Greenhouse Gas Information Research Articles

Methodological approaches for estimating regional emission values using national greenhouse gas inventory: A case study of the Republic of Korea

AbstractSince the Paris Agreement in 2015, the greenhouse gas (GHG) inventory has been considered as an indicator in the evaluation of national GHG reduction. Despite the importance of achieving and evaluating the national GHG reduction targets by the local government, GHG information availed to local governments is very limited, thus necessitating the use of additional resources to create a GHG inventory for each region. This study established and introduced procedures for the selection and distribution of activity data using a national inventory to allow for the estimation of emission values according to region and used them to calculate emissions in Korea. Statistics that were not based on regional data or those based on different data collection systems were identified, and in such cases, data required improvement to achieve consistency. Emission estimation showed that the applied activity data was consistent with the sum of the regional and national values for 12% of GHG emissions. We expect the improvement of certain statistical data to improve data consistency to 82% within a ± 5% variance. With this method, the consistency between the emission data at the national and local or regional levels can be ensured, and ultimately used to establish or evaluate the implementation of a GHG reduction plan. The proposed method can be particularly useful when capacity enhancement of local governments in developing countries is required for GHG inventory management. © 2021 Society of Chemical Industry and John Wiley & Sons, Ltd.

The effect of board diversity on disclosure and management of greenhouse gas information: evidence from the United Kingdom

PurposeThe global interest in climate change makes carbon information important for decision-making. This study examines to what extent companies voluntarily disclose and manage greenhouse gas (GHG) information and whether board diversity and industry type explain variations in the level of disclosure and management of GHG information.Design/methodology/approachCross-sectional data analysis is used for the Financial Stock Exchange 350 (UK FTSE 350) in 2017. Disclosure of GHG information is measured using the scores of the Carbon Disclosure Project (CDP), whereas board diversity is measured using gender diversity, board tenure and board skills. The control variables include firm size, leverage, industry type, board meetings, board size, board independence and CEO duality. Ordinal logistic regression (OLR) is used for data analysis.FindingsThe results indicate that representation of female directors in the board of directors positively influences disclosure and management of GHG information. Conversely, a high percentage of directors with a financial and industrial background negatively affects GHG information, while board tenure has no significant effect on GHG information. Concerning the control variables, only firm size and industry type are significant in their relationships to GHG information.Research limitations/implicationsThe main limitation of the study is investigating only few variables of board diversity. Future studies could investigate other variables such as cultural diversity and age diversity. Furthermore, cross-sectional data analysis cannot capture the dynamic casual impact between the determinants of disclosure and management of GHG information. Future studies could use long-term data, which may yield results that are more significant.Originality/valueThe study emphasizes the importance of the role of female directors in ensuring more transparency toward climate change activities. The findings of this study could be of interest to policymakers and stakeholders and could be used to take initiatives to reduce gender bias and increase the percentage of women in the boardroom. It is also likely to be beneficial for investors and stakeholders to evaluate carbon footprint of businesses and to assess the extent to which they meet their environmental responsibility.

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.

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.

Fighting Climate Change with Disclosure? The Real Effects of Mandatory Greenhouse Gas Emission Disclosure

We examine whether mandatory disclosure of greenhouse gas (GHG) emissions influences companies’ GHG emission levels. We identify the disclosure effect by exploiting a mandate requiring UK-incorporated listed companies to disclose information on GHG emissions in their annual reports. Using a difference-in-differences design, we show that disclosing GHG emissions in annual reports reduces emission levels by about 18% over three years. We find that emission reductions primarily occur for first-time mandatory reporters compared to firms who already voluntarily reported GHG information prior to the mandate. Further, we find that the emission reductions are permanent rather than transitory and we obtain stronger results for firms with larger savings potentials. Our effects are robust to various sample specifications, i.e., analysis at the installation- and firm-level, alternative control groups, and propensity score matching.

The Relevance to Investors of Greenhouse Gas Emission Disclosures

AbstractThis study finds that investors price firms' greenhouse gas (GHG) emissions as a negative component of equity value, and this valuation discount does not differ between firms that voluntarily disclose to the Carbon Disclosure Project (CDP) and nondisclosing firms. We derive the GHG emissions for nondisclosers from an estimation model that incorporates firm characteristics and industry. The finding that investors view CDP amounts and estimates of emissions as equally value‐relevant suggests that equity values reflect GHG information from channels other than the CDP. An event study of investors' response to emission‐related information in firms' 8‐K filings further supports this finding. Economically, our results suggest that, for the median S&P 500 firm, GHG emissions impose a market‐implied equity discount of $79 per ton, representing about one‐half of 1 percent of market capitalization.

The nature of voluntary greenhouse gas disclosure – an explanation of the changing rationale

PurposeThis paper aims to explore the nature of voluntary greenhouse gas (GHG) disclosure by non-GHG-registered companies among industry sectors over a period after the introduction of theNational Greenhouse and Energy Reporting(NGER)Act 2007and before the introduction of the Australian ETS.Design/methodology/approachA GHG disclosure index is used to evaluate the levels of GHG disclosure in 2009 and 2011 annual reports.FindingsThis paper highlights that non-GHG-registered companies seem to improve their disclosure by incorporating more “behavioural management” actions rather than “symbolic” actions. The changing rationale of GHG disclosure is towards more serious GHG reduction strategies. Consistent with voluntary disclosure and signalling theories, companies having good news to tell disclose their superior GHG information to promote their superior environmental performance.Research limitations/implicationsThe findings should be useful for stakeholders who are interested in GHG disclosure strategies. Also, the content analysis of the annual reports provides some clarity in respect of the most common aspects of GHG disclosure by non-GHG-registered companies which is helpful in the evaluation of correspondence between carbon disclosure strategies and the objectives of carbon abatement.Originality/valuePrevious studies mostly investigate the differences in the type of GHG disclosure among companies subject to mandatory GHG regulations. However, this paper is the first study to examine the changing rationale in the nature of GHG disclosure of non-GHG-registered companies. While much of the prior research uses GHG-registered companies as the sample, no empirical study to date has considered non-GHG-registered companies that encompass 96 per cent of ASX listed companies.

Voluntary Disclosure of Greenhouse Gas Emissions: Contrasting the Carbon Disclosure Project and Corporate Reports

As global warming continues to attract growing levels of attention, various stakeholders (states, general public, investors, and lobbyists) have put climate change on corporate agendas and expect firms to disclose relevant greenhouse gas (GHG) information. In this paper, we investigate the consistency of the GHG information voluntarily disclosed by French listed firms through two different communication channels: corporate reports (CR) and the Carbon Disclosure Project (CDP). More precisely, we contrast the amounts of GHG emissions reported and the methodological explanations provided (named ‘traceability’) in each channel. Consistent with a stakeholder theory perspective, we find that GHG amounts are significantly lower in the CR than in the CDP. We also find that firms increase the CR figures’ traceability when there is a discrepancy between disclosures in the two channels. We suggest that the aim of this greater traceability is to enhance information credibility across the different channels used.

The effect of DEFRA guidance on greenhouse gas disclosure

This paper investigates the effect of the 2009 guidance of the Department for Environment, Food & Rural Affairs on greenhouse gas (GHG) disclosure. The sample comprises 215 companies from a population of London Stock Exchange FTSE 350 companies over four years (2008–2011). To quantify GHG disclosure, a research index methodology is employed, with information derived from several GHG reporting frameworks. The econometric model is estimated using panel fixed effects. Our findings suggest that the publication of the 2009 guidance has had a significant effect on the level of GHG disclosure, and that corporate governance mechanisms (board size, director ownership, and ownership concentration) also affect the extent of GHG information disclosure. The results also indicate that companies increased their disclosures prior to the 2009 guidance in anticipation of its publication. These results have important implications for the government, suggesting that non-mandatory guidance could increase disclosure as much as do mandatory requirements.

Gender diversity, board independence, environmental committee and greenhouse gas disclosure

This paper examines the impact of corporate board's characteristics on the voluntary disclosure of greenhouse gas (GHG) emissions in the form of a Carbon Disclosure Project report. Using both univariate and regression models with a sample of the 329 largest companies in the United Kingdom, we find a significant positive association between gender diversity (measured as the percentage of female directors on the board) and the propensity to disclose GHG information as well as the extensiveness of that disclosure. In addition, a board with more independent directors or environmental committee show a higher tendency to be ecologic transparent. However, if the committee is not sufficiently large, independent or active, its effect seems insignificant. The results are consistent with stakeholder theory, suggesting that a diversified and independent board and the existence of a board-level environmental committee may balance a firm's financial and non-financial goals with limited resources and moderate the possible conflicting expectations of stakeholders who have disparate interests. The findings should be useful for top managers and regulators who are interested in improving corporate governance practices and climate-change strategies.

Does the Voluntary Adoption of Corporate Governance Mechanisms Improve Environmental Risk Disclosures? Evidence from Greenhouse Gas Emission Accounting

Prior research suggests that voluntary environmental governance mechanisms operate to enhance a firm’s environmental legitimacy as opposed to being a driver of proactive environmental performance activities. To understand how these mechanisms contribute to the firm’s environmental legitimacy, we investigate whether environmental corporate governance characteristics are associated with voluntary environmental disclosure. We examine an increasingly important attribute of a firm’s disclosure setting, namely the disclosure of greenhouse gas (GHG) information. GHG information represents proprietary non-financial information about the firm’s exposure to environmental concerns and is related to the firm’s operations and future profitability. Thus, we expect governance participants would view such information as a potentially important strategic device for managing stakeholders’ demands for information concerning environmental risks. We find that the presence of an environmental committee and a Chief Sustainability Officer (CSO) is positively associated with the likelihood of GHG disclosure and that CSOs are associated with disclosure transparency. Further analysis reveals that the likelihood of disclosure is associated with committee size, number of committee meetings, expertise of committee members and CSO, and overlap between the environmental committee and audit committee. Only expertise of the environmental committee members and the CSO are associated with GHG disclosure transparency, while larger committees tend to be associated with lower transparency. Our results are particularly important to those with interests in evaluating the potential role that corporate governance mechanisms play in responding to stakeholder concerns about environmental risks. Directors and officers who are considering appointment to similar governance positions, may wish to consider what attributes would make such governance positions more influential.

Does the Voluntary Adoption of Corporate Governance Mechanisms Improve Environmental Risk Disclosures? Evidence from Greenhouse Gas Emission Accounting

Prior research suggests that voluntary environmental governance mechanisms operate to manage a firm’s reputation as opposed to being a driver of proactive environmental performance activities. In understanding how such corporate governance mechanisms can operate as a symbolic practice, we investigate whether environmental corporate governance characteristics are associated with voluntary environmental disclosure. We examine an increasingly important attribute of a firm’s disclosure setting, namely the disclosure of greenhouse gas (GHG) accounting information. GHG information represents proprietary non-financial information about the firm’s exposure to environmental concerns and is related to the firm’s operations and future profitability. Thus, we expect governance participants would view such information as a potentially important strategic device for managing stakeholder impressions regarding environmental risks. We find that the presence of an environmental committee and a chief sustainability officer (CSO) is positively associated with the likelihood of GHG disclosure and that CSO’s are associated with increased disclosure transparency. Further analysis reveals that the likelihood of disclosure is associated with committee size, number of committee meetings, expertise of committee members and CSO, and overlap between the environmental committee and audit committee. Only expertise of the environmental committee members and the CSO are associated with GHG disclosure transparency, while larger committees tend to be associated with lower transparency. Our results are particularly important to those with interests in evaluating the potential role that corporate governance mechanisms play in responding to stakeholder concerns about environmental risks. Directors and officers who are considering appointment to similar governance positions, may wish to consider what attributes would make such governance positions more influential.

GAAP for GHG Emissions Accounting: How Consistent are GHG Emissions Reported Among Different Channels?

Various institutions in the government, business, and investment communities are now demanding and relying on credible, comparable, consistent sustainability (economic, social, and environmental) information for decision making, especially related to greenhouse gas (GHG) emissions. Based on GHG emissions reports, governments are developing policy to ensure adherence to reduction commitments under worldwide agreements which in turn affect corporations’ planning and investment requirements. As well, investors want to know how these commitments will affect their returns. Organizations have answered the demand by providing GHG information to their shareholders through a number of reporting channels. As each channel provides its own guidelines for reporting, the question arises as to how consistent are the numbers reported under the various channels? We investigate the reliability of reporting of GHG emissions by corporations available through three different channels: mandatory reporting under government regulations; voluntary reporting under the CDP; and voluntary reporting through the companies’ stand-alone sustainability report.

The Relevance to Investors of Greenhouse Gas Emission Disclosures

This study documents that investors care about companies’ greenhouse gas (GHG) emission disclosures. Three kinds of evidence support this finding. First, using companies that disclose GHG emissions voluntarily through the Carbon Disclosure Project (CDP), we show that investors act as if they use GHG emission information to assess company value. Second, our evidence finds that investors view estimates of non-disclosed GHG emission amounts as value relevant, suggesting that stock prices reflect GHG information from channels other than CDP disclosure. Third, we conduct an event study and observe a significant stock market response when companies disclose climate change information in an 8-K filing. Our results strengthen for GHG-intensive industries such as utilities, energy, and materials companies, whose valuation effects are more negative. Economically, our results suggest that for every ton of GHG emitted by the median company in our sample at an assumed cost of $20 per ton, the stock market recognizes about 20-50 percent of that amount as an off-balance sheet liability.