Rethinking Sustainability Reporting with Reference to the Inflation Reduction Act

• Published date: 01 November 2023
• DOI: http://doi.org/10.1177/00953997231198843
• Author: Sunita S. Rao
• Date: 01 November 2023
• Subject Matter: Perspectives

https://doi.org/10.1177/00953997231198843

Administration & Society

2023, Vol. 55(10) 1911 –1931

© The Author(s) 2023

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DOI: 10.1177/00953997231198843

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Perspectives

Rethinking Sustainability

Reporting with

Reference to the

Inflation Reduction Act

Sunita S. Rao1

Abstract

This article explores the possible effects of the Inflation Reduction Act

(IRA) on stand-alone corporate sustainability reporting and assurance on

such reports. To this end, we use stakeholder theory to examine the

potential impact of the IRA on sustainability reporting, which includes

environmental, social, and governance indicators. It also explores

the various ways of implementing measures to achieve high-quality

sustainability reporting and guidelines for assurance of such reports. This

article provides one of the first frameworks for organizations to initiate

action on climate change.

Keywords

Inflation Reduction Act, sustainability reporting, assurance on sustainability

reporting

Introduction

Sustainability reporting is a common practice among companies (Mahmood &

Uddin, 2021) and crucial for policymakers (Peters, 2021). With the passing of

the comprehensive climate, healthcare, and tax bill on August 17, 2022, called

1Washburn University, Topeka, KS, USA

Corresponding Author:

Sunita S. Rao, Henderson Learning Resources Center, Washburn University, Room 309 B,

1700 SW College Avenue, Topeka, KS 66621, USA.

Email: sunita.rao@washburn.edu

1198843AAS0010.1177/00953997231198843Administration & SocietyRao

research-article2023

1912 Administration & Society 55(10)

the Inflation Reduction Act (IRA), sustainability reporting takes on a whole

new significance due to its focus on the environment and society. Notably, the

IRA places the US on course with the UN Sustainable Development Goals.

This study presents ways to improve sustainability reporting in an agency rule-

making process, so as to be in harmony with the IRA.

The IRA comes on the heels of the Securities and Exchange Commissions

(SEC) acknowledgment in March 2022 that “climate change poses an urgent

risk for investors, companies, capital markets, and the economy.” The SEC

clearly states that its climate “proposal would require these disclosures to be

filed with the Commission, phase reporting requirements over time based on

a company’s size, and importantly, includes a phased-in requirement for veri-

fication or ‘reasonable assurance’ of GHG Scopes 1 and 2 for larger filers to

help ensure the reliability of these disclosures” (SEC, 2022). Both initiatives

point toward a concerted proactive effort to mitigate climate change and

bring systematic change within society and its institutions. Many government

leaders, political figures, and business executives welcome this (Greer et al.,

2022).

The US government seeks to bring about systematic organizational change

to combat climate change, for which the IRA aims to a forceful and effective

instrument. Stakeholder Theory suggests why corporations publish sustain-

ability reports, why the IRA will change sustainability reporting guidelines,

and why corporations will be part of the process of this change and will adopt

such change.

The normative approach to stakeholder theory “identifies moral or philo-

sophical guidelines for the operation and management of corporations.”

(Donaldson & Preston, 1995, p. 71). Since “businesses have long promoted

themselves to their shareholders and the world as moral, socially conscious

entities engaged in the community, social activists naturally try to engage

corporations in their causes” (Lin, 2018, p. 1567). Due to this, the normative

approach of stakeholder theory may very well compel businesses to align

with IRA goals (Valentinov et al., 2019).

Industry leaders realize that they need to take immediate action to mini-

mize the adverse effects of climate change (Sayce et al., 2022). Moreover,

other developed countries worldwide have taken significant strides in

adopting rules similar to the IRA (e.g., the UK, Germany, and Spain;

Galvin & Healy, 2020), and such actions will motivate the US to take an

analogous path.

The economic downturn experienced during the COVID-19 pandemic dif-

fers from the ones experienced in the past and has been particularly devastat-

ing. “Rebuilding G20 economies after the COVID-19 pandemic requires

rethinking what type of economy we need and want in the future. Reviving