Research Proposal: Carbon Disclosure Project and Accounting Issues

This research proposal investigates contemporary issues in accounting, focusing on the Carbon Disclosure Project (CDP) and its role in managing carbon emissions and climate change risks. The study employs legitimacy theory to analyze how organizations disclose environmental performance measures and carbon risk management strategies. It explores practical and theoretical motivations, examining the impact of carbon emissions on financial, marketing, operational, and environmental performance. A literature review synthesizes existing research on carbon disclosure, climate change risks, and the CDP's influence on corporate behavior. The proposal highlights the importance of management and accounting teams in implementing risk management procedures and sustainable environmental performance initiatives. The project aims to understand how firms can enhance their environmental sustainability performance through carbon disclosure reports and effective risk management practices. The research also addresses the role of regulators, performance targets, and stakeholder interests in promoting environmental responsibility and financial performance.

Contemporary Issues in Accounting Proposal 1
Contemporary Issues in Accounting: Carbon Disclosure Project

Contemporary Issues in Accounting Proposal 2
Contents
Introduction.................................................................................................................................................3
Practical Motivation....................................................................................................................................4
Theoretical Motivation................................................................................................................................5
Literature Review........................................................................................................................................6
Hypothesis.................................................................................................................................................11
References.................................................................................................................................................12
Appendices................................................................................................................................................14

Contemporary Issues in Accounting Proposal 3
Introduction
The main purpose of this research report is to conduct the empirical analysis of the disclosures of
the environmental performance measures and carbon risk management for minimizing the
negative impacts of the carbon gas emissions and climate change risks. This research report is
aimed at providing an in-depth analysis of the climate change risk management and carbon
disclosure report by using the legitimacy theory to maximize the firm’s efficiency for reducing
the carbon emission hazards as well as managing the environmental performance and climate
change associated risks. This report is based on addressing the adverse impacts of the higher
emissions of the carbon gases and climate risks consequences by releasing and communicating
the information in general through the firm’s website, annual environmental sustainability report,
stand-alone sustainability reports, and CDP (carbon disclosure project data). This report will also
analyze the important roles and responsibilities of the management and accounting team for
following the risk management procedure and sustainable environmental performance
mechanism or initiatives to manage the climate change issues, carbon emissions risks, green-
house impact, and environmental pollution activities (Aerts and Cormier, 2009).

Contemporary Issues in Accounting Proposal 4
Practical Motivation
Nowadays, the multinational organizations are becoming more environmental friendly by
adopting the environmental sustainability strategies and practical implications of the risk
management and control process for reducing the climate change risks and green house impacts
of the carbon emissions on the corporations. The practical aspects of the environmental changes
could be applied to the empirical studies of this research project for managing the climate change
issues and carbon risks to assist in protecting the interests of the stakeholders, well-being of the
communities and better organizational performance. The climate change and carbon footprints
create risks to the organizational financial, marketing, operational and environmental
performance and shareholders’ investment value (Al-Tuwaijri, Christensen, and Hughes, 2004).
The setting of the performance sheets, environmental changes initiatives, and incentives and
reward of the organizational individuals may assist in achieving better performance outcomes in
the form of the organizational financial and environmental performance, and maximize the
shareholders’ returns. The regulators are given authority to regulate the unlikely climate changes,
such as temperature change, rainfall, sea rise level, humidity and Carmon emissions through an
effective control and regulation mechanism for the sustainable environmental performance.
Along with this, the regulators and controllers are required to achieve the coordinated balance
between the higher temperature, humidity, rainfall, and environmental performance (Beatty and
Shimshack, 2010). Additionally, the management and accounting team is required to take
initiatives for maximizing the organizational financial performance, such as assets value, share
prices, huge profits, large sales volumes and huge revenues by encouraging the high investment
or more share by the shareholder and investors in the corporation. This research proposal will
implement the research purpose by engaging the management team to design and implement the

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performance management strategies and initiatives for improving the performances and
productivity of the organizational individuals by providing them safe working conditions,
flexible environment, performance-based rewards and incentives.
Theoretical Motivation
The theoretical motivation part is significant to understand and analyze the issues causing for the
climate change risks and carbon emissions or green-house effect to disturb the natural
environment, communities and societies as well as corporation’s environmental sustainability
performance. This part will understand and analyze the effects of the changes in the strategies,
targets, and initiatives and risk management procedure for reducing the negatives effects of the
climate change, carbon emissions/footprints, and industrial pollution. This research project will
support the empirical studies by integrating the practical research with the theoretical research
for analyzing the impacts of the carbon risks or green-house impact on the firm performance as
well as on the interests of the stakeholders and general public (Botosan, Plumlee, and Wen,
2011). The environment sustainability performance will be linked to the carbon disclosure report,
risks management process and control mechanism for reducing the growing impacts of the
carbon emissions/green-house impact and climate change risks.
This research will also address the building slacks by the managers of the corporation for the
setting of the environmental performance targets, information asymmetry, and management
strategies for the sustainable environment performance by reducing the carbon emissions and
unlikely climate change risks. This research study will also enable the researcher to make
effective judgment and decision for introducing the risk management process and carbon

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disclosure report for the effective management of the carbon risks and climate change issues
(Cho and Roberts, 2010).
Literature Review
From the reviews of the empirical research studies by Clarkson, Overell, and Chapple (2011), it
is analyzed that the climate change and green-house effect have become the concerning issue for
the organizations operating in the Australian environment as well as in the global context that
influence the organizational corporate financial performance, sustainable environmental
performance, and stakeholders’ intention. The empirical studies also state that the impact of the
climate change risks and green-house has been gradually increased during the past two decades
due to the excessive carbon emissions, industrial wastes, pollution, and global warming. But, the
control mechanism, set performance targets, risk management procedure, strategic initiatives,
and carbon disclosure reports have contributed to increase the environmental, financial, and
operational performances as well as protecting the stakeholders’ intention and interests to the
great extent by reducing the excessive carbon emissions, industrial wastes and pollution, and
climate change risks during the last five years (Clarkson, Overell, and Chapple, 2011). The
legitimacy theory of the CDP report has contributed to follow the environmental protection laws,
performance measures, and environment change policies for improving the environmental
performance.
The research studies by Degomir (2010) depict that the organizational industrial wastes and
excessive carbon emissions create the global warming, ozone layer depletion, and climate change
risks (shortage of rainfall, high temperature, and droughts) that cause for the decline in the

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organizational environmental, financial, and operational performances. But, the environmental-
based carbon disclosures and risk management and control procedures have contributed to the
minimization of the risks and maximization of the opportunities. The CDP report emphasizes the
firm’s ability to estimate the expected carbon intensify and identify the potential carbon
emissions and climate change risks and associated opportunities and adoption of the strategic
plans or actions in the term of control mechanism and risk management procedure for the
management of the climate change risks, carbon emissions, and environmental performance
issues (Degomir, 2010).
From the empirical analysis by Dawkins and Fraas (2011), it is reviewed that the carbon
disclosure is a set of the qualitative and quantitative information that relates to the firm’s past
and forecast environmental performance in the term of the carbon emissions levels, exposure to
the financial implications of the climate change and carbon risks and opportunities, and the
future actions to manage the climate change issues and carbon risks. The research also
investigates that the factors, such as company size, leverage, revenues and profitability,
regulatory threats, stakeholder resolutions, economic consequences, stakeholders’ interests and
intention, shareholder or investors’ investment value, corporation’s environmental and
operational management performance are associated with the carbon disclosure project (Dawkins
and Fraas, 2011).
According to Fisher-Vanden and Thorburn (2011), the CDP report shows that the organizations
have the greatest potential with the increased responsibility of the management and accounting
team to set performance targets and take action plans and performance strategy initiatives for

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encouraging and preparing the organizational individuals to understand their roles and
responsibilities in the management of the carbon risks and climate change issues. The CPD
report shows that the firm’s management is more likely to disclose the reliable and quality
information to tackle the climate change risks and historical carbon emissions by partitioning the
carbon risk management and disclosure measurements as a proxy for the environmental change
and carbon performance (such as carbon emissions and toxic releases). The information related
to the environmental emissions performance and climate change risk management procedure will
be released or disclosed by the management and accounting to the stakeholders and general
public through the corporate website and multiple information disclosure channels, such as
stand-alone report, CDP report, and annual environmental performance reports (Fisher-Vanden
and Thorburn, 2011).
In the reviews of Lundholm and Van Winkle (2006), the legitimacy theory depicts that the
environmental sustainable organizations are operating within the environmental protection laws,
performance standards, and social norms under the social contract between the organization and
societies. The environmental sustainable organizations are always trying the best with the
greatest potentials and social responsibility to seek the legitimacy conferred by the societies and
communities based on the social contracts with the organization. If once the legitimacy is
threatened, then the organization will pursue the action plans and strategies to retain the
legitimacy again. According to the stakeholder approach, the organizational management
decisions could not be taken in the absence of the stakeholders. According to this theory, the
participation of the stakeholders is important to communicate or disclose the information
regarding the risk management and control process, environmental changes policies, strategic
initiatives for protecting the stakeholders’ interests (Lundholm and Van Winkle, 2006).

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The empirical research analysis by Lyon and Maxwell (2011) depicts that the legitimacy theory
supports the environmental performance initiatives for enhancing the corporate social
performance and ethics with the societies and stakeholders by reducing the carbon emissions and
excessive industrial waste. According to this theory, the information asymmetry between the
firm and externals (general public and stakeholders) regarding the environmental performance is
important to improve the organizational financial and operational performance. This theory
predicts the positive relationship between the financial-environmental disclosure and
environmental-financial performance. The corporate disclosure of the climate change and
environmental performance is growing area of research interest for the disclosure of the climate
change opportunities and risks, carbon emissions and climate change disclosures in the annual
and sustainability report, stand-alone reports, disclosures in response to the climate change risks
and CDP questionnaire, and association between the carbon disclosure and climate change and
carbon emissions level (Lyon and Maxwell, 2011).
Prado-Lorenzo et. Al views that the CDP is a non-profit or voluntary organization that acts in the
interests of 534 institutional investors. The CDP started requesting the disclosure of the
information related to the carbon emissions and climate change from more than 37,00 firms
across the world. The CDP encourages the firms for the disclosure and identification of the
information of the carbon emissions and climate change risks and opportunities, control
management and risks management procedure, action plans, strategies, performance initiatives to
mitigate the climate change risks and high carbon emissions. The CDP also includes the setting
of the performance targets by the managers for assigning the roles and responsibilities to the

Contemporary Issues in Accounting Proposal 10
organizational individuals in order to mitigate the carbon emissions/green-house impacts and
climate change risks. The energy efficiency, environmental audit, and risk management are
important aspects of the CDP report that encourage the firms to reduce the carbon emissions,
climate risks, and industrial wastes (Prado-Lorenzo, Rodriguez-Dominguez, Gallego-Alvarez,
and Garcia-Sanchez, 2009). The CDP promotes the use of the renewable energy resources,
recycling of the unused or waste materials, balanced preposition between the climate change and
environmental performance, and CSR for reducing the growing impacts of the higher rates of the
carbon emissions and climate change risks.
From the statistics of CERES (2009), it is found that the data from 2000-2008 in the global
context shows that the despite of the carbon emissions and climate change risk awareness,
approximate 76.3% firms do not disclose the climate change risks and opportunities,
environmental change initiatives, strategies, and performance measures to mitigate the climate
risks and carbon emission levels in their annual environmental performance reports. It shows
their less willingness to communicate or share the environmental performance and CDP report in
the general public or with stakeholders. CERES (2009) finds from the CDP reports of top 100
global companies in 2008 that these company don’t disclose any CHG or climate change
risks/opportunity information with the stakeholders and societies. CERES investigates the factors
related to the annual environmental performance and sustainability report disclosure of the CHG
emissions and climate change risks on the environmental and financial performance of the
corporations (CERES, 2009).
Stanny (2010) depicts that there is higher rate of the responsiveness of the firms to the CDP
surveys, but low rates of the disclosure of the detailed information about the climate change and

Contemporary Issues in Accounting Proposal 11
carbon emission risks and strategies to mitigate the negative impacts of the climate change risks.
The median values of the MNCs show that the companies disclosing their carbon emissions and
climate change information, and action plans and strategies to mitigate the CHG and carbon
emissions are $2.3 billion higher than the non-disclosing counterpart corporations (Stanny and
Ely, 2010).
From the statements of Reid and Toffel (2009), it is analyzed that after 2010, the trend for the
carbon emissions and CHG disclosure has been increased to the great extent. The companies
now are more likely to reveal or disclose information about the climate change risks and
opportunities, carbon emissions impacts, company’s environmental change policies and
technologies, and environmental practices and performance measure to satisfy the company’s
stakeholders including shareholders/investors, regulators, employees, and customers. Now, the
most of the MNCs are allowing the information asymmetry between the organization and
outsiders for expressing their environment performance in the sustainability report (Reid and
Toffel, 2009).
Hypothesis
The organizational control process, risk management procedure, and carbon disclosure
information system management will be more effective than the strategic importance and
environmental performance targets for protecting the stakeholders’ interests and community
well-being and organizational performance (CERES, 2009).

Contemporary Issues in Accounting Proposal 12
References
Aerts, W. and Cormier, D. (2009). 'Media legitimacy and corporate environmental
communication', Accounting, Organizations and Society, Vol. 34 (1), pp. 1-27.
Al-Tuwaijri, S., Christensen, T., and Hughes, K. (2004). ‘The relations among environmental
disclosure, environmental performance, and economic performance: a simultaneous equations
approach', Accounting, Organizations and Society, Vol. 29, (5-6), pp. 447-71.
Beatty, T. and Shimshack, JP (2010). 'The impact of climate change information: new evidence
from the stock market', The BE Journal of Economic Analysis & Policy, Vol. 10(1), pp. 1- 27.
Botosan, C., Plumlee, M., and Wen, H. (2011). 'The relation between expected returns, realized
returns, and firm risk characteristics', Contemporary Accounting Research, Vol. 28 (4), pp. 1085-
122.
CERES (2009). ‘Climate risk disclosure in SEC filings: an analysis of 10-K reporting by Oil and
Gas, Insurance, Coal, Transportation and Electric Power Companies’, CERES & Environmental
Defense Fund, [Online]. Available at: http://www.ceres.org/resources/reports/climate-risk-
disclosure-2009/view. (Accessed: 6 September 2017).
Cho, C. and Roberts, R. (2010). 'Environmental reporting on the internet by America's Toxic
100: legitimacy and self-presentation', International Journal of Accounting Information Systems,
Vol. 11 (1).
Clarkson, P., Overell, M., and Chapple, L. (2011), 'Environmental reporting and its relation to
corporate environmental performance', A journal of accounting, finance and business studies,
Vol. 47 (1), pp. 27-60.

Contemporary Issues in Accounting Proposal 13
Dawkins, C. and Fraas, J. (2011). 'Coming clean: the impact of environmental performance and
visibility on corporate climate change disclosure', Journal of Business Ethics, Vol. 100 (2), pp.
303-22.
Dragomir, V. (2010). 'Environmentally sensitive disclosures and financial performance in a
European setting', Journal of Accounting & Organizational Change, Vol. 6 (3), pp. 359-88.
Fisher-Vanden, K. and Thorburn, KS (2011). 'Voluntary corporate environmental initiatives and
shareholder wealth', Journal of Environmental Economics and Management, Vol. 62, (3), pp.
430-45.
Lundholm, R. and Van Winkle, M. (2006). 'Motives for disclosure and non-disclosure: a
framework and review of the evidence', Accounting and Business Research, Vol. 36, pp. 43-8.
Lyon, T. and Maxwell, J. (2011). Greenwash: Corporate environmental disclosure under threat
of audit, Journal of Economics & Management Strategy, Vol. 20(1), pp. 3-41.
Prado-Lorenzo, JM, Rodriguez-Dominguez, L., Gallego-Alvarez, I., and Garcia-Sanchez, IM
(2009). 'Factors influencing the disclosure of greenhouse gas emissions in companies
worldwide', Management Decision, Vol. 47 (7), pp. 1133-57.
Reid, E. and Toffel, M. (2009). 'Responding to public and private politics: corporate disclosure
of climate change strategies', Strategic Management Journal, Vol. 30 (11), pp. 1157-78.
Stanny, E. and Ely, K. (2008), 'Corporate environmental disclosures about the effects of climate
change', Corporate Social Responsibility and Environmental Management, Vol. 15 (6), pp. 338-
48.

Contemporary Issues in Accounting Proposal 14
Appendices
Author Date Title Journal Type of
Paper
(Theoret
ical or
Empiric
al)
If
empiric
al,
researc
h
method
and
sample
If
empirica
l,
depende
nt and
independ
ent
variables
100 word
summary of
contribution to
the research
question
Aerts, W.
and
Cormier,
D.
2009 Media
legitimacy and
corporate
environmental
communication
Journal of
Accounting,
Organizations
and Society
Empirical
Analysis
Empirical
studies
from the
sample of
more than
50
Australian
MNCs
Mixed
research
approach
with
Qualitative
and
quantitative
data based
on the CDP
and
environme
nt changes
of the
companies
Intended to
communicate the
stand-alone report,
CDP report, and
annual environmental
performance reports
with the stakeholders
and targeted audiences
Dragomir,
V.
2010 Environmentally
sensitive
disclosures and
financial
performance in a
European setting
Journal of
Accounting &
Organizational
Change
Empirical
analysis
Specimen
from the
top 25
European
CSR firms
Empirical
analysis
with mixed
data based
on the
qualitative
and
quantitative
information
Performance targets,
strategic initiatives,
and action plans to
emphasize the firms’
potentials and
capabilities to
environmental change
policies and climate
change risk
management
Stanny, E.
and Ely,
K.
2008 Corporate
environmental
disclosures about
the effects of
climate change
Journal on
Corporate
Social
Responsibility
and
Environmental
management
Theoretical
analysis
Based on
the
theoretical
data from
the
scholar
studies,
not
empirical
analysis
Legitimacy theory,
stakeholder theory,
and CSR approach to
analyse the corporate
environmental
performance and
social responsibility of
the firms to follow the
social norms,
community laws, and
environmental
performance standard
measures for reducing
the carbon emissions
and climate risks
Reid, E. 2009 Responding to Strategic Theoretical Based on Communication of the

Contemporary Issues in Accounting Proposal 15
and
Toffel, M.
public and
private politics:
corporate
disclosure of
climate change
strategies
Management
Journal
analysis theoretical
data from
the
reviews of
the
statements
, opinions,
and views
of
different
scholars
and
authors
Carbon disclosures
report and climate
change risk
management process
to the stakeholders and
general public for
emphasizing the
commitment and
strategic performance
of the organization for
the environmental
change and
minimization of the
climate risks and green
house impact of the
excessive carbon
impact
Dawkins,
C. and
Fraas, J.
2011 Coming clean:
the impact of
environmental
performance and
visibility on
corporate climate
change
disclosure
Journal of
Business
Ethics
Empirical
analysis
Empirical
studies
with the
mixed
data
collection
research
method
(both
qualitative
and
quantitativ
e)
sample
size of 40
global
manufact-
uring
industries
Empirical
research
with
regression
analysis
CSR and
Environmental
friendly policies,
climate change and
carbon emissions
disclosures, and
control mechanism to
enhance the
environmental
sustainable
performance,
corporate image, and
visbility