Corporate Carbon Disclosure Research Articles

Government Reform, Regulatory Change and Carbon Disclosure: Evidence from Australia

This paper examines the effect of two Australian environmental regulatory changes, specifically the Clean Energy Act (CEA) 2011 and the National Greenhouse and Energy Reporting (NGER) Act 2007 with reference to voluntary corporate carbon disclosure practices. In doing so, it describes the brief history of this carbon-related regulatory change, its scope, enforcement criteria and corporations’ disclosures. This is a longitudinal analysis of 219 annual reports of 73 listed corporations in Australia which were subjected to carbon tax and report carbon emissions as per the CEA 2011 and NGER Act 2007 accordingly. Any corporation or facility that emitted scope 1 emissions of 25,000 tonnes of carbon dioxide equivalent (CO2-e) or more were liable for a carbon tax in accordance with CEA 2011. Drawing on stakeholder theory and legitimacy theory, this study uses content analysis to examine corporate carbon disclosure. The findings suggest there is a considerable increase in the number of carbon-related disclosures following these regulations being enacted as law. In addition, carbon-specific communication has become much more prevalent and accounts for a larger proportion of the sampled organisations’ reported environmental information. The results of this study enrich the validity of the hypothesis that organisations would seek to legitimise their operations to stakeholders by increasing their environment-related declarations. The evidence presented in the analysis confirms the assertion that government environmental legislation/regulation has a positive impact on corporate behaviour and accountability. These findings have significant consequences for the government, decision-makers and the accounting profession, indicating that regulatory guidance enhances both mandatory and voluntary disclosure. It also offers key insights into the possible impacts of the carbon regulatory change for future research to consider.

Carbon disclosure and firm risk: evidence from the UK corporate responses to climate change

By considering the theoretical association between corporate transparency, information asymmetry and firm risk, this paper investigates the relationship between corporate carbon disclosure and firm risk in the UK context. Using a sample of FTSE350 firms with Carbon Disclosure Project based year-observations from 2007 to 2015, we find that enhanced voluntary carbon disclosure reduces a firm’s total, systematic, and idiosyncratic risks. We also find that this negative association is driven mainly by carbon-intensive industries. Additional tests show that carbon disclosure was not a significant determinant of a firm’s risk until after the global financial crisis of 2007–2008. Our findings are of interest to stakeholders, including business managers and investors as they have considerable interest in assessing firms’ survival and sustainability.

Corporate Carbon Disclosure, Carbon Performance and Corporate Firm Performance

The primary objective of this study is to examine the current state of corporate carbon disclosure (CCD) among a sample of FTSE 350 non-financial firms. It also investigates the effect of CCD on firms' carbon emission performance and corporate financial performance (CFP). This study adopts a quantitative approach to fulfil its aims. In particular, it quantifies the level of CCD reported by non-financial companies listed in the FTSE 350. A number of regression models are developed to examine relationships that are assumed. The results demonstrate that CCD can significantly enhance a firm's carbon performance. Further, the findings reveal that CCD can boost firms' financial performance. The findings provide some policy implications for regulators, preparers, and investors on the usefulness of voluntary disclosure, including carbon information.

Corporate carbon disclosure, carbon performance and corporate firm performance

Corporate carbon disclosure, carbon performance and corporate firm performance

A systematic review of corporate carbon accounting and disclosure practices: Charting the path to carbon neutrality

The study examined the theoretical motivation for carbon disclosure and its adequacy for deliberate responsible action. Generally, there is an increase in corporate carbon disclosures in the business sector. Organizations are mostly disclosing their carbon emissions through annual reports, integrated reports, or stand-alone sustainability reports for different reasons and motives. However, the study infers that the quality and adequacy of the current disclosures are debatable due to a lack of consistency and technical details. The causal reason may be due to the inherently voluntary nature of the corporate carbon disclosure. The study finds that there is less research on carbon accounting and disclosures in developing countries especially, in Africa. There is a need for organizations to streamline the application and approaches to carbon accounting. The study suggests the necessity for government regulators and standard setters in accounting to provide a framework that will guide carbon disclosure practices.

Corporate Carbon Disclosure and Foreign Investor Participation in Korean Firms

Purpose – This study principally examines the relationship between foreign ownership and firms’ responses on the Carbon Disclosure Project (CDP) participation as a method to cope with climate change. Design/Methodology/Approach – The sample taken for this study includes 1,346 firm-year observations. The sample employed herein was obtained from firms listed on the Korean Stock Exchange (KSE) from 2011 to 2016. Findings – First, our finding shows a positive relationship between the survey response designating CDP participation and the ratio of equity ownership by foreign owners. The result indicates that foreign investors are likely to exert pressure on management to implement CDP participation, thereby justifying the firm’s approaches to corporate environmental activities and efforts to cope with carbon regulation. Additionally, this study demonstrates that foreign investors acquiring more than 5% of shares in individual firms tend to practice more effective control in management’s decisions with regard to CDP participation. Research Implications or Originality – First, these findings will be used in formating the investment policies of foreign investors and disclosure policy regarding carbon risk managements.

Has Carbon Disclosure Become More Transparent in the Global Logistics Industry? An Investigation of Corporate Carbon Disclosure Strategies Between 2010 and 2015

Global logistics companies are increasingly disclosing carbon related information due to institutional and stakeholder pressures. Existing research, however, is limited to categorizing these pressures and their influences on corporate carbon disclosure strategies. In particular, literature to date has not distinguished between different carbon disclosure strategies and how they may have changed over time. In response, this paper: (1) proposes a framework that depicts four different carbon disclosure responses and strategies based on internal and external pressures; and (2) subsequently analyzes and compares corporate carbon disclosure strategies between 2010 and 2015. Using a sample of 39 leading global logistics companies, carbon disclosure strategies are categorized based on the analysis of 25 applied carbon management practices from Bloomberg ESG to see if carbon management practices and the associated strategies have changed. The findings show overall shifts to more transparent corporate carbon disclosure strategies between 2010 and 2015 with an increase of applied carbon management practices in both internal and external actions.

Climate Change and Asset Prices: Are Corporate Carbon Disclosure and Performance Priced Appropriately?

AbstractThis paper empirically assesses the relevance of information on corporate climate change disclosure and performance to asset prices, and discusses whether this information is priced appropriately. Findings indicate that corporate disclosures of quantitative greenhouse gas (GHG) emissions and, to a lesser extent, carbon performance are value relevant. We use hand‐collected information on quantitative GHG emissions for 433 European companies and build portfolios based on GHG disclosure and performance. We regress portfolios on a standard four factor model extended for industry effects over the years 2005 to 2009. Results show that investors achieved abnormal risk‐adjusted returns of up to 13.05% annually by exploiting inefficiently priced positive effects of (complete) GHG emissions disclosure and good corporate climate change performance in terms of GHG efficiency. Results imply that, firstly, information costs involved in carbon disclosure and management do not present a burden on corporate financial resources. Secondly, investors should not neglect carbon disclosure and performance when making investment decisions. Thirdly, during the period analysed, financial markets were inefficient in pricing publicly available information on carbon disclosure and performance. Mandatory and standardised information on carbon performance would consequently not only increase market efficiency but result in better allocation of capital within the real economy.

Environmental Legitimacy, Green Innovation, and Corporate Carbon Disclosure: Evidence from CDP China 100

Firms worldwide are increasingly required to disclose (and make efforts to reduce) their carbon emissions due to the environmental damage associated with climate change. Because there has been no previous literature focusing on the determinants of corporate carbon disclosure integrating environmental legitimacy and green innovation, the present study attempted to develop an original framework to fill the research gap. This study explored the influence of environmental legitimacy (an external informal mechanism) on corporate carbon disclosure, and investigated the role of green innovation (an internal formal mechanism) as a mediator. With the samples of Carbon Disclosure Project (CDP) in China from 2008 to 2012, the results demonstrate that environmental legitimacy significantly negatively influences the likelihood of corporate carbon disclosure, and that green process innovation mediates the relationship, while green product innovation has no significant mediating effect. It means that environmental legitimacy not only directly affects the likelihood of corporate carbon disclosure, but also indirectly affects it via green process innovation. Hence, companies must increase both informal and formal mechanisms, i.e., external environmental legitimacy and internal green process innovation, to engage in carbon information disclosure and ensure sustainability.

Change in Global Environmental Governance

Where does change come from in the architecture of global environmental governance? To the extent that a traditional answer to this question exists, it is that states self-consciously make changes in the architecture, to meet specific cooperative goals and in response to new information about the state of the natural environment. This is the classical neoliberal, institutionalist, regime theory answer: States, understood as rational unitary actors, create new institutions to reduce the market imperfections in international cooperation. This answer has informed much good work on global environmental politics over the past two decades, but it is limited by its terms of reference. States are often neither rational nor unitary, and they are not the only actors of relevance to global environmental governance. A more recent counter-narrative to state-based regime theory abjures the state and the formal intergovernmental organizations created by states, looking both to other levels of government and to nongovernmental actors as sources of environmental governance. This approach looks at networks of nonstate actors as the source of voluntary global environmental leadership, built up from the grass roots rather than imposed from the top. This is a useful corrective to an exclusive focus on the state as the unit of analysis, and on conscious design rather

Does National Culture Influence Corporate Carbon Disclosure Propensity?

ABSTRACT This study examines the influence of culture on management's response to the challenge of climate change, as manifested in firms' voluntary participation in carbon disclosure via the Carbon Disclosure Project (CDP). We argue that national culture impacts managerial attitudes and philosophies about environmental protection and thus affects the willingness as well as the extent to which managers recognize the need for emissions control and disclosure. Based on a sample of 1,762 firms from 33 countries, we find that cultural dimensions of masculinity, power distance, and uncertainty avoidance are strongly and consistently related to carbon disclosure propensity, regardless of whether G. Hofstede, G. J. Hofstede, and Minkov (2010) or Global Leadership and Organizational Behaviour Effectiveness (GLOBE) culture measures are used. Our results also show individualism and long-term orientation has significant impact under the Hofstede measure, although not under GLOBE measures, after controlling for other compounding factors. In addition, our evidence implies that national culture may moderate the effect of carbon control mechanisms, such as emissions trading schemes. Finally, the empirical evidence indicates that the impact of culture is not sensitive to national wealth and industry membership. The findings suggest culture exerts incremental influences beyond economic and regulatory incentives and therefore should be adequately considered in the combat against global warming and particularly in negotiations for an international climate agreement that is more acceptable to societies with disparate cultural backgrounds.

Does voluntary carbon disclosure reflect underlying carbon performance?

Carbon information is becoming more and more important in the decision making of stakeholders, but there is growing concern regarding the reliability of corporate carbon disclosure and a lack of empirical studies addressing this issue. The purpose of this paper is to examine whether voluntary carbon disclosure reflects firms’ true carbon performance. Level of carbon disclosure was measured based on content analysis of Carbon Disclosure Project (CDP) reports, and our carbon performance index focused on both carbon intensity of emissions and carbon mitigation. Based on a sample of 474 U.S., U.K., and Australian firms, our findings show a significant positive association between carbon disclosure and performance, suggesting that firms’ voluntary carbon disclosure in the CDP is indicative of their underlying actual carbon performance. This result is consistent with signalling theory. Our findings are useful for corporate stakeholders and governmental policymakers who are concerned about the quality of voluntary greenhouse gas disclosure.

Transparency of Corporate Carbon Disclosure: International Evidence

Purpose – Increased awareness regarding environmental issues has encouraged corporations to disclose carbon related information. The study concerns carbon disclosure in the typical form of the Carbon Disclosure Project (CDP). The CDP constitutes an international voluntary code developed by a non-government organization to encourage consideration of carbon emission issues in decision making. Such a code can flexibly bridge the gap between individual companies’ sustainability initiatives and mandatory, legal regulation. We examine the effectiveness of the code and the determinants of the transparency of the carbon disclosure. The study contributes to the understanding of management (dis)incentives to be (un)accountable for their carbon impact on global warming.Design/methodology/approach – The paper is based on the academic literature on motivations for sustainability and environmental reporting, together with an analysis of the carbon disclosures made by the Global 500 firms. We assess the degree of transparency using the Carbon Disclosure Transparency Score (CDTS) adopted from the CDP reports. The CDTS focuses on carbon risks and opportunities, carbon footprints, carbon reduction activities, governance and verification of carbon information. We consider the influence of information needs of stakeholders and institutional effects on carbon transparency.Findings – We find the CDP has attracted an overwhelming majority of the Global 500 to disclose carbon information. However, we observe a great disparity in carbon transparency between firms in different sectors and institutions. Our results show 74% of 243 firms in our sample achieved 50% or higher on the CDTS (sample average is 60%), so their reports are reasonably transparent, and the remaining were un-transparent (or opaque). We interpret the lack of transparency as evidence of a lack of managerial incentive to be accountable. In addition, we find firm size, leverage, industry membership, emission trading scheme (hereafter ETS), stringency of environmental regulation, as predicted, are significantly associated with carbon transparency. Research limitations/implications –The results imply that stakeholder theory and institutional theory provide different but complementary explanations for the development of carbon disclosure practices. Future research is needed to gauge how the CDP code impacts front-line decision making. It could be useful to have further standardization of CDP reporting formats and contents, including more details about project-level implementation. Practical implications – The CDP in its current incarnation is a system which produces assessable reports of carbon activities, and it encourages the development of web-based forms of corporate accountability. From the organization’s perspective, the study provides immediate feedback and has the potential to improve practice through the identification of forces for change not considered in prior theorizing. Based on the findings, we make some suggestions for improvement of carbon disclosure. Some firms have already been involved in voluntary external assurance, which added creditability and value to the reports. Use of voluntary external assurance should be encouraged.Originality/value – Our study attempts to propose a research instrument to measure carbon transparency (obscurity) as a multi-item construct. Our findings help to illuminate the effectiveness of a voluntary code in the social construction of how stakeholder theory and institutional theory are to be interpreted and implemented. In addition, our international cross-sectional evidence for determinants of carbon transparency contrasts with findings in previous research focusing on general environmental issues, and research in national settings.