A longitudinal analysis of corporate greenhouse gas disclosure strategy

AuthorYang Stephanie Liu, Jessica Hong Yang
Publication Date03 Apr 2018
A longitudinal analysis of corporate
greenhouse gas disclosure strategy
Yang Stephanie Liu and Jessica Hong Yang
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

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