Climate Change and Mandatory Carbon Reporting: Impacts on Business Process and Performance

Abstract

As part of their annual directors' report, UK‐listed companies are now required to disclose their greenhouse gas emissions and account publicly for their contributions to climate change. This paper uses this mandatory carbon reporting to explore wider debates about corporate social responsibility and the purpose, practice, and impacts of such non‐financial reporting. Empirically, it combines documentary analysis of the carbon reporting practices of 176 large firms listed in the FTSE100 and/or subject to the UK government's adaptation reporting power with 60 interviews with stakeholders involved in carbon reporting. Firms disclose their emissions in response to financial incentives, social pressure and/or regulatory compulsion. In turn, rationales shape whether and how carbon reporting influences internal business processes and performance. The importance of reporting to the bottom line varies by sector depending on two variables – energy intensity and economic regulator status – yet there is limited evidence that carbon reporting is driving substantial reductions in emissions. Findings suggest reasons for caution about hopes for ‘nudging’ firms to improve their environmental performance and social responsibility through disclosure requirements.

Greenwashing and environmental communication: Effects on stakeholders' perceptions

“…With this attitude, companies seek to generate a positive but totally misleading impression of the company's environmental performance (Lyon & Maxwell, 2011). Today, greenwashing at the company level is particularly significant both for the growing demand from stakeholders for high levels of responsibility and transparency (Bromley & Powell, 2012;Tang & Demeritt, 2018) and for the growing spread of real environmental crimes related to the so-called eco-mafia or eco-criminality (Massari & Monzini, 2004;Rege & Lavorgna, 2017). In recent decades, due to the growing sensitivity of stakeholders to environmental issues, it seems that greenwashing has become a widespread attitude among companies to try to outdo their competitors (Parguel, Benoît-Moreau, & Larceneux, 2011).…”

Determinants and Characteristics of Korean Companies’ Carbon Management under the Carbon Pricing Scheme

“…Carbon strategies and management practices have been clarified [31], some focusing on small and medium size companies [6] or large companies [4]; some focusing on CO 2 reduction strategies [5,32]; governance practices [3]; and others on environmental and carbon information disclosure [33]. The development of reporting mechanisms for GHG is related to a company's accounting system, since a numerical approach helps firms disclose more credible information.…”

“…They set out a strategy for carbon management in detail, e.g., through plan-do-check-act and implement more innovative carbon management, e.g., by disclosing carbon emissions reports. The rationale of corporate carbon reporting is financial [33] and to distinguish themselves from competitors and gain recognition [49] in [33]. The strategies in this stage are more concerned with stakeholders, investors, and consumers.…”

Carbon disclosure and financial performance: UK environmental policy

“…The association between social/environmental responsibility and FP has long been the focus of considerable research in many scholarly disciplines (Griffin & Mahon, 1997;Hang, Geyer-Klingeberg, & Rathgeber, 2019;Hassan & Romilly, 2018;Margolis & Walsh, 2003;Orlitzky, Schmidt, & Rynes, 2003;Pava & Krausz, 1996;Qiu, Shaukat, & Tharyan, 2016;Tang & Demeritt, 2018). Hahn, Reimsbach, and Schiemann (2015) review the research addressing the outputs and outcomes of carbon disclosure and conclude that a considerable number of studies emphasise the empirical determinants and, to a lesser extent, the effects (outcomes) of carbon disclosure, which has become a strategic decision-making issue for organisations within the current competitive scenarios (Kuo & Chen, 2013).…”