ACC30008 Accounting Theory: Climate Change Disclosure Report, TP2 2018

This report examines climate change disclosures within the context of accounting theory, prepared for the Australian Accounting Standards Board (AASB). It reviews four scholarly journal articles, analyzing the importance of climate change-related disclosures in sustainability and annual reports. The research investigates the role of accounting and accountants in addressing environmental concerns, exploring the perception and attitude of accountants towards environmental issues in developed and developing countries. Findings suggest that while non-financial information regarding climate change is valuable to some stakeholders, its importance may vary among different investor groups. The report highlights the need for improved comparability and standardization in carbon disclosure practices to enhance decision-making usefulness.

Running head: ACCOUNTING THEORY
Accounting theory
Name of the Student:
Name of the University:
Author’s Note:

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Executive summary:
The report is prepared for addressing the disclosures related to the climatic change in the context
of any countries across the world. For this purpose, several journal articles have been selected
that has helped in gaining knowledge about the importance and relevance of disclosure of
climatic change in their sustainability and annual report. The findings generated from the
research paper would help in contributing to the importance of disclosing non financial
information in their report as it act as one of the crucial factors in making investment decisions.

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Table of Contents
Introduction:....................................................................................................................................2
Discussion:.......................................................................................................................................3
Analysis of selected journal articles:...............................................................................................3
Conclusion:......................................................................................................................................8
References list:...............................................................................................................................10

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Introduction:
The report is prepared for conducting the research on the disclosures of climatic change
in the context of any country. For the external and internal decision making, a disclosure about
the corporate carbon is presented as the voluntary mechanism and increasingly common place.
Data production regarding the climatic change tends to assist the corporations in strategically
positioning themselves in terms of opportunities faced and the carbon risks. Disclosures of
carbon lead to the promising of assisting with the decisions of capital allocation that is external
to the firm. The broad purpose of this study is to conduct research on the disclosures related to
the climatic change incorporating carbon disclosures by reviewing the journal articles that is
relevant in the context of any country. In addition to this, the accounting theory in relation to the
climatic disclosures would also be addressed. The articles selected will be addressing the issue of
climatic disclosures in different aspects along with exploring the practice of disclosure of carbon
in practice.
Discussion:
In this section, reviewing of the four selected journal articles have been for analyzing the
climatic disclosures with the help of research perspective and using current accounting
theoretical knowledge. In addition to this, the research paper or the article discussed intends to
conduct the investigation of the role of accounting and accountants in response to the change in
the matter of environmental concerns. The perception of accountants towards the environmental
issues has also been explored and the attitude of accountants is explored within the corporation
of developed and developing countries.

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Analysis of selected journal articles:
The first article titled “Shareholder proposals: A catalyst for climate change-related
disclosure, Analysis and Action” presents different case studies in relation to climatic
disclosures in the context of different corporations. It presents that the proposals of shareholders
are considered as an effective means for furthering the progress related to any climatic change in
American oil and gas companies. It has been found that such proposals of the climatic change
related disclosures acts as a catalyst for action and analysis. Proposals of shareholder tend to
have an educational effect on fostering dialogue between shareholders and management
(Rindfleisch 2008).
Analysis of the case study presented in the article depicts that Anadarko Corporation
petroleum intends to make genuine efforts for analyzing and disclosing the climatic change
business practice and reduction in the emission of green house gas. The proponents and directive
of shareholders regarding the climatic change disclosures were agreed by Anadarko. A company
wise management system of green house emission is established by Anadarko and the same have
been incorporated in the management plan (Najah and Cotter 2012). It has been found that
significant efforts have been taken by the corporations in reducing the emission of green house
across its operations. In addition to this, ConocoPhillips Company is also committed to address
the climatic change issue. However, the emission of green house gas is limited and there is no
existing benchmark of performance and progress. The progress of company regarding the
quantification of reduction of green house emission is difficult to determine. Compared to their
competitors, Anadarko and Conoco Philips have been lagging behind and it is required by them
to take substantive actions for mitigating the risks related to climatic change and taking the
advantage of available business opportunities. Business are required to implement and set green

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house emission for pursuing the technologies of renewable energy and taking the advantage of
the opportunities that is bestowed by the climatic change (Grauel and Gotthardt 2016).
Nevertheless, it can be inferred that the shareholder proposals had acted as a catalysts in
analyzing, disclosing and taking actions related to climatic change disclosures.
The second article titled “Carbon disclosures: Comparability, carbon disclosure project
and Green house gas protocol” has the objective of providing meaningful for decision making
in relation to climatic change. In this study, the carbon disclosures of mining companies of
Australia have been examined by conducting exploratory study that is in compliance with the
regime of voluntary carbon disclosures. The carbon related data that is produced by mining
companies have been examined in compliance with the information request. Data relating to the
carbon disclosure project is supposed to provide assistance institutional investors in making
decisions about allocation of resources by incorporating then financial position alongside the
green house gas position (Andrew and Cortese 2011). However, the information relating to the
carbon disclosure is considered new for making investment decisions in contrast of financial
information that has been used for long.
It has been examined by the exploratory research that the project of carbon disclosure has
increased the amount of carbon related corporate information along with the scope and size
holding impressively on the allocation decision related to widespread climatic change. All this
helps in disciplining the market towards the carbon sensitivities and sustainable future. However,
there is no literature on the data of carbon disclosure project based on country and industry
research. Furthermore, it is possible to document the limitations of carbon disclosure project that
would help in providing opportunities to deeply exploring the reasons behind the choice of
company to not respond to the information request. The paper has identified a number of

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challenges concerning decision usefulness for the information that is derived from the
implementation of such methods. It has been found that there are considerable variations in the
method used for accounting of green house emissions between reporting organization and this
makes it difficult for users to understand, interpret and make the comparison. The facilitation of
data comparison is done by making improvement in standardize report and quality improvement
(Sullivan and Gouldson 2017). From the analysis of the sample companies, it was ascertained
that the data related to carbon disclosure project lacked comparability and uniformity. The
classification and change in method of carbon disclosure project have compounded this problem.
Moreover, the validity of carbon disclosure data across companies has been found to be difficult
in determination. It has been portrayed that the one of the integral factors to the financial
reporting is carbon reporting. Although, it has been found that the significant response rates have
been generated by carbon disclosure project in producing information that is not considered
important to investors. Assessment of the performance of company in relation to other is not
possible by the production of data without creating an emphasis on comparability (Cormier and
Magnan 2015). In the social and environmental reporting, one of the key missing ingredients that
have been cited is comparability which is certainly true in case of disclosure of carbon project.
The third articles titled “Are climatic change disclosures an indicator of superior
climatic change management risk” have been extracted from research paper on Sustainable
business and development of University of Southern Queensland”. Under this article, the
disclosure of climatic change and environmental performance of organization have been
revisited by using the theories of economic based disclosures. The implementation of carbon risk
management is implemented and its relevance to non investor stakeholders and investors has
been examined. It has been fond from the research paper that carbon risk management is

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significantly and positively related with the quality of disclosures of climatic carbon change
(Najah and Cotter 2012).
For the purpose of fulfilling the description of carbon disclosures is regarded s a set of
qualitative and quantitative information in relation to the forecasted and last level of carbon
emissions. Analysis of disaggregated scores has revealed that the disclosure quality is enhanced
by the practices of carbon risk management. It has been found that the disclosure is not
associated with the historical carbon risk management. Contrary to this, the strategies of future
and current carbon risk management are positively associated with such strategies quality.
Furthermore, the importance of disclosure measurements and the partitioning the carbon risks
management have also been highlighted (Kjellstrom 2016). The consequences and benefits of
activities related to environmental performance disclosures have been debated in this research
paper.
Data related to the disclosures of climatic change have been extracted from the
sustainability and annual report of the companies. It has been found that the analysis of carbon
intensity is parallel to the emission trading category. Analysis of the research paper indicates that
the market value of firms is not enhanced by a better and quality carbon disclosure. The
participants of stock market is not effectively engaged in making the assessment about the
carbon information generated from annual and sustainability report (Najah and Cotter 2012). The
reason is attributable to the fact that investors are more reliable on other information channels for
assessing risk management and carbon emissions.
Furthermore, it is indicated by the research that management of carbon risk is
significantly and positively associated with the sustainability report and quality of carbon

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disclosure. Hence, the findings generated from the research paper lend support to the disclosure
theories based one accountants and economies. Organization tends to make disclosure of their
strategies and policies if they are dealing adequately with the risk and opportunities related to
climatic change. The management practices of disclosing carbon is done by the superior firms to
differentiate from inferior firms (Cormier and Magnan 2015). The issues associated with the
information asymmetry can be reduced by such disclosures between external and internal parties
to the organization.
The journal article titled “Multinational corporations and climatic adoptions- Are we
asking the right questions? A review of current knowledge and research perspective” has been
extracted from centre for climatic change economics and policy. Many multinational
corporations are taking steps forward to incorporate the adoption to climatic change into their
operations. The review presented in the article highlights on the impact of outcome and
identification of adaption of climatic change disclosures on MNC. There is a growing
recognition at both national and international level concerning the climatic change magnitude
(Averchenkova et al. 2015). However, not much attention has been received in the management
and business academic literature in relation to the evaluation of climatic change in general by the
private sectors.
It is suggested by the review that regarding the climatic disclosures adoption, MNC are
currently in the initial stage. The corporations are required to tend data for responding to the
concerns of climatic disclosures by designing various strategies such as making improvement to
resilience to climatic change, redesigning products and building workforce. Furthermore, it has
been found that the key driver for Multinational Corporation to adopt the climatic change
disclosures is due to the policy makers (Damert and Baumgartner 2018). However, additional

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research is also required for analyzing different drivers of such climatic change adaption. It is
required by corporations to have a better understanding of the existing level of corporate
adoption relating to the internal and external drivers.
Conclusion:
The study illustrates the importance of climatic change disclosure to the corporations by
reviewing the four journal articles extracted from different sources. Analysis of the findings
generated from research papers have yielded mixed results where the non financial information
disclosure relating to the climatic change have been important to stakeholders such as non
investors and are least important to stakeholders such as investors. In addition to this, the
research paper has also found that the climatic change disclosures have not been extensively
adopted by the firms presented in the first journal article. However, the findings generated have
found to be a contributory factor in accounting theories.

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Reference and Bibliography list:
Adhikari, A., Emerson, D., Gouldman, A. and Tondkar, R., 2015. An examination of corporate
social disclosures of multinational corporations: A cross-national investigation. Advances in
accounting, 31(1), pp.100-106.
Andrew, J. and Cortese, C.L., 2011. Carbon disclosures: comparability, the carbon disclosure
project and the greenhouse gas protocol. Australasian Accounting, Business and Finance
Journal, 5(4), pp.5-18.
Aragón-Correa, J.A., Marcus, A. and Hurtado-Torres, N., 2016. The natural environmental
strategies of international firms: old controversies and new evidence on performance and
disclosure. Academy of Management Perspectives, 30(1), pp.24-39.
Averchenkova, A., Crick, F., Kocornik-Mina, A., Leck, H. and Surminski, S., 2015.
Multinational corporations and climate adaptation–Are we asking the right questions? A review
of current knowledge and a new research perspective. Grantham Research Institute on Climate
Change and the Environment Working Paper, 183.
Backman, C.A., Verbeke, A. and Schulz, R.A., 2017. The drivers of corporate climate change
strategies and public policy: a new resource-based view perspective. Business & Society, 56(4),
pp.545-575.
Cormier, D. and Magnan, M., 2015. The economic relevance of environmental disclosure and its
impact on corporate legitimacy: An empirical investigation. Business Strategy and the
Environment, 24(6), pp.431-450.

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Damert, M. and Baumgartner, R.J., 2018. External Pressures or Internal Governance–What
Determines the Extent of Corporate Responses to Climate Change?. Corporate Social
Responsibility and Environmental Management, 25(4), pp.473-488.
Grauel, J. and Gotthardt, D., 2016. The relevance of national contexts for carbon disclosure
decisions of stock-listed companies: a multilevel analysis. Journal of Cleaner Production, 133,
pp.1204-1217.
Hahn, R., Reimsbach, D. and Schiemann, F., 2015. Organizations, climate change, and
transparency: Reviewing the literature on carbon disclosure. Organization &
Environment, 28(1), pp.80-102.
Kjellstrom, T., 2016. Impact of climate conditions on occupational health and related economic
losses: A new feature of global and urban health in the context of climate change. Asia Pacific
Journal of Public Health, 28(2_suppl), pp.28S-37S.
Lee, S.Y., Park, Y.S. and Klassen, R.D., 2015. Market responses to firms' voluntary climate
change information disclosure and carbon communication. Corporate Social Responsibility and
Environmental Management, 22(1), pp.1-12.
Najah, M.M. and Cotter, J., 2012. Are climate change disclosures an indicator of superior
climate change risk management. Australian Centre for Sustainable Business and Development.
Retrieved from http://mams. rmit. edu. au/myfzrqb7lhvw1. pdf.
Rindfleisch, E.N., 2008. Shareholder proposals: A catalyst for climate change-related disclosure,
analysis, and action. Berkeley Bus. LJ, 5, p.45.