Impact of Corporate Reporting on Carbon Emissions

This article discusses the impact of corporate reporting on carbon emissions, including the literature review, analysis, and conclusions. The article highlights the importance of reporting on carbon emissions and the social obligations of companies towards the environment. It also discusses the various theories related to corporate social responsibility and the impact of carbon reporting on the corporate world. The article concludes that result-oriented plans are necessary to ensure actual effects on the control of carbon emissions.

ACCOUNTING THEORY
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Contents
INTRODUCTION......................................................................................................................3
LITERATURE REVIEW...........................................................................................................3
ANALYSIS................................................................................................................................4
CONCLUSIONS:.......................................................................................................................7
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INTRODUCTION
Emission of the green house gases is the major activity harming the environment today. In
order to have a little control over the rapid climate change, the proposal of reporting on
carbon emissions by the corporate has been introduced. Climate change has been referred to
as the greatest environmental challenge which the world is facing currently. In order to have a
control over emissions, many companies involved in the business of manufacturing or power
supply have been required by the government to report on the carbon footprint (Flood, 2017)
. The authorities are of the view that if high numbers are reported by these corporate, then
they would take initiative in order to control the carbon emissions, so that the value of their
company is not affected. Many countries have taken part in this initiative. In Australia the
National greenhouse and energy reporting scheme was introduced, in order to meet up with
international reporting standards and provide a single framework on energy consumption and
carbon emissions reporting. This scheme is guided by the National Greenhouse and Energy
Reporting Act 2007 (Freeman, 2011). The scheme acts towards reducing the carbon
emissions by the corporate in the country by making policies and conducting researches for
the same.
LITERATURE REVIEW
The corporate are facing increased stress form the various shareholders, investors,
stakeholders with respect to disclosures and measures for the carbon emissions. These are
huge expenses related to carbon emissions. Some of these include heavy capital expenditure
on the carbon efficient machinery and technology. The corporate are required to take steps in
order to reduce the carbon footprint (Kauffmann, 2010). Huge expenditure on research is
being made in order to produce carbon efficient products. The carbon emissions also define
the risk profile of the corporate. Research has showed that the carbon emissions have impact
on the value of the firm. These can be classified into three major heads. Firstly, the costs
incurred due to mandatory reporting of carbon emissions by regulatory authorities, secondly,
the costs in connection with capital expenditure for emission control and lastly the costs in
correction with voluntary reporting of carbon emissions.
In the article by Tony Nwanji in The Stakeholder Theory in the Modern Global Business
Environment, the author has stated how the duty of the company is more than just earning
profits (Nwanji, 2016). The stakeholder theory states that it is the responsibility of the
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company is more than just towards its shareholders. A stakeholder is any person who can be
affected by the decision of the company. They include customers, employees, creditors, etc.
Stakeholder theory plays a very important role in the corporate responsibility of the company.
The company’s which are involved in processes involving carbon emissions, have a duty
towards the environment and the stakeholders. In order to fulfil their duty towards the
stakeholders it is important that the corporate report on the carbon emission which is due to
their activities. They should report on the measures take in order to offset the carbon
emissions.
In the paper - Institutional Theory as a Driver of CSR: An Integrative Framework, by Sanket
Sunand Dash, the author has explained how the institutional theory just like stakeholder
theory assists the company in corporate social responsibility (Dash, 2016). The institutional
theory states that the behaviours of an institution is dependent and is affected by the factors it
Is surrounded by. The social environment is one of such factors. Increasing globalisation has
shown that the social factors have a huge impact on the behaviours of an organisation.
Therefore, in the case of carbon emission the company will be obligated to report on the
carbon footprint. The traces which they leave on the environment are likely to have affect on
the organisation, which will result in better accountability.
Just like the theories mentioned above the author James Guthrie in his work on legitimacy
theory has explained how the companies seek to work within the boundaries which are set by
the society (Guthrie, 2012). In other words they try to legitimate the work done by staying
within the social boundaries. When an action of the organisation affects the social factors,
then it is to have effect on the organisation. When polluting the environment, the organisation
understands that they have breached a boundary. In order to make up to it and exist, they will
be required to report on the same.
All the theories above are of the view that there are some social obligations of the
organisation. In order for them to meet up with these obligations the company will report on
carbon emissions and that is likely to control the impact on environment. In our study below
we have discussed in details the actual affect of reporting on carbon emissions.
ANALYSIS
Environmental safety has become a very important taking into the climate change. Emission
of the greenhouse gases by the corporate are the major contributors to the climate change. In
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order to control these emissions, many steps including establishment of legislation for
reporting was tried to be implemented. But in vain, no step was put into action. Later,
incidents like that of the BP oil spill in the Gulf of Mexico created the alarming need to
control the harm being made to the environment. It was then that the Environmental
Protection Agency (EPA) came into action and initiated the greenhouse gas reporting
program. This became a law in the year 2010, and as a result almost all of the Top emitters of
Greenhouse gases in US were made to report on the emission made by them. Later, the
remaining emitters of the greenhouse gases were also required to mandatory report on the
greenhouse gas emissions.
It was the first and the foremost step which was taken in order to control the carbon
emissions (Ihlen, 2009). Though it was expected from introduction of this legislation, that
reporting will force these corporate to control the emissions, but no such major effect was
noticed. Also, this act aimed the corporate to opt for more environment friendly products and
processes, so that more consumers could be attracted, but the studies show no major claims
for the same.
Later in the year 2012, United Kingdom followed the step of United States, and made it
mandatory for all the companies listed on the London stock exchange to report of the carbon
emission (Scott, 2014). This made the listed companies in UK report on greenhouse gas
emission yearly in their annual report.
In the year 2006, the international standard on environment protection launched the ISO
14064 standard, which laid down the methods to control greenhouse gas emissions along with
its reporting and monitoring (Schnapf, 2011). It was a globally recognised standard which
was expected to launch both regulated and voluntary programs to protect the environment.
The Paris Agreement in 2015 was set forward keeping in view the increasing danger to the
environment due to climate change. The countries all over participated in this agreement with
a view to reduce the carbon emissions for environment safety. The World economic forum in
2017 stated that the weather risk was the most significant issue which was to be faced by the
businesses everywhere.
In order to evaluate the result of corporate reporting on carbon emission, a lot of studies and
researches were conducted. The studies indicate three possible effects of reporting (Rogers,
2015) .
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The theories discussed above in the literature review all point towards one conclusion, that is
the company has some social obligations which makes is responsible to report on the harms
to the environment done by it. But mere reporting on issues created is not a solution for these
issues. There should be actions and penalties which the corporate should be entitled to in case
of harm caused by it. They should be made to take measures in order to cut off the carbon
emission and help protect the environment. Reporting on certain issues will only bring to
attention to the problem, it is important solution be devised in order to solve the problem.
Secondly, it may be said that the impact of carbon reporting will not immediately be seen
(Strathern, 2010). The level of greenhouse gases has increased over the years and there effect
has been increasingly see in the last few years. The researchers are of the view that the effect
of reporting on these emissions will be witnessed with time. It is not important that the results
will immediately be reflected by measures.
Lastly, the measures of reporting lack impact oriented information. The corporate are
required to report on the measures taken by them to control the carbon footprint, but it fails to
calculate the impact of measures on the result (Wahlen, 2012). Therefore it is important that
the corporate also report on the impact they are likely to have on carbon emissions and
control.
The impact of carbon reporting has been huge on the corporate worldwide. They have
actively taken part and adopted the carbon management principles (CMP) in order to meet up
with the regulations. The recent study showed that of the top 500 global companies only
43% took part in the reporting in 2004. This number increased gradually to 50% in 2010 and
82% in 2015 (Donanldson, 2012). Also these corporate allocated a part of their management
in order to take responsibility for the issues related to climate related change.
The theoretical knowledge and implementation of reporting was expected to have larger
impact on carbon emission reporting. But practically the resultant effect was not at par
(Wolk, 2013). The theories that have been mentioned above also state that the companies
would fulfil their social obligations by reporting on the environmental issues caused by them.
But this was not the actual result. Therefore, measures in order to ensure actual effects on the
control of carbon emissions should be taken.
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CONCLUSIONS:
It was faith in the policymakers and the companies that reporting on carbon emission and
good management practices will help them control and have better performance in carbon
control. Because of this faith, other policies and measures which were likely to have effect
were not given much attention. It has now become a fact that the most comprehensive data on
carbon emission and measures to control the emission have failed to show any major impact
on the actual outcome. However it has still not been established that the failure to obtain
major results is due to lack of data or due to lack of relationship between the corporate
management principles and the performance or due to lack of emphasis of companies on the
actual performance of management principles (Eliskandarani, 2014). The management need
to opt for result oriented plans, so that the actual result on the carbon emissions can be
accounted for.
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References
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Donanldson, T. (2012). Ethical issues in business. New Jersey: Prentice Hall.
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