Corporate Incentives to Disclose Carbon Information: Evidence from Global 500

Abstract

We investigate how the Global 500 companies respond to the challenge of climate change with regard to carbon disclosure strategy. This paper is motivated by a growing body of research that examines the role of large companies in carbon disclosure responsibility and practices. Based on the previous research, we consider the impact of economic, regulatory, social and financial market factors on motivation of Global 500 to voluntarily disclose carbon information in Carbon Disclosure Project in 2009. We find that the economic factor is significantly associated with the voluntary carbon disclosure decision. That is, companies that face direct economic consequence are more likely to disclose carbon related information. Companies in carbon intensive sectors show the same tendency. In addition, large companies have more propensity to disclose carbon information, suggesting social or political pressure plays an important role in such a decision. In addition, we provide evidence of why a large proportion of our sample Global 500 firms refuse to disclose carbon information. Our results suggest the information needs of investors for carbon footprints do not appear relevant to the carbon disclosure decision. In sum, the tendency of Global 500 to disclose carbon information is likely explained by economic and social pressure, and the major driving force for climate change disclosure comes from the general public and government, rather than other major stakeholders such as shareholders and debtholders. Our results are robust after controlling other influences.