We collect a novel dataset on images in Environmental, Social, and Governance (ESG) reports using deep learning and artificial intelligence (AI), to test hypotheses arising from experimental literature that visual impression management enhances audience perception. We further combine AI and manual methods to contrast images that lack information content (“generic images” evoking broad ESG themes) against images with information content (“specific images” depicting firm-specific ESG activities). We hypothesize and find that firms (1) operating in socially problematic industries (e.g., “sinful”, polluting, or controversial industries), (2) issuing less extensive textual ESG disclosures, and (3) experiencing poor ESG performance tend to use more images, especially generic images, consistent with strategic motivations. We then examine the impact of image usage on stakeholders, observing unduly enhanced perception in retail traders but seldom in institutional investors. We observe that ESG award committees reward specific images and penalize generic images. Our results show that ESG report visual impression management affects stakeholders in the real world, though its impact can be overcome by attention and expertise

Consumers are increasingly conscientious of societal and environmental impacts of their purchases, prompting companies to make environmental, social, and governance (ESG) claims and engage in voluntary ESG assurance. However, prior literature lacks insight into whether consumers consider negative accounting news events (e.g., error/irregularity restatements) and their effects on purchasing intentions. Using real world consumers of sustainable goods, we investigate how varying levels of negative accounting news events (i.e., error or irregularity restatements), the presence of ESG product-quality assurance (e.g., cage free egg certification), and the type of assurance provider (e.g., an accounting firm that also audits the financial statements, an accounting firm that does not audit the financial statements, government agency) influence purchasing intentions and organizational legitimacy perceptions. We find that consumers surrogate negative accounting news events as indicators of ESG claim reliability, negatively impacting purchasing intentions, especially for more severe events (e.g., irregularity). However, ESG product-quality assurance partially mitigates these negative effects. Moreover, we find that when an error restatement occurs, the mitigating effect is less pronounced when the same firm provides both financial statement and ESG product-quality assurance compared to a governmental agency or non-financial statement auditor. Finally, when irregularities occur, though product-quality assurance partially mitigates the detrimental effects, there is no difference between assurance providers, likely because management's willingness to deceive auditors decreases the perceived reliability of assurance in general. Our results suggest boards should obtain ESG product-quality assurance and carefully select their assurance providers