Detecting label adopters in double materiality application: a machine learning approach

Diego Andrés Correa-Mejía, Jaime Andrés Correa-García and María Antonia García-Benau

Journal of Accounting & Organizational Change, 2025, vol. 22, issue 3, 381-405

Abstract: PurposeThis paper aims to detect the use of label adoption practices by early adopters of double materiality reporting.Design/methodology/approachA gradient boosting machine was used to analyse variables related to financial performance, corporate governance, sustainability reports and control variables of 162 European companies listed on the Dow Jones Sustainability Index (DJSI), which claim to apply double materiality reporting.FindingsThe model achieved an overall accuracy of 81.8%, correctly detecting label adopters at 78.6% and committed adopters at 84.2%. These results demonstrate the high accuracy of the model in distinguishing between label and committed adopters, reducing the risk of type I and II errors.Research limitations/implicationsThis study is limited to large DJSI companies in Europe that explicitly state the use of double materiality in their sustainability reports. The results may differ if companies of various sizes or in different regions were analysed.Practical implicationsThe results highlight challenges for regulators in identifying companies falsely claiming compliance with double materiality reporting in their sustainability reports. Furthermore, this research has implications for assurers, who are responsible for endorsing the provision of sustainability information and may be assisted in this task by the use of detecting tools. Additionally, capital providers can use these tools to ensure companies genuinely implement sustainability practices, not just adopt labels.Originality/valueThis research integrates empirical evidence with the use of machine learning techniques to offer fresh insights into the phenomenon of greenwashing, focusing specifically on the early adoption of the double materiality principle.

Keywords: Double materiality; Sustainability reporting; CSRD; Business transparency; Gradient boosting machine (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jaocpp:jaoc-08-2024-0285

DOI: 10.1108/JAOC-08-2024-0285

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