Voluntary Environmental Disclosure Research Articles

A comparison of voluntary and mandated climate change-related disclosure

This study draws on legitimacy theory to investigate the relationship between mandatory disclosure of greenhouse gas emissions by companies that are subject to specific environmental legislation (the Australian National Greenhouse Energy Reporting Act 2007) and the level of voluntary environmental disclosures. Using a sample of 535 observations, we find that i) Overall, legislation-affected companies increase their disclosures compared with non-affected companies, ii) As many companies reduce their disclosures as increase them, iii) there is an increase in the level of emissions volume disclosures in legislation-affected companies compared with the same company pre-implementation, iv) legislation-affected higher emitters have higher levels of voluntary disclosures. These findings are consistent with legitimacy theory, which predicts differential disclosures in circumstances to avoid scrutiny.

Sustainable development carbon pricing initiative and voluntary environmental disclosures quality

AbstractAlthough corporate environmental disclosures have been researched extensively, empirical evidence regarding the indirect impact of carbon pricing on firms' voluntary disclosures is scarce. The objective of this study is to identify the indirect impact of carbon pricing initiatives on the voluntary environmental disclosures (VEDs) of electricity generating companies, analyzed through the lens of institutional theory. This study adds to the growing literature on the determinants of VED, investigating the impact of adoption of the Global Reporting Initiative and ISO 14001 on VED. Secondary data were collected from 2015 annual reports and/or standalone sustainability reports of electricity generating companies from 53 countries around the world. Content analysis approach was adopted for measuring the extent of the quality of VED. Findings of multiple regression analysis suggest that there is an indirect institutional impact of carbon pricing on the quality of VED. This study also finds that, as the form of nongovernment guidance, the Global Reporting Initiative adoption and ISO 14001 certification also have an institutional influence on the VED. VED is also affected by company size although this study reveals no significant relationship of leverage with VED.

Environmental Performance and Voluntary Disclosure on Specific Environmental Activities: An Empirical Study of Carbon vs. Non-Carbon Intensive Industries Legitimacy Proactive Approach

Adopting legitimacy proactive approach, this paper examines and evaluates relationship between levels of environmental performance (measured by environmental awards) and the quality of specific voluntary environmental disclosure using a sample of UK FTSE 100 companies. Companies in the sample have been grouped according to industry membership (carbon intensive vs. non-carbon-intensive) and environmental performance (poor performers vs. better performers). Statistical techniques have been used to test for variations in the quality of voluntary environmental disclosure between the companies in these groups. The findings reveal that the extent of quantitative environmental disclosure by companies with poor environmental performance in the carbon intensive group was significantly higher than similar disclosures made by either better environmental performers or poor environmental performers from non-carbon intensive industries for some activities. In contrast, quantitative environmental disclosure by better performers is found to be of a significantly higher quality than similar disclosures made by either poor performers or better performers from carbon intensive group for other activities. The results have some implications for various stakeholders and offers opportunities for future research, specially, in relation to environmental awarding bodies and their criteria for awarding.

Environmental performance and analyst information processing costs

This study tests whether the information processing costs of analysts vary positively with the environmental performance information available on the firms they follow. Consistent with this conjecture, we find that these costs increase when analysts process a wider array of environmental performance ratings. Specifically we find that as the number of environmental performance ratings increases, analysts cover fewer firms in their portfolio, provide fewer earnings-per-share (EPS) forecast revisions, and make less timely forecast revisions. Two additional tests confirm that our results relate to environmental performance information and not to confounding factors. First, the “shock” of the Global Warming Solutions Act of 2006 implemented for California firms in 2012 increases analyst information processing costs incremental to the main effect of environmental performance ratings. Second, analyst information processing costs increase further in the year a firm covered by an analyst provides a CSR report for the first time. Our results have implications for firm managers considering voluntary environmental disclosure and investors deciding on what stocks to include in their socially responsible portfolios because when processing costs are high, analysts will provide less information or less timely information, resulting in more gradual price discovery in capital markets.

The impact of voluntary environmental disclosure on firm value: Does organizational visibility play a mediation role?

AbstractThe current study investigates whether organizational visibility, that is the extent to which analysts follow, and institutions hold, a firm's stock (Baker, Powell, & Weaver, , p. 47), may explain the mechanism through which corporate environmental disclosure (CED) affects firm value. It explores whether CED impacts organizational visibility, and if so, whether firm value increases in organizational visibility, after accounting for greenhouse gas emissions intensity (GHG) as well as several firm‐level and country‐level controls. It utilizes a sample of S&P Global 1200 companies from 2010 to 2015. Using structural equation modeling to address the complex interrelationships between the variables of interest and employing Full Information Maximum Likelihood regression method, the findings show that organizational visibility does not play a statistically significant mediation role on the relationship between CED and firm value. However, organizational visibility is significantly associated with both CED and firm value, which indicates that failing to control for organizational visibility when examining the relationship between CED and firm value could yield misleading results. The results also show that prior CED significantly reduces current GHG. Interestingly, analyst coverage is found to play a full mediation role on the relationship between institutional ownership and firm value as well as a partial mediation role on the relationship between prior GHG and firm value. Thus, this study suggests that corporate management lobby financial analysts and educate them about their firms' environmental disclosure and performance to improve their information set and increase firm visibility and value.

Implementing internal environmental management and voluntary environmental disclosure

PurposeThe purpose of this paper is to investigate to what extent the implementation of internal environmental management and voluntary environmental information is related to organisational change.Design/methodology/approachOrganisational change literature provided a framework for the analysis of the materials which were collected through a mixed method. Data on internal environmental management were collected through a survey, while a quality disclosure index was used to assess the quality of the environmental voluntary disclosure. Interviews were used to enhance the quantitative results interpreted according to the four pathways proposed by Tilt (2006) and characterised by several levels of internal environmental management and voluntary disclosure.FindingsThe results indicated that companies implement more internal activities than external disclosure. Environmental planning and operational practices were the most important changes carried out. When environmental management accounting and environmental disclosure were also implemented, environmental aspects were more integrated within companies, thus revealing that a more structured integration of sustainability aspects within organisational values had taken place. The results underline the importance of primarily establishing a set of internal changes, driven by environmental planning, to promote organisational change.Research limitations/implicationsThe study presents a larger empirical analysis of the organisational change pathways followed by companies, showing similarities and differences among the four pathways. The results underline the importance of both dimensions for studying organisational changes. The framework of Tilt has been enriched, considering a more precise explanation of the internal aspects and adding the concept of the quality of disclosure as proxy to assess organisational change.Originality/valueOrganisational change is investigated through an extensive analysis of internal and external aspects and collecting quantitative and qualitative evidence. The analysis complements previous sustainability accounting literature focussed on the analysis of internal environmental management and external disclosure.

Estudo sobre Variáveis Determinantes do Nível de Divulgação de Informações Voluntárias Ambientais

This research had the objective of verifying the variables that determine the voluntary disclosure of environmental information from a sample of forty - seven publicly traded companies listed in B3 - Brasil Bolsa Balcao, and classified as having a high environmental impact, evidenced in the Sustainability and Management Reports, corresponding to the year 2013. The research is applied as to its nature; quantitative approach to the problem; descriptive and explanatory, regarding the objective and documentary, regarding the technical procedure used. The first part of the analysis presents a descriptive analysis of the data evidenced by the companies, and in the second part, considering the results of previous studies and expert contributions, eleven variables considered as possible determinants of this disclosure were tested using multiple linear regression analysis. The level of voluntary environmental disclosure was measured by means of a metric containing eight categories and thirty-eight subcategories, suggested in a study by Rover, Borba and Murcia (2009). The main results obtained in the study indicate that the categories most evidenced by the companies refer to the impacts of products and processes and environmental policies. Company size, environmental certification and share control were confirmed as determining variables of the voluntary environmental disclosure level of the sample companies.

Public and Private Sector Environmental Reporting

The organisation's interest in producing an image of commitment towards the environment has motivated the development of new informational needs by the different stakeholders. Their satisfaction requires that the organization's traditional information systems change. This happens in both public and private organizations, in order to generate environmental information, not only for management purposes, but also for external disclosure. In this sense, the contents and display of the information produced by these systems must also adapt, receiving new information besides the traditional one [for example, the annual reports], including the ad hoc information, environmental report and/or sustainability report. The literature highlights that there is no consensual opinion among researchers about mandatory or voluntary reporting. In the private sector, the accounting regulations of environmental issues, specifically in what concerns the environmental information disclosure in the annual reports, presents a certain degree of development, with several initiatives, both national and international, concerning the approval of an environmental accounting standard. Nevertheless, in the public sector, the delay of specific accounting standards concerning environmental information has led public entities not to submit suitable information about their environmental management. The aim of this paper is to present the state of the art, both in public and private sector contexts, according to national and international legislation, in the annual reports or separately. A further objective, in addition, is to present a short reflection on the subject of mandatory and voluntary environmental disclosure.

Achieving Sustainable Development through Environment Accounting from the Global Perspective: Evidence from Bangladesh

The study visualizes the link between environment accounting & triple bottom line, quantitative environmental reporting & standard method, voluntary environmental disclosure & legal requirement, size of company & volume of environmental disclosure, material flow analysis & life cycle assessment to achieve sustainable development in Bangladeshi corporation. Therefore, the purpose of the study is to investigate the role of these factors to achieve sustainable development in Bangladeshi corporation. To investigate the role of these factors, ten factors that significantly contribute to achieve sustainable development were determined. A set of closed-minded questionnaire was developed on the basis of these factors to collect the data from employees & employers. Questionnaire was administered by using statistical tools such as matrix, cross tabulation & Paired Samples Tests as a data collection tool and analyses. Research finding shows that sustainability of corporation was associated with the performance of economic, social, and environment. Other factors like quantitative environmental reporting, standard method, voluntary environmental disclosure, legal requirement, size of the company, volume of environmental disclosure, material flow analysis & life cycle assessment were found that they worked as a complement to enhance the performance of economic, social, and environment to achieve sustainable development in Bangladeshi corporation.

Achieving Sustainable Development through Environment Accounting from the Global Perspective: Evidence from Bangladesh

The study visualizes the link between environment accounting & triple bottom line, quantitative environmental reporting & standard method, voluntary environmental disclosure & legal requirement, size of company & volume of environmental disclosure, material flow analysis & life cycle assessment to achieve sustainable development in Bangladeshi corporation. Therefore, the purpose of the study is to investigate the role of these factors to achieve sustainable development in Bangladeshi corporation. To investigate the role of these factors, ten factors that significantly contribute to achieve sustainable development were determined. A set of closed-minded questionnaire was developed on the basis of these factors to collect the data from employees & employers. Questionnaire was administered by using statistical tools such as matrix, cross tabulation & Paired Samples Tests as a data collection tool and analyses. Research finding shows that sustainability of corporation was associated with the performance of economic, social, and environment. Other factors like quantitative environmental reporting, standard method, voluntary environmental disclosure, legal requirement, size of the company, volume of environmental disclosure, material flow analysis & life cycle assessment were found that they worked as a complement to enhance the performance of economic, social, and environment to achieve sustainable development in Bangladeshi corporation.

Is the Extractive Industry Transparency Initiative (EITI) sufficient to generate transparency in environmental impact and legacy risks? The Zambian minerals sector

Developing administrative and financial mechanisms to achieve transparency and compliance with legal frameworks related to mine operation and closure is a major challenge. Ensuring the appropriate level of disclosure, transparency, and accountability of all compliant and non-compliant parties, and accessibility of this information to external interested parties is a cornerstone of achieving a well-governed minerals sector. This research investigates mining company voluntary environmental disclosures in Zambia as an indicator of how the EITI (Extractive Industry Transparency Initiative) may or may not achieve transparency and accountability. Our research findings drew on three sources: literature review, qualitative primary data with EITI and government officials and content analysis to compare public environmental reporting via company websites of a total of 27 mining companies operating in Zambia. Our analysis found that non-EITI and EITI selected companies disclose similar provisions for environmental liabilities at country, subsidiary, or multinational level. While EITI compliance may improve the environmental financial disclosure by mining companies, the detail and specificity of the voluntarily disclosed information is insufficiently transparent to third parties investigating whether governments and companies are compliant with the law in terms of environmental and governance considerations. We propose solutions to achieve transparency in practice by linking aggregated international voluntary initiatives (akin to the EITI) with mandatory jurisdiction-level reforms in mining financial securities and mine closure legislation accounted at the tenement level that is publicly available. Such reforms enable both independent accounting of financial transactions and improved national capacity for minerals sector governance that attracts international investment and incentivises an innovative, environmentally sustainable, and an economically beneficial mining industry.

CLIMATE CHANGE MITIGATION AND VOLUNTARY DISCLOSURE IN MALAYSIA’S LISTED PROPERTY COMPANIES

Climate change mitigation is a challenge faced by most nations of the world. The task is even more challenging in Malaysia considering the occurrence of sequence of floods within the past and the need to be a part of the developed economy by 2020 which needs environment protection. This paper examines the state of climate change mitigation and the practice of voluntary carbon disclosure in sustainable development practice among listed Property companies in Malaysia. Consequently the paper analyses policies and programs on-going in Malaysia to create an enabling environment for the implementation of climate change mitigation. From the studies, it can argued that Malaysia has made significant progress in setting up legal framework for the implementation of climate change mitigation and voluntary environmental disclosure, but critical mass is yet to be achieved. This was achieved as a function of Malaysia’s membership to United Nation Framework Convention on Climate Change (UNFCCC), and ratifying the Kyoto Protocol and also participates in the Clean Development Mechanism; and further establishes nationwide ecological protection laws which are implemented in the government’s Development Plans and development industry master plan. Lastly, the impetus given to the free market sector to be participants in mitigation through the Bursa Malaysia listing requirement that specifies corporate social responsibility reporting as part of the annual reports, with measurement, disclosure and management of emission integral part. The review allows us to infer that the Malaysia voluntary environmental disclosure and climate change mitigation practice in the property sector has made initial progress but there is need for more market driven motivation to be introduced so that more companies especially those in carbon-intensive practice would be involved.

Does environmental performance affect companies’ environmental disclosure?

Purpose– This study aims to verify the presence, evolution and determinants of voluntary environmental disclosure from companies listed on the Milan Stock Exchange. The authors examined documentation of listed firms from 2006 and 2009. These years immediately precede and follow Italian legislative decree n. 32/2007, which introduced (albeit on a voluntary basis) disclosure of environment-related company information.Design/methodology/approach– The authors’ approach utilizes multivariate regression analysis. The disclosure index of the years 2006 and 2009 represents the dependent variable. Independent variables include firm size, business industry, public shareholders, legislation and environmental performance.Findings– The results show positive effects on environmental disclosure related to legislative decree n. 32, the presence of government shareholdings in firms’ ownership structure, business industry and firm size. The interrelation between firm size and environmental performance shows that large companies give more information only if they produce more environmental pollution, to legitimize themselves to stakeholders.Research limitations/implications– Despite the authors’ contributions concerning environmental information described in the Introduction, they must express two limitations of their analysis. First, the sample analyzed is quite small (only 44 firms). Second, carbon dioxide emissions was chosen as an indicator of atmospheric pollution, yet emissions information has not been provided by Italian firms (even those that are listed on the Milan Stock Exchange), despite being accepted internationally as a measure of environmental performance in business. In addition, in Italy, there is no database ranking firms on corporate social responsibility (CSR).Practical implications– There are many reasons behind the weak or even negative roles of managers regarding social and environmental disclosure. These reasons include a dearth of resources, the profit imperative, lack of legal requirements, insufficient knowledge or awareness, poor performance and fear of bad publicity. What seems to be a real obstacle is the lack of knowledge about non-financial disclosure – in particular, how to gauge, produce and release information when it comes to a firm’s interaction with environment and society, and this void causes low levels of disclosure and even the absence of such action. Some of the reasons for non-disclosure might be attributed to a lack of awareness and knowledge among corporate managers regarding CSR reporting, in general, and disclosure on eco-justice issues, in particular.Originality/value– The first contribution of this work is to realize, for the first time, a specific analysis on Italian firms’ environmental disclosures. Moreover, the study extends this analysis to all entities’ informative documents. This paper also allows an examination of effects of new legislation that encourages environmental information in a corporation’s financial annual report. Finally, this is the first paper to conduct quantitative analysis on firms in the Italian financial market concerning environmental disclosure, as well as regression analysis to identify determinants of firms’ disclosure.

Voluntary environmental disclosure quality and firm value: Further evidence

This study reexamines the relationship between the quality of a firm’s voluntary environmental disclosures and firm value by exploring the relationship between the components of firm value (expected future cash flows and cost of equity) and voluntary environmental disclosure quality. We measure voluntary environmental disclosure quality using a disclosure index consistent with the Global Reporting Initiative (GRI, 2006) disclosure framework for a sample of US firms across five industries. In addition to overall disclosure quality, we consider the type (i.e., hard/soft) and the nature (i.e., positive/neutral/negative) of the disclosure in our analysis. Our analyses provide evidence that voluntary environmental quality is associated with firm value through both the cash flow and the cost of equity components, consistent with our expectations. More importantly, however, we demonstrate that both the type and nature of the environmental disclosures is informative in establishing the predicted relations. Thus, in addition to providing evidence on the association between voluntary disclosure quality and firm value, our results highlight the benefit of parsing broader measures (e.g. voluntary environmental disclosure quality) when examining complex relationships.

Environmental performance and voluntary disclosure on specific environmental activities: an empirical study of carbon vs. non-carbon intensive industries. Legitimacy proactive approach

Adopting legitimacy proactive approach, this paper examines and evaluates relationship between levels of environmental performance (measured by environmental awards) and the quality of specific voluntary environmental disclosure using a sample of UK FTSE 100 companies. Companies in the sample have been grouped according to industry membership (carbon intensive vs. non-carbon-intensive) and environmental performance (poor performers vs. better performers). Statistical techniques have been used to test for variations in the quality of voluntary environmental disclosure between the companies in these groups. The findings reveal that the extent of quantitative environmental disclosure by companies with poor environmental performance in the carbon intensive group was significantly higher than similar disclosures made by either better environmental performers or poor environmental performers from non-carbon intensive industries for some activities. In contrast, quantitative environmental disclosure by better pe...

A comparison of US and Canadian environmental disclosures according to AICPA and CICA guidelines

This study discusses potential influences on firms to provide voluntary environmental disclosure and empirically analyses the extent of environmental disclosure and changes in disclosure levels in the annual reports of US and Canadian firms over a three-year period. Firms' environmental disclosure content is measured based on environmental reporting guidelines published by the American Institute of Public Accountants and the Canadian Institute of Chartered Accountants. Overall, US firms provided a significantly higher level of environmental disclosure than did Canadian firms. Also, firms in each nation did provide a significant increase in disclosure for at least one specific environmental subject area relative to firms in the other nation. Regression results indicate that the number of polluting facilities and firm size each have a positive and significant effect on the extent of environmental disclosure.

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.

Voluntary Environmental Disclosures in 10-Ks and Environmental Reports: Determinants and Relationship to Firm Risk Premium

Recent studies have examined the motivations of firm voluntary disclosure of environmental and social responsibility performance stand-alone reports. We extend this literature by examining firm voluntary disclosure of environmental performance in stand-alone reports (CERs) and 10-Ks. We model disclosure in these reports as jointly determined, endogenous functions of private information regarding environmental performance and demand for disclosure through shareholder resolutions. When voluntary and mandatory environmental performance information is subsequently made public, we examine the relationship between the level of disclosure and firm risk premium. Our results relating to firms in the chemicals and electric utility industries show a positive association between the levels of voluntary disclosure in CERs and 10-Ks. There is a negative relationship between emissions and CER disclosure. Environmental disclosure related shareholder resolutions are associated with higher disclosures in both types of reports. Finally, the association between disclosure and firm risk premium is dependent on industry sector.

The relevance of environmental disclosures: Are such disclosures incrementally informative?

Establishing the information content of transparent voluntary environmental disclosures and the source of this information content is of fundamental importance for corporate social responsibility (CSR) practitioners. Our results indicate that: (1) incremental to information provided by current Toxics Releases Inventory (TRI) data, voluntary environmental disclosures provide valuation relevant information; (2) the various disclosure categories are similar in value relevance, implying that each category is informative of management’s current environmental strategies; (3) current TRI is positively associated with cost of capital but there is no association between voluntary environmental disclosures and cost of capital; and (4) taken together, the above results point to a signaling role for such disclosures and financial performance prediction as the means by which voluntary environmental disclosures enhance firm value. This advances the literature by pinning down the source of firm value enhancement of such disclosures. Our results suggest that a proactive environmental strategy and the signaling of such a strategy to investors can enhance a firm’s stock price, a finding which will assist CSR practitioners in convincing top management that proactive environmental strategies combined with transparent voluntary environmental disclosures are worthwhile.

Competitive Strategy and Voluntary Environmental Disclosure: Evidence from the Chemical Industry

ABSTRACTIn this paper, we investigate the relationship between corporate competitive strategy and environmental disclosure in the voluntary channel. Two major competitive strategies, investment in brand image and investment in research and development (R&D), are examined. Using a sample of companies in the chemical industry, we find that both strategies are associated with higher levels of environmental disclosure than chemical companies not emphasizing either of the two strategies. Additionally, companies emphasizing investment in brand image tend to disclose more when their actual environmental performance is low; conversely, companies emphasizing investment in R&D tend to disclose more when their environmental performance is good. When trying to interpret environmental disclosures, stakeholders should be aware of a company's strategy and adjust their assessment of environmental performance accordingly.Data Availability: Data are available from sources identified in the text.