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Do Independent Sustainability Audits Provide a Competitive Advantage? Joseph Caziera; Ken Corleya; David Goraa a Appalachian State University, Online publication date: 09 March 2011
To cite this Article Cazier, Joseph , Corley, Ken and Gora, David(2011) 'Do Independent Sustainability Audits Provide a
Competitive Advantage?', EDPACS, 43: 2, 1 — 14 To link to this Article: DOI: 10.1080/07366981.2011.554343 URL: http://dx.doi.org/10.1080/07366981.2011.554343
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THE EDP AUDIT, CONTROL, AND SECURITY NEWSLETTER FEBRUARY 2011 VOL. 43, NO. 2
DO INDEPENDENT SUSTAINABILITY AUDITS PROVIDE A COMPETITIVE ADVANTAGE? Downloaded By: [Corley, Ken] At: 13:09 14 March 2011
JOSEPH CAZIER, KEN CORLEY, AND DAVID GORA Abstract. This study explores the value of sustainability information on consumer behavior and addresses two questions. First, can a sustainability report positively influence consumer behavior? Second, does a sustainability report from an independent, third party auditing agency have a greater impact on consumer behavior than an organization’s self generated sustainability report? We conducted a lab experiment in which participants were randomly assigned to two treatment groups. Participants in both groups were given general information about a fictional retailer of digital music, movies, and MP3 players and consumer behavior data were collected. Following this initial data collection, a summary of a sustainability report for the company was presented to participants. Based on group assignment participants were told the sustainability report was generated by either an independent auditing agency or the company itself, and consumer behavior data were collected again. The results indicate a positive and significant difference in consumer behavior toward a company with a published sustainability report versus a company with no sustainability report. However, no significant difference was found in consumer behavior based on the origin of the sustainability report. Implications are discussed.
IN THIS ISSUE n Do Independent Sustainability Audits Provide a Competitive Advantage? n Book Review: Information Security Governance
INTRODUCTION Sustainability has become a central strategic focus within many modern organizations. This is attributed to changes in public awareness and consumer behavior. The increase in media coverage of environmental issues and changes in general consumer behavior patterns have given rise to what is known within the research literature as ‘‘ethical consumption’’ and ‘‘ethical consumerism’’ (Strong, 1996; Newholm & Shaw, 2007). Organizations have responded to ethical consumerism by implementing cause-related marketing (CRM) to attract conscientious consumers (Barone, Miyazaki, & Taylor, 2000). Recent studies including surveys by McKinsey &
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Company, the United Nations Global Compact led by Accenture, and the Boston Consulting Group indicate ‘‘strengthening reputation and trust are prime motivators for companies to be involved with sustainability’’ (O’Brien, 2010). Therefore, sustainability reporting has become one method of implementing CRM within an organization to create and maintain a competitive advantage. There are many definitions of sustainability ranging from a label for environmental concerns to a subsection of a corporation’s social responsibility (CSR) program (O’Brien, 2010). One of the earliest definitions of sustainability can be traced to a 1987 United Nations conference where sustainability is defined as developments that ‘‘meet present needs without compromising the ability of future generations to meet their needs’’ (WCED, 1987). For the purposes of this study we closely adhere to the United Nations definition of sustainability, and further define ‘‘sustainability reporting’’ as an organization’s focus on environmental issues as a central component of normal business operations. These business operations include waste reduction, recycling and the use of materials that are easily recycled, utilizing energy efficient operations, the use of green power (solar, wind, hydro, etc.), and supporting non-profit environmental organizations and initiatives. The purpose of our study is to investigate whether or not sustainability reporting can provide a competitive advantage through its potential impact on consumer behavior. We address this issue through two basic research questions: (a) Can a sustainability report positively influence consumer behavior? (b) Does a sustainability report from an independent, third party auditing agency have a greater impact on consumer behavior than an organization’s self generated sustainability report?
THEORETICAL BACKGROUND Based on previously published literature four constructs are used in this study to measure consumer behavior: (a) premium pricing, defined as ‘‘the monetary amount above the average price received by multiple sellers for a certain matching product’’ (Ba & Pavlou, 2002, pp. 247–258); (b) consumer trust, defined as ‘‘a consumers’ willingness to rely on the seller and engage in behaviors that make the consumer vulnerable’’ (Jarvenpaa & Tractinsky, 1999, p. 2); (c) consumer loyalty, defined as ‘‘a consumers’ favorable attitude toward If you have information of interest to EDPACS, contact Dan Swanson (
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a business resulting in repeat business or re-purchase intentions’’ (Taylor & Strutton, 2010, p. 955); and (d) for the purposes of this study consumer purchase intention is defined as consumers’ intention to purchase specific products or services from a particular vendor.
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Price Premiums Price premiums are a sought-after goal for businesses. Ba and Pavlou (2002, pp. 247–258) define a price premium as ‘‘the monetary amount above the average price received by multiple sellers for a certain matching product.’’ Businesses strive for price premiums to increase profitability beyond the scope of reducing costs and increasing market share. The ability to charge price premiums traditionally relates to a differentiation strategy in which products or services are perceived to have superior value (Porter, 1985). One method of implementing a differentiation strategy to achieve price premiums involves offering incentives based on subjective measures (Porter, 1985). Individuals who believe strongly in a cause will often demonstrate their support through donations of both time and money (Cazier, 2006). Religious and non-profit organizations often depend solely on the goodwill of such individuals and their contributions. Consequently, fund raising is critical for the survival of such organizations. Reports have indicated approximately half of non-profit organizations in the United States have started business ventures to generate additional revenues (Brancaccio & Cole, 2003). This practice has evolved into what is presently known as cause-related marketing (Barone et al., 2000). However, cause-related marketing (CRM) is not limited to religious and non-profit organizations. For-profit businesses are also using CRM, and it is now regarded as an effective method of achieving a competitive advantage (Barone et al., 2000). This is evident in corporate support of social causes that currently exceed $1 billion annually (Barone et al., 2000).Therefore, we hypothesize: H1 Sustainability audits/reports will have a significant, positive effect on the price consumers are willing to pay for a product or service.
Trust Trust has also been identified as the most widely included construct used to understand pre-purchase consumer behavior particularly studies related to consumer purchases online (Milne & Boza, 1999; Lee & Turban, 2001; Bhattacherjee, 2002; McKnight, Choudhury, & Kacmar, 2002; Cazier, 2006; Cazier, Shao, & St. Louis, 2006; Eastlick, Lotz, & Warrington, 2006; Taylor & Strutton, 2010). For the purposes of this study we defined trust as a consumers’ willingness to rely on the seller and engage in behaviors that make the consumer vulnerable (Jarvenpaa & Tractinsky, 1999). Therefore, trust is also included in our study as a very important construct used to understand consumer behavior. Therefore, we hypothesize:
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H2 Sustainability audits/reports will have a significant, positive effect on consumer trust.
Loyalty Consumer loyalty, is considered a post-purchase attitude. Taylor and Strutton (2010) define consumer loyalty as a consumers’ favorable attitude toward a business resulting in repeat business or ‘‘re-purchase intentions.’’ This has implications for continuing patronage of company’s products or services in the future. As such it is a valuable construct to understanding consumer behavior. Therefore we hypothesize: H3 Sustainability audits/reports will have a significant, positive effect on consumer loyalty.
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Taylor and Strutton’s (2010) meta-analysis of 112 Internet-related marketing studies found several commonalities related to constructs used to measure consumer behavior. Behavioral intention or ‘‘purchase intention’’ was included in almost all studies in Taylor and Strutton’s meta-analysis. Behavioral intention is based on several widely accepted theories including the theory of reasoned action (Fishbein & Ajzen, 1975), the theory of planned behavior (Ajzen, 1991), the technology acceptance model (Davis, 1989), and flow theory (Csikszentmihalyi, 1988; Hoffman & Novak, 1996). Given the common use of purchase intention within the literature purchase intention was included in this study as a measure of consumer behavior. H4 Sustainability audits/reports will have a significant, positive effect on consumer purchase intentions.
Value of Third Party Report By comparing the four constructs used to measure consumer behavior we will be able to measure differences between consumer reaction to companies with no sustainability report and companies with a published sustainability report. One further issue still needs to be addressed. Does a third party sustainability report generated by an auditing agency have a greater impact on consumer behavior than a company’s self-generated sustainability report? Typically a third party audit is considered more objective and tends to validate a company’s sustainability related information. As mainstream investors begin to make investments based on corporate social responsibility they will want to be certain the information and processes by which the information has been gathered is reliable. Therefore, verification of sustainability reports by third party auditing agencies should become increasingly important. See Table 1 for a summary of all hypotheses. Therefore we hypothesize:
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Table 1 Hypotheses Summary Table Name
Symbol
Text
H1
SR ! Price
H2 H3 H4
SR ! Trust SR ! Loyalty SR ! PI
H5
TP ! SG
H5a
TP ! SG (Price)
H5b H5c H5d
TP ! SG (Trust) TP ! SG (Loyalty) TP ! SG (PI)
Sustainability audits/reports will have a significant, positive effect on the price consumers are willing to pay for a product or service. Sustainability audits/reports will have a significant, positive effect on consumer trust. Sustainability audits/reports will have a significant, positive effect on consumer loyalty. Sustainability audits/reports will have a significant, positive effect on consumer purchase intentions. An independent, third-party (TP) Sustainability audits/reports (SR) will have a significantly greater effect on consumer behavior than a report self generated (SG) by an organization. A TP will have a significantly greater effect on the price a consumer is willing to pay for a product or service than an SG. A TP will have a significantly greater effect on consumer trust than an SG. A TP will have a significantly greater effect on consumer loyalty than an SG. A TP will have a significantly greater effect on consumer purchase intentions than an SG.
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Loyal = consumer loyalty towards an organization; Price = the price a consumer is willing to pay for a good or service; SG = self generated sustainability report by an organization; SR = sustainability report; TP = third party sustainability report; Trust = consumer trust towards an organization.
H5 An independent, third-party (TP) Sustainability audits/reports (SR) will have a significantly greater effect on consumer behavior than a report self generated (SG) by an organization. H5a: A TP will have a significantly greater effect on the price a consumer is willing to pay for a product or service than a SG. H5b: A TP will have a significantly greater effect on consumer trust than a SG. H5c: A TP will have a significantly greater effect on consumer loyalty than a SG. H5d: A TP will have a significantly greater effect on consumer purchase intentions than a SG.
RESEARCH METHODOLOGY Participants The use of students as surrogates in social science research is a controversial issue and has often been debated within the IS research literature. Burnette and Dunne (1986) suggest that students should only be used as subjects when they represent the subject of interest. Bass and Firestone (1980) note that research findings that are not widely generalizable beyond a specific population, can provide evidence of causal relationships and testable hypotheses that can be extended to other subject populations. Despite the controversy, previous social science research seems to indicate that it is suitable to use students as surrogates when the participants’ skills and experiences are considered appropriate for an experimental task (Chi & Glaser, 1985; Hughes & Gibson, 1991). It has been noted that university students represent one of the largest target markets for MP3 players and digital downloads of both music and movies (Ipsos_Research, 2006). Consequently, graduate and undergraduate students were recruited as participants for this study. Since participants are asked
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to behave in their normal capacity, the use of students is considered appropriate (Gordon, Slade, & Schmitt, 2002). A total of 123 participants (60% males and 40% females) ranging in age from 19 to 29 (average age of 22) completed the research study. Participants were randomly assigned to one of two treatment groups during the web-based experiment.
Procedure
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In order to test our proposed hypotheses, we conducted an online lab experiment. During the lab experiment a fictitious company was presented to help control for possible bias during data collection. For example, if Amazon.com were incorporated into the lab experiment participants who have purchased goods or services from Amazon.com might rely on previous experience to answer consumer behavior questions rather than information provided during the experiment. Therefore, we created a fictional company—a manufacturer and retailer of digital media players and seller of downloadable digital songs and movies. There are several established companies that bear resemblance to aspects of our company’s business, including Apple (iPod and iTunes), Microsoft (Zune), and Amazon (digital downloads). In step one of the lab experiment participants were given some basic facts about the fictitious company called Media Magic. The basic facts provided to our participants stated that the company was founded in 2001, it has over $100 million a year in sales, consumers consistently rate its products very high, and its products are reasonably priced. Participants were also told that they were looking for a gift for a close friend, and they have decided to buy an MP3 player along with a downloaded song and a downloaded movie as a gift. In step two of the lab experiment consumer behavior data was collected. This included reporting the highest dollar amount they were willing to pay for the MP3 player, downloaded song, and movie. Data were also collected on the participants’ level of consumer trust, loyalty, and future purchase intentions. The initial data collection in steps one and two serves as our neutral consumer behavior data since participants had no knowledge of Media Magic’s sustainability reports. In step three participants were randomly assigned to two treatment groups. Participants in group A were told Media Magic has issued a sustainability report generated by an international sustainability auditing firm which specializes in sustainability audits. In contrast, participants in Group B were simply told Media Magic has issued a self-generated sustainability report. The summary of the sustainability report for both Group A and B notes that Media Magic supports the environment and gives back to local communities by (a) avoiding the use of toxic elements in its products, (b) supplementing its energy needs with renewable power, (c) promoting an initiative to be ‘‘good stewards’’ of the environment as the central mission of the company, and (d) the company donates a set percentage of profit from each MP3 player sold to various environmental organizations.
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Figure 1 Experimental Procedure. General Information for Media Magic, Inc.
Consumer Behavior Questionnaire #1 Treatment A: Sustainability Self Reported
Treatment B: Sustainability Third Party Audit
Summary of Media Magic’s Self-reported Sustainability Info
Summary of Sustainability Report By Independent Audit
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Consumer Behavior Questionnaire #2
In step four of the lab experiment consumer behavior data was collected a second time. This included reporting the highest dollar amount they were willing to pay for the MP3 player, downloaded song, and movie. Data were also collected on the participants’ level of consumer trust, loyalty, and future purchase intentions. The data collection in step four serves as the consumer behavior data for both treatment groups since participants were presented with additional information regarding Media Magic’s sustainability reports. Steps one through four are summarized in Figure 1.
Measures Survey items were used to measure each of the four consumer behavior constructs. A complete list of all items can be found in Table 2. Price premiums were measured by asking participants to report the highest price they would be willing to pay to purchase a digital song, a digital movie, and a digital media player from the fictitious company, Media Magic, used in this study. The consumer behavior construct of trust was measured using four Likert-type questions. Participants were asked to rate their level of agreement with each statement on a scale of one to seven. For example, ‘‘The Company is _____________.’’ (1 == Trustworthy, 7 == Untrustworthy). These four items were adopted from previously published studies (Cazier, 2006; Cazier et al., 2006). The consumer loyalty construct was also measured using four Likert-type questions. Participants were asked to rate their level of agreement with each statement on a scale of one to seven. For example, ‘‘I would ________ to buy from The Company.’’ (1 == Prefer To, 7 == Prefer Not To). These four items were also adopted from previously published studies (Cazier, 2006; Cazier et al., 2006). The last consumer behavior construct, purchase intention, was measured using four Likert-type questions. Participants were asked to rate their level of agreement with each statement on a scale of one to
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Table 2 Survey Items Used to Measure Consumer Behavior Construct
Questions
Price
Price1 Price2 Price3
Digital Song: Digital Movie: MP3 Player:
Trust
Trust1
The Company is _____________.
Trust2
I _________ The Company.
Trust3
The Company deserves _________.
Trust4
I feel ___________ trusting The Company.
Loyal1
I would ___________ The Company to others.
Loyal2
I would ________ to buy from The Company.
Loyal3
I will say _____ things about The Company.
Loyal4
I will ______ others to do business with The Company.
PI1
It is _______________ I will buy these items from The Company rather than a competitor. It is ________ I will purchase the digital song from The Company rather than a competitor. It is __________ I will purchase the digital movie from The Company rather than a competitor. It is ________ I will purchase the MP3 player from The Company rather than a competitor.
Loyal
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Identifier
PI2 PI3 PI4
Response
1 - Trustworthy to 7 - Untrustworthy 1 - Trust to 7 Distrust 1 - My Trust to 7 - Distrust 1 - Comfortable to 7 - Uncomfortable 1 - Recommend to 7 - Criticize 1 - Prefer to 7 - Prefer Not 1 - Positive to 7 - Negative 1 - Encourage to 7 - Discourage 1 - Likely to 7 - Unlikely 1 - Likely to 7 - Unlikely 1 - Likely to 7 - Unlikely 1 - Likely to 7 - Unlikely
Loyal = consumer loyalty towards an organization; Price = the price a consumer is willing to pay for a good or service; SG = self generated sustainability report by an organization; SR = sustainability report; TP = third party sustainability report; Trust = consumer trust towards an organization.
seven. For example, ‘‘It is _______________ I will buy these items from The Company rather than a competitor’’ (1 == Likely, 7 == Unlikely).
DATA ANALYSIS AND RESULTS In an effort to operationalize our first research question (can an independent sustainability audit positively influence consumer behavior?) we conducted two sets of t-tests on the consumer behavior data. Table 3 contains the results of the first set of t-tests between the consumer behavior data collected from a company with no sustainability report versus a company with a sustainability report generated internally (Treatment Group A—Self Generated Report). Table 4 contains the results of the second set of t-tests between the consumer behavior data collected from a company with no sustainability report versus a company with a sustainability report generated by an independent, third party auditing agency (Treatment Group B—Third Party Report). The results of the t-tests reported in Table 3 indicate that all items measuring consumer behavior were significantly higher for an organization that issued a self-generated sustainability report when compared to an organization with no sustainability report. That is, evidence suggests a self-generated sustainability report has a significant, positive effect on (a) the price a consumer is willing to pay for a product or service, (b) consumer trust, (c) consumer loyalty, and (d) consumer purchase intentions. 8
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Table 3 Paired Sample t-Test for Different Environmental Perceptions No Report
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Item
Mean
Self Report
Std. Dev.
Mean
Difference
Std. Dev.
Mean Diff.
t Stat
Sig
Price 1 Price 2 Price 3
0.80 5.73 124.10
0.56 4.88 89.66
1.03 6.34 135.11
0.80 5.33 97.43
–0.24 –0.85 –34.44
4.11 1.91 3.46
0.00 0.00 0.00
Trust 1 Trust 2 Trust 3 Trust 4
3.26 3.37 3.48 3.30
0.70 0.64 0.62 0.66
3.00 3.07 3.12 3.02
0.78 7.90 0.79 0.76
–2.56 –2.73 –2.86 –2.64
3.20 4.33 5.12 3.93
0.00 0.00 0.00 0.00
Loyal 1 Loyal 2 Loyal 3 Loyal 4
3.26 3.52 3.29 3.37
0.66 0.72 0.64 0.66
2.90 3.05 2.84 3.03
0.82 0.90 0.79 0.81
–2.6 –2.8 –2.65 –2.71
4.79 5.76 6.11 4.73
0.00 0.00 0.00 0.00
PI 1 PI 2 PI 3 PI 4
3.25 3.41 3.35 3.34
0.97 1.21 1.21 0.97
2.87 3.08 3.07 2.88
1.00 1.32 1.27 1.06
–2.28 –2.2 –2.14 –2.37
5.05 4.60 3.79 5.65
0.00 0.00 0.00 0.00
Loyal = consumer loyalty towards an organization; Price = the price a consumer is willing to pay for a good or service; PI = consumer purchase intentions; SG = self generated sustainability report by an organization; SR = sustainability report; TP = third party sustainability report; Trust = consumer trust towards an organization.
The results of the t-tests reported in Table 4 indicate that all items measuring consumer behavior were significantly higher for an organization with a sustainability report generated by an independent, third party auditing agency when compared to an organization with no sustainability report. That is, evidence suggests a third-party sustainability report has a significant, positive effect on (a) the price a consumer is willing to pay for a product or service, (b) consumer trust, (c) consumer loyalty, and (d) consumer purchase intentions. Table 4 No Report vs. Third Party Report No Report Item
Mean
Self Report
Std. Dev.
Mean
Difference
Std. Dev.
Mean Diff.
t Stat
Sig
Price 1 Price 2 Price 3
1.12 6.25 122.46
0.90 5.00 71.73
1.63 7.47 136.62
2.07 7.20 94.61
–0.22 –1.25 –50.73
2.49 2.15 2.30
0.00 0.00 0.00
Trust 1 Trust 2 Trust 3 Trust 4
3.34 3.36 3.51 3.25
0.85 0.80 0.70 0.79
2.92 2.93 2.98 2.87
0.99 0.89 0.94 0.89
–2.49 –2.56 –2.81 –2.46
4.49 4.13 5.07 3.69
0.00 0.00 0.00 0.00
Loyal 1 Loyal 2 Loyal 3 Loyal 4
3.36 3.69 3.30 3.54
0.78 0.90 0.74 0.70
2.72 2.85 2.82 2.87
0.95 1.03 0.90 0.90
–2.58 –2.79 –2.56 –2.84
5.96 6.86 4.38 5.78
0.00 0.00 0.00 0.00
PI 1 PI 2 PI 3 PI 4
3.34 3.49 3.43 3.41
1.08 1.16 1.19 1.17
2.77 2.85 2.89 2.74
1.09 1.25 1.27 1.12
–2.26 –2.33 –2.24 –2.24
4.77 4.76 4.67 6.17
0.00 0.00 0.00 0.00
Loyal = consumer loyalty towards an organization; Price = the price a consumer is willing to pay for a good or service; PI = consumer purchase intentions; SG = self generated sustainability report by an organization; SR = sustainability report; TP = third party sustainability report; Trust = consumer trust towards an organization.
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Table 5 ANOVA for Consumer Data for Self-Generated vs. a Third Party Sustainability Report Item Price 1 Price 2 Price 3 Trust 1 Trust 2 Trust 3 Trust 4
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Loyal 1 Loyal 2 Loyal 3 Loyal 4 PI 1 PI 2 PI 3 PI 4
Sum of Squares Between Groups Within Groups Total Between Groups Within Groups Total Between Groups Within Groups Total Between Groups Within Groups Total Between Groups Within Groups Total Between Groups Within Groups Total Between Groups Within Groups Total Between Groups Within Groups Total Between Groups Within Groups Total Between Groups Within Groups Total Between Groups Within Groups Total Between Groups Within Groups Total Between Groups Within Groups Total Between Groups Within Groups Total Between Groups Within Groups Total
40373.207 40599.641 172.265 38769.816 38942.082 3127.576 1059621.738 1062749.314 0.541 90.256 90.797 0.778 81.824 82.602 0.711 85.696 86.407 1.064 81.927 82.992 0.859 99.889 100.748 0.918 113.049 113.967 0.001 89.365 89.366 0.44 92.552 92.992 0.001 143.365 143.366 0.44 218.552 218.992 0.267 210.66 210.927 0.09 155.829 155.919 40373.207
df 121 122 1 121 122 1 121 122 1 121 122 1 121 122 1 121 122 1 121 122 1 121 122 1 121 122 1 121 122 1 121 122 1 121 122 1 121 122 1 121 122 1 121 122 121
Mean Square
F
Sig.
333.663 172.265 320.412
0.538
0.465
3127.576 8757.204
0.357
0.551
0.541 0.746
0.725
0.396
0.778 0.676
1.15
0.286
0.711 0.708
1.003
0.318
1.064 0.677
1.572
0.212
0.859 0.826
1.041
0.310
0.918 0.934
0.983
0.323
0.001 0.739
0.001
0.971
0.44 0.765
0.575
0.450
0.001 1.185
0.001
0.977
0.44 1.806
0.244
0.623
0.267 1.741
0.153
0.696
0.09 1.288
0.070
0.792
333.663
Loyal = consumer loyalty towards an organization; Price = the price a consumer is willing to pay for a good or service; PI = consumer purchase intentions; SG = self generated sustainability report by an organization; SR = sustainability report; TP = third party sustainability report; Trust = consumer trust towards an organization.
Therefore, evidence suggests sustainability reports positively influence consumer behavior. In an effort to operationalize our second research question (does an independent sustainability audit have a greater impact on consumer behavior than an organization’s self-reported sustainability statement?) we used a one-way analysis of variance (ANOVA) to test for a significant difference in consumer behavior toward a company with a sustainability report generated internally (self-generated) versus a sustainability report generated by an independent, third party auditing agency (third party). The results of the ANOVA are reported in Table 5. The results of the ANOVA reported in Table 5 suggests there is no significant difference among the items measuring consumer 10
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Table 6 Results of Hypothesis Tests Name H1 H2 H3 H4 H5 H5a H5b H5c H5d
Symbol SR ! Price SR ! Trust SR ! Loyal SR ! PI TP ! SG on all measures TP ! SG on PP TP ! SG on Trust TP ! SG on Loyalty TP ! SG on PI
Results Supported Supported Supported Supported Not Supported Not Supported Not Supported Not Supported Not Supported
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H# = hypothesis 1, hypothesis 2, etc.; Loyal = consumer loyalty towards an organization; Price = the price a consumer is willing to pay for a good or service; PI = consumer purchase intentions; SG = self generated sustainability report by an organization; SR = sustainability report; TP = third party sustainability report; Trust = consumer trust towards an organization.
behavior toward an organization with a sustainability report generated internally (self-generated) versus an organization with a sustainability report generated by an independent, third party auditing agency (third party). That is, there is not enough evidence to suggest the origin of a sustainability report has a significant effect on (a) the price a consumer is willing to pay for a product or service, (b) consumer trust, (c) consumer loyalty, or (d) consumer purchase intentions. We found strong support for H1 through H4. However, H5 was not supported suggesting our respondents did not differentiate between a self-report and a third party audit. A summary of hypothesis tests results are presented in Table 6.
DISCUSSION This study investigates the value of sustainability reporting. Sustainability reporting refers an organizations focus on environmental issues as a central component of normal business operations. This includes waste reduction, recycling & the use of materials that are easily recycled, utilizing energy efficient operations, the use of green power (solar, wind, hydro, etc.), and supporting non-profit environmental organizations and initiatives. The results of our study suggest there is a tangible monetary incentive for companies to issue sustainability reports. In fact, many participants indicated that they would be willing to pay as much as 11% to 45% more to purchase products from companies who issue sustainability reports over companies who do not issue such reports. However, this study found no statistical evidence to suggest a significant positive change in consumer behavior when a sustainability report is generated by a third party auditing agency. This seems to suggest consumers may not be fully aware of the differences and implications of each type of report. This may change over time given the infancy of sustainability reporting in the corporate sector within the United States.
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Implications Many participants are willing to pay price premiums for the products and services of companies who issue sustainability reports. This can be very useful to organizations searching for a method of creating a competitive advantage. Maintaining a competitive advantage in highly volatile markets is a challenge for any company especially Internet based firms. Given the ease at which business strategies can be duplicated, cause-related marketing in the form of sustainability reporting can provide a long-term competitive advantage. It would not replace the need to make quality products, but it just might provide an edge in an already crowded marketplace. It also might be important to invest in information systems capable of monitoring and measuring sustainability initiatives such as power consumption.
Limitations
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It is important to note some of the issues that must be considered when using students as participants. Some participants may make assumptions about the purpose of a research study and answer questions in a biased manner. In addition, students tend to be more idealistic about environmental issues. While recruiting students as participants may be considered a limitation, university students as a group represent the largest consumer of digital media. We should also note this study reflects consumer intentions rather than observed behavior. Therefore, a consumer’s reported intentions may not accurately mirror their actual behavior. Nevertheless, behavioral intention is widely regarded as one of the best predictors of future behavior within the research literature (Fishbein & Ajzen, 1975). Therefore, we feel this article makes a valuable contribution in terms of measuring the impact of self-generated sustainability reports and third party attested sustainability reports.
Future Research There are several avenues for future research. First, a field study could be conducted that surveys consumers while they are shopping on an actual e-commerce website with a published sustainability report. Data collected from customers regarding their purchase intentions could be compared to their actual purchasing behavior on the e-commerce website. This study was localized to participants residing in the United States. Future research studies could expand the data collection globally to participants in various parts of the world. The results from cross-culture research often vary significantly from studies localized to one geographical area or country. Recent research studies have noted consumer behavior can actually be negatively impacted by cause-related marketing in certain situations. For example, if a petro-chemical company was responsible for a major environmental disaster and immediately began an extensive marketing campaign to promote their research and development of green power consumers may view it as an effort to cover up their mistakes. Sustainability reports are meant to provide all information concerning a company’s social and 12
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environmental impact. Therefore, sustainability reporting is likely most effective when the overall mission and general operations of a company are focused on sustainability.
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Dr. Joseph A. Cazier is Assistant Dean at Appalachian State University. Dr. Cazier received a Ph.D. from Arizona State University. He actively does research in the areas of sustainability, information security, trust & ethics, and has taught courses in network security, information systems, database, and ecommerce. Prior to academia, he worked as a data analyst and a research scientist in the biotech industry. Dr. J. Ken Corley is an Assistant Professor of Computer Information Systems at Appalachian State University. He received his Ph.D. from Auburn University. His current research interests include sustainability, information privacy and security, and human computer interaction. Prior to academia, he worked as the general manager of a corporation servicing the petro-chemical industry and in marketing communications within the industrial manufacturing industry. David Gora received his Masters Degree in Accounting at Appalachian State University and is currently employed as an accountant for Time-Warner. He can be reached at
[email protected] 14
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