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The aim of this study is to critically examine the transparency and reporting practice of Environmental, Social, and Governance (ESG) controversies within the pharmaceutical and textile industry. Based on the four core dimensions of transparency, we explore which reporting medium is most frequently chosen for the disclosure of negative ESG contributions, the nature and information content of the disclosed incidents and how voluntary adherence to sustainability reporting standards and independent assurances affect the reporting.

We use conceptual content analysis and employ a counter-accounting approach to analyse the disclosure of 190 ESG controversies in 104 corporate reports from the pharmaceutical and textile industries, covering a three-year period from 2018–2020.

The very large majority of controversies are reported only once in the legal proceedings section of the annual report, but not again in the sustainability report, where it would be necessary to provide a balanced picture. Moreover, companies tend to disclose only those controversies that are either associated with high media attention or are expected to be related to litigation, resulting in 26 per cent of controversies not being disclosed at all. The overall quality of disclosure is unsatisfactory and in need of improvement, but comparably higher in the pharmaceutical industry than in the textile industry. Interestingly, neither the application of sustainability reporting standards nor independent assurance seems to positively impact the disclosure behaviour.

Our paper provides new insights into the shortcomings of current ESG controversy disclosures by revealing patterns of selective reporting practices and the strategic framing of issues. In addition, it contributes to the debates on corporate cherry-picking in the adoption of sustainability reporting guidelines and on the effectiveness of external assurance of sustainability reports. Based on the findings, it offers important implications for practitioners, in particular management, policy makers, rating agencies and assurance providers.

This study investigates the relationships between environmental, social, and governance (ESG) controversies and insolvency risk in the insurance sector. Drawing from legitimacy and stakeholder theories, the authors explore the impact of ESG controversies on insurers’ insolvency risk and the moderating effect of ESG practices on this relationship.

This study utilises a dataset comprising 120 stock insurance firms spanning from 2011 to 2022. The authors employed system-GMM estimations to control for potential endogeneity and conducted several robustness checks.

ESG controversy positively influences insurers’ insolvency risk, with ESG practices mitigating these positive effects. The Governance (G) component of ESG practices plays a key role in counteracting the effects of ESG controversies on insurance companies’ insolvency risk.

This is the first study to investigate the direct relationship between ESG controversies and insolvency risk in the insurance industry. It underscores the critical influence of stakeholders’ perceptions of the company’s legitimacy, which is determined by the number of ESG controversies undertaken by the insurer company, on its insolvency risk. Additionally, by examining the three components of ESG practices individually, the authors offer insights into how managers can gain a competitive edge, particularly by utilising governance practices as safeguards against the adverse effects of ESG controversies on their financial risk.

This study aims to investigate the effect of ESG controversies and their moderating role in ESG performance and the cost of equity and overall, short-term and long-term debt capital relationship in European listed companies.

The study employs two-way fixed effects panel linear regression models on the balanced longitudinal dataset of 231 European non-financial companies listed in the MSCI Europe Index in 2017–2022. To check the robustness, the study utilises the fixed effects logistic regression models with heteroskedasticity-consistent standard errors.

The study reveals the significant effect of ESG performance (negative) and ESG controversies (negative) on the cost of debt capital and the substantial moderating effect of ESG controversies (positive). Additionally, it provides empirical evidence of the crossover moderating effect of ESG controversies in ESG performance and cost of equity relationship.

The findings contribute to corporate practice and empirically support legitimacy and stakeholder theories.

Companies can utilise the results to proactively enhance their internal policies and behaviour to align with ESG practices and avoid ESG controversies, which will translate into reduced equity capital costs for shareholders and a lower cost of debt capital charged by creditors.

To the best of the authors’ knowledge, this is the first study to comprehensively investigate the influence of ESG controversies and their moderating effect in the context of the equity and debt capital cost for European listed companies.

Interest in environmental, social and governance (ESG) controversies is acquiring great relevance in the business and academic communities. Nonetheless, previous studies in the area have devoted little attention to how the market views ESG controversies. Against this backdrop, this paper aims to investigate whether ESG controversies are value-relevant to investors, as reflected in equity values. It also investigates whether top management team (TMT) gender diversity is likely to affect the association between ESG controversies and equity market values in the context of high-tech firms.

This paper uses a sample of high-tech firms listed on the STOXX 600 index during the period 2006–2022. The ESG data for the sample is retrieved from the Refinitiv Eikon database. This paper adopts a fixed-effect panel regression to test the hypotheses.

Based on the Ohlson’s (1995) valuation framework, the authors find evidence that ESG controversies are associated with a lower market valuation, suggesting that shareholders perceive ESG controversies as conveying negative information about future performance. The authors also find evidence that TMT gender diversity negatively moderates the relationship between ESG controversies and equity values, indicating that TMT gender diversity alleviates the detrimental effect of corporate controversies. These results remain consistent when using the return model of Easton and Harris (1991).

This paper throws more light on the economic consequences of ESG controversies in European high-tech firms. This is particularly important due to the increasing importance of ESG criteria in guiding investment choices. This paper also adds to the current literature by providing new evidence that the value-relevance of ESG controversies is affected by TMT gender diversity.

With the increasing understanding of stakeholders on sustainability aspects for the business, companies are nowadays paying more attention to environmental and social issues. This study aims to examine the relationship between Environmental, Social, Governance (ESG) Index and firms’ value. Moreover, this study also examines how the controversy score influences the company’s value. The authors employ a dataset of 1.356 companies from 22 countries in Asia which representing the Asian market from 2014 to 2018. This study shows that ESG index score and controversy score are statistically significant, affecting the firms’ value, measured by Tobin’s Q. From the individual tests, the findings of this study indicate that ESG-environmental, ESG-social, and ESG-governance, individually affect the firms’ value. This study suggests that providing disclosure on ESG aspects is essential, not only to increase company value but also to show the company resilience and sustainability. On the other hand, ESG controversy score surprisingly indicates a positive relationship with the company value. The result implies that controversies provide a positive signal to the investor because controversies could provide a signal to the public of companies’ willingness to have transparency and accountability.

The study aims to determine whether a relationship exists between the potential significance of corporate controversies for stakeholders and how organisations respond to them in their annual and sustainability reports.

This paper employs content analysis on annual and sustainability reports of 48 listed companies from the Refinitiv database. The logit regression was used to estimate the model.

The study revealed that the main factors increasing the probability of a controversial issue being addressed in a corporate report are the controversy’s potential significance, companies’ financial performance and lawsuits.

Our study has three major limitations. These are a relatively small sample of companies and reports, focusing on disclosures made in corporate reports and omitting other channels of communication, for example, social media, and a certain amount of subjectivity in the process of coding information.

Former studies show that corporations face a serious risk of their hypocritical strategies becoming too evident for stakeholder groups. Our findings suggest that the risk is already materialising and may undermine the idea of CSR and sustainability reporting.

Our research focuses on high-profile adverse incidents widely reported in the media, the omission of which from corporate reports seems to constitute a particular case of organised hypocrite. It also demonstrates that companies use an impression management strategy to defuse adverse publicity and that major controversies cause minor ones to be omitted from their reports.

In recent years, European banks have been required to integrate environmental and social objectives into their business practices. At the same time, they have become increasingly exposed to environmental, social and governance (ESG) controversies. This paper empirically examines the relationship between the board characteristics of banks (i.e. size, gender diversity, meeting frequency, sustainability compensation incentives and the presence of a sustainability committee) and exposure to ESG-related controversies.

The empirical analysis focuses on a sample of 61 European banks between 2012 and 2021. Employing generalized method of moments (GMM) estimation, the authors examine the relationship between board characteristics and ESG controversies.

The results of the study indicate that banks featuring certain board characteristics (i.e. larger and more gender-diverse boards, facing sustainability compensation provisions and having sustainability committees) experience lesser exposure to ESG controversies. Additionally, the authors ascertain that prior instances of ESG controversies play a role in influencing current levels of such controversies. This result highlights the relevance of a bank's historical trajectory.

The authors' sample contains banks based in the European Union (EU). Future research should broaden the analysis to encompass banks operating in other advanced countries, as well as in emerging countries. This expansion would offer more insights into the relationship between board characteristics and ESG controversies under different regulatory frameworks.

The authors' findings provide relevant implications for several stakeholders, including shareholders, regulators and supervisors. Certain board characteristics should be taken into consideration to limit exposure to ESG controversies.

To the best of the authors' knowledge, this paper represents the first attempt to provide evidence of the link between strong corporate governance standards and reduced exposure to ESG controversies.

The purpose of this study is to develop a method to assess social performance. Traditionally, environment, social and governance (ESG) rating providers use subjectively weighted arithmetic averages to combine a set of social performance (SP) indicators into one single rating. To overcome this problem, this study investigates the preconditions for a new methodology for rating the SP component of the ESG by applying machine learning (ML) and artificial intelligence (AI) anchored to social controversies.

This study proposes the use of a data-driven rating methodology that derives the relative importance of SP features from their contribution to the prediction of social controversies. The authors use the proposed methodology to solve the weighting problem with overall ESG ratings and further investigate whether prediction is possible.

The authors find that ML models are able to predict controversies with high predictive performance and validity. The findings indicate that the weighting problem with the ESG ratings can be addressed with a data-driven approach. The decisive prerequisite, however, for the proposed rating methodology is that social controversies are predicted by a broad set of SP indicators. The results also suggest that predictively valid ratings can be developed with this ML-based AI method.

This study offers practical solutions to ESG rating problems that have implications for investors, ESG raters and socially responsible investments.

The proposed ML-based AI method can help to achieve better ESG ratings, which will in turn help to improve SP, which has implications for organizations and societies through sustainable development.

To the best of the authors’ knowledge, this research is one of the first studies that offers a unique method to address the ESG rating problem and improve sustainability by focusing on SP indicators.

This study aims to investigate the relationship between board gender diversity and environmental, social and governance (ESG) controversies and to determine if a critical mass of female directors has a significant impact on ESG performance.

The study analyzes a sample of non-financial companies from 13 European countries between 2004 and 2021. The primary method used to reach conclusions was the pooled ordinary least squares regression. Additionally, the study used supplementary techniques such as alternative measurement, sub-sample analysis and two-stage least squares to enhance its reliability.

The results indicate that a higher representation of women on boards is correlated with a reduction in the number of ESG controversies, particularly when there are three or more female directors. Furthermore, the relationship between board gender diversity and ESG controversies may be affected by factors such as industry, governance and a company’s environmental performance.

This study suggests that increasing women’s representation on boards may mitigate ESG controversies and improve firm reputation and performance, especially in industries with high ESG risks. Policymakers can support this through policies, targets, training and inclusive practices. The findings also inform investors and stakeholders of the relationship between board gender diversity and ESG controversies.

This study expands the understanding of the relationship between board gender diversity and sustainable accounting and finance. It focuses on the effect that having female board members has on corporate policies, which is significant for shaping global policies that promote diversity on boards.