Carbon disclosure: A legitimizing tool or a governance tool? Evidence from listed US companies

Abstract

We study the motivations behind and consequences of firms disclosing carbon information. Specifically, we explain the bidirectional relationship between carbon disclosure and carbon performance and examine whether carbon disclosure is used as a legitimizing tool or a governance tool. We analyze carbon emissions and disclosure data from 2012 to 2015 for a sample of S&P 500 companies. After addressing issues of endogeneity, our findings support legitimacy theory and suggest that firms tend to greenwash carbon information and use carbon disclosure as a legitimizing tool. In particular, managers strategically select particular types of carbon information to disclose to the public. Our findings also indicate that firms in lowcarbon sectors tend to use disclosure as a governance tool rather than a legitimizing tool, suggesting that firms in high carbon intensity sectors are likely to face serious legitimacy anxiety, and have stronger reasons to manage their green image. Implications of our empirical evidence for managers, investors, and policymakers are explored.

Does performance persistence below aspirations affect firms' accounting information disclosure strategies? An empirical study based on reliability and comparability

“…Fourth, as stakeholders increasingly embrace the concept of sustainability, their support and endorsement of the firm are increasingly dependent on its social and environmental performance (Jiang et al, 2023; Pizzi et al, 2022). Finally, the power that a CEO or CFO wields in relation to accounting disclosure decisions is not homogeneous across firms.…”

Can the innovation in sustainability disclosures reflect organisational sustainable development? An integrated reporting perspective from China

“…Cho et al (2012) have a similar finding in the context of environmentally sensitive industries in America. Jiang et al (2022) find that a low carbon performance leads to a high level of carbon disclosures, suggesting that S&P 500 companies tend to use carbon disclosures as a legitimising tool. To sum up, the literature that analyses the relationship between sustainability performance and sustainability reporting practices heavily focuses on the environmental aspect and other aspects are neglected.…”

Does SDG disclosure reflect corporate underlying sustainability performance? Evidence from UN Global Compact participants

“…This study adopts a broader theoretical framework to examine the relationship between sustainability performance and SDG disclosure. It is based on the voluntary disclosure approach, to which signaling theory belongs, and the legitimacy theory, which purports greenwashing behaviors (Clarkson et al, 2008(Clarkson et al, , 2011Hummel & Schlick, 2016;Jiang et al, 2022;Li et al, 2023) Such theories focus on discretionary disclosure practices and are based on the assumption that the disclosure is costly and that stakeholders tend to punish "bad" corporate citizens while rewarding "good" corporate citizens (Mahoney et al, 2013). However, they yield opposing predictions motivated by companies' different incentives to provide voluntary nonfinancial disclosure.…”

“…Second, the study addresses the ongoing debate on the relationship between nonfinancial performance and nonfinancial disclosure by extending prior research with hitherto undocumented empirical evidence. Prior research investigated the association between individual or aggregate sustainability performance measures and different types of nonfinancial disclosure, such as environmental (e.g., Al-Tuwaijri et al, 2004;Arena et al, 2015;Clarkson et al, 2008Clarkson et al, , 2011Deegan & Rankin, 1996;Patten, 2002); social and environmental (e.g., Herbohn et al, 2014;Hummel & Schlick, 2016;Li et al, 2023;Papoutsi & Sodhi, 2020); corporate social responsibility (CSR) (e.g., Mahoney et al, 2013;Uyar et al, 2020); or carbon (e.g., Jiang et al, 2022;Luo, 2019;Luo & Tang, 2014). However, there is no evidence about the potential relationship between sustainability performance and SDG disclosure.…”