Third-party assurance of sustainability reports and GHG emissions: do institutional characteristics and industry sensitivity matter?

Purpose We examine the influence of external sustainability assurance and the Big-4 assurance providers on greenhouse gas (GHG) emissions, as well as the moderating impact of stakeholder orientation, environmental policy stringency and industry sensitivity on the sustainability assurance–GHG emissions nexus. Design/methodology/approach We employ the system generalised method of moments (SGMM) on a global sample of 7,968 firm-year observations from 34 countries. We also use the entropy balancing method to overcome the issue of sample selection bias. Findings We document a negative relationship between external sustainability assurance and GHG emissions. The negative relationship also persists when the Big-4 assurance providers provide the assurance. We also find that the negative association between sustainability assurance, the Big-4 assurance providers and GHG emissions holds only for firms located in countries with stakeholder orientation and less stringent environmental regulations, as well as in environmentally sensitive industries. Our main findings are robust to endogeneity concerns, the use of alternate proxies and sample composition. Originality/value Our study is the first of its kind to report the impact of sustainability assurance on a verifiable account of corporate sustainability performance, such as GHG emissions. Unlike other studies, we also examine the moderating effects of environmental policy stringency, stakeholder orientation and industry sensitivity on the external assurance–GHG emission nexus. Overall, our findings have implications for policymakers, corporate executives, board members and assurance providers.