Convergence or divergence? Corporate climate-change reporting in China

• Published date: 03 October 2016
• Pages: 391-414
• DOI: https://doi.org/10.1108/IJAIM-02-2016-0010
• Date: 03 October 2016
• Author: Helen Hong Yang,Alan Farley
• Subject Matter: Accounting & Finance,Accounting/accountancy,Accounting methods/systems

Convergence or divergence?

Corporate climate-change

reporting in China

Helen Hong Yang

College of Business, Victoria University, Melbourne, Australia, and

Alan Farley

Victoria University, Melbourne, Australia

Abstract

Purpose – This paper aims to investigate the extent international and domestic guidelines have

inuenced the content of corporate environmental reporting (CER) in the context of China’s radical

institutional transition from bureaucratic secrecy to openness, marked by the rst nationwide

guidelines on Open Government Information (OGI) and Open Environment Information (OEI), effective

in 2008.

Design/methodology/approach – The study develops a research instrument that captures

international and Chinese national guidelines pertaining to environmental information disclosure. This

instrument is used to analyse 471 reports of leading 100 listed Chinese companies for the critical period

between 2006 and 2010. Chi-square test statistics are used to analyse the signicance of differences in

reporting items supported by Chinese guidelines versus those supported by international reporting

guidelines only.

Findings – Partial convergence in climate-change reporting co-exists with divergent China specic

interpretation of climate change. The coercive institutional inuences of the Chinese government’s

guidance in OGI and OEI led to the rapid growth of CER in 2008 compared to 2006, despite compliance

being voluntary.

Originality/value – The study is innovative in explicitly measuring any changes in reporting relative

to the potential for additional reporting. Such a method more accurately evaluates the effect of

institutional inuences on reporting. The study provides a fresh prole of the content and the reporting

medium of CER, with a particular focus on climate change in the Chinese context. The ndings highlight

research into CER based on annual reports risks results being incomplete and misleading. Findings

have practical implications for policy makers in other emerging economies.

Keywords China, International, Developing country, Institutional context,

Corporate climate-change reporting, National

Paper type Research paper

1. Introduction

Studies of corporate environmental reporting (CER) in developing countries, such as

Bangladesh (Belal and Owen, 2007), South Africa (de Villiers and van Staden, 2006) and

The paper beneted from suggestions made by anonymous reviewers, journal editors Maggie Liu

and Kamran Ahmed, as well as participants at the 2015 Accounting and Finance Association of

Australia and New Zealand (AFAANZ) Conference, and the 2016 Research Symposium of College

of Business, Victoria University. The authors also would like to acknowledge Russell Craig’s

editorial assistance in the earlier versions of the paper.

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/1834-7649.htm

Convergence

or divergence?

391

Received 2 February 2016

Revised 9 May 2016

25 May 2016

Accepted 1 June 2016

InternationalJournal of

Accounting& Information

Management

Vol.24 No. 4, 2016

pp.391-414

©Emerald Group Publishing Limited

1834-7649

DOI 10.1108/IJAIM-02-2016-0010

Lebanon (Jamali and Neville, 2011), reveal consistently that CER is subject to a country’s

political and economic context. This is despite the increasing global diffusion and

harmonisation of reporting guidelines and practices. Hence, caution must be exercised

when applying international reporting guidelines for CER to developing countries (Belal

and Owen, 2007).

China, as the world’s largest developing country, largest carbon emitter and the

second largest economy (after the USA), is playing an important role in global

climate-change adaptation and mitigation. However, unlike other developing countries,

China has a strong administrative capacity to formulate policies (e.g. on climate change)

that are adapted especially to local conditions (Hubbard, 2008). China is a one-party

state, in which the ruling Communist Party of China (CPC) is politically unchallengeable.

Its inuence on company behaviour in China (including with respect to CER) is

acknowledged widely (Ezzamel et al., 2007;Ji et al., 2015;Lin, 2001;Yang et al., 2015).

Thus, China’s institutional context offers an insightful setting to investigate reporting

behaviour (Scott, 2002). With the exception of the study by the Association of Chartered

Certied Accountants (ACCA) and Global Reporting Initiative (GRI) (ACCA and GRI,

2009), no empirical study has hitherto investigated the content of CER with a particular

focus on climate change in China. This limitation is addressed in this study.

Before 2007, the lack of Chinese government guidance discouraged Chinese enterprises

from engaging in CER. However, a study of Chinese CER by Yang et al. (2015, p. 35), reported

“the year 2008 was one of rapid growth of CER reporting” as the CPC’s policy “shifted from

a preference for bureaucratic secrecy to one of openness and information transparency”.

This was marked by the Chinese government’s release of Open Government Information

(OGI) and Open Environment Information (OEI), effective in 2008, and its encouragement of

corporate social responsibility (CSR) reports. While there is a signicant overlap between

these guidelines and those commonly used internationally (e.g. GRI), the Chinese guidelines

(CN) tend to be more general. This leads to a substantial number of more specic disclosure

items in the international guidelines (INT) not being mentioned in the CN, hereafter referred

to as items supported INT only. However, there are also disclosure items that are unique to

the Chinese context. In this study, the term “supported by Chinese domestic guidelines”

refers to both those instances where support is solely from Chinese domestic guidelines and

those instances where Chinese domestic guidelines and INT converge (Section 2.1.3).

China’s institutional reform and push for environmental information transparency

provides a timely opportunity to investigate the content and pattern of climate-

change-related environmental information disclosure. We do so here through a

comprehensive analysis of such disclosures in Chinese companies’ annual reports (ARs) and

CSR reports. Specically, this study draws on institutional theory to investigate the impact

of Chinese domestic guidelines (marked by OGI and OEI) on climate-change-related

environmental reporting in China. The following research question is addressed:

RQ1. To what extent have CN and INT inuenced climate-change reporting by

Chinese companies?

The relevance of institutional theory to CER is well documented in organisational study

literature (Jennings and Zandbergen, 1995;Hoffman, 1999;Hoffman and Ventresca,

2002) and accounting literature (Larrinaga, 2007). Although institutional theory was

developed in the West, an extensive review of literature on CER in China (Yang et al.,

2015) reveals it is a suitable framework to analyse Chinese CER. This is because of its

IJAIM

24,4

392