Corporate Greenhouse Gas Emissions Research Articles

Scope 3: what question are we trying to answer?

Once a little-scrutinized and largely optional aspect of corporate greenhouse gas emissions disclosure, Scope 3 emissions accounting and reporting is now a common element of voluntary climate best practice and is increasingly being adopted as part of new mandatory corporate climate disclosure policies. As Scope 3 disclosure becomes more central to what companies are asked (or required) to do, we perhaps should ask anew what exactly it is we are trying to accomplish. While those NGOs and other stakeholders that designed the Scope 3 framework and who have included it in highly influential corporate leadership programs were well-intentioned, it is becoming clear that the system as designed is ill-suited to serve its fundamental purpose: driving corporate actions to reduce, avoid, and remove greenhouse gas emissions. Scope 3 inventories are often seen as an end in and of themselves, yet from a climate perspective, they are only tools—and only useful if they help lead to positive emissions impact. What companies are asked to do regarding value chain emissions is not adequately aligned with what climate science demands. Therefore, greenhouse gas accounting, disclosure, and leadership programs and rules must modernize their approaches to Scope 3. Options include: limiting data collection requirements to seeking actionable, primary data; using proxy data only as a baseline from which the demonstrated impact of emissions-reducing interventions can be credited by target setting and leadership programs; and by fully embracing the use of verified market mechanisms to enable investments in positive emissions impact.

Carbon price and firm greenhouse gas emissions

Drawing on the recent enthusiasm in the carbon markets, I examine the impact of carbon prices on firm greenhouse gas (GHG) emissions. Using a sample of 1591 firms from 23 European countries, I demonstrate that an increase in carbon price decreases corporate GHG. At hypothesized higher carbon pricing levels, I document that the effect of pricing on corporate GHG emissions is negative. The negative impact of high carbon prices manifests in other harmful gases such as sulphur and volatile organic compounds (VOCs). In evaluating how the various phases of the EU emission trading scheme have affected firm greenhouse gas emissions, I show that the negative effect of pricing became pronounced in Phase 3 of the EU ETS. The findings from this study are robust to alternative econometric specifications and further sample selection criteria.

Corporate carbon emissions data for equity and bond portfolios

PurposeTo better understand the impact of choosing a carbon data provider for the estimated portfolio emissions across four asset classes. This is important, as prior literature has suggested that Environmental, Social and Governance scores across providers have low correlation.Design/methodology/approachThe authors compare carbon data from four data providers for developed and emerging equity markets and investment grade and high-yield corporate bond markets.FindingsData on scope 1 and scope 2 is similar across the four data providers, but for scope 3 differences can be substantial. Carbon emissions data has become more consistent across providers over time.Research limitations/implicationsThe authors examine the impact of different carbon data providers at the asset class level. Portfolios that invest only in a subset of the asset class may be affected differently. Because “true” carbon emissions are not known, the authors cannot investigate which provider has the most accurate carbon data.Practical implicationsThe impact of choosing a carbon data provider is limited for scope 1 and scope 2 data for equity markets. Differences are larger for corporate bonds and scope 3 emissions.Originality/valueThe authors compare carbon accounting metrics on scopes 1, 2 and 3 of corporate greenhouse gas emissions carbon data from multiple providers for developed and emerging equity and investment grade and high yield investment portfolios. Moreover, the authors show the impact of filling missing data points, which is especially relevant for corporate bond markets, where data coverage tends to be lower.

Institutional ownership and corporate greenhouse gas emissions: The evidence from China

This paper examines the impact of corporate ownership structure on greenhouse gas (GHG) emissions in China, with a focus on the role of institutional investors. Using data on Chinese listed companies, we find that institutional ownership has a significant negative effect on corporate GHG emissions. We also observe that pressure-resistant institutional investors and qualified foreign institutional investors have a more substantial impact on reducing emissions. Our results suggest that institutional investors act as active monitors, influencing corporate behavior through both “exit and selection” and “voice” mechanisms. Furthermore, we find that institutional investors are more concerned with policy uncertainty risk than physical risk. These findings have implications for policymakers and investors seeking to promote sustainable development and address climate change.

Managerial ability and corporate greenhouse gas emissions

Top managers are responsible for important decisions and their efficient implementation. Therefore, higher ability is more likely to lead to effective practice and favourable firm outcomes. This paper examines the association between managerial ability and corporate greenhouse gas emissions. The results suggest that firms with more able managers have lower greenhouse gas emissions. The disaggregation of total greenhouse gas emissions into Scope 1 emissions and Scope 2 emissions shows that managerial ability is negatively associated with both components. The results hold while controlling for various firm and country-level attributes and econometric specifications mitigating endogeneity concerns.

Foreign Institutional Investors, Legal Origin, and Corporate Greenhouse Gas Emissions Disclosure

Foreign Institutional Investors, Legal Origin, and Corporate Greenhouse Gas Emissions Disclosure

Challenges for the Accurate Measurement and Accounting of Corporate Greenhouse Gas Emissions

Challenges for the Accurate Measurement and Accounting of Corporate Greenhouse Gas Emissions

GHG emissions and firm performance: The role of CEO gender socialization

In this paper, I examine the effect of corporate greenhouse gas emissions (GHG) on profitability. I use the gender composition of the CEOs' children as an identification strategy to investigate the impact of GHG emissions on profits. CEOs who father a daughter are associated with a 10% reduction in GHG emissions. The reduction in emissions, in turn, improves profitability. A one standard deviation decrease in GHG emissions leads to a 0.14 standard deviations increase in profitability. Examining the channels, I show that CEOs with daughters are more likely to adopt a climate-integrated business strategy and set emission-reduction targets. Emission reduction affects profitability through both information advantage (protection from negative industry shocks, and lower cost of capital), and operational efficiency (lower operating costs and energy consumption) channels.

Corporate Carbon Footprint: A Machine Learning Predictive Model for Unreported Data

The authors propose a model based on statistical learning techniques to predict unreported corporate greenhouse gas emissions that generates considerably better results than existing approaches. The model uses one linear learner and one nonlinear learner only, which reduces its complexity to the minimum required. An iterative approach to detecting and correcting data significantly improves the model predictions. Unlike mainstream approaches, which tend to construct one model for each industry, we construct one single global model that uses industry as a factor. This addresses the problem of lack of breadth or lack of reported data in some sectors and generates practical results even for industries where other approaches have failed. We show results for Scope 1 and Scope 2 corporate carbon emissions. Adapting the framework to Scope 3 will be the focus of a future article.

Sustainability Performance of the Firm: Measurement and Mechanisms

This symposium presents several papers addressing the measurement of corporate climate change governance and ESG more broadly. Green neighbors? Local vs firm-level determinants of corporate greenhouse gas emissions reduction Presenter: Benjamin Leffel; U. of Michigan An exploration of GHG target setting over time Presenter: Miron Avidan; HSG U. of St. Gallen How do Firms Respond to Ratings? The Influence of Rating Methodology on Disclosure Behavior Presenter: Patrick J. Callery; U. of Vermont, Grossman School of Business, US

The status of corporate greenhouse gas emissions reporting in the food sector: An evaluation of food and beverage manufacturers

The global food system is a key contributor to anthropogenic greenhouse gas emissions. Companies can play an important role in reducing these emissions but doing so effectively requires accurate emissions data. This study assessed the status and quality of corporate emissions reporting and target setting in the food system mainly through a survey of the public emission reports for 2018 to the CDP by the largest 50 food and beverage manufacturers worldwide. In total, these companies reported 0.9 Gt CO2-eq. per year, although 7 companies did not publicly report emissions and many other companies provided incomplete reports of emissions. Direct emissions (Scope 1) comprised 8% of total reported emissions, and indirect emissions of purchased energy (Scope 2) 4% and of the value chain (Scope 3) 88%. Despite the large proportion of Scope 3 emissions, reporting for this scope was often incomplete and inconsistent. For example, land-use change emissions are key for the food system but they are only explicitly covered by 10% of the companies. In addition, more than a third of reported Scope 3 emissions were not covered by emissions reduction targets of the companies. Based on a first order approximation, we estimated that the 50 companies are associated with 1.9–3.8 Gt CO2-eq. per year, indicating that between 53 and 77% of emissions go under-reported. Together with the relatively poor reporting of Scope 3 emissions, our findings suggest that the food and beverages industry needs to urgently improve their GHG emissions reporting and management if they are serious about mitigating their impact on climate change. For more accurate emission reporting of companies in the food system, sector-specific guidance for Scope 3 is needed that prioritizes the most significant scope 3 categories, includes a dedicated category for emissions from land-use change and provides clear, easily applicable methods to determine the emissions from these high priority categories.

Institutional Ownership and Corporate Greenhouse Gas Emissions: The Evidence from China

Institutional Ownership and Corporate Greenhouse Gas Emissions: The Evidence from China

Institutional Ownership and Corporate Greenhouse Gas Emissions: The Evidence from China

Institutional Ownership and Corporate Greenhouse Gas Emissions: The Evidence from China

Supply chains (Scope 3) toward sustainable food systems: An analysis of food & beverage processing corporate greenhouse gas emissions disclosure

To align business activities with the Paris Agreement goal to limit global warming to 1.5°, companies may disclose and set targets to mitigate their emissions. The global food system contributes up to 37% of total annual emissions. Major food & beverage processing companies heavily contribute to food system emissions through their supply chains. Despite this, sector-specific analysis of the status and quality of scope 3 emissions for food & beverage processing companies is lacking. Using 2018 CDP data to build a sample of 153 companies, the authors describe the state of voluntary disclosure, particularly for scope 3, for food & beverage processing companies. Further, the paper investigated the effect of emissions performance, national environmental policy, international negotiation group, and primary activity on scope 3 disclosure. It also examined the effect of primary activity, scope 3 disclosure, and national environmental policy and international negotiation group on direct- and energy-related emissions performance. The authors found scope 3 disclosure in the food & beverage processing sector was incomplete and inconsistent. The 2018 Environmental Performance Index score and the international negotiating group of a company's headquarter country were significant predictors of scope 3 disclosure by category. Firm size (by revenue) was the only significant predictor of direct and energy-related (scopes 1 and 2) emissions, but was not correlated with improved emissions performance. The authors concluded with a set of recommendations to improve the availability and transparency of scope 3 emissions data, and invited further research into sector-specific scope 3 disclosure, performance, effect of firm size and climate policy at the national and international levels. • Scope 3 disclosures by F&B processing companies lacked completeness and consistency. • Annual revenue predicted scope 1 & 2 emissions, larger firms were not more efficient. • Proposed ranking index for qualitative comments on relevant scope 3 category disclosures. • EPI score and UNFCCC alliance of firm home country explain scope 1 and 2 emissions intensity. • EPI score and UNFCCC alliances of firm home country explain completeness of scope 3 disclosure.

Institutional Investor Legal Origins and Corporate GHG Emissions Disclosure Quality

The disclosure of corporate environmental performance is an increasingly important element of a firm’s ethical behavior. Building on stakeholder theory and legitimacy arguments as well as prior research that proposes legal origin as a major determinant of corporate social responsibility (CSR), we examine how foreign institutional ownership and its legal origin affect the quality of carbon disclosure. Using a large sample of firms from 36 countries, we find that foreign institutional owner-ship from civil law countries improves the quality of a firm’s greenhouse gas (GHG) emissions reporting, as indicated by emissions verification levels and Carbon Disclosure Project scores. This relation is robust to addressing endogeneity and selection bias. This relation is more pronounced in firms from non-climate-sensitized countries, for which the gap between firms’ CSR standards and investors’ CSR targets is potentially larger, and in less international firms. Further analyses indicate that firms with a better GHG emissions reporting quality exhibit higher valuations.

Reduction in Corporate Greenhouse Gas Emissions Under Prescriptive Disclosure Requirements

We study the real and financial effects of a unique law in the United Kingdom that mandates publicly listed firms to disclose their greenhouse gas emissions (GHG) in a standardized way in their annual reports. Firms respond to the law by reducing GHG emissions by about 16 percent. Firms reduce emissions through costly operational adjustments. Examining why firms reduce emissions, we present evidence consistent with the views that the regulation increased the future costs of high emissions and facilitated across firm comparisons. We conclude that financial motivations push firms to reduce GHG emissions when mandatory emissions disclosure requirements are introduced.

Do Sustainability Rating Schemes Capture Climate Goals?

The 2015 Paris Agreement set a global warming limit of 2°C above preindustrial levels. Corporations play an important role in achieving this objective, and methods have recently been developed to map global climate targets to specific industries, and individual corporations within those industries. In this article, we assess whether Sustainability ratings capture corporate performance in meeting the 2°C target. We analyze nine rating schemes used by investors and three commonly used in academic studies. Most rating schemes do consider corporate greenhouse gas emissions in their analysis, whereas only a minority scale emissions by factors that have the potential to allow benchmarking against science-based targets. None take the final step of mapping climate indicators against the 2°C target. Furthermore, we find a lack of consistency in the climate change ratings of the databases used in academic studies. These results are concerning in the context of being able to meet global climate change goals.

Green from the Inside? Corporate Environmental Behavior and Corporate Governance Configurations

This paper empirically investigates the relationship between corporate governance and corporate greenhouse gas emissions. Firms differ in the extent of emissions even when controlling for sector, s...

‘Carrots for Corporate Sustainability’: Impacts of Incentive Inclusiveness and Variety on Environmental Performance

AbstractIn this paper we explore the role that managerial incentives play in improving corporate environmental performance, finding that greater inclusiveness of incentive beneficiaries and greater variety of incentive types are important factors in firms' incentive schemes. Drawing on a large dataset of multinational enterprises, our results suggest that including more beneficiaries from different levels within the corporate hierarchy and offering both monetary and non‐monetary rewards are generally more likely to lead to reductions in corporate greenhouse gas emissions. Developing two principles of incentive design, inclusiveness and variety, and the conceptualization of patterns of these in organizations as configurations of incentives, our research contributes substantially to normative advice regarding the relative effectiveness of alternative systems of environmental incentives. Such an understanding of the potential of incentives is critical to informing how firms address complex problems such as sustainability in the context of increasingly extended organizational hierarchies and designs. Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment

What are we missing? Scope 3 greenhouse gas emissions accounting in the metals and minerals industry

Metal and mineral companies have significant greenhouse gas emissions in their upstream and downstream value chains due to outsourced extraction, beneficiation and transportation activities, depending on a firm’s business model. While many companies move towards more transparent reporting of corporate greenhouse gas emissions, value chain emissions remain difficult to capture, particularly in the global supply chain. Incomplete reports make it difficult for companies to track emissions reductions goals or implement sustainable supply chain improvements, especially for commodity products that form the base of many other sector’s value chains. Using voluntarily-reported CDP data, this paper sheds light on hotspots in value chain emissions for individual metal and mineral companies, and for the sector as a whole. The state of value chain emissions reporting for the industry is discussed in general, with a focus on where emissions could potentially be underestimated and how estimates could be improved.