Evaluating Companies' Impression Management Tactics in Mandatory Sustainability Reporting

Abstract

The study aims to investigate how a sample of Italian companies adopt impression management (IM) tactics in sustainability reports under mandatory sustainability disclosure regulations. Using longitudinal panel data analysis on sustainability reporting and firm features of 76 Italian companies over 5 years, it evaluates the influence of GRI, integrated reporting, and corporate characteristics on adopting assertive, performance‐oriented, and defensive impression IM strategies. IM in corporate social responsibility (CSR) disclosure refers to the use of communication to shape stakeholders' perceptions of organizations' social and environmental performance. The findings reveal a dominance of assertive tactics, particularly in the manufacturing and electronics sectors, while performance‐oriented strategies are more prevalent in industries with measurable outcomes, such as utilities. Defensive tactics are marginally used, reflecting a preference for proactive image building. Larger firms tend to adopt performance‐oriented and defensive tactics, driven by visibility and reputational risks. Integrating sustainability disclosures discourages assertive tactics, while GRI compliance promotes assertive and performance‐oriented strategies. The results highlight the strategic role of IM in balancing reputational goals and regulatory compliance, thus supporting legitimacy theory, indicating that businesses strategically employ non‐financial reporting to align with prevailing societal norms and expectations. This study contributes to the debate on IM, providing social and environmental policy implications, with a focus on climate change. Specifically, it offers theoretical contributions by advancing the understanding of IM within mandatory reporting frameworks and emphasizing the role of regulatory and sectorial dynamics in shaping corporate disclosure strategies. Practical implications for CEOs and policymakers are also discussed, highlighting that CEO letters should focus on aligning corporate sustainability goals with stakeholder values and prioritizing transparency and trustworthiness in sustainability communication while depicting a comprehensive integrated scenario of companies' non‐financial performance. Assertive tactics could highlight directly actual achievements, but excessive use may trigger stakeholder skepticism. Integrating performance‐oriented narratives supported by quantifiable metrics strengthens the credibility of non‐financial disclosures, while defensive strategies should be limited to addressing concrete reputational threats. From policymakers' perspectives, sector‐specific standards and independent oversight, through audit committees and board independence, are considered to align with long‐term sustainability goals and promote stakeholders' engagement.