AN ASSESSMENT OF THE QUALITY OF ENVIRONMENTAL DISCLOSURE THEMES

Abstract

An understanding of disclosure themes used in annual reports can provide a foundation for improving communication of environmental information. The objective of this study is to provide insight into environmental disclosure themes that are used to provide management communication in the financial and non-financial sections of corporate annual reports. The study also explores the relationship between these disclosure themes and environmental performance. Findings from a sample of 53 U.S. companies in four major industry groups suggest that environmental disclosures in the financial section of annual reports contain information focused on expenditures and contingencies. Environmental disclosures in the non-financial section of the annual report mostly contain information about pollution abatement and various other environmental data. The highest perceived quality of disclosure is associated with environmental expenditures and contingencies. Other environmental information and pollution abatement disclosures appear to be of lower quality. These findings support previous studies showing that there is little relationship between environmental disclosures and environmental performance.