Countries’ regulatory context and voluntary carbon disclosures

Abstract

Purpose This study aims to analyse the relationship between countries’ regulatory context and voluntary carbon disclosures. To date, little attention has been paid to how specific climate change-related regulation influences companies’ climate change disclosures, especially voluntary carbon reporting. Design/methodology/approach The New Institutional Sociology perspective has been adopted to examine the pressure of a country’s climate change regulation on voluntary carbon reporting. This research uses Tobit regression to analyse data from 2,183 companies in 12 countries that were invited to respond to the Carbon Disclosure Project (CDP) questionnaire in 2015. Findings The results show that countries’ specific climate change-related regulation does influence both the participation of its companies in the CDP and their quality, as measured by the CDP disclosure score. Research limitations/implications The sample is restricted to 12 countries’ regulatory environment. Thus, caution should be exercised when generalising the results to other institutional contexts. Practical implications The results are of use to regulators and policymakers to better understand how specific climate change-related regulation influences voluntary carbon disclosure. Investors may also benefit from this research, as it shows which institutional contexts present greater regulatory stringency and how companies in more stringent environments take advantage of synergy to disclose high-quality carbon information. Social implications By linking regulatory and voluntary reporting, this study sheds light on how companies use voluntary carbon reporting to adapt to social expectations generated in their institutional context. Originality/value This is the first research that considers specific climate change-related regulation in the study of voluntary carbon disclosures.

The influence of countries' climate change‐related institutional profile on voluntary environmental disclosures

“…The results of the Regulative variable are consistent with previous studies (Freedman & Jaggi, 2005; Jira & Toffel, 2013; Luo et al, 2012), despite being focused on generic environmental regulations. This result is also consistent with the findings of Mateo‐Márquez et al (2020), who concluded that regulative pressures related to climate change positively influence voluntary carbon disclosures. However, they examined the response decision and the level of disclosure together using a tobit model, thus making it difficult to disaggregate the effect of regulative pressures on firms' decisions to voluntarily disclose carbon data.…”

“…Therefore, this study provides evidence against analyzing companies' decisions to voluntarily disclose carbon information and the quality of their disclosures together. This is in contrast to the prior literature on voluntary carbon disclosure that uses a tobit model in order to explain both aspects (e.g., González‐González & Zamora‐Ramírez, 2016b; Guenther, Guenther, Schiemann, & Weber, 2016; Mateo‐Márquez et al, 2020).…”

“…This facilitates the comparison of CDP data across firms, countries, and industries (Luo et al, 2012). In recent years, several scholars have used the CDP score to measure firms' participation in voluntary carbon reporting (Cotter & Najah, 2012; Luo et al, 2012; Stanny, 2013), as well as the quality of the information reported (Ben‐Amar & McIlkenny, 2014; Lemma et al, 2019; Luo, 2019; Mateo‐Márquez, González‐González, & Zamora‐Ramírez, 2020). Hahn et al (2015) point out that the CDP disclosure score provides a comprehensive measure of the quality of information reported by companies, as well as highlighting that it captures the quality of carbon information more objectively than self‐created indices such as content analysis.…”

“…It is based on the EPSI, prepared by the OECD, and measures the regulatory stringency of each country's environment‐related policies (Botta & Koźluk, 2014; OECD, 2019). Previous studies have used this index to measure countries' environmental pressures (Andersson, 2018; Mateo‐Márquez et al, 2020; Rosati & Faria, 2019). The EPSI has a range of values from 0 (not stringent) to 6 (the highest level of stringency).…”

Components of Countries’ Regulative Dimensions and Voluntary Carbon Disclosures

“…Although there has been considerable research into the factors influencing voluntary carbon disclosure, there is still very little scientific understanding of the institutional pressures involved, especially those related to the regulative dimension. In this regard, previous studies have found that the regulative context plays a crucial role in influencing voluntary carbon disclosure on the part of companies [6,7]. Prior investigation has found that climate-related laws contribute to increased visibility of climate change challenges in society.…”