Energy Firms' Development Role

Manuscript Details
Manuscript number ERSS_2019_57_R2
Title Climate protection or corporate promotion? Energy companies, development,

and sustainability reports in Latin America
Article type Perspective article
Abstract
There is an agreement in the academic literature about the crucial role of energy to development. Energy can
contribute with the three dimensions of development: social, economic and human. However, energy poverty is a
concern in this regard and in this paper we explore this issue in Latin American energy firms. The aim of this study is
to identify the frequency of words about development in sustainability reports of Latin American companies in the
energy industry. The frequency of words was analyzed through the content analysis based on a list of 61
development-related words. We observed that the annual reports of 93 companies in the years of 2012 and 2017
addressed issues such as development, education, poverty, and human development. There is also evidence of
improvement in this information over time. We found arguments in the reports showing how energy companies can
promote the development of their respective regions, but the arguments about the contribution for indigenous
communities seem to deserve more attention. Moreover, companies’ size seems to play an important role to improve
the understanding on information about development.
Keywords Development; Latin America; Sustainability Reports
Manuscript category Energy institutions and governance
Corresponding Author Rodrigo Malaquias
Corresponding Author's Universidade Federal de Uberlândia (Brazil)

Institution
Order of Authors Rodrigo Malaquias, Dermeval Borges Junior, Fernanda Malaquias, Alberto
Albertin
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1
RESPONSE LETTER
Energy Research & Social Science
Ref: ERSS_2019_57_R1
Title: Climate Protection or Corporate Promotion? Energy Companies, Development,
and Sustainability Reports in Latin America
Dear Editor,
We would like to present the revised version of the manuscript. In this new version, we
have observed the comments and suggestions of the reviewer regarding our fist revision.
The main modifications are marked in yellow.
Again, we would like to thank you and the reviewer for the helpful comments and
suggestions.
If you have any question, please let us know.
Thank you.
Best Regards,
The Authors
Comments and Suggestions:

- This question is still not answered:
p. 8 In content analysis, the unit of analysis around the key term/s is called a "strip": the
number of words before and after the term in question. Thus, what was your strip here?
"we selected a group of quotations" R: We have revised it to: “based on the content of
reports, we selected a group of quotations in which companies clearly ague about their
contribution to the development of their surrounding region. To select these quotations,
we have analyzed the sentences containing the key terms (those terms available in
Appendix A). The sentences stating the contribution of companies for development were
selected. These quotations are discussed in the result analysis”.
R: We have revised this part of the text again. In this new version, we only inform that
we selected and analyzed some parts of the text. This selection was based on the words
available in Appendix A. Therefore, we used the analysis of the text containing such
words to make the selection of some initiatives that contribute to development.
2
“Part B: we selected and analyzed some parts of the reports in which companies clearly
highlight their contribution to the development of their surrounding region. We
summarized a set of initiatives in a table (Table 4); these initiatives are also discussed in
the result analysis”.
noun-verb disagreement: "had a frequency equals to zero in the annual reports of 2012: "
R: In the first revision, this part of the text was changed to:
“Additionally, the frequency of the following three words was zero in the annual reports
of 2012: illiteracy, inequality and public facilities”.
This: "The five most frequency terms..." should be "The five most frequently cited
terms..."
R: We have revised it.
Sorry but I just don't see how the number of pages is a control variable. How are you
operationalizing this control? What is being held constant? This is the section that still is
fuzzy: "“Regarding the results of the regression analysis, Table 3 indicates that the
number of pages of annual reports correlates to the number of words about development.
The number of pages was included in the model as a control variable (since it is a
characteristic that may affect the number of development-related words), but it also
allows to analyze the relationship between the size of reports and the frequency of words
related to development”.
R: In this new version, the number of pages was removed of the regression analysis of
the quantitative model. Now, we only comment the number of pages in the descriptive
analysis (it is not used as a control variable in this new version of the paper).
Table 4 is a welcome addition! Well done!

R: Thank you!
“Robalino-López, Mena-Nieto, García-Ramos and Golpe (2015) should be "Robalino-

López et al. (2015)..."
R: We have revised it.
3
In this matter: "Conclusions: Again, translation issue: " identify the intensity of
expressions about..." Expressions is not the word you are looking for. R: We have
changed it to “intensity of words”." --- are you not discussion the word count or
frequency count? If so, say "word count" or "length of report" as "intensity of word"s is
not much more enlightening. I defer to Dr. Sovacool on this.
R: We have changed it to “frequency of words”:
“The objective of this study was to identify the frequency of words about development
on the sustainability reports of Latin American companies of the energy industry”.
To use the word "important" in the conclusions seems subjective and not very helpful.
Thus, "The results indicate an important participation of these companies in relation to
education, social inclusion, health and environmental issues (socio-environmental
projects, training courses, botanical centers and afforestation), as summarized in Table
4”. Can you specify exactly what kind of participation you identified? Otherwise, this
finding reads like a public-relations statement from a large state or private company.
R: The word “important” was removed of the conclusions. We have revised the text and
rearranged the paragraph with the examples and the content of the previous paragraph:
“In the qualitative analysis, energy companies performed various development activities,
such as educational projects, economic and social local development, income generation,
environmental protection, inclusion of minorities, among others, as summarized in Table
4. Some examples of these initiatives include socio-environmental projects (i.e. discount
in electricity bills to incentive an adequate discard of recyclable waste), training
courses/activities (for employees and for the community), the preservation of local flora
through a botanical center, among many others”.
“The main advancement of this study is to highlight the contribution of energy companies
from Latin America to different dimensions of development. We expect that this study
provides insights for policymakers on the role of Latin American energy firms in the
development of communities in which they are inserted, beyond the simple economic
aspect, in terms of wealth generated to its shareholders and the way such activities are
communicated to them. This is particularly relevant if we consider that energy is strongly
related to human development”.
1 1
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Climate Protection or Corporate Promotion?
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Energy Companies, Development, and Sustainability Reports in Latin America
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10 Abstract
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12 There is an agreement in the academic literature about the crucial role of energy to
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14 development. Energy can contribute with the three dimensions of development: social,
15
16 economic and human. However, energy poverty is a concern in this regard and in this paper
17
18 we explore this issue in Latin American energy firms. The aim of this study is to identify the
19
20
frequency of words about development in sustainability reports of Latin American companies
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in the energy industry. The frequency of words was analyzed through the content analysis
24
25 based on a list of 61 development-related words. We observed that the annual reports of 93
26
27 companies in the years of 2012 and 2017 addressed issues such as development, education,
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29 poverty, and human development. There is also evidence of improvement in this information
30
31 over time. We found arguments in the reports showing how energy companies can promote
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33 the development of their respective regions, but the arguments about the contribution for
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35 indigenous communities seem to deserve more attention. Moreover, companies’ size seems to
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37
play an important role to improve the understanding on information about development.
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Key-words: Development; Latin America; Sustainability Reports.
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60 2
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1. Introduction
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66 Development, the New Name for Peace. “76. Extreme disparity between nations in
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68 economic, social and educational levels provokes jealousy and discord, often putting
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70 peace in jeopardy”. (Populorum Progressio, Encyclical of Pope Paul VI on the
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Development of Peoples, March 26, 1967)
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In both developing and developed countries, the main obstacle for sustainable
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78 development is poverty (Kanagawa & Nakata, 2008). Usually, the concept of poverty is
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80 associated with monetary terms; however, it should be treated as a multidimensional concept,
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82 considering different components of well-being (Pachauri et al., 2004). Moreover, poverty is
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84 related with deprivation, and deprivation “can be thought of in terms of constraints on
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86 people’s choices to access certain material goods, assets, capabilities, freedoms and
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88 opportunities” (Pachauri et al., 2004, p. 2084).
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Considering that development and poverty are associated, the measures to reduce
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poverty can also have a positive effect on development. Access to electricity can contribute to
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95 a reduction in poverty (Kanagawa & Nakata, 2008) and to sustainable development
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97 (Bhattacharyya, 2006b). There is an important link between poverty and energy (Pachauri et
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99 al., 2004) and the relationship between these two variables has been a concern among
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101 development specialists (Khandker, Barnes & Samad, 2012). “As countries progress their
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103 energy consumption increases” (González-Eguino, 2015, p. 379), which reinforces the
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105 benefits of energy to the economic development (González-Eguino, 2015).
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The benefits of energy are not limited to the economic dimension of development. The
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demand for energy in poor households is usually lighting and cooking (Bhattacharyya,
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112 2006a). When these individuals have access to energy, their quality of life can drastically
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114 improve, but these benefits are also related to income, environment, health and education
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(Kanagawa & Nakata, 2008), which indicates the positive effects of energy to human
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development. Observing the definition of Sen (1999) about development, González-Eguino
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126 (2015, p. 379) states that “not having access to energy may mean being deprived not only of
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128 basic services such as cooking and home heating, for instance, but also other elements which
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130 are fundamental for individual and collective development, such as access to education,
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132 health, information and participation in politics” (González-Eguino, 2015, p. 379).
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134 Considering this development includes economic benefits related with a more comfortable
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136 and convenient life (Bak, 2018).
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This seems to be an important gap related to inequalities in the access to basic
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facilities, particularly in Latin America, as presented by Malaquias and Albertin (2018). The
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143 authors present, for example, that the access to electricity has relevant differences in Latin
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145 American countries, where some countries have good indexes (such as Argentina, Chile and
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147 Cuba), but others have a more delicate scenario (such as Haiti and Nicaragua). These
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149 considerations become more salient when we observe that disparities within and among
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151 developing countries can affect social instability and human development (Spalding-Fecher,
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153 Winkler & Mwakasonda, 2005).
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Disparities are available, for example, in some regions, where technological
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innovations present a higher demand from people, while in other cities people suffer with
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160 precarious conditions. “While people in major cities and developed countries enjoy an ever-
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162 expanding selection of applications and other innovations to help them live more efficient,
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164 safer and entertaining lives, millions in the hinterlands of Africa, Asia and Latin America are
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166 still waiting for the digital revolution to arrive” (ICT4D Conference, 2018). Considering that
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168 energy is an important ingredient for development, firms that operate in the energy industry
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170 have a crucial role in their local areas. When consulting previous research about energy and
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development and studies related with ICT4D, we found a gap to be addressed: a more
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comprehensive analysis about the contribution of companies in the energy industry to the
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development of their surrounding areas. Therefore, the aim of this study is to identify the
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185 frequency of words about development in sustainability reports of Latin American
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187 companies in the energy industry. In order to analyze the frequency of words, we employed
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189 the content analysis based on a list of 61 development-related words. To develop this analysis,
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191 we considered the three dimensions of development (Sen, 1999): economic, social and
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193 human.
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195 Considering the situation of many parts of the developing world, there seems to exist a
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potential conflict that affects development in terms of priority of investments (Bak, 2018).
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This conflict can be observed when “short-term economic needs may take priority over long-
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202 term investment in education and learning” (Bak, 2018, p. 1). According to Pachuari et al.
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204 (2004, p. 2086), “although there is a fairly substantial literature on the existence of energy-
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206 poverty linkages, there is relatively little direct, empirical evidence concerning the nature of
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208 these linkages in developing countries”. This study can fill this gap and present a
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210 comprehensive panorama about the contribution that companies in the energy industry can
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212 provide to their respective areas.
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This study is comprised of five sections, including this introduction. Section 2 presents
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a literature review about development and sustainable development. We present the criteria
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219 employed to collect and analyze data in Section 3. Section 4 contains the main results and
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221 discussion. Finally, in Section 5, we present the final remarks and suggestions for further
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223 research.
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227 2. Literature Review
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229 Studies on development involve different disciplines and levels, since development
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can be viewed as a multifaceted term (Walsham, 2017; Madrueño & Tezanos, 2018).
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Regarding the energy industry, previous research have reported the contribution of energy to
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economic, social and human dimensions of development (Spalding-Fecher et al., 2005;
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244 Kanagawa; Nakata, 2008; Khandker et al., 2012; González-Eguino, 2015; Wang et al., 2018).
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246 Energy can enable social and human development through access to modern health
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248 facilities, education, and communication (Wang et al., 2018). Despite its importance, part of
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250 the world’s population, particularly in developing countries and in rural areas, lives under
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252 conditions of energy access deprivation (Bhattacharyya, 2012; Mainali et al., 2014; González-
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254 Eguino, 2015; Brand-Correa et al., 2017). Therefore, energy poverty, that is “the situation in
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which energy access is not established yet” (Kanagawa; Nakata, 2008, p. 2026) represents one
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of the main problems that the energy industry will need to face in the next decades (González-
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261 Eguino, 2015).
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263 Energy is considered to be a core component of societies and a traditional factor of
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265 production (Brand-Correa et al., 2017; Wang et al., 2018). Solarin and Ozturk (2015)
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267 explored the relationship between hydroelectricity consumption and economic growth in
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269 Latin America countries (Argentina, Brazil, Colombia, Ecuador, Chile, Venezuela and Peru)
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271 and found a long run unidirectional causality from the first to the second variable in Brazil,
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Colombia, Chile, Ecuador and Peru. Shahbaz et al. (2018) also identified a positive
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relationship between energy consumption and economic growth in the top ten energy-
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278 consuming countries.
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280 Production depends on energy and economic growth demands an intensive energy use
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282 (Ahn et al, 2015). However, the increasing energy use and the greenhouse gases emissions
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284 associated to it are considered the primary cause of adverse environmental effects and climate
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286 change (Agovino et al. 2018; Ahn et al., 2015). According to Zhou et al. (2017), climate
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288 change and energy consumption have become the most complex challenge in global
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environment facing human development.
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In this context of a climate-constrained world, highly humanly developed countries
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have been producing and consuming renewable energy instead of non-renewable energy,
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303 since renewable energy plays a fundamental role to secure future climate change (Wang et al.,
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305 2018). While in the past the criteria to choose the energy system was the technical and
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307 economic viability, over the last few decades the criteria for this decision changed to the
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309 environmental impact of the energy system (Barros et al., 2015; Moreira et al., 2015).
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311 Renewable energy technologies can also contribute to equitable access to energy,
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313 particularly for low-income and vulnerable populations. McCabe, Pojani and van Groenou
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(2018) argue that the development of renewable energies allowed individuals and
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communities to act as both consumers and producers, changing the traditional way in which
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320 distribution in energy systems occurs. Because of this phenomenon, communities of energy
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322 ownership have emerged, which, despite various difficulties and barriers, have a potential to
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324 democratize the provision and access to energy, especially for low-income households.
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326 A term that emerged with this trend was “sustainable development”, which seeks to
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328 harmonize economic growth and socio-environmental aspects. Bhattacharyya (2012) states
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330 that sustainable development is a broader concept that involves not only economic growth,
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but also a development based on three fundamental pillars: economy, environment and
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society. Therefore, this concept contrasts with the traditional idea of development focused on
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337 income generation and wealth accumulation. In other words, sustainable development
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339 represents an “equitable environment-friendly and balanced development” (Bhattacharyya,
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341 2012, p. 261).
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343 Due its importance, the relation between energy and sustainable development received
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345 a great deal of attention from academic researchers over the past years. Bhattacharyya (2012)
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347 provided a critical review about energy and sustainable development by analyzing relevant
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literature on the subject and the application of a multi-dimensional sustainability framework
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to energy access programmes. The author concluded that a rebalancing of approaches to
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enhance energy access is required to ensure the linkage between economic development and
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362 sustainability, since the programmes analyzed supporting energy access did not show to
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364 contribute to sustainable development (Bhattacharyya, 2012).
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366 In this context, according to Streimikiene et al. (2012), the demand for sustainable
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368 development in the past decades has made the use of sustainable energy sources an imperative
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370 standard. However, the selection of sustainable energy sources is a complex task, since it
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372 involves multiple variables and conflicting objectives (such as financial costs, availability,
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security, environmental impact, etc.). As a way to address these decision problems,
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Streimikiene et al. (2012) proposed a multi-criteria decision support framework to select the
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379 most sustainable electricity production systems. Among the results, the authors found that
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381 renewable energy systems based on water and solar power sources are the most sustainable
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383 ones, which should be considered in future energy policies in order to ensure economic, social
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385 and environmental development (Streimikiene et al., 2012).
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387 Latin America, the focus of this study, has a great potential to boost its development
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389 through energy efficiency. Camioto et al. (2018) analyzed the renewable and sustainable
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energy efficiency of Latin American countries using the data envelopment analysis (DEA)
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method. Their results showed that Brazil, Uruguay and Venezuela have the highest renewable
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396 and sustainable energy efficiency (above 85%), while Mexico, Bolivia, Ecuador, Guatemala
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398 and Argentina presented renewable and sustainable energy efficiencies below 30%. Still
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400 regarding energy efficiency, Meneses-Jácome et al. (2016) did a literature review on energy
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402 recovery from agro-industrial wastewaters in Latin America. They also identified a lack of
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404 efficient wastewater technologies and energy policies that stimulate the use of this kind of
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406 energy.
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When discussing the role of energy in development in Latin America, addressing the
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Venezuela case is a must. Venezuela is one of the most important countries in terms of
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421 energy, since it holds some of the world’s largest reserves of oil, natural gas and coal. More
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423 than a third of the primary energy produced is for domestic consumption (of which about a
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425 half is wasted due to technological and operational inefficiencies); the rest is exported and
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427 represents a relevant element of the Venezuelan economy. On the other hand, the high
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429 availability and dependence of primary energy sources narrowed the development of other
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431 resources, such as renewable ones, even with good conditions to solar, wind and water power,
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as well as biogas (Rojas-Zerpa & Yusta-Loyo, 2015).
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Robalino-López et al. (2015) studied the conditions in which Venezuela could
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438 approach the fulfillment of the EKC hypothesis (i.e. the inverted U shaped relationship
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440 between income per capita and pollution) in the medium term (2011 to 2025), since its energy
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442 matrix is based on fossil fuels, which are highly polluting. The model estimates indicated that
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444 Venezuela did not support the EKC hypothesis in any of the scenarios projected. Pollution
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446 increase with the GDP growth per capita (positive relationship), however, the environmental
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448 damage did not decline as expected in accordance with the EKC hypothesis. Despite this, the
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authors argue that Venezuela may reach environmental stabilization in the medium term if it
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changes its energy matrix by increasing the presence of renewable energy sources.
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455 In Brazil, which is one of the industrialized countries with the cleanest energy
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457 matrices, Pao and Fu (2013) examined the causal relationships between the real GDP and four
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459 types of energy consumption. Their study identified a long run equilibrium between real GDP
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461 and the four types of consumption, suggesting that an expansion in renewable energy could
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463 lead Brazil to a leading position in the international scenario.
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465 Regarding Argentina, the third largest economy of Latin America in terms of total
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GDP, despite its high potential for renewable energy due its favorable conditions to solar,
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wind and water power and biofuels, its estimated share of energy generated from renewable
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sources is only around 2%. Some factors that compromise the expansion of the renewable
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480 energetic matrix of Argentina are economic instability, stringent importation regulations, state
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482 subsidies for traditional energy sources and lack of state funding to supply the rural
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484 population with electricity. These conditions represent constraints to future development
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486 opportunities of the country (Schaube, Ortiz & Recalde, 2018).
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488 Despite its importance to development, sometimes the implemantation of energy
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490 systems may lead to conflicts arising mainly from an unequal wealth distribution. For
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example, the expansion of the hydropower sector in Colombia provoked struggles between
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social agents, including armed ones (e.g. destruction of energy transmission towers), due
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497 ecological distributive conflicts such as rural versus urban populations (e.g. rural populations
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499 are expropriated from their territory for the installation of hydroelectric dams while urban
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501 populations benefit from high quality energy services at a low cost). Thus, populations
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503 directly affected by energy development must be invited to participate in energy planning and
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505 policies as a way to mitigate these conflicts and promote fair energy distribution (Martinez &
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507 Castillo, 2016).
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Moriarty and Honnery (2014) pointed out that the strong relationship between global
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production and energy consumption will continue in the future, but alternative energy
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514 generation is growing so slowly that it may not be sufficient to prevent global climate change.
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516 Nevertheless, based on the literature review, we concluded that, as the energy industry is
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518 related not only to the economic development of the countries but also to the well-being of the
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520 population, investments and policies in this sector must take into account the increasing need
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522 for a sustainable development. The way energy companies contribute to the development of
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524 their respective countries/regions is the focus of the present study.
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3. Data and Method
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In order to identify the companies of the energy industry in Latin America, we
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539 consulted the Economatica database. Based on the North American Industry Classification
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541 System (NAICS), we selected all the companies listed that operate with energy generation,
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543 transmission or distribution. For comparative purposes, we collected data from two periods,
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545 with a difference of five years between them (2012 and 2017); therefore, we can analyze
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547 whether the number of development-related words is increasing/decreasing over time. Annual
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549 sustainability reports were downloaded from the website of each company. Table 1
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summarizes the number of companies that have a sustainability report for each year.
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556 Please insert Table 1 about here
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560 After downloading the annual sustainability reports, we conducted the content analysis
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562 based on a list of 61 development-related words, available in Appendix A. These words were
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564 selected after a comprehensive literature review on references related to development (mainly:
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566 Sen, 1999; Bhattacharyya, 2012; Malaquias et al., 2017; Malaquias & Albertin, 2018). For
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example, based on Sen (1999, p. 3), we can find that “development requires the removal of
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major sources of unfreedom: poverty as well as tyranny, poor economic opportunities as well
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573 as systematic social deprivation, neglect of public facilities as well as intolerance or
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575 overactivity of repressive states”. These considerations motivated the inclusion in Appendix
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577 A of words such as tyranny, poor, opportunity, development, intolerance, deprivation,
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579 poverty, and public facilities. Moreover, Malaquias and Albertin (2018, p.4) state that “the
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581 application of technology in rural areas represents an important factor to promote human,
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583 social and economic development”, which motivated the inclusion of the words technology
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and rural in Appendix A. The following quotation also reinforces the inclusion of the word
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591 11
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“rural” in Appendix A: “Further, energy access is predominantly a rural problem. 1.1 billion
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(out of 1.3 billion or 85%) lacking electricity access are found in rural areas” (Bhattacharyya,
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598 2012, p.263). Therefore, Appendix A is comprised of development-related words selected
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600 after the analysis of the mentioned references.
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602 Initially, we analyzed a subsample of 10 annual reports in order to check the suitability
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604 of the word list and adjust its final version, as reported in Appendix A. Then, we conducted
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606 the content analysis of the full sample, comprising 171 annual sustainability reports (84 from
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608 2012 and 87 from 2017) based on word frequency. These annual reports refer to 93
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companies. The analysis of annual reports using the frequency of words has been used in
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recent academic studies such as Yekini et al. (2016) and Loughran and Mcdonald (2011).
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615 The annual reports of the sample are available in three different languages: Brazilian
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617 Portuguese, Spanish and English. Therefore, the words/terms in Appendix A were translated
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619 into Brazilian Portuguese and Spanish before the analysis. First, we registered the frequency
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621 of each word in each report (variable: No.-Words). Then, we added a filter, restricting the
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623 search to the frequency of terms within sentences directly related to development (variable:
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625 No.-Words-Dev). As the variable “No.-Words” presents a considerable degree of variation
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(for example, some companies have less than 10 of these words in their annual report and
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others have more than 1,000), we also calculate the Natural Logarithm of these two variables,
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632 in order to avoid some concerns with extreme values in the quantitative analysis. The labels of
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634 these two new variables are: “No.-Words (NL)” and “No.-Words-Dev (NL)”. Based on the
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636 data collected, our analysis was segregated in two main parts (one, mainly quantitative, and
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638 the other, mainly qualitative).
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640 Part A: based on the number of words related with development and used in a context
641
642 directly related with development, we obtained the number of words related to development
643
644
in each company. We analyzed this number using descriptive statistics and regression
645
646
647
648
649
650 12
651
652
analysis, since we aim to investigate two potential determinants of this variable: firms’ size
653
654
655
and time. In the regression analysis, two quantitative models were considered. In the first, the
656
657 dependent variable is the Natural Logarithm of the number of words according to the list
658
659 available in Appendix A (we calculate the natural logarithm in order to avoid some concerns
660
661 with extreme values). In the second model, the dependent variable is the Natural Logarithm of
662
663 the number of words in sentences directly related to development, also according to the list
664
665 available in Appendix A. Part B: we selected and analyzed some parts of the reports in which
666
667 companies clearly highlight their contribution to the development of their surrounding region.
668
669
We summarized a set of initiatives in a table (Table 4); these initiatives are also discussed in
670
671
672
the result analysis.
673
674
675
676 4. Results
677
678 In the first step of the analysis, we analyzed the words from Appendix A with the
679
680 highest and lowest frequency in the annual sustainability reports. The five most frequently
681
682 cited terms were: development, profit/profitability/income, security, social, and sustainability.
683
684 These five terms presented the highest frequency in both years of the sample period (2012 and
685
686
2017). This result indicates some concern of companies in providing information related to
687
688
689
profitability and also with sustainability, since this kind of information could be important for
690
691 external users of financial reports.
692
693 Regarding the words with the lower frequency, five words did not appear in the annual
694
695 reports of 2012 and 2017: authoritarian, deprivation, epidemic/epidemiological, intolerance,
696
697 and tyranny. Additionally, the frequency of the following three words was zero in the annual
698
699 reports of 2012: illiteracy, inequality and public facilities. On one hand, these results related
700
701 with the highest/lowest frequency of words are in line with the content of the kind of annual
702
703
report selected in this study, since these reports address sustainability, development and social
704
705
706
707
708
709 13
710
711
issues. On the other hand, these initial results show opportunities to improve arguments about
712
713
714
the benefits of energy companies in aspects related to inequality and illiteracy, as well as to
715
716 public facilities.
717
718 Table 2 presents the descriptive statistics of our study database. These statistics are
719
720 segregated per year, in order to indicate potential effects of time on the content of the annual
721
722 reports. The results reported in the table suggest an increase, from 2012 to 2017, in the
723
724 number of pages, number of words and in the number of words in sentences specifically
725
726 related to development.
727
728
729
730
731
Please insert Table 2 about here
732
733
734
736
737
738
739 According to results in Table 2, energy companies use a considerable number of
740
741 expressions related to development in the presentation of their sustainability reports. Some
742
743 examples of these expressions include (the words in parentheses are in Brazilian Portuguese):
744
745
health (saúde); inclusion (inclusão); rural (rural); education (educação); water (água);
746
747
748
corruption (corrupção); security (segurança); nutrition (nutrição); and opportunity
749
750 (oportunidade). The average is around 469 words in 2012 and 539 words in 2017. Regarding
751
752 the frequency of words about development in sentences directly related to development, the
753
754 average is around 9 words in 2012 and 10 words in 2017.
755
756 Regarding the results of the regression analysis (Table 3), company size presented a
757
758 positive effect on the number of words related to development in both measures considered:
759
760 “No.-Words (NL)” and “No.-Words-Dev (NL)”. This result indicates that the traditional
761
762
antecedents of accounting disclosure also seem to present a significant effect on the content
763
764
765
766
767
768 14
769
770
about development available in sustainability reports of energy companies. The difference in
771
772
773
word frequency between the two years was also significant for both variables (p < 0.05 in
774
775 both cases).
776
777 These findings are in line with previous studies that documented a significant, positive
778
779 relationship between firm size and corporate social responsibility practices, including
780
781 disclosure level. The underlying explanation for this evidence is that large firms usually have
782
783 more resources available to spend in socially responsible activities that contribute to
784
785 development, as well as to communicate it to the public. In addition, large firms are more
786
787
subject to pressures from stakeholders to adopt a satisfactory socio-environmental
788
789
790
performance, so that disclosure is a priority for building the company’s image (Beck, Frost &
791
792 Jones, 2018; Andrikopoulos & Kriklani, 2013; Baumann-Pauly, Wickert, Spence & Scherer,
793
794 2013).
795
796 Based on the results of the qualitative approach, we identified some initiatives that
797
798 contribute to development conducted by energy companies. Table 4 indicates some of these
799
800 initiatives.
801
802
803
804
805
806
807
808
809 Some initiatives are related to projects that promote local development, income
810
811 generation and social inclusion (Bandeirante Energia, 2017). Regarding education, projects
812
813 involve partnerships with government to engage teachers and students in initiatives to
814
815 improve the quality of life of students and promote citizen formation and safe/conscious
816
817 energy consumption, as well as preservation of natural resources (Bandeirante Energia, 2017;
818
819 Light, 2017). Some programs also include individuals with intellectual disabilities in the job
820
821
market (Light, 2017). Projects also encourage women to participate and stay in the
822
823
824
825
826
827 15
828
829
companies’ staff; incentives involve different kinds of benefits, such as follow-up during
830
831
832
pregnancy and post childbirth, follow-up of the child during the third initial months, and
833
834 childcare assistance (CEMIG, 2017).
835
836 There are some programs to improve access to energy in rural areas, and these projects
837
838 are expected to benefit more than 200,000 people. These programs also contribute to the
839
840 reduction of poverty in rural areas, in line with some governmental initiatives (CEMIG,
841
842 2017). Eletrobras (2017) develops a program that offers development opportunities for the
843
844 entire production chain of about 26,000 rural family farms, in order to create a sustainable
845
846
productive matrix. Some actions involve diversification of crops, organic agriculture,
847
848
849
technical assistance and rural extension network, family agriculture and rural tourism.
850
851 Social projects also benefit people (7,000+) who live in poor communities (CESP,
852
853 2017). CESP has also innovative initiatives involving ecological gymkhanas, environmental
854
855 training, campaigns, environmental audits, and social security orientation for people who lives
856
857 in rural areas (CESP, 2017). Some companies also encourage sport activities in the
858
859 communities in which they operate. An example is Equatorial Energia (2017), which supports
860
861 projects that benefit about 700 children and adolescents with sports such as judo, table tennis,
862
863
basketball, among others.
864
865
866
Regarding the Indigenous Community, annual reports usually state a contribution to a
867
868 specific community as an environmental compensation due to the interference that some
869
870 energy firms cause in the region where the community is installed. These projects also
871
872 consider ethnicity characteristics of each community before implementation. These projects,
873
874 previously approved by the National Indian Foundation of Brazil (FUNAI), involve initiatives
875
876 about environmental programs.
877
878 In face of this, the results were consonant with previous research findings that have
879
880
already demonstrated the potential of energy for the development of the economic, social and
881
882
883
884
885
886 16
887
888
human dimensions, such as Spalding-Fecher et al. (2005), Kanagawa & Nakata (2008),
889
890
891
Khandker et al. (2012), González-Eguino (2015), Wang et al. (2018), among others, discussed
892
893 in the course of this study. We found evidence that energy firms in the Latin American energy
894
895 industry are engaged in activities that contribute to development in these three dimensions
896
897 and communicate them in their annual sustainability reports.
898
899
900
901 5. Conclusion and Policy Implications
902
903 The objective of this study was to identify the frequency of words about development
904
905
on the sustainability reports of Latin American companies of the energy industry. We
906
907
908
collected data and sustainability reports from Latin America public companies of the energy
909
910 industry in 2012 (84 firms) and 2017 (87 firms). We conducted a quantitative analysis in
911
912 order to identify potential determinants of development words in firms’ reports. A qualitative
913
914 analysis allowed a deeper understanding about the subject.
915
916 The results indicated that large companies tend to use more words related to
917
918 development in their sustainability reports. It suggests that large firms may have more
919
920 resources to invest in social responsible initiatives and that large firms can present more
921
922
information on their reports due to pressures from stakeholders and external users of the
923
924
925
financial information (Beck, Frost & Jones, 2018; Andrikopoulos & Kriklani, 2013;
926
927 Baumann-Pauly, Wickert, Spence & Scherer, 2013). However, other alternative explanation is
928
929 that large firms also have more resources that allow them to organize and present all their
930
931 relevant initiatives in the annual reports.
932
933 Based on the quantitative analysis, the results also showed that the number of
934
935 development-related words tend to increase over time. In the qualitative analysis, energy
936
937 companies performed various development activities, such as educational projects, economic
938
939
and social local development, income generation, environmental protection, inclusion of
940
941
942
943
944
945 17
946
947
minorities, among others, as summarized in Table 4. Some examples of these initiatives
948
949
950
include socio-environmental projects (i.e. discount in electricity bills to incentive an adequate
951
952 discard of recyclable waste), training courses/activities (for employees and for the
953
954 community), the preservation of local flora through a botanical center, among many others.
955
956 The main advancement of this study is to highlight the contribution of energy
957
958 companies from Latin America to different dimensions of development. We expect that this
959
960 study provides insights for policymakers on the role of Latin American energy firms in the
961
962 development of communities in which they are inserted, beyond the simple economic aspect,
963
964
in terms of wealth generated to its shareholders and the way such activities are communicated
965
966
967
to them. This is particularly relevant if we consider that energy is strongly related to human
968
969 development.
970
971 It is interesting to note that companies addressed aspects related to the indigenous
972
973 community in their annual reports, which include environmental compensation due the
974
975 impacts generated by firms. However, based on our level of analysis, this content could be
976
977 expanded to include other levels of contribution that these firms can bring to the indigenous
978
979 communities. Future avenues of investigation may concentrate on increasing this analysis
980
981
with firms from other sectors, which, due their own operational characteristics, have a strong
982
983
984
impact on the environment of communities where they operate, in order to identify how
985
986 companies address these issues in their sustainability reports.
987
988 Regarding the use of the frequency of words as a proxy to identify initiatives related to
989
990 development, it may represent a limitation of this study, since there are some outcome
991
992 measures (such as life expectancy and rates of diseases) that could be affected by the effective
993
994 contribution of companies to their local regions. Therefore, further research can expand the
995
996 results of this study by contrasting the frequency of words with official indexes of
997
998
development, considering different countries and periods.
999
1000
1001
1002
1003
1004 18
1005
1006
1007
1008
1009
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relationship and influence factors between China's regional economic development and
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1424 industrial energy–related carbon emissions. Journal of Cleaner Production, 142(part 2), 783-
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1426 800. doi: https://doi.org/10.1016/j.jclepro.2016.09.115
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Appendix A:
1439
1440 List of words considered in the analysis of annual reports
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1443
1444 Agroindustry; Authoritarian; Clothed; Corruption; Deprivation; Development; Economic; Education;
1445
Educational; Elections; Epidemic; Epidemiological; Exclusion; Financial; Freedom; Health; Human; Hunger;
1446
1447 Illiteracy; Illiterate; Illnesses; Inclusion; Income; Indian; Indigenous; Inequality; Intolerance; Misery;
1448
1449 Modernization; Nutrition; Opportunity; Order; Peace; Policy; Politics; Poor; Poverty; Production; Profit;
1450
1451 Profitability; Progress; Public Facilities; Public Resources; Rich; Rights; Rural; Sanitary; Security; Sheltered;
1452
Social; Speech; Sustainability; Sustainable; Technology; Trade; Tyranny; Water; Wealthy.
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Authors:
Rodrigo Fernandes Malaquias is a Full Time Professor at Universidade Federal de
Uberlândia, Brazil. In 2012, he received his PhD in Business Administration from FGV-
EAESP, Brazil. In 2015, he was a Visiting Research Scholar at DePaul University in
Chicago, USA. Email: rodrigofmalaquias@gmail.com
ORCID: 0000-0002-7126-1051 (http://orcid.org/0000-0002-7126-1051)
Dermeval Martins Borges Junior obtained his Master Degree in Business
Administration from Universidade Federal de Uberlândia, Brazil. He also obtained his
undergraduate degree in Business Administration from Universidade Federal de
Uberlândia (UFU). He is a PhD Student of Accounting at UFU. Email:
dermevaljr14@hotmail.com
Fernanda Francielle de Oliveira Malaquias is a Full Time Professor at Universidade
Federal de Uberlândia (UFU). In 2012, she received her PhD in Electrical Engineering
from UFU. She also holds a MS degree in Computer Science. In 2015, she was a Visiting
Research Scholar at DePaul University in Chicago, USA. Email:
fernandafrancielle@gmail.com
Alberto Luiz Albertin: Professor Albertin received his MSc and a PhD in Business
Administration from Faculdade de Economia, Administração e Contabilidade da
Universidade de São Paulo (FEA-USP). He is a Full Time Professor at Escola de

Administração de Empresas de São Paulo da Fundação Getulio Vargas (FGV-EAESP)
and Coordinator of the Center for Applied Information Technology (CIA), of the Program
for Excellence in Business in Digital Age (NED) and of the Information Technology
research area of professional post graduation programs at FGV-EAESP. He is also a
consultant in Administration of Information Technology, Business in Digital Age and
Project Management. Previously, he has worked for several years in national and
multinational companies in the IT area. He also wrote various studies, researches and
articles about information technology and has won many prizes for his works. Email:
albertin@fgv.br
Acknowledgements:
We would like to thank the Center for Applied Information Technology (GVcia) from
FGV EAESP for the support to develop part of this study

1 1
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5
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7
8
9
10 Abstract
11
12 There is an agreement in the academic literature about the crucial role of energy to
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14 development. Energy can contribute with the three dimensions of development: social,
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16 economic and human. However, energy poverty is a concern in this regard and in this paper
17
18 we explore this issue in Latin American energy firms. The aim of this study is to identify the
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20
frequency of words about development in sustainability reports of Latin American companies
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22
23
in the energy industry. The frequency of words was analyzed through the content analysis
24
25 based on a list of 61 development-related words. We observed that the annual reports of 93
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27 companies in the years of 2012 and 2017 addressed issues such as development, education,
28
29 poverty, and human development. There is also evidence of improvement in this information
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31 over time. We found arguments in the reports showing how energy companies can promote
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33 the development of their respective regions, but the arguments about the contribution for
34
35 indigenous communities seem to deserve more attention. Moreover, companies’ size seems to
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37
play an important role to improve the understanding on information about development.
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Key-words: Development; Latin America; Sustainability Reports.
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60 2
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1. Introduction
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66 Development, the New Name for Peace. “76. Extreme disparity between nations in
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68 economic, social and educational levels provokes jealousy and discord, often putting
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70 peace in jeopardy”. (Populorum Progressio, Encyclical of Pope Paul VI on the
71
Development of Peoples, March 26, 1967)
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74
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76
In both developing and developed countries, the main obstacle for sustainable
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78 development is poverty (Kanagawa & Nakata, 2008). Usually, the concept of poverty is
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80 associated with monetary terms; however, it should be treated as a multidimensional concept,
81
82 considering different components of well-being (Pachauri et al., 2004). Moreover, poverty is
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84 related with deprivation, and deprivation “can be thought of in terms of constraints on
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86 people’s choices to access certain material goods, assets, capabilities, freedoms and
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88 opportunities” (Pachauri et al., 2004, p. 2084).
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90
Considering that development and poverty are associated, the measures to reduce
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poverty can also have a positive effect on development. Access to electricity can contribute to
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95 a reduction in poverty (Kanagawa & Nakata, 2008) and to sustainable development
96
97 (Bhattacharyya, 2006b). There is an important link between poverty and energy (Pachauri et
98
99 al., 2004) and the relationship between these two variables has been a concern among
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101 development specialists (Khandker, Barnes & Samad, 2012). “As countries progress their
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103 energy consumption increases” (González-Eguino, 2015, p. 379), which reinforces the
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105 benefits of energy to the economic development (González-Eguino, 2015).
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The benefits of energy are not limited to the economic dimension of development. The
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demand for energy in poor households is usually lighting and cooking (Bhattacharyya,
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112 2006a). When these individuals have access to energy, their quality of life can drastically
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114 improve, but these benefits are also related to income, environment, health and education
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117
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119 3
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(Kanagawa & Nakata, 2008), which indicates the positive effects of energy to human
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development. Observing the definition of Sen (1999) about development, González-Eguino
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126 (2015, p. 379) states that “not having access to energy may mean being deprived not only of
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128 basic services such as cooking and home heating, for instance, but also other elements which
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130 are fundamental for individual and collective development, such as access to education,
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132 health, information and participation in politics” (González-Eguino, 2015, p. 379).
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134 Considering this development includes economic benefits related with a more comfortable
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136 and convenient life (Bak, 2018).
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This seems to be an important gap related to inequalities in the access to basic
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facilities, particularly in Latin America, as presented by Malaquias and Albertin (2018). The
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143 authors present, for example, that the access to electricity has relevant differences in Latin
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145 American countries, where some countries have good indexes (such as Argentina, Chile and
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147 Cuba), but others have a more delicate scenario (such as Haiti and Nicaragua). These
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149 considerations become more salient when we observe that disparities within and among
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151 developing countries can affect social instability and human development (Spalding-Fecher,
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153 Winkler & Mwakasonda, 2005).
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Disparities are available, for example, in some regions, where technological
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innovations present a higher demand from people, while in other cities people suffer with
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160 precarious conditions. “While people in major cities and developed countries enjoy an ever-
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162 expanding selection of applications and other innovations to help them live more efficient,
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164 safer and entertaining lives, millions in the hinterlands of Africa, Asia and Latin America are
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166 still waiting for the digital revolution to arrive” (ICT4D Conference, 2018). Considering that
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168 energy is an important ingredient for development, firms that operate in the energy industry
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170 have a crucial role in their local areas. When consulting previous research about energy and
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development and studies related with ICT4D, we found a gap to be addressed: a more
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comprehensive analysis about the contribution of companies in the energy industry to the
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development of their surrounding areas. Therefore, the aim of this study is to identify the
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185 frequency of words about development in sustainability reports of Latin American
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187 companies in the energy industry. In order to analyze the frequency of words, we employed
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189 the content analysis based on a list of 61 development-related words. To develop this analysis,
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191 we considered the three dimensions of development (Sen, 1999): economic, social and
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193 human.
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195 Considering the situation of many parts of the developing world, there seems to exist a
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potential conflict that affects development in terms of priority of investments (Bak, 2018).
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This conflict can be observed when “short-term economic needs may take priority over long-
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202 term investment in education and learning” (Bak, 2018, p. 1). According to Pachuari et al.
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204 (2004, p. 2086), “although there is a fairly substantial literature on the existence of energy-
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206 poverty linkages, there is relatively little direct, empirical evidence concerning the nature of
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208 these linkages in developing countries”. This study can fill this gap and present a
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210 comprehensive panorama about the contribution that companies in the energy industry can
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212 provide to their respective areas.
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This study is comprised of five sections, including this introduction. Section 2 presents
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a literature review about development and sustainable development. We present the criteria
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219 employed to collect and analyze data in Section 3. Section 4 contains the main results and
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221 discussion. Finally, in Section 5, we present the final remarks and suggestions for further
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223 research.
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227 2. Literature Review
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229 Studies on development involve different disciplines and levels, since development
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can be viewed as a multifaceted term (Walsham, 2017; Madrueño & Tezanos, 2018).
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237 5
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Regarding the energy industry, previous research have reported the contribution of energy to
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economic, social and human dimensions of development (Spalding-Fecher et al., 2005;
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244 Kanagawa; Nakata, 2008; Khandker et al., 2012; González-Eguino, 2015; Wang et al., 2018).
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246 Energy can enable social and human development through access to modern health
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248 facilities, education, and communication (Wang et al., 2018). Despite its importance, part of
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250 the world’s population, particularly in developing countries and in rural areas, lives under
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252 conditions of energy access deprivation (Bhattacharyya, 2012; Mainali et al., 2014; González-
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254 Eguino, 2015; Brand-Correa et al., 2017). Therefore, energy poverty, that is “the situation in
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which energy access is not established yet” (Kanagawa; Nakata, 2008, p. 2026) represents one
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of the main problems that the energy industry will need to face in the next decades (González-
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261 Eguino, 2015).
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263 Energy is considered to be a core component of societies and a traditional factor of
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265 production (Brand-Correa et al., 2017; Wang et al., 2018). Solarin and Ozturk (2015)
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267 explored the relationship between hydroelectricity consumption and economic growth in
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269 Latin America countries (Argentina, Brazil, Colombia, Ecuador, Chile, Venezuela and Peru)
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271 and found a long run unidirectional causality from the first to the second variable in Brazil,
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Colombia, Chile, Ecuador and Peru. Shahbaz et al. (2018) also identified a positive
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relationship between energy consumption and economic growth in the top ten energy-
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278 consuming countries.
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280 Production depends on energy and economic growth demands an intensive energy use
281
282 (Ahn et al, 2015). However, the increasing energy use and the greenhouse gases emissions
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284 associated to it are considered the primary cause of adverse environmental effects and climate
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286 change (Agovino et al. 2018; Ahn et al., 2015). According to Zhou et al. (2017), climate
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288 change and energy consumption have become the most complex challenge in global
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environment facing human development.
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In this context of a climate-constrained world, highly humanly developed countries
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have been producing and consuming renewable energy instead of non-renewable energy,
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303 since renewable energy plays a fundamental role to secure future climate change (Wang et al.,
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305 2018). While in the past the criteria to choose the energy system was the technical and
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307 economic viability, over the last few decades the criteria for this decision changed to the
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309 environmental impact of the energy system (Barros et al., 2015; Moreira et al., 2015).
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311 Renewable energy technologies can also contribute to equitable access to energy,
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313 particularly for low-income and vulnerable populations. McCabe, Pojani and van Groenou
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(2018) argue that the development of renewable energies allowed individuals and
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communities to act as both consumers and producers, changing the traditional way in which
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320 distribution in energy systems occurs. Because of this phenomenon, communities of energy
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322 ownership have emerged, which, despite various difficulties and barriers, have a potential to
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324 democratize the provision and access to energy, especially for low-income households.
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326 A term that emerged with this trend was “sustainable development”, which seeks to
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328 harmonize economic growth and socio-environmental aspects. Bhattacharyya (2012) states
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330 that sustainable development is a broader concept that involves not only economic growth,
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332
but also a development based on three fundamental pillars: economy, environment and
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335
society. Therefore, this concept contrasts with the traditional idea of development focused on
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337 income generation and wealth accumulation. In other words, sustainable development
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339 represents an “equitable environment-friendly and balanced development” (Bhattacharyya,
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341 2012, p. 261).
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343 Due its importance, the relation between energy and sustainable development received
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345 a great deal of attention from academic researchers over the past years. Bhattacharyya (2012)
346
347 provided a critical review about energy and sustainable development by analyzing relevant
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literature on the subject and the application of a multi-dimensional sustainability framework
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355 7
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to energy access programmes. The author concluded that a rebalancing of approaches to
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enhance energy access is required to ensure the linkage between economic development and
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362 sustainability, since the programmes analyzed supporting energy access did not show to
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364 contribute to sustainable development (Bhattacharyya, 2012).
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366 In this context, according to Streimikiene et al. (2012), the demand for sustainable
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368 development in the past decades has made the use of sustainable energy sources an imperative
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370 standard. However, the selection of sustainable energy sources is a complex task, since it
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372 involves multiple variables and conflicting objectives (such as financial costs, availability,
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security, environmental impact, etc.). As a way to address these decision problems,
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Streimikiene et al. (2012) proposed a multi-criteria decision support framework to select the
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379 most sustainable electricity production systems. Among the results, the authors found that
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381 renewable energy systems based on water and solar power sources are the most sustainable
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383 ones, which should be considered in future energy policies in order to ensure economic, social
384
385 and environmental development (Streimikiene et al., 2012).
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387 Latin America, the focus of this study, has a great potential to boost its development
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389 through energy efficiency. Camioto et al. (2018) analyzed the renewable and sustainable
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energy efficiency of Latin American countries using the data envelopment analysis (DEA)
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394
method. Their results showed that Brazil, Uruguay and Venezuela have the highest renewable
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396 and sustainable energy efficiency (above 85%), while Mexico, Bolivia, Ecuador, Guatemala
397
398 and Argentina presented renewable and sustainable energy efficiencies below 30%. Still
399
400 regarding energy efficiency, Meneses-Jácome et al. (2016) did a literature review on energy
401
402 recovery from agro-industrial wastewaters in Latin America. They also identified a lack of
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404 efficient wastewater technologies and energy policies that stimulate the use of this kind of
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406 energy.
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414 8
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416
When discussing the role of energy in development in Latin America, addressing the
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Venezuela case is a must. Venezuela is one of the most important countries in terms of
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421 energy, since it holds some of the world’s largest reserves of oil, natural gas and coal. More
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423 than a third of the primary energy produced is for domestic consumption (of which about a
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425 half is wasted due to technological and operational inefficiencies); the rest is exported and
426
427 represents a relevant element of the Venezuelan economy. On the other hand, the high
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429 availability and dependence of primary energy sources narrowed the development of other
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431 resources, such as renewable ones, even with good conditions to solar, wind and water power,
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433
as well as biogas (Rojas-Zerpa & Yusta-Loyo, 2015).
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435
436
Robalino-López et al. (2015) studied the conditions in which Venezuela could
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438 approach the fulfillment of the EKC hypothesis (i.e. the inverted U shaped relationship
439
440 between income per capita and pollution) in the medium term (2011 to 2025), since its energy
441
442 matrix is based on fossil fuels, which are highly polluting. The model estimates indicated that
443
444 Venezuela did not support the EKC hypothesis in any of the scenarios projected. Pollution
445
446 increase with the GDP growth per capita (positive relationship), however, the environmental
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448 damage did not decline as expected in accordance with the EKC hypothesis. Despite this, the
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450
authors argue that Venezuela may reach environmental stabilization in the medium term if it
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changes its energy matrix by increasing the presence of renewable energy sources.
454
455 In Brazil, which is one of the industrialized countries with the cleanest energy
456
457 matrices, Pao and Fu (2013) examined the causal relationships between the real GDP and four
458
459 types of energy consumption. Their study identified a long run equilibrium between real GDP
460
461 and the four types of consumption, suggesting that an expansion in renewable energy could
462
463 lead Brazil to a leading position in the international scenario.
464
465 Regarding Argentina, the third largest economy of Latin America in terms of total
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GDP, despite its high potential for renewable energy due its favorable conditions to solar,
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472
473 9
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wind and water power and biofuels, its estimated share of energy generated from renewable
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sources is only around 2%. Some factors that compromise the expansion of the renewable
479
480 energetic matrix of Argentina are economic instability, stringent importation regulations, state
481
482 subsidies for traditional energy sources and lack of state funding to supply the rural
483
484 population with electricity. These conditions represent constraints to future development
485
486 opportunities of the country (Schaube, Ortiz & Recalde, 2018).
487
488 Despite its importance to development, sometimes the implemantation of energy
489
490 systems may lead to conflicts arising mainly from an unequal wealth distribution. For
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example, the expansion of the hydropower sector in Colombia provoked struggles between
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495
social agents, including armed ones (e.g. destruction of energy transmission towers), due
496
497 ecological distributive conflicts such as rural versus urban populations (e.g. rural populations
498
499 are expropriated from their territory for the installation of hydroelectric dams while urban
500
501 populations benefit from high quality energy services at a low cost). Thus, populations
502
503 directly affected by energy development must be invited to participate in energy planning and
504
505 policies as a way to mitigate these conflicts and promote fair energy distribution (Martinez &
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507 Castillo, 2016).
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509
Moriarty and Honnery (2014) pointed out that the strong relationship between global
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512
production and energy consumption will continue in the future, but alternative energy
513
514 generation is growing so slowly that it may not be sufficient to prevent global climate change.
515
516 Nevertheless, based on the literature review, we concluded that, as the energy industry is
517
518 related not only to the economic development of the countries but also to the well-being of the
519
520 population, investments and policies in this sector must take into account the increasing need
521
522 for a sustainable development. The way energy companies contribute to the development of
523
524 their respective countries/regions is the focus of the present study.
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527
528
529
530
531
532 10
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534
3. Data and Method
535
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537
In order to identify the companies of the energy industry in Latin America, we
538
539 consulted the Economatica database. Based on the North American Industry Classification
540
541 System (NAICS), we selected all the companies listed that operate with energy generation,
542
543 transmission or distribution. For comparative purposes, we collected data from two periods,
544
545 with a difference of five years between them (2012 and 2017); therefore, we can analyze
546
547 whether the number of development-related words is increasing/decreasing over time. Annual
548
549 sustainability reports were downloaded from the website of each company. Table 1
550
551
summarizes the number of companies that have a sustainability report for each year.
552
553
554
555
557
558
559
560 After downloading the annual sustainability reports, we conducted the content analysis
561
562 based on a list of 61 development-related words, available in Appendix A. These words were
563
564 selected after a comprehensive literature review on references related to development (mainly:
565
566 Sen, 1999; Bhattacharyya, 2012; Malaquias et al., 2017; Malaquias & Albertin, 2018). For
567
568
example, based on Sen (1999, p. 3), we can find that “development requires the removal of
569
570
571
major sources of unfreedom: poverty as well as tyranny, poor economic opportunities as well
572
573 as systematic social deprivation, neglect of public facilities as well as intolerance or
574
575 overactivity of repressive states”. These considerations motivated the inclusion in Appendix
576
577 A of words such as tyranny, poor, opportunity, development, intolerance, deprivation,
578
579 poverty, and public facilities. Moreover, Malaquias and Albertin (2018, p.4) state that “the
580
581 application of technology in rural areas represents an important factor to promote human,
582
583 social and economic development”, which motivated the inclusion of the words technology
584
585
and rural in Appendix A. The following quotation also reinforces the inclusion of the word
586
587
588
589
590
591 11
592
593
“rural” in Appendix A: “Further, energy access is predominantly a rural problem. 1.1 billion
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595
596
(out of 1.3 billion or 85%) lacking electricity access are found in rural areas” (Bhattacharyya,
597
598 2012, p.263). Therefore, Appendix A is comprised of development-related words selected
599
600 after the analysis of the mentioned references.
601
602 Initially, we analyzed a subsample of 10 annual reports in order to check the suitability
603
604 of the word list and adjust its final version, as reported in Appendix A. Then, we conducted
605
606 the content analysis of the full sample, comprising 171 annual sustainability reports (84 from
607
608 2012 and 87 from 2017) based on word frequency. These annual reports refer to 93
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610
companies. The analysis of annual reports using the frequency of words has been used in
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613
recent academic studies such as Yekini et al. (2016) and Loughran and Mcdonald (2011).
614
615 The annual reports of the sample are available in three different languages: Brazilian
616
617 Portuguese, Spanish and English. Therefore, the words/terms in Appendix A were translated
618
619 into Brazilian Portuguese and Spanish before the analysis. First, we registered the frequency
620
621 of each word in each report (variable: No.-Words). Then, we added a filter, restricting the
622
623 search to the frequency of terms within sentences directly related to development (variable:
624
625 No.-Words-Dev). As the variable “No.-Words” presents a considerable degree of variation
626
627
(for example, some companies have less than 10 of these words in their annual report and
628
629
630
others have more than 1,000), we also calculate the Natural Logarithm of these two variables,
631
632 in order to avoid some concerns with extreme values in the quantitative analysis. The labels of
633
634 these two new variables are: “No.-Words (NL)” and “No.-Words-Dev (NL)”. Based on the
635
636 data collected, our analysis was segregated in two main parts (one, mainly quantitative, and
637
638 the other, mainly qualitative).
639
640 Part A: based on the number of words related with development and used in a context
641
642 directly related with development, we obtained the number of words related to development
643
644
in each company. We analyzed this number using descriptive statistics and regression
645
646
647
648
649
650 12
651
652
analysis, since we aim to investigate two potential determinants of this variable: firms’ size
653
654
655
and time. In the regression analysis, two quantitative models were considered. In the first, the
656
657 dependent variable is the Natural Logarithm of the number of words according to the list
658
659 available in Appendix A (we calculate the natural logarithm in order to avoid some concerns
660
661 with extreme values). In the second model, the dependent variable is the Natural Logarithm of
662
663 the number of words in sentences directly related to development, also according to the list
664
665 available in Appendix A. Part B: we selected and analyzed some parts of the reports in which
666
667 companies clearly highlight their contribution to the development of their surrounding region.
668
669
We summarized a set of initiatives in a table (Table 4); these initiatives are also discussed in
670
671
672
the result analysis.
673
674
675
676 4. Results
677
678 In the first step of the analysis, we analyzed the words from Appendix A with the
679
680 highest and lowest frequency in the annual sustainability reports. The five most frequently
681
682 cited terms were: development, profit/profitability/income, security, social, and sustainability.
683
684 These five terms presented the highest frequency in both years of the sample period (2012 and
685
686
2017). This result indicates some concern of companies in providing information related to
687
688
689
profitability and also with sustainability, since this kind of information could be important for
690
691 external users of financial reports.
692
693 Regarding the words with the lower frequency, five words did not appear in the annual
694
695 reports of 2012 and 2017: authoritarian, deprivation, epidemic/epidemiological, intolerance,
696
697 and tyranny. Additionally, the frequency of the following three words was zero in the annual
698
699 reports of 2012: illiteracy, inequality and public facilities. On one hand, these results related
700
701 with the highest/lowest frequency of words are in line with the content of the kind of annual
702
703
report selected in this study, since these reports address sustainability, development and social
704
705
706
707
708
709 13
710
711
issues. On the other hand, these initial results show opportunities to improve arguments about
712
713
714
the benefits of energy companies in aspects related to inequality and illiteracy, as well as to
715
716 public facilities.
717
718 Table 2 presents the descriptive statistics of our study database. These statistics are
719
720 segregated per year, in order to indicate potential effects of time on the content of the annual
721
722 reports. The results reported in the table suggest an increase, from 2012 to 2017, in the
723
724 number of pages, number of words and in the number of words in sentences specifically
725
726 related to development.
727
728
729
730
731
732
733
734
736
737
738
739 According to results in Table 2, energy companies use a considerable number of
740
741 expressions related to development in the presentation of their sustainability reports. Some
742
743 examples of these expressions include (the words in parentheses are in Brazilian Portuguese):
744
745
health (saúde); inclusion (inclusão); rural (rural); education (educação); water (água);
746
747
748
corruption (corrupção); security (segurança); nutrition (nutrição); and opportunity
749
750 (oportunidade). The average is around 469 words in 2012 and 539 words in 2017. Regarding
751
752 the frequency of words about development in sentences directly related to development, the
753
754 average is around 9 words in 2012 and 10 words in 2017.
755
756 Regarding the results of the regression analysis (Table 3), company size presented a
757
758 positive effect on the number of words related to development in both measures considered:
759
760 “No.-Words (NL)” and “No.-Words-Dev (NL)”. This result indicates that the traditional
761
762
antecedents of accounting disclosure also seem to present a significant effect on the content
763
764
765
766
767
768 14
769
770
about development available in sustainability reports of energy companies. The difference in
771
772
773
word frequency between the two years was also significant for both variables (p < 0.05 in
774
775 both cases).
776
777 These findings are in line with previous studies that documented a significant, positive
778
779 relationship between firm size and corporate social responsibility practices, including
780
781 disclosure level. The underlying explanation for this evidence is that large firms usually have
782
783 more resources available to spend in socially responsible activities that contribute to
784
785 development, as well as to communicate it to the public. In addition, large firms are more
786
787
subject to pressures from stakeholders to adopt a satisfactory socio-environmental
788
789
790
performance, so that disclosure is a priority for building the company’s image (Beck, Frost &
791
792 Jones, 2018; Andrikopoulos & Kriklani, 2013; Baumann-Pauly, Wickert, Spence & Scherer,
793
794 2013).
795
796 Based on the results of the qualitative approach, we identified some initiatives that
797
798 contribute to development conducted by energy companies. Table 4 indicates some of these
799
800 initiatives.
801
802
803
804
805
806
807
808
809 Some initiatives are related to projects that promote local development, income
810
811 generation and social inclusion (Bandeirante Energia, 2017). Regarding education, projects
812
813 involve partnerships with government to engage teachers and students in initiatives to
814
815 improve the quality of life of students and promote citizen formation and safe/conscious
816
817 energy consumption, as well as preservation of natural resources (Bandeirante Energia, 2017;
818
819 Light, 2017). Some programs also include individuals with intellectual disabilities in the job
820
821
market (Light, 2017). Projects also encourage women to participate and stay in the
822
823
824
825
826
827 15
828
829
companies’ staff; incentives involve different kinds of benefits, such as follow-up during
830
831
832
pregnancy and post childbirth, follow-up of the child during the third initial months, and
833
834 childcare assistance (CEMIG, 2017).
835
836 There are some programs to improve access to energy in rural areas, and these projects
837
838 are expected to benefit more than 200,000 people. These programs also contribute to the
839
840 reduction of poverty in rural areas, in line with some governmental initiatives (CEMIG,
841
842 2017). Eletrobras (2017) develops a program that offers development opportunities for the
843
844 entire production chain of about 26,000 rural family farms, in order to create a sustainable
845
846
productive matrix. Some actions involve diversification of crops, organic agriculture,
847
848
849
technical assistance and rural extension network, family agriculture and rural tourism.
850
851 Social projects also benefit people (7,000+) who live in poor communities (CESP,
852
853 2017). CESP has also innovative initiatives involving ecological gymkhanas, environmental
854
855 training, campaigns, environmental audits, and social security orientation for people who lives
856
857 in rural areas (CESP, 2017). Some companies also encourage sport activities in the
858
859 communities in which they operate. An example is Equatorial Energia (2017), which supports
860
861 projects that benefit about 700 children and adolescents with sports such as judo, table tennis,
862
863
basketball, among others.
864
865
866
Regarding the Indigenous Community, annual reports usually state a contribution to a
867
868 specific community as an environmental compensation due to the interference that some
869
870 energy firms cause in the region where the community is installed. These projects also
871
872 consider ethnicity characteristics of each community before implementation. These projects,
873
874 previously approved by the National Indian Foundation of Brazil (FUNAI), involve initiatives
875
876 about environmental programs.
877
878 In face of this, the results were consonant with previous research findings that have
879
880
already demonstrated the potential of energy for the development of the economic, social and
881
882
883
884
885
886 16
887
888
human dimensions, such as Spalding-Fecher et al. (2005), Kanagawa & Nakata (2008),
889
890
891
Khandker et al. (2012), González-Eguino (2015), Wang et al. (2018), among others, discussed
892
893 in the course of this study. We found evidence that energy firms in the Latin American energy
894
895 industry are engaged in activities that contribute to development in these three dimensions
896
897 and communicate them in their annual sustainability reports.
898
899
900
901 5. Conclusion and Policy Implications
902
903 The objective of this study was to identify the frequency of words about development
904
905
on the sustainability reports of Latin American companies of the energy industry. We
906
907
908
collected data and sustainability reports from Latin America public companies of the energy
909
910 industry in 2012 (84 firms) and 2017 (87 firms). We conducted a quantitative analysis in
911
912 order to identify potential determinants of development words in firms’ reports. A qualitative
913
914 analysis allowed a deeper understanding about the subject.
915
916 The results indicated that large companies tend to use more words related to
917
918 development in their sustainability reports. It suggests that large firms may have more
919
920 resources to invest in social responsible initiatives and that large firms can present more
921
922
information on their reports due to pressures from stakeholders and external users of the
923
924
925
financial information (Beck, Frost & Jones, 2018; Andrikopoulos & Kriklani, 2013;
926
927 Baumann-Pauly, Wickert, Spence & Scherer, 2013). However, other alternative explanation is
928
929 that large firms also have more resources that allow them to organize and present all their
930
931 relevant initiatives in the annual reports.
932
933 Based on the quantitative analysis, the results also showed that the number of
934
935 development-related words tend to increase over time. In the qualitative analysis, energy
936
937 companies performed various development activities, such as educational projects, economic
938
939
and social local development, income generation, environmental protection, inclusion of
940
941
942
943
944
945 17
946
947
minorities, among others, as summarized in Table 4. Some examples of these initiatives
948
949
950
include socio-environmental projects (i.e. discount in electricity bills to incentive an adequate
951
952 discard of recyclable waste), training courses/activities (for employees and for the
953
954 community), the preservation of local flora through a botanical center, among many others.
955
956 The main advancement of this study is to highlight the contribution of energy
957
958 companies from Latin America to different dimensions of development. We expect that this
959
960 study provides insights for policymakers on the role of Latin American energy firms in the
961
962 development of communities in which they are inserted, beyond the simple economic aspect,
963
964
in terms of wealth generated to its shareholders and the way such activities are communicated
965
966
967
to them. This is particularly relevant if we consider that energy is strongly related to human
968
969 development.
970
971 It is interesting to note that companies addressed aspects related to the indigenous
972
973 community in their annual reports, which include environmental compensation due the
974
975 impacts generated by firms. However, based on our level of analysis, this content could be
976
977 expanded to include other levels of contribution that these firms can bring to the indigenous
978
979 communities. Future avenues of investigation may concentrate on increasing this analysis
980
981
with firms from other sectors, which, due their own operational characteristics, have a strong
982
983
984
impact on the environment of communities where they operate, in order to identify how
985
986 companies address these issues in their sustainability reports.
987
988 Regarding the use of the frequency of words as a proxy to identify initiatives related to
989
990 development, it may represent a limitation of this study, since there are some outcome
991
992 measures (such as life expectancy and rates of diseases) that could be affected by the effective
993
994 contribution of companies to their local regions. Therefore, further research can expand the
995
996 results of this study by contrasting the frequency of words with official indexes of
997
998
development, considering different countries and periods.
999
1000
1001
1002
1003
1004 18
1005
1006
1007
1008
1009
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1438
Appendix A:
1439
1440 List of words considered in the analysis of annual reports
1441
1442
1443
1444 Agroindustry; Authoritarian; Clothed; Corruption; Deprivation; Development; Economic; Education;
1445
Educational; Elections; Epidemic; Epidemiological; Exclusion; Financial; Freedom; Health; Human; Hunger;
1446
1447 Illiteracy; Illiterate; Illnesses; Inclusion; Income; Indian; Indigenous; Inequality; Intolerance; Misery;
1448
1449 Modernization; Nutrition; Opportunity; Order; Peace; Policy; Politics; Poor; Poverty; Production; Profit;
1450
1451 Profitability; Progress; Public Facilities; Public Resources; Rich; Rights; Rural; Sanitary; Security; Sheltered;
1452
Social; Speech; Sustainability; Sustainable; Technology; Trade; Tyranny; Water; Wealthy.
1453
1454
1455
1456
1457
1458
1459
1460
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1475
1
Table 1:
Number of companies of the sample
Country 2012 2017

Brazil 42 42
Chile 22 23
Argentina 3 5
Colombia 3 3
Peru 13 13
Mexico 1 1
Total 84 87
Table 2:
Descriptive statistics of the database, per year
Year: 2012 Year: 2017

Variables
obs. Mean Std. Dev. Min. Max. obs. Mean Std. Dev. Min. Max.
Numb-Pages 84 123.43 77.36 11.00 412.00 87 134.86 98.28 12.00 563.00
Numb-Words 84 468.56 333.27 0.00 1379.00 87 539.15 390.32 15.00 2096.00
Numb-Words-Dev 84 8.94 5.70 0.00 20.00 87 9.98 5.14 0.00 24.00
Numb-Words (NL) 84 5.74 1.24 0.00 7.23 87 6.00 0.90 2.77 7.65
Numb-Words-Dev (NL) 84 2.02 0.89 0.00 3.05 87 2.23 0.69 0.00 3.22
TotalAssets (NL) 80 13.96 1.96 7.03 18.67 83 14.00 1.97 6.17 18.70
Notes: No.-Pages: number of pages of the annual report; No.-Words: number of words according to the list
available in Appendix A; No.-Words-Dev: number of words in sentences directly related with development,
following the list of words available in Appendix A; No.-Words (NL): Natural Logarithm of the variable No.-
Words; No.-Words-Dev (NL): Natural Logarithm of the variable No.-Words-Dev; TotalAssets (NL): Total Assets
of the firm at the end of the respective year (2012; 2017). We calculate the Natural Logarithm of these three
variables (No.-Words; No.-Words-Dev; TotalAssets) in order to avoid some concerns with extreme values in the
quantitative analysis.
2
Table 3:
Potential determinants of the number of development-related words
No.-Words (LN) No.-Words-Dev (LN)

Variables
Coef. Std. Err. t P>t Coef. Std. Err. t P>t
TotalAssets (LN) 0.313359 0.035 8.860 0.000 0.230913 0.026 8.730 0.000
Year (2017) 0.303571 0.138 2.200 0.029 0.219799 0.103 2.130 0.035
Constant 1.322640 0.504 2.630 0.009 -1.215285 0.376 -3.230 0.002
Adjusted R2 33.5% 32.8%
Observations 163 163
Mean VIF 1.0 1.0
Notes: Dependent variables: No.-Words (NL): Natural Logarithm of the number of words according to the list
available in Appendix A; No.-Words-Dev (NL): Natural Logarithm of the variable number of words in sentences
directly related to development, following the list of words available in Appendix A. Independent variables:
TotalAssets (NL): Total Assets of the firm at the end of the respective year (2012; 2017); Year(2017): this is a
dummy variable, that receives 1 for the observations from the year of 2017 and 0 for the observations of the year
of 2012. Mean VIF: mean of the statistics for Variance Inflation Factor. We calculate the Natural Logarithm of
three variables (No.-Words; No.-Words-Dev; TotalAssets) in order to avoid some concerns with extreme values
in the quantitative analysis.

3
Table 4:
Reported practices that may contribute to development
Subject Firm Practice

Organizes community visits to company facilities for
Enel Costanera (AR) educational purposes, professional development and
community integration.
Provides a distance education platform that offered 27,662
Neoenergia (BR)
hours of training for 6,258 people in 2017.
Supports English courses in all public and private schools in
AES Gener (CH)
Education the communes of Tocopilla and Mejillones (Chile).
Employees receive a recognition for education assistance for
Intercolombia (CO)
each child of active workers and pensioned personnel.
Offers internship and mentoring programs for technical and
Iberdrola (ME)
university students.
Constructed a classroom to improve education conditions for
Enel Peru (PE)
children in Vítoc (District, Peru).
Prioritizes internship program positions for teenagers living in
Celesc (BR)
orphanages and other similar institutions.
Social Promotes the labor participation of teenagers with physical
Enel Chile (CH)
inclusion disabilities.
Develops a corporate volunteer program with participation of
Isagen (CO)
246 volunteers in Medellín (Colombia).
Supports a NGO that provides health, education and food to
Edenor (AR)
more than 1,150 children from poor families.
Promotes activities related to healthy eating, sports,
Eletrobras (BR) vaccination campaigns and awareness of physical and mental
illness.
Promotes activities related to health, sports and recreation with
Health Saesa (CH)
the participation of more than 200 employees.
Promotes programs regarding life and accident insurance,
Celsia (CO) health insurance, prevention of alcohol and drug consumption,
preparation for retirement and occupational health.
Promotes nutrition campaigns with children to prevent anemia,
Enel Piura (PE)
conducting clinical exams.
Conducted afforestation in the green spaces of the Mano
Pampa Energia (AR) Amiga School garden, in Pilar, province of Buenos Aires
(Argentina).
Settled a socio-environmental project that allows the exchange
Environmental Equatorial (BR)
of recyclable waste by discounts in the electricity bill.
issues
Created a botanical center with 4.2 hectares dedicated to the
Colbun (CH)
preservation of the local flora and care with the environment
Conducted training courses on health and environment issues
Electro Dunas (PE)
to employees.
Notes: (AR) Argentina; (BR) Brazil; (CH) Chile; (CO) Colombia; (MX) Mexico; (PE) Peru.

Energy Firms' Development Role

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Manuscript Details

Manuscript number ERSS_2019_57_R2

Title Climate protection or corporate promotion? Energy companies, development,

Article type Perspective article

Keywords Development; Latin America; Sustainability Reports

Manuscript category Energy institutions and governance

Corresponding Author Rodrigo Malaquias

Corresponding Author's Universidade Federal de Uberlândia (Brazil)

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Comments and Suggestions:

Table 4 is a welcome addition! Well done!

“Robalino-López, Mena-Nieto, García-Ramos and Golpe (2015) should be "Robalino-

Energy Companies, Development, and Sustainability Reports in Latin America

Rodrigo Fernandes Malaquias is a Full Time Professor at Universidade Federal de

EAESP, Brazil. In 2015, he was a Visiting Research Scholar at DePaul University in

Chicago, USA. Email: rodrigofmalaquias@gmail.com

ORCID: 0000-0002-7126-1051 (http://orcid.org/0000-0002-7126-1051)

Dermeval Martins Borges Junior obtained his Master Degree in Business

Administration from Universidade Federal de Uberlândia, Brazil. He also obtained his

undergraduate degree in Business Administration from Universidade Federal de

Uberlândia (UFU). He is a PhD Student of Accounting at UFU. Email:

Fernanda Francielle de Oliveira Malaquias is a Full Time Professor at Universidade

Research Scholar at DePaul University in Chicago, USA. Email:

Administration from Faculdade de Economia, Administração e Contabilidade da

Universidade de São Paulo (FEA-USP). He is a Full Time Professor at Escola de

research area of professional post graduation programs at FGV-EAESP. He is also a

consultant in Administration of Information Technology, Business in Digital Age and

FGV EAESP for the support to develop part of this study

Climate Protection or Corporate Promotion?

Energy Companies, Development, and Sustainability Reports in Latin America

Number of companies of the sample

Country 2012 2017

Descriptive statistics of the database, per year

Year: 2012 Year: 2017

Potential determinants of the number of development-related words

No.-Words (LN) No.-Words-Dev (LN)

in the quantitative analysis.

Reported practices that may contribute to development

Subject Firm Practice

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