Environmental disclosure level: A firms' proactive or defensive posture?

This paper investigated which theory best explains companies' motivation for environmental disclosure: the image theory (proxy: adherence to the Corporate Sustainability Index - ISE), or the legitimacy theory (proxy: materiality of provisions for environmental damage in the Balance Sheet - MatPA). Listed non-financial Brazilian companies with Environmental Disclosure Score (EDS) available on Bloomberg for the period 2010-2018 were analyzed. The panel data analysis indicated that among non-potentially polluting companies, ISE is significant to explain environmental disclosure and MatPA is not; among potentially polluting firms, MatPA is significant, but ISE is not. This suggests the coexistence of two antagonistic motivations for disclosure: the proactive strategy of creating value and differentiation through environmental disclosure prevails (image theory) in non-potentially polluting companies, whereas potentially polluters primarily adopt a reactive attitude toward disclosure, seeking self-legitimation with stakeholders after causing damage to the environment (legitimacy theory).