The evolution of corporate reporting on GHG emissions: A Canadian portrait

Vincent Gagné,Sylvie Berthelot

doi:10.22495/cgsrv5i2p2

Vincent Gagné, Sylvie Berthelot

Open Access

https://doi.org/10.22495/cgsrv5i2p2

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Abstract

This paper examines the evolution of the extent to which firms with a high greenhouse gases (GHG) emission impact complied with Chartered Professional Accountants (CPA) Canada guidelines on climate change disclosures, as well as the factors that influenced these disclosures. The sample is comprised of Canadian firms in the mining, energy, and chemical sectors. The study measures the influence of the firms’ political exposure and media visibility, their audit firm, the presence of an environment committee, their ownership structure, and their financial performance on their GHG emissions disclosures. Our findings show that these disclosures considerably evolved over the 10 year period from 2007 to 2017 and that this evolution was in the form of a leap rather than a slow and steady learning curve. We also confirmed the significant influence of the environment committee, political exposure, and media visibility on this evolution. Our empirical results corroborate the work of DiMaggio and Powell (1983), outlining the important role normative pressures play in voluntary GHG emissions disclosure firms make in order to secure the legitimacy conferred by society (Suchman, 1995)

Highlights

Climate change risks are a growing threat to corporations’ financial performance
This paper examines the evolution of the extent to which firms with a high greenhouse gases (GHG) emission impact complied with Chartered Professional Accountants (CPA) Canada guidelines on climate change disclosures, as well as the factors that influenced these disclosures
The firm does not disclose the results of the implementation of strategies to reduce GHG emissions

Summary

Introduction

Climate change risks are a growing threat to corporations’ financial performance. More and more executives are taking the impact of these risks into account in their calculations and financial statement users are paying closer attention to the issue (Aldy & Gianfrate, 2019; Harrast & Olsen, 2016). In 2008, CPA Canada issued two discussion reports entitled ―Executive briefing: Climate change and related disclosures‖ (CPA Canada, 2008b) and ―Building a better MD&A: Climate change disclosures‖ (CPA Canada, 2008a) to help financial statement users better understand the scope of climate change risks. CPA Canada’s aim was to help executives preparing MD&As decide what information to disclose about the impact of climate change issues on their firm’s management and financial performance. Caused by carbon dioxide, methane, and hydrofluorocarbons (GRI, 2016), climate change is a fundamental environmental issue that has major economic and social repercussions (CPA Canada, 2017)

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