Evaluating the quality of carbon disclosures

Panayis Pitrakkos (School of Accountancy, University of the Witwatersrand, Johannesburg, South Africa)
Warren Maroun (School of Accountancy, University of the Witwatersrand, Johannesburg, South Africa)

Sustainability Accounting, Management and Policy Journal

ISSN: 2040-8021

Publication date: 26 June 2019

Abstract

Purpose

This paper aims to examine the differences in quality and quantity of disclosures dealing with greenhouse gas emissions among companies with a relatively large or small carbon footprint. It also considers whether disclosures are being included in the primary report to stakeholders (an integrated report) or in a secondary source (a sustainability report).

Design/methodology/approach

A comprehensive carbon disclosure checklist was constructed based on professional and academic literature to identify and categorise carbon disclosures. Quality is gauged according to a multi-dimensional assessment derived from prior research based on density of reporting, disclosure attributes, management orientation, integration of information, ease of analysis, reporting on strategy, use of independent assurance and repetition. A content analysis is used to gauge the quantity and quality of carbon disclosures of 50 companies listed on the Johannesburg Stock Exchange. Differences in the quantity and quality scores of high- and low-carbon companies are tested using a Mann–Whitney U test.

Findings

Carbon disclosures are used as part of a legitimacy management exercise. This involves not just the use of additional environmental disclosure to placate stakeholders as environmental impact grows. The quality of reporting and location of disclosures are, perhaps, more important for understanding how companies are responding to stakeholder expectations for reporting on carbon emissions and climate change.

Practical implications

Despite mounting scientific evidence on the risks posed by climate changes, companies remain reluctant to commit to high-quality reporting on specific steps being taken to reduce carbon emissions. Even when disclosures are being targeted at key stakeholders, the possibility of impression management remains. It may, therefore, be necessary to have carbon reporting regulated and independently assured. More guidance on how companies should be managing and reporting on carbon emissions and climate change may also be required.

Social implications

Despite mounting scientific evidence on the risks posed by climate changes, companies remain reluctant to commit to high-quality reporting on specific steps being taken to reduce carbon emissions. Even when disclosures are being targeted at key stakeholders, the possibility of impression management remains. It may, therefore, be necessary to have carbon reporting regulated and independently assured. More guidance on how companies should be managing and reporting on carbon emissions and climate change may also be required.

Originality/value

The study merges the traditional approach of focusing on the quantity of disclosures to illustrate the application of legitimacy theory in a sustainability/integrated reporting setting with less-seldom-studied quality and location of reporting. This result provides a more nuanced perspective of how carbon disclosures are being used to manage stakeholders’ reporting expectations.

Keywords

Acknowledgements

The authors are grateful to the participants at the Meditari Accountancy Research Conference (2018) for their comments on earlier working papers. In particular, special thanks go to Delphine Gibassier, Giovanna Michelon, Danielle Cerbone, Lelys Maddock, Robert Garnett and Wayne van Zijl for their feedback and recommendations.

Citation

Pitrakkos, P. and Maroun, W. (2019), "Evaluating the quality of carbon disclosures", Sustainability Accounting, Management and Policy Journal, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/SAMPJ-03-2018-0081

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Publisher

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Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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