A longitudinal analysis of corporate greenhouse gas disclosure strategy

• Date: 03 April 2018
• DOI: https://doi.org/10.1108/CG-11-2016-0213
• Published date: 03 April 2018
• Pages: 317-330
• Author: Yang Stephanie Liu,Jessica Hong Yang
• Subject Matter: Strategy,Corporate governance

A longitudinal analysis of corporate

greenhouse gas disclosure strategy

Yang Stephanie Liu and Jessica Hong Yang

Abstract

Purpose –This paper aims to investigate the extent to which greenhouse gas (GHG)-sensitive companies

in the FTSE 100 disclose carbon emission information in their annual reports and stand-alone reports during

the period of 2004-2012 and how they respond to the launch of legally binding GHG-reduction schemes –

the European (EU) Emission Trading Scheme (EU ETS) and the Climate Change Act (CCA).

Design/methodology/approach –A 42-item disclosure index is constructed to analyse the quality of

corporate GHG disclosures. The authors initially chart the development of corporate GHG disclosure

from 2004 to 2012, analyse the trend of disclosure development and compare variances for the

convergence of disclosures. Subsequently the authors carry out a t-test to assess the significance of

post-EU ETS and -CCA changes and the difference between GHG trading account holders (AH) and

non-accountholders (NAH).

Findings –The results show that GHG disclosures have been increasing over time, both in number of

firms making disclosuresand in the amount of information being reported,which indicate the movement

towards normativity.The authors also find that the disclosures reach the peak afterthe enactment of EU

ETS and CCA, and firmswith carbon trading accounts are more responsiveto these schemes than those

without accounts. Nevertheless, the quality of the disclosure remains low, which may justify the further

governmentintervention of mandating carbonreporting.

Originality/value –This is the firstpaper that has examined the regulatory effectson GHG disclosures in

an environmentwhere GHG emission triggers directcost for companies.

Keywords Content analysis, GHG emissions, GHG disclosures, Institutional legitimacy theory,

Strategic legitimacy theory

Paper type Research paper

1. Introduction

This paper aims to offer a longitudinal investigation on the quality of greenhouse gas

(GHG) disclosures of the 25 largest, publicly listed UK companies in the utility, mining

and energy industries over a nine-year period from 2004 to 2012. In 2005, the European

Emission Trading Scheme (EU ETS) was launched to support the EU-wide goal of

reducing GHG emissions to the level required by the Kyoto Protocol (European

Commission, 2015). The EU ETS mandates emission accounting and trading for

companies operating in Europe in particular sectors, and it requires participants to

develop new knowledge and advantages within the company (Engels, 2009) and to learn

to deal with disclosure and reporting issues. The Climate Change Act (CCA) was then

enacted in 2008 and established a legally binding framework to develop an economically

credible emission reduction path. These new schemes, coupled with voluntary guidelines

– such as Carbon Disclosure Project (CDP), Global Reporting Initiatives (GRI), World

Business Council for Sustainable Development and World Resources Institute

(WBCSD&WRI) and Department for Environment Food and Rural Affairs (DEFRA) –

create high levels of uncertainty on the reporting and disclosure of GHG and a need for a

longitudinal study on the development of GHG disclosures.

Yang Stephanie Liu is

Lecturer and

Jessica Hong Yang is

Associate Professor in

Accounting, both at the

Faculty of Business

Informatics, Systems and

Accounting, Henley

Business School, University

of Reading, Reading, UK.

Received 10 November 2016

Revised 26 February 2017

13 September 2017

Accepted 3 December 2017

DOI 10.1108/CG-11-2016-0213 VOL. 18 NO. 2 2018, pp. 317-330, ©Emerald Publishing Limited, ISSN 1472-0701 jCORPORATE GOVERNANCE jPAGE 317