Revisit Carbon Disclosure And Performances Essay

Question:

Discuss about the Revisit carbon disclosure and performances.

Answer:

Introduction:

Climate change around the world, one of the vital issue around the world to discuss in business and economic circle (Intergovernmental Panel on Climate Change 2014). Besides this, it has been observed that corporate responses for the climate change have also been increased dramatically during the past decades. Firms have been requested by various governmental and non-governmental authorities to share their carbon related details, which will aid to assess the potential risks and opportunities of climate change on the performance of the business organizations. Since the 1990, financial institutions and institutional investors have displayed concerns on the financial performance and risks to which business organisations are now including the climate change effect on their financial performance. During 2002, Carbon Disclosure Project (CDP) was initiated to collect and combine the carbon information of various financial institutions and since then it has modified to a great extend to become where it is now (Depoers, Jeanjean and Jerome 2016). During the beginning, there were only 400 participating organisation and now there are almost 1467 industries around the world participating in the CDP disclosure program, making it one of the reliable and valid source of carbon emission of the firms. This report is to analyze the effect of carbon risk management of the firms with respect to the climate change risks and opportunities. This research will also highlight voluntary disclosure or some aspect of Greenhouse Gas performance of the firms using the stakeholder theory and CDP data.

Research question:

Research questions are as follows:

  1. What is the relation of voluntary CDP disclosure of the firms with the climate change?
  2. How GHG emission is related with the voluntary disclosure?

Practical motivation:

Various governmental and non-governmental organisations investigate the corporate disclosure of Green House Gas (GHG) to find the linkage between the firm’s performance and climate change. Using the Corporate Social Responsibility (CSR), which assess the GHG emission disclosure firms are ranked and it aids the competent authorities to construct structure to incorporate the climate change issues into the firm’s functionality (Doda et al. 2016). Bringing GHG emission disclosure of the business organisations according to the recommended guideline of the stakeholder is used to control the CDP disclosure of the firms. From the accounting perspective, climate change is one of the main concerns around the world owing to the fact that it affects the firm’s productivity and efficiency (Jeppesen et al. 2014). Moreover, climate change not only possesses the risk in front of the firms, besides this it provide firms opportunity to develop making it one of the important factors to study.

Theoretical motivation:

This report is based on the CDP disclosure of the firms who willingly shares their GHG emission report and it uses the stakeholder theory to identify the relation between carbon emission and performance of the firms. CDP is one of the reliable sources of the carbon emission of the firms and it uses the primary data to assess the firm’s social responsibility (Sharfman and Hart 2015). Besides this owing to the fact that they change their questionnaire every year, making their data valid and constant aligned with the constant flux. When it comes to theoretical motivation for the climate change effect on the performance of the companies, then stakeholder theory is the ideal one to bank upon. According to the stakeholder theory, disclosure behaviour of the firms is a function of political and social pressure, which is exerted by the stakeholders of the firm (Stocker 2014). On the other hand, this theory considers that the management decision of the firm cannot be introduced in absence of the interest of the stakeholder. In other words, stakeholder theory asserts that stakeholders are interested in long term social and environment responsibility of the firms and they willingly showcase the firm’s GHG emission report in the CDP disclosure to deteriorate the chances of detailed scrutiny. From economic perspective it can be said that firms with better stakeholder possess chance to attain higher amount of share price and it can be aggravated through the presentation of carbon emission report of the CDP disclosure.

Literature review:

Carbon emission is one of the vital factors that alter the firm’s performance. Over the last few decades, there have been various researches around the world that consider the carbon emission as the key element that alters the financial, economic as well as the socio-political function of the firm. In the developed countries, there has been strict regulatory practice that enforces the firms to align with the regulatory perspective to reduce the carbon emission effect (Panayotou 2016). Besides this, from the administrative point of view, if organizations cannot satisfy their duties to decrease their discharges to the objectives under compulsory carbon administration plans, they need to pay the fines for their outflow stipend from the carbon exchanging market. To accomplish the carbon outflow targets organizations could put resources into their carbon lessening administration framework by utilizing low emanation vitality, hardware, as well as by growing low carbon innovation. At the point when their outflow of carbon is beneath the specified target, organizations may have some excess of their carbon emission remittances and they could offer their surplus in the market for carbon exchange for monetary advantages. Better execution in carbon administration will thusly decrease the money related weight and notwithstanding bring benefit for the organization that does well (Hasan, Smith and Finnegan 2017). If the unmistakable budgetary effect, better carbon outflow execution as per partner hypothesis forecast, have other impalpable effects on the organization, for example, great notoriety and better associations with government, providers and clients. Past examinations looking at the connection between ecological divulgence and ecological execution are roused by the deliberate idea of revelations identified with corporate natural issues. For the revelations to be valuable to partners there ought to be some correspondence between the divulgences and real execution. There is extremely restricted writing on the natural performance– exposure interface concentrating on corporate carbon discharge issues. They content examine corporate yearly reports, official statements and truth sheets to quantify the substance of exposure and the volume of divulgence. The model of information envelopment investigation, which depends on the scientific system of direct writing computer programs, is utilized for estimating carbon emanation execution. The outcomes record a critical negative relationship between the substance of exposure and execution (Weaver et al. 2015). In accordance with the past examinations, this investigation focuses on the legitimizing capacity of intentional revelations. As opposed to examinations of the natural performance– revelation interface and ecological performance– budgetary execution connects, investigations of the money related effect of ecological exposures are more restricted. Concentrate the conditions under which share costs are expanded for the Financial Times Global 500 organizations because of support in the CDP. They utilize cooperation of CDP as intermediary for corporate carbon exposure and neglect to discover confirm that CDP investment itself could prompt expanded investor esteem. Nevertheless, CDP members do profit by expanded stock costs in a noteworthy and maintained form when there is probability of environmental change control hazard, when Russia endorsed the Kyoto Protocol. The member organizations are seen as being more arranged for exogenous stuns (Lough and Matthew 2014). Notwithstanding the positive effect of carbon divulgence on firm an incentive amid carbon touchy periods, research, with regards to Japan, the relationship between carbon exposure and firm an incentive amid 'ordinary days' when there is no particular carbon motivation.

Hypotheses:

This report is meant to analyze the firm’s social and environmental responsibility and use the CSR report to study how well the firm discloses its carbon emission. In order to perform this research, the report took the help of regression analysis of the 1046 companies and utilizing the result, it has tried to validate its hypothesis. Independent variables of this analysis are CSR, Size of the firm and Carbon risk management of the firm and CDP disclosure is the Dependent variable. The test hypothesis of this project is mentioned below:

H0: There is no relationship between the dependent variables and independent variables

H1: Firms those have greater stakeholder power exerts more amount of carbon information

With the 5% level of significance, if the p value is equal or less than the 0.05, then the null hypothesis will be rejected and the alternative hypothesis will be accepted.

Conclusion:

The report was meant to analyze the academic literature to assess the linkage between financial performance and pollution performance of the firms using the stakeholder theory and CDP data. The report highlighted the hypothesis on which research can be done in future to analyze whether the firm’s performance is driven by the environmental factors or not and more over it analyzed the CDP disclosure efforts of the firms through voluntary initiatives. The findings of the report are consistent with the general idea of linkage between socio political and economic theories of carbon disclosure of the firms. The report has found that firms, which are participating in the CDP disclosure, express their sustainability report and carbon emission report willingly to avoid scrutiny from the competent authority. Moreover, the report has also has found that those firms which have large size and lower amount of insider ownership disclose their emission reports willingly. And thirdly, the report has envisaged that stakeholder power is one of the driving force that explain the willingness of CDP disclosure of the firms; however, the report also suggest that there are places like Korea, which does not support the stakeholder theory CDP disclosure.

Reference:

Depoers, F., Jeanjean, T. and J?r?me, T., 2016. Voluntary disclosure of greenhouse gas emissions: Contrasting the carbon disclosure project and corporate reports. Journal of Business Ethics, 134(3), pp.445-461.

Depoers, F., Jeanjean, T. and J?r?me, T., 2016. Voluntary disclosure of greenhouse gas emissions: Contrasting the carbon disclosure project and corporate reports. Journal of Business Ethics, 134(3), pp.445-461.

Doda, B., Gennaioli, C., Gouldson, A., Grover, D. and Sullivan, R., 2016. Are corporate carbon management practices reducing corporate carbon emissions?. Corporate Social Responsibility and Environmental Management, 23(5), pp.257-270.

Hasan, H., Smith, S. and Finnegan, P., 2017. An activity theoretic analysis of the mediating role of information systems in tackling climate change adaptation. Information Systems Journal, 27(3), pp.271-308.

Intergovernmental Panel on Climate Change, 2014. Climate Change 2014–Impacts, Adaptation and Vulnerability: Regional Aspects. Cambridge University Press.

Jeppesen, E., Meerhoff, M., Davidson, T.A., Trolle, D., SondergaarD, M., Lauridsen, T.L., Beklioglu, M., Brucet Balma?a, S., Volta, P., Gonz?lez-Bergonzoni, I. and Nielsen, A., 2014. Climate change impacts on lakes: an integrated ecological perspective based on a multi-faceted approach, with special focus on shallow lakes.

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Lough, B.J. and Matthew, L.E., 2014, October. International volunteering and governance. In United Nations Volunteers and the International Forum for Volunteering in Development, Bonn, Germany.

Panayotou, T., 2016. Economic growth and the environment. The environment in anthropology, pp.140-148.

Qian, W. and Schaltegger, S., 2017. Revisiting carbon disclosure and performance: Legitimacy and management views. The British Accounting Review.

Sharfman, M. and Hart, T.A., 2015. Assessing the Concurrent Validity of the Revised Kinder, Lydenberg, and Domini Corporate Social Performance Indicators.

Slawinski, N. and Bansal, P., 2015. Short on time: Intertemporal tensions in business sustainability. Organization Science, 26(2), pp.531-549.

Stocker, T. ed., 2014. Climate change 2013: the physical science basis: Working Group I contribution to the Fifth assessment report of the Intergovernmental Panel on Climate Change. Cambridge University Press.

Wang, L., Li, S. and Gao, S., 2014. Do greenhouse gas emissions affect financial performance?–an empirical examination of Australian public firms. Business Strategy and the Environment, 23(8), pp.505-519.

Weaver, T.L., Gilbert, L., El-Bassel, N., Resnick, H.S. and Noursi, S., 2015. Identifying and intervening with substance-using women exposed to intimate partner violence: phenomenology, comorbidities, and integrated approaches within primary care and other agency settings. Journal of women's health, 24(1), pp.51-56.

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