Corporate Disclosure of Greenhouse Gas Emissions in the Context of Stakeholder Pressures: An Empirical Analysis of Reporting Activity and Completeness

Abstract

In this study, we shed light on the practice of disclosure of quantitative Greenhouse gas (GHG) emissions by companies in Europe. We develop a classification of reporting completeness based on three dominant voluntary reporting guidelines. We find that from 2005 through 2009 only 15 percent of companies that disclose GHG emissions report them in a manner that we consider complete with respect to scope of emissions, type of emissions, and reporting boundary. We subsequently examine whether proxies for exposure to climate change concerns from different stakeholder groups influence the existence and, separately, the completeness of quantitative GHG emissions disclosure. Controlling for factors representing companies’ resources to report, the results of our logistic regression analyses provide evidence that while external stakeholder pressure is a determinant of the existence of GHG emissions disclosure, it is not substantially related to the disclosure completeness. Our findings are consistent with stakeholder theory in that companies appear to respond to stakeholder pressure to report GHG emissions. Results are also consistent with legitimacy theory arguments in that firms may be using incomplete reporting of GHG data, presumably due to the voluntary nature of the disclosure practice, as a symbolic act to maintain legitimacy in the face of the exposures. We conclude that bringing corporate GHG emissions disclosure in line with recommended guidelines will require either more direct stakeholder pressure or, perhaps, a mandated disclosure regime.