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Why Transparency May Not Be Best in Facilitating Corporate responsibility

5 January 2017
By Dennis Schoeneborn, Patrick Haack

Corporate Responsibility (CR) has become an increasingly important issue for business firms across the globe. Yet, implementing and embedding CR tends to be costly. Accordingly, it is tempting for firms to “greenwash” existing business practices with CR policies, reports, and fancy brochures – but without adopting these policies in a substantive way (i.e. what would mean an in-depth implementation in business practices and procedures).

In the same context, corporate transparency is typically seen as the key to make sure that firms would adopt CR practices in substantive form. In contrast, other scholars have argued that a certain degree of intransparency (or opacity) can be beneficial for the adoption of organizational practices. The argument here is that freedom from scrutiny provides space for decision makers to experiment with new CR practices and consider how to implement those practices. This leeway for experimentation, in turn, can then lead to a substantive institutionalization of CR practices – if compared to a more strict transparency regime (that would impede the occurrence of such dynamics to begin with).

In a recent simulation-based study (as part of a larger research project with Dr. Dirk Martignoni, University of Lugano), we demonstrate that a certain degree of hypocrisy and greenwashing, counter-intuitively, can be beneficial to the industry-wide adoption of CR practices. In our study, we explain differences in the ceremonial (i.e. superficial) vs. substantive (i.e. in-depth) adoption of CR practices in an industry with changes of “evaluation regimes” (i.e. degree to which implementation of CR practices are visible to outsiders).
In particular, we look at two evaluation regimes – transparency and opacity – and three levels of adoption – non-adoption, ceremonial adoption, and or substantive adoption. We assume that the evaluation regime can remain stable or switch, due to regulatory changes or industry dynamics. Of the four different possible sequences of evaluation regimes, we pay particular attention to the situation where there is little visibility at first (opacity) followed by greater visibility (transparency), and explore the conditions under which this particular sequence maximizes the prospects of substantive adoption.

Please find here a more extensive summary of the article.

Read the original paper: The paper has won the 2015 Best Paper Award of the Social Issues in Management Division of the Academy of Management. While the paper is currently in a review process, a shorter version can be accessed here. Haack, P. & Schoeneborn D. (2015). Exploring the Institutionalization of Corporate Responsibility: A Formal Modeling Approach. Academy of Management Proceedings, doi: 10.5465/AMBPP.2015.141

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Patrick Haack is an Assistant Professor of Business Ethics in the Strategy Department at HEC Lausanne, Switzerland.

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Dennis Schoeneborn is Professor at the Department of Intercultural Communication and Management at Copenhagen Business School.


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