Corporate Governance and Environmental Reporting: an Australian study

• DOI: http://doi.org/10.1111/j.1467-8683.2007.00615.x
• Author: Gary O'Donovan,Kathy Gibson
• Published date: 01 September 2007
• Date: 01 September 2007

Corporate Governance and

Environmental Reporting: an

Australian study

Kathy Gibson and Gary O’Donovan*

The development of best practice recommendations by the Corporate Governance Council

(CGC) of the Australian Stock Exchange in 2003 clearly linked corporate regulators’ concerns

about good governance to the concept of corporate social and environmental responsibility.

The CGC recommended that one way to demonstrate good governance was to use the annual

report to disclose information to all legitimate stakeholders. This paper reports on the quantity

and categories of environmental information disclosed in the corporate annual reports of 41

Australian companies across eight industry groups covering the period 1983–2003. This time

period has seen the importance of good corporate governance practice in relation to environ-

mental protection escalate, as demonstrated by the introduction of separate environmental and

sustainability reports, the advent of triple bottom line reporting, changes in environmental

legislation and the occurrence of major environmental incidents. The results of this study

indicate that an increasing number of companies are disclosing environmental informa-

tion, and the relative volume of such information in annual reports is increasing across all

categories.

Keywords: Annual reports, environmental reporting, stakeholder, governance, legitimacy,

political economy

Introduction

In August 2002, the Australian Stock

Exchange (ASX) established the Australian

Corporate Governance Council (CGC). One of

its aims was to develop agreed corporate gov-

ernance requirements and establish best prac-

tice recommendations for Australian entities.

The CGC developed 28 recommendations

based on 10 key principles of good corporate

governance. The tenth of these principles is

aimed at recognising and disclosing legal and

other obligations to all legitimate stakeholders,

and establishing a code of conduct to guide

compliance. It is recommended that disclo-

sures include the extent of compliance with,

and any departure from, best practice recom-

mendation 10.1 in the Annual Report (ASX

Corporate Governance Council, 2003).

It is clear from this key principle and its

related recommendations that good gover-

nance is now closely linked to the concept

of corporate social responsibility (CSR) and

accountability and that one way to demon-

strate CSR is to increase annual report disclo-

sures. One important area of corporate social

responsibility, which is the focus of this study,

is impact on the natural environment and sub-

sequent environmental disclosures.

CSR reporting is not a new phenomenon

and has been traced as far back as 5000 bc in

Egypt (Anderson, 1989). A brief survey of the

extant literature, however, indicates that CSR

reporting, particularly environmental report-

ing, within corporate annual reports has

attracted increased interest, particularly since

the mid to late 1980s. The extent to which the

quantity of environmental information pro-

vided by companies over this time period has

increased commensurately with this interest

has not been consistently tested in Australia.

Whilst many short-term studies, discussed

*Address for correspondence:

Facultyof Business, University

of Tasmania, Private Bag 84,

Hobart, Tasmania 7001. Tel:

+61(0)3 6226 2278; Fax:

+61(0)3 6226 2095; E-mail:

gary.odonovan@utas.edu.au

944 CORPORATE GOVERNANCE

Volume 15 Number 5 September 2007

© 2007 TheAuthors

Journal compilation © 2007 BlackwellPublishing Ltd, 9600 Garsington Road,

Oxford, OX4 2DQ, UK and 350 Main St,Malden, MA, 02148, USA