A Study of Corporate Environmental Disclosure Practices of Companies Doing Business in India

Abstract

There is a growing pressure from the stakeholders, particularly government and international funding agencies, to publish environmental reports. Environmental reporting and disclosure practices are a means of communicating to the stakeholders about the impact of the organization’s actions on the environment. The reporting can be done in the form of financial or non-financial reporting. We have conducted a study on 50 companies on the basis of turnover from the list brought out by ET 500. We have studied the environmental disclosure practices of Indian companies and also the impact of different independent variables on environmental disclosure index (EDI). Based on a review of literature, we have classified the independent variables according to profitability, size, type of industry, financial leverage, multinational status and environmental certification. We have constructed year-wise pooled regression model with EDI as dependent variables and profitability, size, type of industry, financial leverage, multinational status and environmental certification as independent variables. We find that in all the four years, size and environmental certification are statistically significant at the 1 per cent level and are positively associated. This indicates that bigger-sized companies and the environmentally certified companies by an external agency disclose more environmental information. Environmental certification reduces the agency cost as it reduces the monitoring cost since the firms voluntarily follow an external set of measured objectives. No other variable was found to be significant.