Financial and non-financial benefits of carbon controls

Bui, Binh; Truong, Thu Phuong; Chapple, Larelle

doi:10.1108/medar-12-2019-0663

Cited by 8 publications

(9 citation statements)

References 77 publications

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“…Most notably, the data reveal that carbon targets in CEO compensation are used only in the presence of a carbon strategy. In line with past research arguing in favor of the linkage between a company's environmental management system and corporate governance instruments (Arjaliès and Mundy, 2013;Bui et al, 2020b;Guenther et al, 2016;Lueg and Radlach, 2016;Wang et al, 2018), these results demonstrate the need for action with regard to carbon-related CEO compensation.…”

Section: Use Of Carbon Strategy and Carbon Targetssupporting

confidence: 86%

Climate change policies and carbon-related CEO compensation systems: an exploratory study of European companies

Winschel

2021

JGR

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Purpose In view of current climate change policies, this study aims to provide researchers, regulators, and business practice with the current picture of practices regarding carbon-related compensation granted to chief executive officers (CEO). To this end, it examines whether and to what extent European companies translate their carbon reduction strategies into carbon targets underlying their CEOs’ short-term and long-term compensation, what characteristics the carbon targets used commonly have in terms of their quality and time frame, and whether the carbon targets used differ among carbon-intensive, and less carbon-intensive companies. Design/methodology/approach Drawing on the stakeholder-agency theoretical perspective, this study explores the patterns of use and characteristics of carbon-related targets in CEO compensation. In this vein, a content analysis of corporate disclosure for the business years 2018 and 2019 is conducted for a European sample of 65 large listed companies from 16 countries and 11 industries. Findings The findings of this study show that albeit the trend toward new adoption, carbon-related CEO compensation systems are still uncommon. The results also reveal that carbon targets are mainly used to determine short-term compensation. Further, the findings highlight that carbon-related CEO compensation is almost equally widespread among carbon-intensive and less carbon-intensive companies. However, in terms of target quality, the study shows that carbon-intensive companies display greater heterogeneity and opacity. Originality/value By analyzing the characteristics of carbon targets and the prevalence of carbon-related CEO compensation for the first time, this study contributes to the stakeholder-agency theoretical perspective on corporate governance. In view of the European Green Deal and climate-related stakeholder demands, regulators and business practice are encouraged to recognize that carbon-related CEO compensation should gain momentum and the disclosure on this matter should become more transparent and comparable among companies and across industries.

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Section: Use Of Carbon Strategy and Carbon Targetssupporting

confidence: 86%

Climate change policies and carbon-related CEO compensation systems: an exploratory study of European companies

Winschel

2021

JGR

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“…Further, our study is also related to, but differs from, the research of Bui, Chapple and Truong (2020) and Bui et al (2021). These studies focus on the drivers and benefits of carbon‐related management control systems, whereas we examine whether board governance dimensions, carbon risks and carbon opportunities affect CMSQ.…”

Section: Introductioncontrasting

confidence: 57%

Exploring the determinants of carbon management system quality: The role of corporate governance and climate risks and opportunities

Elsayih

Datt

Tang

et al. 2023

Accounting & Finance

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We examine whether board governance dimensions, carbon risks and opportunities, and environmental management affect carbon management system quality (CMSQ). Based on 1035 firm‐year observations from UK companies from 2011 to 2018, we find that internal governance is significantly related to CMSQ. In addition, firms with a heightened degree of carbon risks and/or opportunities are motivated to adopt a high‐quality carbon management system to mitigate exposure and harness opportunities. Finally, climate risk and opportunity have an interactive and complementary effect on CMSQ (i.e., both climate risk and opportunity can strengthen the effect of the other on CMSQ). This study contributes significantly to a growing body of research on how corporate governance, carbon risks and carbon opportunities may simulate proactivity of corporate sustainability in general and carbon management strategy in particular. Our results provide insights for investors, policymakers, managers and regulators on the combined effect of greenhouse gas emissions and corporate governance practice.

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“…Bui, Truong and Chapple (2020) argue that the most effective way to maximize nonfinancial benefits is to apply a range of carbon control levers, including diagnostic controls and communication and innovation systems. These controls will allow for increased environmental benefits and are also crucial for financial benefits as they promote regulatory context‐based actions in organizations (such as EU‐ETS), which are environmentally proactive.…”

Section: Literature Review and Hypothesismentioning

confidence: 99%

Carbon management accounting and financial performance: Evidence from the European Union emission trading system

2020

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Companies are responding to the effects of climate change by reducing CO2 emissions as a way of managing stakeholder interests and complying with legal and regulatory requirements. In Europe, the emissions trading system is consolidated as a limiting market and control scheme to support business climate change management through a collaborative relationship between government and industry. This work focuses on the economic accounting field, analysing carbon management accounting and its impact on financial performance in scenarios attached to that trading system. The methodological approach used is quantitative, empirically testing the hypotheses through a multiple regression analysis with a sample of 350 European companies. The results attest to the importance of carbon management accounting (CMA) control and its effects on financial performance. Compared with European emission trading, the results failed to display significant differences in the relationship studied between those that make up this type of market and those that do not.

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Financial and non-financial benefits of carbon controls

Cited by 8 publications

References 77 publications

Climate change policies and carbon-related CEO compensation systems: an exploratory study of European companies

Climate change policies and carbon-related CEO compensation systems: an exploratory study of European companies

Exploring the determinants of carbon management system quality: The role of corporate governance and climate risks and opportunities

Carbon management accounting and financial performance: Evidence from the European Union emission trading system

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