Corporate sustainability transitions: Are there differences between what companies say and do and what ESG ratings say companies do?

The existing literature agrees that companies' sustainability concerns are related to stakeholders' sustainability awareness. However, these studies disagree on how this relationship occurs. Some suggest that companies strategically decide to be more sustainable, expecting that stakeholders' recognition of their efforts will generate competitive advantage (inside-out perspective). However, others suggest that companies' sustainability awareness (and actions) increases only in response to stakeholder requests (outside-in perspective). Each perspective offers different views on how much stakeholders should trust the available information sources about companies' sustainability performance—what companies say (e.g., sustainability reports) and what ESG ratings companies present—because obtaining direct information about what companies do may be difficult for external stakeholders. In exploring how these theories support each other, we suggest strong structuration theory as a helpful tool for integrating inside-out and outside-in perspectives. We argue that these perspectives are complementaries instead of opposites, propose a framework to approach empirical settings, and apply the said framework to analyze the Cerrado Manifesto case, a zero-deforestation initiative led by private organizations, mainly European, on the Brazilian Cerrado biome. Using different information sources, we apply SmartPLS 4.0.9.2 to test the relationship between what companies say, do, and what ESG ratings say they do, additionally investigating the influence of social pressure, institutional environment, and controversies around companies. The results show no direct relationship between what ESG ratings say companies do and manifesto-signing (what companies do), but show an indirect effect through reporting (what companies say). A positive relationship was found between ESG rating and reporting, and between reporting and manifesto-signing. Significant relationships were found between the pressure received construct and both manifesto-signing and reporting. The proposed framework, integrating inside-out and outside-in perspectives, explains a company's manifesto-signing. [Display omitted] •We explored how ESG rating, what companies say, and what they do are connected.•We examined the role of social pressure to understand what companies do and say.•We studied company-level reporting and practice and its links to social pressure.•ESG controversy and headquarters country's SDG moderate so