Sustainability Reporting and Strategic Disclosure: A Review of Reference Point Effect and Impression Management

ABSTRACT An increasing number of firms disclose sustainability information as part of their strategic disclosure decisions, reflecting incentives to influence stakeholders’ assessments of firm performance and legitimacy. Given the considerable discretion firms possess over the content and framing of such disclosure, economic research has increasingly adopted the reference point effect framework and impression management theory to analyze opportunistic behavior in sustainability reporting. This paper reviews the literature on reference point effect and impression management and applies these two frames to examine corporate sustainability disclosure strategies. Building on this, we integrate a conceptual model for analyzing corporate sustainability reporting behavior. In this model, decision makers compare sustainability performance with reference points and choose between symbolic disclosure and substantive disclosure depending on the outcomes. When sustainability performance falls below the reference point, firms tend to adopt symbolic disclosure strategies to influence stakeholders’ perceptions. In contrast, when performance exceeds the reference point, firms are more likely to engage in substantive disclosure to foster a favorable corporate image. We conclude by outlining directions for future research, highlighting the importance of reference point selection, the extension of impression management behaviors, and the development of explanatory frameworks to better understand the motivations underlying corporate sustainability reporting.