Greenhouse Gas Disclosure Research Articles

Greenhouse Gas Disclosure: Evidence from Private Firms

AbstractExisting literature on greenhouse gas (GHG) emissions disclosure has paid little attention to private firms, despite the fact that this type of firm is responsible for significant GHG emissions. This study empirically analyzes the GHG disclosure of German private firms. The results suggest that more pronounced information asymmetries due to a more dispersed ownership structure and/or multiple bank relationships are associated with more extensive GHG disclosure. This aligns with arguments from agency and stakeholder theory. While this result is not new for public firms, it is for private firms. Given the specific characteristics of this type of firms (no separation of ownership and control, private communication channels, close bank–borrower relationships), it is not a straightforward assumption that observations from public firms can be transferred to private firms one-to-one. Moreover, higher levels of actual GHG emissions are also associated with more GHG disclosure, indicating that legitimacy theory arguments hold for private firms as well.

Measuring Accountable Information in CSR Reports: A New Operationalization and Analysis Applied to Greenhouse Gas Disclosures

ABSTRACT We develop a novel and generic text-based measure to classify and evaluate greenhouse gas (GHG) disclosures. We construct the measure using collocation analysis of GHG-related words and regular expressions. Automated implementation achieved high concordance compared to manual investigations. We move beyond the “bag-of-words” approach in classifying voluminous nonfinancial corporate disclosure. We also outline a methodology that is manyfold scalable and makes replicability straightforward. Compared to past studies, we work with a significantly larger sample of 5,017 reports across 80 countries, thereby dealing with greater complexity and leading to better generalizability. We also contribute to the debate on whether nonfinancial disclosures exhibit accountability or are merely greenwashing. We find a negative trend in accountability worldwide, and firm-level accountability in GHG disclosures is not detectable in a country-level reduction of GHG emissions. Moreover, firms disclose significantly higher accountable information in a civil-law legal environment compared to those in a common-law legal environment. JEL Classifications: M14; M40.

Ownership structure and climate-related corporate reporting

ABSTRACT We investigate the impacts of various types of corporate ownership structures (i.e. institutional, government, and managerial ownership) on climate-related corporate reporting as reflected in the levels of voluntary carbon disclosure. Using a sample of S&P 500 companies from 2015 to 2020 across both environmentally sensitive and non-environmentally sensitive industries, we find that diverse ownership structures have distinct impacts and preferences in corporate carbon disclosure. Specifically, government ownership is likely to promote transparency of carbon information. In contrast, the ownership held by institutional investors (total, short-term, and long-term), managers (i.e. CEOs, directors), and block-holders are negatively associated with the proactive greenhouse gas disclosure. We also find evidence that climate governance quality plays a positive moderating role in the relationship between two ownership types (i.e. long-term institutional investors and block-holder) and a firm’s climate-related corporate reporting. Our findings offer some practical insights for managers, regulators, and policymakers to focus on the configuration of corporate ownership in the context of improving green practices.

Greenhouse Gas Disclosure and Emissions Benchmarking

ABSTRACTI examine the effects of the U.S. Greenhouse Gas (GHG) Reporting Program, which requires thousands of industrial facilities to measure and report their GHG emissions. I show that facilities reduce their GHG emissions by 7.9% following the disclosure of emissions data. The evidence indicates that benchmarking—whereby facilities use the disclosures of their peers to assess their own relative GHG performance—spurs emission reductions. Firms' concerns about future legislation appear to motivate this behavior and measurement alone (without disclosure) seems not to reduce emissions. My study highlights how mandatory GHG disclosure can create real effects for peers.

Greenhouse Gas Emission Accounting Disclosure, Corporate Characteristics and Governance: An Empirical Investigation on Indonesian Firms

Currently the world is facing global warming, one of the causes of which is greenhouse gas (GHG) emissions. For these reasons, the disclosure of GHG emission information is one of the interesting research areas. However, previous research generally focused on developed countries with inconsistent findings. In this sense, this study aims to contribute to GHG disclosure by analyzing the characteristics of firms as determinants of GHG emission disclosure in a developing country, Indonesia. This study also analyzed the role of corporate governance consisting of the structure of the board of commissioners and the effectiveness of the audit committee in moderating the effect of corporate characteristics on GHG emission disclosure. The sample consisted of 69 firms-years companies listed on the Indonesia Stock Exchange (IDX). The results of testing with Partial Least Squares-Structural Equation Modeling (PLS-SEM) showed that the structure of the board of commissioners; consisting of indicators of independence, women representation, and the number of members of the board of commissioners; strengthened the leverage effect on GHG emission disclosure. The results of the moderation test also showed that the effectiveness of the audit committee can encourage firms with high leverage and poor performance to reveal more GHG emissions.

Stakeholder pressure and greenhouses gas voluntary disclosures

AbstractThis paper reports managers' perceived importance of various stakeholders' pressure in their greenhouse gas (GHG) disclosure decisions. We also report on which stakeholders explain the variation in the extent of GHG disclosures. Further, evidence of how firm size moderates the relationship between some stakeholders and GHG disclosure is provided. Data were obtained through a mail survey of the United Kingdom's FTSE 100 listed firms, to which 62 firms responded. GHG disclosures within the respondents' annual reports were scored, and regression analysis was undertaken to determine if a relationship existed between actual GHG disclosures and the rating assigned to the stakeholders. The results indicate that the provider stakeholder group (shareholders, investors and community) is perceived to have the most significant influence on managers' GHG disclosure decisions, followed by government regulators, organisational (employee, customers and suppliers) stakeholders and social (competitors, NGOs and media) stakeholders, respectively. Regression results show a positive and significant relationship between perceived organisational and regulatory stakeholder pressure and actual GHG disclosures. However, the relationship between providers and social stakeholders and GHG disclosure is not significant. The findings further suggest that the relationships between organisational and regulatory pressure are moderated by firm size. The results have important implications for policymakers.

Determinants of The Firm Value in Indonesia

Companies are no longer only faced with a single bottom line that centers on financial conditions, but companies must adjust to the triple bottom line concept. One form of environmental responsibility for corporate management for stakeholders and shareholders is by disclosing greenhouse gas emissions. Company value is also a very important factor because it can describe the business processes in a company. A high company value will provide a strong interest for investors to buy shares. An increase in stock prices will also increase the value of a company. This study aims to test and obtain empirical evidence regarding the effect of greenhouse gas disclosure, profitability and leverage on firm value. The population of this research is mining sector companies listed on the Indonesia Stock Exchange during the 2014-2018 period. The sample selection in the study using purposive sampling method. The data analysis technique used multiple linear regression. The results of this study indicate that the variable of greenhouse gas disclosure and profitability has a significant positive effect on firm value. The leverage variable does not have a significant effect on firm value, this is because the amount of debt held by the company is not a major concern for investors because investors are more concerned with how management uses the debt effectively and efficiently for use in developing the company

Mandatory disclosure, greenhouse gas emissions and the cost of equity capital: UK evidence of a U‐shaped relationship

AbstractThis paper examines the effects of disclosing greenhouse gas (GHG) information mandatorily on the cost of equity capital (COC) using a longitudinal unbalanced panel database of the United Kingdom's FTSE 350 firms for the period 2011–2016. We use a nonlinear panel quantile regression (PQR) model to examine the relationship between GHG disclosure (GHGD) and COC in the United Kingdom. This technique was supplemented by conducting a two‐step generalised method of moment (GMM) estimation to address any concerns related to the potential existence of endogeneity problems. Our findings suggest that high‐level GHGD appeared to be negatively associated with COC up to a certain level, which is known as the turning point; then, any increase in GHGD is likely to increase the COC. This means that the nonlinear association between GHGD and COC is evidenced in our study and takes a U shape. Likewise, our findings are associative of a moderating effect of the 2013 carbon disclosure regulation (CDR) on the GHGD–COC nexus. We argue that mandatory GHGD and GHG risk are linked so that those companies that are associated with higher GHG risk have a tendency to be better disclosers. Consequently, we urge regulators to design GHGD regulations in a way that mirrors corporate environmental risk and leads to a lower COC in order to align the interests of corporations with those of the society at large.

Board gender diversity, environmental committee and greenhouse gas voluntary disclosures

AbstractWe explore the impact of gender diversity and environmental committees on greenhouse gas (GHG) voluntary disclosures utilising a sample of 215 firms, which are listed on the London Stock Exchange market. We provide strong evidence for a strong positive association between GHG voluntary disclosures and gender diversity, which constitutes an important input to the ongoing debate about the role of women in the boardroom. The governance mechanism of environmental committees is not found to significantly affect GHG disclosures. This adds to the growing empirical evidence in the literature that questions the effectiveness of the current board structures in serving the wider needs of stakeholders and in addressing the relevant issues on climate change. Overall, our results suggest that by being diverse and open to a mixed‐gender governance approach, a firm can better serve the demands of stakeholders and legitimise their green credentials, thus gaining more trust from a broad range of stakeholders other than their shareholders. The noneffectiveness of the environmental committees in enhancing GHG voluntary disclosures demonstrates that firms may not have to directly link the relevant governance mechanism to their disclosure decisions and practices.

Corporate voluntary greenhouse gas reporting: Stakeholder pressure and the mediating role of the chief executive officer

AbstractThe study sheds light on the extent to which various stakeholder pressures influence voluntary disclosure of greenhouse gas (GHG) emissions and how the impact is explained and moderated chief executive officer (CEO) characteristics of 215 FTSE 350 listed U.K. companies for the year 2011. The study developed a classification of GHG emission disclosure based on the guidelines of GHG Protocol, Department for Environment, Food and Rural Affairs, and Global Framework for Climate Risk Disclosure using content analysis. Evidence from the study suggests that some stakeholder pressure (regulatory, creditor, supplier, customer, and board control) positively impacts on GHG disclosure information by firms. We found that stakeholder pressure in the form of regulatory, mimetic, and shareholders pressure positively influenced the disclosure of GHG information. We also found that creditor pressure also had a significant negative relationship with GHG disclosure. Although CEO age had a direct negative effect on GHG voluntary disclosure, its moderation effect on stakeholder pressure influence on GHG disclosure was only significant on regulatory pressure.

CSR Disclosure and Benchmarking-Learning: Emissions Responses to Mandatory Greenhouse Gas Disclosure

In 2010, the United States mandated the reporting of greenhouse gas (GHG) emissions for thousands of manufacturing facilities. Studying this rule, and focusing on facilities for which emissions information was largely not available elsewhere, I find a 7.9% emissions reduction following disclosure. I highlight the role of ‘benchmarking’. Specifically, facilities are able to assess their own, relative GHG performance once they can observe their peers' disclosures. This benchmarking facilitates emissions reductions. In contrast, I highlight uncertainty around whether measurement and reporting to the regulator alone, prior to disclosure, leads to emissions reductions. Lastly, I show that concern about future legislation partly motivates the observed responses. The main takeaway is that mandatory, granular disclosure can curb GHG emissions, and that benchmarking plays an important role in this process.

Greenhouse gas emissions disclosure by cities: the expectation gap

PurposeCities are crucial to reducing greenhouse gas (GHG) emissions. This paper aims to explore the quality of GHG disclosures by cities via the Carbon Disclosure Project (CDP) and compares them with the expectations of users.Design/methodology/approachThe expectation gap framework is used to examine the GHG disclosure quality of 42 cities. User expectations are determined via a literature review and CDP documentation. City disclosures are reviewed using content analysis.FindingsGHG information at the city level is outdated, incomplete, inconsistent, inaccurate and incomparable and, therefore, to meet user expectations, improvement is needed.Research limitations/implicationsThe findings have implications for policymakers, stakeholders and managers. Guidelines are required for better disclosure of GHG information relating to cities, and stakeholders need to develop better skills to understand emissions information. Managers have a responsibility to measure, disclose and mitigate GHG emissions to meet the expectations of stakeholders.Originality/valuePrior studies focus on GHG disclosures via the CDP by corporations. This is the first accounting study to examine GHG disclosures by cities via the CDP. The expectation gap framework is a novel approach to sustainability disclosure research.

The Role of Corporate Governance and Environmental Committees on Greenhouse Gas Disclosure

The study aims to determine the impact of corporate governance (board of commissioners, directors and gender diversity) and environmental committees in greenhouse gas disclosure. The sampling method in this study using purposive sampling method with a total of 26 manufacturing companies listed in Indonesia Stock Exchange by using multiple regression analysis. The results show that the role of the board of commissioners has not been able to provide control over the reduction of greenhouse gases on the company, the board of directors has no effect on the disclosure of greenhouse gases refuse to make emission gas reduction due to litigation pressure and expenditure, gender diversity has not been able to control the role of women and men in decision-making and risk and environmental committees have been little able to contribute to the disclosure of greenhouse gases as it is expected that the establishment of an environmental committee on the company.

Determinants of Voluntary Greenhouse Gas Emission Disclosure: An Empirical Investigation on Turkish Firms

Firms worldwide have been facing an increasing pressure to disclose their Greenhouse Gas (GHG) emissions since GHG emissions are seen as the main source of global warming which is one of the most challenging problems that the world is faced with. For this reason, voluntary GHG disclosure represents a growing area of research interest. However, the existing research generally focuses on developed countries. In this sense, the present paper aims to contribute to the existing GHG disclosure literature by analyzing the determinants of voluntary disclosure of firms operating in a developing country, Turkey. The effects of both financial characteristics and board structures of firms on voluntary disclosure decisions are analyzed as the possible determinants of GHG disclosures of Turkish firms. We use two proxies for assessing the firms’ GHG disclosures. The first proxy, “sensitiveness tendency”, indicates the response behavior of firms to the Carbon Disclosure Project (CDP) survey. The second proxy, namely, “transparence tendency”, represents the disclosure behavior of firms. Using logistic regression models with a sample of 84 listed Turkish companies which were included in the Carbon Disclosure Project survey in 2014, 2015 and 2016, we find that firm size, institutional ownership and market value are positively related to the sensitivity of sampled firms, while board size is negatively related. On the other hand, our results indicate that firm size, profitability and institutional ownership have positive impacts on the transparency of Turkish listed firms.

Emission Levels and Greenhouse Gas Emissions Disclosure: Evidence From Private Firms

Previous financial disclosure literature suggests that private and public firms exhibit different characteristics in their financial reporting behavior. And yet literature on greenhouse gas (GHG) emissions disclosure has so far paid little attention to private firms, despite the fact that this type of firm is responsible for significant GHG emissions. This study analyzes the GHG disclosure behavior of German private firms, considering not only the typical theoretical foundations in environmental disclosure literature – approaches from sociopolitical theories – but also arguments from disclosure theory. The results suggest that if a private firm’s decision to disclose GHG emissions information is divided into two sequential steps – the first step being to decide whether or not to disclose such information, and the second being to decide on the extent of the information to be disclosed – these two steps can be assigned to two different disclosure incentives: the initial disclosure decision seems to be triggered by sociopolitical issues, while the decision on the extent of disclosure is driven by information demands of capital providers.

Voluntary greenhouse gas emission disclosure impacts on accounting-based performance: Australian evidence

ABSTRACTUsing a cost-benefit framework, this research examines the impact of voluntary greenhouse gas (GHG) disclosure on accounting-based performance. Previous studies suggest that the implementation of carbon management and reporting may be associated with the improvement of accounting-based performance by the identification of cost savings opportunities or the introduction of innovation opportunities in products and services. This study is the first that applies several proxies of accounting-based performance, such as, return on assets, return on equity and return on sales, to empirically examine the association between voluntary GHG disclosure by non-GHG registered Australian companies and accounting-based performance. The level of GHG disclosure is scored through content analysis of the annual reports of sample organisations for the financial years 2009 to 2011. This research highlights that GHG disclosure is positively associated with ROA in the year following disclosure. The findings are consistent with the predictions of the cost-benefit framework. It indicates that companies bear the extra voluntary disclosure costs to gain the perceived benefits of voluntary disclosure. Our findings are useful for organisations and stakeholders who are concerned about the cost-benefit of voluntary carbon disclosure.

Reliability and Comparability of GHG Disclosures to the CDP by US Electric Utilities

ABSTRACTThis exploratory study analyses voluntary disclosures of greenhouse gas (GHG) emissions to the Carbon Disclosure Project (CDP) by the largest emitters in the US utilities sector. We compare the amounts that firms voluntarily disclose to the CDP to mandatory amounts that should be less than them and find that the opposite is true for some firms. Examining the comparability of the CDP amounts, we find that firms calculate them using different reporting boundaries and accounting methodologies. We analyse how the choice of boundary affects emissions and find that it results in differences in emissions amounts. We also find that most firms do not have their reported amounts verified by third parties. Our analysis indicates that the amounts that some of the largest emitters disclose to the CDP are unreliable and incomparable. Our results suggest caution in relying on voluntary GHG emissions disclosures.

A longitudinal analysis of corporate greenhouse gas disclosure strategy

PurposeThis paper aims to investigate the extent to which greenhouse gas (GHG)-sensitive companies in the FTSE 100 disclose carbon emission information in their annual reports and stand-alone reports during the period of 2004-2012 and how they respond to the launch of legally binding GHG-reduction schemes – the European (EU) Emission Trading Scheme (EU ETS) and the Climate Change Act (CCA).Design/methodology/approachA 42-item disclosure index is constructed to analyse the quality of corporate GHG disclosures. The authors initially chart the development of corporate GHG disclosure from 2004 to 2012, analyse the trend of disclosure development and compare variances for the convergence of disclosures. Subsequently the authors carry out a t-test to assess the significance of post-EU ETS and -CCA changes and the difference between GHG trading account holders (AH) and non-account holders (NAH).FindingsThe results show that GHG disclosures have been increasing over time, both in number of firms making disclosures and in the amount of information being reported, which indicate the movement towards normativity. The authors also find that the disclosures reach the peak after the enactment of EU ETS and CCA, and firms with carbon trading accounts are more responsive to these schemes than those without accounts. Nevertheless, the quality of the disclosure remains low, which may justify the further government intervention of mandating carbon reporting.Originality/valueThis is the first paper that has examined the regulatory effects on GHG disclosures in an environment where GHG emission triggers direct cost for companies.

Greenhouse gas disclosures by Chinese power companies: trends, content and strategies

PurposeThis paper aims to investigate the greenhouse gas (GHG)-related disclosure trends, content and strategies of the eight most high GHG-emitting Chinese power companies, over a period when government pressure to manage GHG emissions increased.Design/methodology/approachData were collected from the 2000-2009 annual reports, corporate social and environmental responsibility reports and websites of eight Chinese power companies. Content analysis results were supplemented with excerpts from documents written in English or Chinese. Legitimacy theory informed the interpretation of the findings.FindingsGHG-related disclosures increased from 2002 when the Chinese Government ratified the Kyoto Protocol and promulgated stringent environmental regulations. However, some expected types of GHG-related disclosure were absent or rare. Disclosure practices were found to be underpinned by reputation management objectives and reflected a symbolic rather than substantive legitimation strategy.Research limitations/implicationsThis study extends the literature on GHG-related disclosures by carbon-intensive firms and points to the need for future research to examine such disclosures in different countries to appreciate the variety in practice.Practical implicationsWhile the Chinese Government appears to have driven the emergence of GHG-related disclosure practices, companies can effect improvement by expanding the scope and content of what they disclose. Also, the growing emphasis on website disclosures may present challenges in ensuring the reliability and assurance of GHG disclosures.Originality/valueThis is the first study to examine GHG-related disclosure practices by Chinese power-generating companies, a sector crucial to managing the GHG effects of China’s significant economic growth.

Corporate governance and greenhouse gas disclosure: a mixed-methods approach

PurposeThe purpose of this paper is to investigate whether four corporate governance mechanisms (board size, non-executive directors, ownership concentration and directors’ share ownership) influence the extent of greenhouse gas (GHG) disclosure.Design/methodology/approachThe study uses a mixed-methods approach based on a sample of 62 FTSE 1,000 firms. Firstly, the authors surveyed the senior management of 62 UK-listed firms in the FTSE 1,000 index to determine whether the corporate governance mechanisms influence their GHG disclosure decisions. Secondly, the authors used ordinary least squares (OLS) regression to model the relationship between the corporate governance mechanisms and GHG disclosure scores of the 62 firms.FindingsThe survey and OLS regression results both suggest that corporate governance mechanisms (board size and NEDs) do not influence GHG disclosures. However, the results of the two approaches differ, in that the survey results suggest that corporate governance mechanisms (ownership concentration and directors’ share ownership) do not influence the extent of GHG disclosure, while the opposite is true with the OLS regression results.Research limitations/implicationsThe sample size of 62 firms is small which could affect the generalisability of the study. The mixed results mean that more mixed-methods approach is needed to improve the understanding of the role of corporate governance in GHG disclosures.Originality/valueThe use of mixed-methods to examine whether corporate governance mechanisms determine the extent of GHG voluntary disclosure provides additional insights not provided in prior studies.