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Article
Publication date: 1 July 2019

Ragini Rina Datt, Le Luo and Qingliang Tang

The purpose of this study is to examine the impact of legitimacy threats on corporate incentive to obtain external carbon assurance.

Abstract

Purpose

The purpose of this study is to examine the impact of legitimacy threats on corporate incentive to obtain external carbon assurance.

Design/methodology/approach

The sample consists of the largest US companies that disclosed carbon emissions to CDP (formerly the Carbon Disclosure Project) over the period 2010-2013. Based on legitimacy theory, firms are more likely to obtain carbon assurance when they are under greater legitimacy threat. Carbon assurance is measured using CDP data. Three proxies are identified to measure legitimacy threat related to climate change: carbon emissions intensity, firm size and leverage.

Findings

This paper finds that firms with higher levels of emissions are more likely to obtain independent assurance, and large firms show the same tendency, as they are probably under pressure from their large group of stakeholders. In sum, the findings suggest that firms with higher carbon emissions face greater threats to their legitimacy, and the adoption of carbon assurance can mitigate risks to legitimacy with enhanced credibility of carbon disclosure in stakeholders’ decision-making.

Research limitations/implications

The study has some limitations. The authors have relied on CDP reports for analysis and focus on the largest companies in the US. Caution should be exercised when generalising the results to smaller firms, other countries or voluntary carbon assurance information disclosed in other communications channels.

Practical implications

This study provides extra insights into and an improved understanding of determinants and motivation of carbon assurance, which should be useful for policymakers to develop policies and initiatives for carbon assurance. The collective results should be useful for practicing accountants and accounting firms.

Originality/value

The paper investigates how legitimacy threats affect firms’ choice of external carbon assurance in the context of US, which has not been documented previously. It contributes to the understanding of legitimacy theory in the context of voluntary carbon assurance.

Details

Accounting Research Journal, vol. 32 no. 2
Type: Research Article
ISSN: 1030-9616

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Article
Publication date: 15 December 2020

Probal Dutta and Anupam Dutta

The purpose of this research is to examine the impact of external assurance on the level of voluntary corporate climate change disclosures by Finnish firms.

Abstract

Purpose

The purpose of this research is to examine the impact of external assurance on the level of voluntary corporate climate change disclosures by Finnish firms.

Design/methodology/approach

The sample of this study includes 228 firm-year observations over the period 2008–2015 for listed Finnish companies that have issued sustainability reports and responded to the Carbon Disclosure Project (CDP) questionnaire at least once during the sample period. The authors conduct a panel regression analysis to study the afore-mentioned linkage. In addition, the Tobit regression model is also estimated to check the robustness of our findings.

Findings

The findings suggest that assurance has a highly significant positive impact on the level of corporate climate change disclosures even after controlling for the effect of a number of control variables. Moreover, among the control variables, firm size and asset age are found to have significant effect on the extent of carbon emissions disclosure. Furthermore, the additional analysis reveals that the type of assurance providers (accounting firms vs non-accounting firms) and the type of financial auditors (Big4 financial auditors vs non-Big4 financial auditors) do not influence the level of climate change disclosure of assured companies.

Research limitations/implications

This research is subject to certain limitations. First, the source of the data used in this research is the CDP database which has limitations in that it is a voluntary disclosure process where all the observations collected are self-reported by the responding firms. This may bias the reported findings. Second, our sample includes only listed companies and hence the results might have limited explanatory capacity for unlisted firms.

Practical implications

By using the results of this research, corporate managers will be able to reduce the information asymmetry between various stakeholders and them through disclosure of accurate, reliable and credible environmental information. Such disclosures will, in turn, allow socially responsible investors to choose eco-friendly investments and will thus enable them to make appropriate investment decisions.

Originality/value

Research on the external assurance-corporate climate change disclosure nexus is scarce. This study addresses this gap in the nonfinancial disclosure assurance literature by demonstrating that external assurance increases the level of voluntary corporate climate change disclosure. Drawing on stakeholder-agency theory, this study views external assurance as a monitoring structure that potentially curbs the monitoring problem between corporate managers and other stakeholders and increases the amount of climate change disclosures making a possible avenue for the reduction of the information asymmetry between them.

Details

Journal of Applied Accounting Research, vol. 22 no. 2
Type: Research Article
ISSN: 0967-5426

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Article
Publication date: 1 January 2012

Wendy Green and Qixin Li

This paper aims to examine whether an expectation gap exists between different stakeholders (i.e. emissions preparers, emissions assurers and shareholders) in relation to…

Abstract

Purpose

This paper aims to examine whether an expectation gap exists between different stakeholders (i.e. emissions preparers, emissions assurers and shareholders) in relation to the assurance of greenhouse gas emissions. Further, the paper seeks to explore whether stakeholder expectations are influenced by the uncertainties inherent in the assurance engagement for different industry sectors (i.e. greenhouse gas emitter or greenhouse gas user entities).

Design/methodology/approach

An experimental survey was used to address the stated aims. Three stakeholder groups: shareholders, greenhouse gas emissions preparers and assurers, completed a survey based on the greenhouse gas emissions assurance for either an emitter or user entity.

Findings

The results provide support for the existence of an expectation gap in the emission assurance setting. Fundamental differences were identified between the stakeholder groups in relation to the responsibilities of the assurer and management; as well as the reliability and decision usefulness of the emissions statement. Moreover, the extent of the gap was found to differ between user entity engagements and emitter entity engagements.

Research limitations/implications

The paper highlights the need for the assurance services profession and assurance standard setters to consider mechanisms to enhance the effectiveness of communicating the assurance function in this setting in order to enhance the credibility and social value of emissions assurance.

Originality/value

The paper is the first to examine the expectation gap in the greenhouse gas emissions assurance context. It thereby also contributes to the literature on the expectation gap in the assurance of non‐financial information. Moreover, the research findings provide standard setters with unique insights into areas to consider as they work toward the development of an international assurance standard for greenhouse gas emissions statements.

Details

Accounting, Auditing & Accountability Journal, vol. 25 no. 1
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 7 June 2011

Sumit Lodhia

The purpose of this paper is to draw out the accounting implications of the National Greenhouse and Energy Reporting (NGER) Act in Australia.

Abstract

Purpose

The purpose of this paper is to draw out the accounting implications of the National Greenhouse and Energy Reporting (NGER) Act in Australia.

Design/methodology/approach

An analytical approach is undertaken to ascertain the (accounting) practice and research implications of the NGER Act.

Findings

Accounting researchers, especially those with interests in social and environmental issues, have a critical role to play in highlighting the potential of the accounting practice in managing, and providing accountability over, carbon emissions, facilitated via the NGER Act. A number of opportunities in social and environmental accounting research are also identified in this paper.

Practical implications

The paper highlights that the NGERS legislation which requires reporting of carbon emissions by affected parties has a number of implications for the accounting practice.

Originality/value

The paper relates a practical issue, in this case the NGER Act, to accounting and suggests that the accounting process can play a critical role in organizational attempts to manage, communicate and price carbon emissions.

Details

Journal of Accounting & Organizational Change, vol. 7 no. 2
Type: Research Article
ISSN: 1832-5912

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Article
Publication date: 1 January 2012

Sumit Lodhia and Nigel Martin

This paper aimed to explore the submissions made to the National Greenhouse and Energy Reporting (NGER) policy paper by corporations and other stakeholders. It also sought…

Abstract

Purpose

This paper aimed to explore the submissions made to the National Greenhouse and Energy Reporting (NGER) policy paper by corporations and other stakeholders. It also sought to establish whether broader climate change issues were addressed in the context of the submissions.

Design/methodology/approach

The agenda‐setting framework was utilised to provide the theoretical perspective for the study. This research applied a combination of concept analysis and mapping, and content analysis, of the submissions using the Leximancer software tool.

Findings

The study found a divergence in the responses of corporations and other stakeholders, with the former focusing primarily on the NGER policy paper, while the latter presented significant concerns over carbon pollution and climate change, an issue that was not the primary concern of the policy paper. Moreover, corporations also acknowledged the close link between the NGER process and a future emissions trading scheme, and expressed concerns over the development of a mechanism that would put a price on carbon.

Research limitations/implications

The paper contributes to the limited literature on carbon accounting and reporting in relation to both the local and international context. Moreover, an agenda‐setting perspective provided a suitable lens for understanding the NGER submissions process and its role within the broader climate change policy area in Australia.

Practical implications

Policies are influenced by key players and their familiarity with these policies could lead to successful implementation. The establishment of the NGER legislation was deemed successful, despite concerns raised in the submissions. This was because the policy used corporate reporting as a means of assessing accountability for carbon emissions. This finding has implications for other nations seeking to develop mandatory carbon reporting.

Originality/value

The paper has built further explanatory potential of the agenda‐setting framework, provides direct evidence in relation to stakeholder submissions to prospective environmental legislation, and adds to the use of combination methods that can be utilised for effectively analysing stakeholder submissions on major policy questions and issues.

Details

Accounting, Auditing & Accountability Journal, vol. 25 no. 1
Type: Research Article
ISSN: 0951-3574

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Article
Publication date: 27 September 2019

Ragini Rina Datt, Le Luo and Qingliang Tang

This study aims to examine whether good carbon performers disclose more carbon information overall than poor performers, and if yes, how firms select different types of…

Abstract

Purpose

This study aims to examine whether good carbon performers disclose more carbon information overall than poor performers, and if yes, how firms select different types of carbon information to signal their genuine superior carbon performance.

Design/methodology/approach

The level of disclosure is measured based on content analysis of Carbon Disclosure Project (CDP) reports. The study sample consists of 487 US companies that voluntarily participated in the CDP survey from 2011 to 2012. The authors use the t-test and multiple regression models for analyses.

Findings

The results consistently indicate that firms with better carbon performance disclose a greater amount of overall carbon information, supporting the signalling theory. In addition, in contrast to previous studies that merely consider the overall disclosure level, the authors also investigate disclosure of each major aspect of carbon activities. The results show that good carbon performers disclose more key carbon items, such as goods and services that avoid greenhouse gas (GHG) emissions, external verification and carbon accounting, to signal their true type.

Research limitations/implications

This study has some limitations. The authors rely on CDP reports for analysis and focus on the largest companies in the USA. Caution should be exercised when generalising the results to other countries, smaller firms or voluntary carbon information disclosed in other communications channels.

Practical implications

Because carbon disclosure has already been moving from a voluntary to mandatory requirement in many jurisdictions, the format and content of CDP reports might be considered for a formal standalone GHG statement. Based on the results, the authors believe that there should be industry-specific disclosure guidelines, and more disclosure should be made at the project level.

Originality/value

In the context of climate change, this study provides support for the signalling theory by utilising the relationship between voluntary carbon disclosure and performance. The study also provides empirical evidence on how companies may use different types of carbon information to signal their underlying carbon performance.

Details

Accounting Research Journal, vol. 32 no. 3
Type: Research Article
ISSN: 1030-9616

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Article
Publication date: 16 June 2021

Anup Kumar Saha, Theresa Dunne and Rob Dixon

This study aims to investigate the carbon emission disclosures (CED) and performance of UK higher educational institutions (HEIs) and the associated impact on their…

Abstract

Purpose

This study aims to investigate the carbon emission disclosures (CED) and performance of UK higher educational institutions (HEIs) and the associated impact on their environmental reputation. The paper argues that HEIs possess distinct characteristics that make comparisons with profit-oriented companies problematic and misleading.

Design/methodology/approach

The green score published by the People and Planet organisation provided the population for this analysis. All universities with a 2012 score were entered into the initial sample. The association between green reputation, CED and carbon performance was examined using a robust least squared regression model. The green score published in 2019 was then compared with this to confirm whether the findings still held.

Findings

CED, carbon emissions and carbon audit were found to have highly significant determinant relationships with HEIs’ green reputation status at a 1% significance level.

Research limitations/implications

The impact of CED and carbon performance indicators needs to have a clear relationship with reputation to motivate HEIs to act and disclose.

Originality/value

The study is distinct in investigating the impact of CED and carbon performance by UK HEIs on their environmental reputation. The study shows whether, and how, the HEI CED and carbon performances contribute towards their environmental reputation. HEIs have distinct characteristics from profit-seeking organisations and thus tailored research is required.

Details

Journal of Accounting & Organizational Change, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1832-5912

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Article
Publication date: 6 February 2020

Abeer Hassan, Ahmed A. Elamer, Mary Fletcher and Nawreen Sobhan

This paper aims to investigate the supply and demand side of sustainability assurance in Bangladesh.

Abstract

Purpose

This paper aims to investigate the supply and demand side of sustainability assurance in Bangladesh.

Design/methodology/approach

Drawing on signalling theory, a logistic regression model is used for a sample of 100 of the largest Bangladeshi companies to study the relationships between assurance, sustainability disclosure, industry membership and reporting format.

Findings

Authors’ results show that companies which produce more sustainability information are more likely to get their sustainability assured, to be from non-carbon intensive industries, and are more likely to integrate their sustainability information with the financial annual reports. Authors’ results support the argument that organisations based in weaker legal environments are more likely to secure assurance as this adds to the credibility and reliability of sustainability reports.

Research limitations/implications

This paper has limitations which raise some issues for future research. First, the authors have covered only large companies; therefore, future research could examine the differences between small and large companies in relation to assurance. Secondly, the authors’ data consist of company sustainability disclosure information in the fiscal year 2015. Longitudinal studies are recommended to extend this research. Finally, future research could examine the moderating effects of geographical location on the relationship between assurance (and its providers) and other variables.

Practical implications

The findings of this paper will prove valuable to practitioners and researchers. Practitioners, including assurance providers and sustainability reporting managers will benefit from authors’ study as it covers both the demand and supply side characteristics of assurance. Researchers will benefit from the study as it investigates assurance practices in the developing country of Bangladesh.

Originality/value

To the best of the authors’ knowledge, this is the first study to examine both the supply and demand sides of sustainability assurance in Bangladesh. Authors also introduce reporting format when measuring the relationship between assurance and its determinant factors at micro level. The study also links assurance to signalling theory.

Details

Accounting Research Journal, vol. 33 no. 2
Type: Research Article
ISSN: 1030-9616

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Article
Publication date: 16 November 2012

Nonna Martinov‐Bennie

Global climate change has become a major societal issue providing the impetus for governments to legislate policy in order to manage and mitigate greenhouse gas (GHG…

Abstract

Purpose

Global climate change has become a major societal issue providing the impetus for governments to legislate policy in order to manage and mitigate greenhouse gas (GHG) emissions. To assess whether the use of biomass can reduce GHG emissions requires accounting, reporting and assurance methods and procedures. The purpose of this paper is to illustrate key challenges of GHG reporting and assurance with the example of the Australian framework.

Design/methodology/approach

This viewpoint, discussing GHG emissions reporting and assurance, critically analyses some of the key issues arising in practice, including the current state of organizations' systems and controls, the changing nature of governance structures as well as measurement challenges being experienced by companies regarding GHG reporting.

Findings

The paper finds that more rigorous governance frameworks and management systems are likely to evolve around GHG reporting given the recent introduction of the carbon pricing mechanism and its nexus to companies' financial performance as well as increased risks associated with inaccurate reporting.

Practical implications

The paper contains an overview of the current regulatory environment and key issues surrounding GHG reporting and assurance.

Originality/value

The management of GHG‐related issues has significant implications for organisations. The paper provides both practitioner and academic perspectives on the current issues and challenges within the GHG reporting context.

Details

Sustainability Accounting, Management and Policy Journal, vol. 3 no. 2
Type: Research Article
ISSN: 2040-8021

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Article
Publication date: 25 October 2011

Markus J. Milne and Suzana Grubnic

This paper aims to set out several of the key issues and areas of the inter‐disciplinary field of climate change research based in accounting and accountability, and to…

Abstract

Purpose

This paper aims to set out several of the key issues and areas of the inter‐disciplinary field of climate change research based in accounting and accountability, and to introduce the papers that compose this AAAJ special issue.

Design/methodology/approach

The paper provides an overview of issues in the science of climate, as well as an eclectic collection of independent and inter‐disciplinary contributions to accounting for climate change. Through additional accounting analysis, and a shadow carbon account, it also illustrates how organisations and nations account for and communicate their greenhouse gas (GHG) footprints and emissions behaviour.

Findings

The research shows that accounting for carbon and other GHG emissions is immensely challenging because of uncertainties in estimation methods. The research also shows the enormity of the challenge associated with reducing those emissions in the near future.

Originality/value

The paper surveys past work on a wide variety of perspectives associated with climate change science, politics and policy, as well as organisational and national emissions and accounting behaviour. It provides an overview of challenges in the area, and seeks to set an agenda for future research that remains interesting and different.

Details

Accounting, Auditing & Accountability Journal, vol. 24 no. 8
Type: Research Article
ISSN: 0951-3574

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