ruin a company’s reputation? Public Relations Review, 43(1), 201–210.

47.

Kasymova

. (2017). Understanding the challenges and sustainability of citizen engagement in the budgeting processes of developing countries. Administration & Society, 49(3), 374–393.

48.

KPMG. (2020). The time has come: The KPMG survey of sustainability reporting 2020. https://assets.kpmg/content/dam/kpmg/xx/pdf/2020/11/the-time-has-come.pdf.

49.

Krabbe

Linthorst

Blok

Crijns-Graus

van Vuuren

D. P.

Höhne

Faria

Aden

Pineda

A. C.

(2015). Aligning corporate greenhouse-gas emissions targets with climate goals. Nature Climate Change, 5(12), 1057–1060.

50.

Lee

S. Y.

Park

Y. S.

Klassen

R. D.

(2015). Market responses to firms’ voluntary climate change information disclosure and carbon communication. Corporate Social Responsibility & Environmental Management, 22(1), 1–12.

51.

Lin

T. C

. (2018). Incorporating social activism. Boston University Law Review, 98, 1535–1608.

52.

Linnenluecke

Smith

Whaley

R. E.

(2018). The unpaid social cost of carbon. Accounting Research Journal, 31(2), 122–134.

53.

Lodhia

S. K.

Sharma

(2019). Sustainability accounting and reporting: Recent perspectives and an agenda for further research. Pacific Accounting Review, 31(3), 309–312.

54.

Lützkendorf

Fan

Lorenz

(2011). Engaging financial stakeholders: Opportunities for a sustainable built environment. Building Research & Information, 39(5), 483–503.

55.

Mahmood

Uddin

(2021). Institutional logics and practice variations in sustainability reporting: Evidence from an emerging field. Accounting, Auditing & Accountability Journal, 34(5), 1163–1189.

56.

Maroun

. (2019). Does external assurance contribute to higher quality integrated reports? Journal of Accounting and Public Policy, 38(4), 106670.

57.

McCarthy

Muthuri

J. N.

(2018). Engaging fringe stakeholders in business and society research: Applying visual participatory research methods. Business & Society, 57(1), 131–173.

58.

Mikler

. (2018). The political power of global corporations: John Wiley & Sons.

59.

Morioka

S. N.

Carvalho

M. M.

(2016). Measuring sustainability in practice: Exploring the inclusion of sustainability into corporate performance systems in Brazilian case studies. Journal of Cleaner Production, 136, 123–133.

60.

Nègre

Verdier

M.-A.

Cho

C. H.

Patten

D. M.

(2017). Disclosure strategies and investor reactions to downsizing announcements: A legitimacy perspective. Journal of Accounting and Public Policy, 36(3), 239–257.

61.

Pearce

Markandya

Barbier

(1989). Blueprint 1: For a Green economy (1st ed.). Routledge. https://doi.org/10.4324/9781315070223

62.

Pellegrino

Lodhia

(2012). Climate change accounting and the Australian mining industry: Exploring the links between corporate disclosure and the generation of legitimacy. Journal of Cleaner Production, 36, 68–82.

63.

Perkiss

Bayerlein

Dean

B. A.

(2021). Facilitating accountability in corporate sustainability reporting through Spotlight Accounting. Accounting, Auditing & Accountability Journal, 34(2), 397–420.

64.

Persson

Å.

Rockström

. (2011). Business leaders. Nature Climate Change, 1(9), 426–427.

65.

Peters

B. G

. (2021). Some optimism about public governance. Administration & Society, 53(10), 1624–1630.

66.

Rahi

A. B. M.F.

Akter

Johansson

(2022). Do sustainability practices influence financial performance? Evidence from the Nordic financial industry. Accounting Research Journal, 35(2), 292–314.

67.

Ramudhin

Chaabane

Paquet

(2010). Carbon market sensitive sustainable supply chain network design. International Journal of Management Science and Engineering Management, 5(1), 30–38.

68.

Reiff

M. R

. (2020). In the name of liberty: An argument for universal unionization: Cambridge University Press.

69.

Romero

Ruiz

Fernandez-Feijoo

(2019). Sustainability reporting and stakeholder engagement in Spain: Different instruments, different quality. Business Strategy and the Environment, 28(1), 221–232.

70.

Sayce

S. L.

Clayton

Devaney

van de Wetering

(2022). Climate risks and their implications for commercial property valuations. Journal of Property Investment & Finance, 40(4), 430–443.

71.

Schlossberg

Zimmerman

(2003). Developing statewide indices of environmental, economic, and social sustainability: A look at Oregon and the Oregon Benchmarks. Local Environment, 8(6), 641–660.

72.

Security and Exchange Commission(SEC). (2022). Shelter from the storm: Helping investors navigate climate change risk. https://www.sec.gov/news/statement/lee-climate-disclosure-20220321

73.

Sethi

S. P.

Rovenpor

J. L.

Demir

(2017). Enhancing the quality of reporting in corporate social responsibility guidance documents: The roles of ISO 26000, Global Reporting Initiative and CSR-Sustainability Monitor. Business and Society Review, 122(2), 139–163.

74.

Sullivan

Gouldson

(2013). Ten years of corporate action on climate change: What do we have to show for it? Energy Policy, 60, 733–740.

75.

Thijssens

Bollen

Hassink

(2016). Managing sustainability reporting: Many ways to publish exemplary reports. Journal of Cleaner Production, 136, 86–101.

76.

Valentinov

Roth

Will

M. G.

(2019). Stakeholder theory: A Luhmannian perspective. Administration & Society, 51(5), 826–849.

77.

Van Den Brink

T. W.

van Der Woerd

(2004). Industry-specific sustainability benchmarks: An ECSF pilot bridging corporate sustainability with social responsible investments. Journal of Business Ethics, 55(2), 187–203.

78.

Vormedal

Ruud

(2009). Sustainability reporting in Norway – an assessment of performance in the context of legal demands and socio-political drivers. Business Strategy and the Environment, 18(4), 207–222.

79.

The White House. (2023). Justice40: A whole-of-government initiative. https://www.whitehouse.gov/environmentaljustice/justice40/

80.

Zhou

. (2019). Effects of corporate governance on the decision to voluntarily disclose corporate social responsibility reports: Evidence from China. Applied Economics, 51(55), 5900–5910.