Voluntary GHGs Emissions Reporting: Australian Evidence

This is a brief summary about my jointly-written research paper on Green House Gases (GHGs) emissions reporting, with my supervisors - Michaela Rankin and Carolyn Windsor - when I did my Master degree in Monash University. We examined voluntary corporate GHGs emissions disclosures in the absence of public policy regarding climate change in Australia. 
My video presentation is as follows:

PURPOSE

Our study looked at the determinants of voluntary GHGs emissions disclosures by Australian firms. In particular, we aimed to investigate two main points: (1) factors that associate with the Australian firms’ decision to provide voluntary (GHGs) emissions reporting in 2007; and (2) for those disclosing firms, factors that relate to the extent and credibility of corporate voluntary (GHGs) emissions reporting.

Institutional governance theory is introduced here to explain proactive corporate response to climate change in the Australian context. This theory is used to examine the hypothesised links between voluntary emissions reporting, internal governance systems and private regulations that guide GHGs emissions disclosures from external parties.

METHOD

We studied GHGs emissions disclosure in a voluntary setting in 2007. It is a point in time when global warming and climate change risks are acknowledged on the international stage as a crucial issue for corporations, and when a cap and trade scheme had been proposed in Australia, but before any mandatory reporting of corporate GHGs emissions was required in Australia.

Since the first July of 2008, Australian firms that meet certain thresholds, have to report their GHGs emissions and energy use to a government agency.

The sample includes all of the top 300 firms listed in Australian Securities Exchange (ASX).

Initially, we collected 295 firms that were recorded in the ASX300 as at 26 August 2008. But then we decided to study 187 firms as the final sample because the rest of them did not meet all testing requirements in our models.

We used a two-stage approach to test two different models.

First, we want to investigate the propensity to disclose emissions for ASX 300 firms as the sample. The first model includes both internal and external factors that relate to decision to provide or not provide voluntary GHGs disclosure.

Therefore, we use binary-choice logistic regression to test 187 firms that have all testing requirements.

Then we proceed to the next one.

The second model is to test whether the internal organisational systems and the external factors that are likely to impact on voluntary emissions disclosure, also relate to the extent and credibility of disclosures.

To measure the extent and credibility of emissions disclosures we designed an index based on the guidance provided in ISO 14064, part 1. 

It is a standard that details guidance on what should be included in a publicly available GHGs report.

We use an OLS (Ordinary-Least Squares) regression to test this more complex measure on a sub-sample of 80 disclosing firms as the dependent variables.

FINDINGS

Interestingly, we find evidence that 80 firms out of  187 Australian firms that we analysed, that is around 43%, provided voluntary GHGs emissions reports for the year 2007. That was before the Government required them to report this information to a government agency starting from 2008. They disclosed emissions information in their annual reports, and or stand-alone sustainability disclosures.

Firms are more likely to present voluntary (GHGs) emissions disclosures when they have an Environmental Management System (EMS) in place, either certified or uncertified, have stronger governance systems, make publicly available disclosures to the CDP (Carbon Disclosure Project), are larger in size, and operate in either the energy and mining, or industrial sector.

When we evaluate the extent and credibility of disclosures by the sub-sample of 80 disclosing firms, we find that they are more likely to have an EMS that is ISO14001-certified, use the Global Reporting Initiative (GRI) to guide their sustainability disclosures, and disclose to the CDP with those disclosures being publicly available. Firms that provide more credible emissions disclosures also tend to be larger and operate within the energy and mining, industrial, or services sectors.

CONCLUDING REMARKS

We find evidence of Australian firms’ willingness to move to a carbon-low future in the absence of public policy.

These proactive companies have implemented organisational systems, but also have relied on external private guidance provided by GDP & GRI to publicly disclose their responses to climate change risks, including GHGs emissions data. 

AAAJ

For more details about this research, the article is available in the recently released edition of AAAJ, Accounting, Auditing, and Accountability Journal in November 2011, volume 24 number 8 - which is a special issue on climate change & greenhouse gas - pages 1037-1070. 

Here is the link for the paper on Emerald

Hope you find it useful.