Accounting for Integrity: ESG and Financial disclosures: the challenge of Internal Fraud in Management decision-making

Abstract 

This Doctoral Thesis presents a comprehensive examination of the controversies surrounding Environmental, Social, and Governance (ESG), focusing on the integrity of financial disclosures, the adoption of International Financial Reporting Standards (IFRS), and the growing issue of ESG fraud in the global business environment. In addition, it employs a mixed-methods research design, exploring the interplay between ESG controversies and corporate governance, with a particular focus on the role of gender diversity, ethical oversight, and mitigation of controversial practices. A combination of financial and digital systems using qualitative bibliometric analysis through the R programming language and a quantitative generalized linear model (GLM) clarifies the important role that women's leadership plays in mitigating ESG controversies, advocating for a governance model that is both empathy-led and ethically rigorous. 

The thesis studies/research: 

i) the complex relationship between controversies, political instability, and the mechanism of direct democracy, which empowers public participation in decision-making. An interesting paradox emerges from the data: higher levels of democracy correlate with higher levels of controversy. This raises critical questions about the effectiveness of democratic processes in ensuring transparency and limiting corruption and illegal practices in corporate governance, 

ii) the impact of the IFRS transition on the quality of narrative disclosures in financial statements during major economic events in Northern and Western Europe and the US. Applying the Multi-Criteria Decision Analysis (MCDA) method, Prometheé II yields remarkable findings; European companies demonstrate superior financial literacy and quality in voluntary financial disclosures compared to their US counterparts, which predominantly follow the mandatory disclosure provisions. 

iii) ESG Fraud - where phenomena of misreporting of ESG criteria are observed - adding a key dimension to the debate on corporate transparency and governance. The increasing reliance of stakeholders on reliable ESG metrics for investment decisions makes the growing trend of ESG fraud a significant risk to investor confidence and, by extension, corporate reputation. This highlights the urgent need for solid control mechanisms and legal frameworks to prevent such fraudulent activities and maintain the integrity of ESG reporting, which is vital for sustainable business operations. 

In addition, by analyzing geographical and sectoral differences in reporting practices, the thesis argues for harmonizing financial reporting to suit different corporate environments across nations. The use of multi-criteria analysis in combination with the ESG framework minimizes potential manipulation of information, highlighting the need for balanced leadership, overall transparency, and differentiated standardization in financial disclosures. 

This thesis highlights the importance of internal and external audits in the "green frauds" that are growing exponentially and details the new trends that business executives, investors, and regulators should follow, highlighting the importance of integrating anti-corruption standards into corporate social responsibility (CSR) initiatives and promoting equitable leadership structures. Finally, it notes the urgent need for further research on the impact of ESG controversies on business performance, particularly in the context of the European Union (EU). It urges an expanded dialogue on the role of democratic processes in corporate accountability and the reduction of ESG-related corporate fraud.

🔗 : https://www.didaktorika.gr/eadd/handle/10442/55359?locale=en