Research Project: Analyzing Climate Change and Firm Performance

This research report presents a framework to analyze the impact of climate change on firm performance, incorporating the Climate Disclosure Project (CDP) and legitimacy theory. The report outlines a conceptual framework, detailing independent and dependent variables, including carbon disclosure scores, integration of climate change in business, internal carbon pricing, and future risk considerations. It establishes a hypothesis suggesting a positive relationship between these independent variables and carbon disclosure scores, with firm size as a control variable. Proxy measures, utilizing CDP data and firm age, are proposed to assess carbon disclosure and environmental responsibility. The study aims to analyze the firm’s economic and environmental performance in relation to corporate responses and climate change risks, using regression analysis on data from 1047 companies. The research underscores the importance of corporate responses in addressing climate change and its impact on firm performance.

Running head: RESEARCH PROJECT
Research project
Name of the student
Name of the University
Author note

1RESEARCH PROJECT
Table of Contents
Introduction:....................................................................................................................................2
Literature review:.............................................................................................................................2
Conceptual framework:...................................................................................................................3
Hypothesis:......................................................................................................................................4
Proxy measures:...............................................................................................................................4
Conclusion:......................................................................................................................................4
Reference:........................................................................................................................................6

2RESEARCH PROJECT
Introduction:
A long-standing debate is always there regarding the linkage between the environmental
performance of the corporate and the firm’s performance (Endrikat, Guenther and Hoppe 2014).
This research report provides a research framework to analyze the effect of climate change on
the firm’s performance and efficiency considering the Climate Disclosure Project (CDP) and
integrating the legitimacy theory. This research framework will provide details on the conceptual
framework for developing the research on climate change with the help of CDP data and
legitimacy theory and along with this; it will establish the hypothesis and proxy measures.
Literature review:
Recently it has been observed that various research papers use CDP data and the
legitimacy theory is one of the most applied theory with respect to the CDP disclosure in order to
assess the firm’s policy for inclusion of the climate change (Dahlmann, Branicki and Brammer
2015). Legitimacy theory confronts that if a firm were conforming to its environmental and
social expectations, then it would display enough in order to avoid scrutiny (Fernando and
Lawrence 2014). In order to meet the requirement of the institutional investors, applying
legitimacy theory with the CDP disclosure will lead towards a prediction that the organisation
will display the minimum amount of its necessary (Filatotchev and Nakajima 2014). CDP
disclosures can also be applied in the context of accounting, which will aid to assess the
stakeholder power and ability of the firm. Legitimacy theory also aids to assess the Green House
Gas emission and social performance of the firm making it one of the best tool analyze and
compare the firm’s performance with climate change.

3RESEARCH PROJECT
Integration of climate change in business
Internal price of carbon
Future consideration of risk
Carbon disclosure score
Independent Variables
Control variables: Size of the firm
Dependent Variables
Conceptual framework:
Environmental performance of a firm has been one of the main accelerators, that have
given fume to various empirical researches and mixed results have been perceived from the
previous works (Lee et al. 2015).
Figure 1: Conceptual model
Source: (Created by Author)
In this research framework, there are three independent variables and one dependent
variable along with a control variable. It has been considered that carbon disclosure score is the
dependent variable, which is according to the CDP disclosure is dependent upon the integration
of climate change in business, internal price of carbon and future consideration of risk, making
them the independent variable for this research framework. This research framework considers
that size of the firm is one of the main factors that control the carbon disclosure score, this it will
be considered as the control variable.

4RESEARCH PROJECT
Hypothesis:
H0: There is no relationship between the independent variables and dependent variables
H1: Integration of climate change in business, internal price of carbon and future
consideration of risk positively affects the Carbon disclosure score of a firm
Regression analysis will be used in this research framework to analyze the taste
hypothesis. With 5% level of significance, if the p value is less than 0.05, then H0 will be
rejected and H1 will be accepted (Park 2015). The research will use the data from 1047
companies, which are available from the CDP disclosure. Over the time, CDP changes their
questionnaire and the responses from the firms are in constant flux. Moreover, the responses of
the firm according to the CDP are discretionary compared to CSR report making it one of the
ideal sources to analyze and compare the firm’s climate change responsibility.
Proxy measures:
In order to measure the Carbon Disclosure Score of the firm, this research framework
will use the CDP data as the proxy. It will aid the researcher to trace the carbon disclosure of the
firm and voluntary disclosure of Green House Gas emission . Besides this, the research
framework will utilize the age of the firm to determine its environmental disclosure (Juhmani
2014). Additionally it will guide the researcher to assess its future risk consideration to downsize
the carbon emission.
Conclusion:
Climate change is one of the most important issues around the world. It is a common
believe that climate change alters the firm’s economic and social performance. To analyze the
firm’s economic and environmental performances, corporate responses is a useful tool owing to

5RESEARCH PROJECT
the fact that it will guide the researches to trace out how well a firm has introduced social
responsibility in its business model. Using the CDP disclosure, this research will try to achieve
the desired objective. This research framework will take CDP disclosure data of 1047 companies
and construct the climate change risks and values in a proper way.

6RESEARCH PROJECT
Reference:
Dahlmann, F., Branicki, L. and Brammer, S., 2015, January. Shooting for the Moon?
Relationships between Corporate Environmental Aspirations and Achievements. In Academy of
Management Proceedings (Vol. 2015, No. 1, p. 15994). Academy of Management.
Endrikat, J., Guenther, E. and Hoppe, H., 2014. Making sense of conflicting empirical findings:
A meta-analytic review of the relationship between corporate environmental and financial
performance. European Management Journal, 32(5), pp.735-751.
Fernando, S. and Lawrence, S., 2014. A theoretical framework for CSR practices: integrating
legitimacy theory, stakeholder theory and institutional theory. Journal of Theoretical Accounting
Research, 10(1), pp.149-178.
Filatotchev, I. and Nakajima, C., 2014. Corporate governance, responsible managerial behavior,
and corporate social responsibility: organizational efficiency versus organizational
legitimacy?. The Academy of Management Perspectives, 28(3), pp.289-306.
Juhmani, O., 2014. Determinants of corporate social and environmental disclosure on websites:
The case of Bahrain. Universal Journal of Accounting and Finance, 2(4), pp.77-87.
Lee, V.H., Ooi, K.B., Chong, A.Y.L. and Lin, B., 2015. A structural analysis of greening the
supplier, environmental performance and competitive advantage. Production Planning &
Control, 26(2), pp.116-130.
Park, H.M., 2015. Hypothesis testing and statistical power of a test.