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ND Management Professor earns ‘best paper’ award for greenwashing research

by Carol Elliott

November 22, 2010

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University of Notre Dame research that examines whether companies that walk the talk when it comes to sustainability initiatives won its authors the prestigious Best Paper Award given by the International Conference of the Decision Sciences Institute (DSI).

Authors Sarv Devaraj, a management professor at the Mendoza College of Business, and Suvrat Dhanorkar, a 2010 graduate of the Notre Dame MBA program, will receive the “Best Environmental Issues Paper” award – one of four award categories – given by the during a DSI annual gathering on Nov. 21-24 in San Diego, Calif.

“Do as I Say Not as I Do—An Empirical Examination of the Relationship between Corporate Sustainability Beliefs and Performance” was selected for the recognition from among 1,100 entries.

“We focused on the signals that companies are providing to the stakeholders about sustainability,” said Devaraj, whose research expertise includes supply chain management, healthcare and information technology payoffs. “Specifically, we looked at 10K reports from a sample of Fortune 200 companies, and the statements that they make in these reports with regards to their beliefs and their actions on the dimension of sustainability.”

Devaraj and Dhanorkar studied the relationship between these statements and sustainability performance measures, including greenhouse gas emissions as reported by the Carbon Disclosure Project and the Environmental Sustainability Rankings published by Newsweek.

Surprisingly, they found a negative relationship: Companies that used sustainability keywords most often in their 10K reports had lower performance levels.

The research focused on the relationship between “belief signaling,” as indicated by the language used, and performance measures. But Devaraj conjectured that one of the reasons for the negative finding could be that companies are including mentions of sustainability in their annual reports because the topic increasingly is important to investors, even though operational measures haven’t yielded actual performance results as yet.

“One of the implications of the study is that there is going to be increasing scrutiny of the words and actions that companies use in relation to their sustainability beliefs,” said Devaraj. “So they should be very careful in terms of the claims and promises made in reports, press release and annual reports. They don’t want to make unsubstantiated claims. I think what all of this is going to lead toward is a more transparent, more standard procedure for reporting environmental disclosures so that the public and stakeholders can make fair judgments about the environmental efforts of companies.”