Environmental reporting in the UK, Australia, and South African multinational companies

Abstract

Disclosure is an important communication channel that can enhance corporate transparency and accountability and improve engagement with numerous stakeholders. Corporate environmental disclosure has garnered attention globally in recent years across multiple stakeholders groups including businesses, investors, watch groups and legislative branches of governments etc. for its far-reaching social and economic implications. It has become a major challenge for business organizations to address and deal with environmental issues, in particular for multinational enterprises as part of their legitimacy and meeting stakeholders’ expectations. Again, the need for stakeholders’ response to corporate environmental reports has been reiterated in extant literature; however there remains lack of adequate response from stakeholders for the inability for corporations to identify specific environmental issues that stakeholders expect companies to disclose to assure them of corporate legitimacy. To respond to this gap, this study contributes to knowledge by highlighting specific areas of importance which companies in both developed and emerging economies can address in order to encourage report users and stakeholders to positively respond to their assured environmental reports. This study, therefore, focuses on environmental disclosure in multinational companies in both developed (Australia and United Kingdom) and emerging (South Africa) economies. Building on both legitimacy and stakeholders’ theories and Global Reporting initiative (GRI) disclosure guidelines (G3), the study applies hierarchical regression modelling to examine the influences of stakeholder, legitimacy, financial and demographic variables on the ‘preservation’, ‘responsibility’ and ‘initiatives’ aspects of environmental disclose of 67 companies operating in these three countries over a period of two years from 2008 to 2009. Empirical results indicated that return on assets and industry sector were significantly predictive of both preservation and responsibility components. Again, firm age was predictive of preservation and initiatives components, while assurance was predictive of initiatives and responsibility components. On the other hand, firm size and board structure were predictive of only the initiatives component and not the preservation and responsibility components. However, diversification, ownership, internal policy, other financial variables appear to have no influence on any environmental components. These findings have implications for companies, investors, policy makers and stakeholders at large. Environmentally sensitive companies could be encouraged to allocate more resources in order to increase their environmental activities and disclosure. From a policy perspective, the results could form part of the inputs to be considered in the future GRI guidelines. Similarly, policy makers also can take note in formulating environmental policies to address both social and economic implications.

The role of the board in voluntary disclosure

“…Among these, we highlight a company involved in recent corruption scandals. This corroborates with the conclusions of Farooque and Ahulu (2015) and Alonso-Almeida et al (2015) that voluntary disclosure offers the opportunity for companies to show their initiatives and defend their actions or infractions, which would not be possible through notifications. It may be an attempt by companies to "clean" their image to society.…”

“…However, Brazilian companies highlight information on environmental management, emissions and effluents. Farooque and Ahulu (2015) described similar results in Australian companies. Oliveira et al (2009) found similar results in the financial performance and local community categories and differed results in the environmental categories.…”

“…This approach was selected because of the nature of the data, as a statistical-only approach would not extract this information. The content analysis technique is used in studies of the socioenvironmental information disclosed in reports, as in the works of Post et al (2011), Michelon and Parbonetti (2012), Matos and Gois (2013), Calixto (2013), Friaz-Aceituno et al (2013 and Farooque and Ahulu (2015).…”

“…These results corroborate with the findings of Conceiçã o et al (2012). A probable justification for the results of Farooque and Ahulu (2015) and Alonso-Almeida et al (2015) is that these sectors are considered "dirty industry," and "cleaning" the company image requires this type of certification. Especially in Latin America, where a significant number of countries have considerable reserves of energy resources and the company's interaction with the environment becomes increasingly important for future generations.…”

“…Voluntary disclosure is important because it reduces information asymmetry (Cormier et al, 2010). Alignment of the board with a business strategy focused on voluntary disclosure is an alternative to strengthen credibility and promotes transparency and dialogue between parties (Adams, 2002;Boulouta, 2013), in addition to providing stakeholders indirect management monitoring (Farooque and Ahulu, 2015;Michelon and Parbonetti, 2012).…”