The valuation impact of carbon reporting: assessing firm-specific and extended supply chain carbon disclosures of S&P 500 firms

Abstract

Prior corporate sustainability studies that examine the association between corporate environmental performance (CEP) and corporate financial performance (CFP) primarily focus on firm-specific environmental impacts, avoiding considerations of the much larger environmental impacts within firms' extended supply chains. In addition, prior literature has concentrated more on the performance of regulated pollutants, less on unregulated pollutants. This study focuses on these two gaps by examining three interrelated questions: 1) the association between firm-specific greenhouse gas (GHG) performance and valuation; 2) the association between GHG reporting in the extended supply chain and valuation; 3) the moderating effect of reporting GHG emissions in the extended supply chain on the association between firm-specific GHG performance and valuation. The results suggest that firm-specific GHG emission performance is positively associated with valuation and that reporting GHG emissions in the extended supply chain affords firms an incremental valuation premium.