Voluntary Non-Financial Reporting: The Role of Strategic and Operational Controls

This research looks internally to investigate the role of both strategic and operational controls in motivating the broadness of the organization’s accountability definition and in turn its willingness to provide voluntary disclosure on environmental, social, and governance issues. The premise of this research is that the existence of internal controls within the organization provides a higher degree of confidence in the integrity of the voluntary non-financial disclosures to ward off any disclosure risk that might occur from revealing poor performance results. Strategic control evolves from the structure and characteristics of the board of directors. The board’s direction then cultivates operational controls through an environmental management system. Using archival data, we study the existence of two board characteristics (independent directors and CEO/Chair duality) and three components of an organization’s environmental management system (policy, training, and assurance). All, except CEO/Chair duality, are significantly related to the organization’s voluntary non-financial disclosure score, predicting over 50 percent of the variance in the disclosure score (R squared of .509). Our findings show that various levels of control provide additional insights into the voluntary disclosure decision.