Business Strategy And Environment: The Role Of CDP Disclosures In Economic Performance

Economic performance of the nation

Discuss about the Business Strategy and Environment.

It is necessary to identify the stakeholders associated with the economy of a nation in making relevant disclosures. In this case, the government, the domestic and foreign firms, the national community and the suppliers, which possess the highest priority in the nation. This is because with the increasing negative impact of global warming, it is necessary for the stakeholders to make relevant CDP disclosures in order to comply with the relevant accounting standards. Thus, the role of the stakeholders is crucial to establish the relationship between CDP and country disclosures.

The economic performance of a nation is an impending factor to ascertain whether the environmental issues are mentioned in the priority list. For instance, the governments of the big European countries have made it mandatory for all the firms operating in the countries to include CDP disclosures in their annual reports. Disclosure of such information would help the government of nation to determine the carbon emissions and adequate steps could be taken to improve the environmental sustainability of the country.

The theoretical structure associated with the voluntary disclosures comprise of different constituents of disclosures. There are different theories, which would help in identifying the country specific determinants of voluntary disclosures through CDP. The most notable frameworks for creating the base of theoretical structure include the stakeholder framework and legitimacy theory. According to this theory, the success of a nation is largely dependent on the CDP disclosures of the organisations in the nation and their relationships with the associated stakeholders. The main reason for choosing the stakeholder theory in this study is to compare between the stakeholder and social issues. The social issues are those concerns, which need to be the subject matter of regulation and legislation.

The legitimacy theory, on the other hand, help in assessing the legality of the corporate disclosures of a nation. Therefore, it helps in identifying the particular events, which act as a threat to the legitimacy of a nation.

Authors	Date	Title	Journal	Type of Paper	Empirical	Summary related to contribution of the research questions
Eleftheriadis I. M. & Anagnostopoulou E. G.	2014	Business Strategy and the Environment	Relationship between corporate climate change disclosures and firm factors	Journal	No	The researchers have acknowledged the climate change as the primary source of economic, physical and social risks to the worldwide communities. Therefore, this article aims to evaluate the association between the disclosures related to environmental information and additional organisational factors. The disclosures of the organisations, which are listed in Athens Stock Exchange and the organisational factors like leverage, size and profitability are chosen as the variables for this research. The disclosures of the corporate climate change have been chosen as the dependent variable and the above-mentioned organisational factors are selected as the independent variables. It has been found that corporate climate change disclosure is intensely related with the firm size; however, it does not possess any linkage with leverage and profitability. However, there is a scope for further investigation in future through selection of a large sample size and inclusion of additional organisational factors.
Luo, L. & Tang, Q.	2014	Pacific Accounting Review	Carbon tax, corporate carbon profile and financial return	Journal	No	The research paper focuses on evaluating the effects of carbon tax on the market return of the Australian organisations. In addition, the researchers have taken into account the varying impact of tax on individual organisations having diverse carbon profiles. These include several influential dynamics like cost of emission, policies pertaining to climate change and carbon disclosure. From the application of the proposed methods, it has been found that carbon tax has negative influence on the wealth of the shareholders, since it is gauged by abnormal returns.
Depoers F., Jeanjean T. & Jérôme T.	2014	Journal of Business Ethics	Voluntary Disclosure of Greenhouse Gas Emissions: Contrasting the Carbon Disclosure Project and Corporate Reports	Journal	No	According to the researchers, carbon emissions lead to global warming and this has been a serious menace to the human beings. Therefore, the organisations are engaged in providing voluntary disclosures on greenhouse gas emissions through various communication modes to address this issue. The theoretical framework used for this research includes stakeholder theory, which focuses on assessing the influence of carbon management on the society. From the results obtained, the researchers have concluded that the managers of the organisations acclimatise their strategy of disclosures for fulfilling the information requirements of the associated stakeholders. This research could be enhanced by extension of the information scope examined through accumulation of country samples.
Rankin M., Windsor C. & Wahyuni D.	2011	Accounting, Auditing & Accountability Journal	An investigation of voluntary corporate greenhouse gas emissions reporting in a market governance system: Australian evidence	Journal	Yes	The article focuses on examining the relationship among reporting of greenhouse gas emissions, internal systems of an organisation, peripheral privately promulgated advices and trading of EU ETS. The theory pertaining to institutional governance systems has been chosen as the major theory to progress ahead with the research. The descriptive statistics have been used, from which it has been found that the firms disclosing both approved and non-approved have greater quality of corporate governance.
Freedman M. & Jaggi B.	2005	The International Journal of Accounting	Global warming, commitment to the Kyoto protocol, and accounting disclosures by the largest global public firms from polluting industries	Journal	No	The research paper aims to investigate the pollution-related disclosures and greenhouse gases on the part of the organisations in those countries, which have adopted the ratification of the Kyoto Protocol. The major countries, which could not be included are USA, Australia and Switzerland. The stakeholder theory and legitimacy theory have been taken into consideration for this research to depict a convincing doctrine for disclosures of environmental pollution. It has been obtained that Kyoto Protocol has been highly effective, as the firms, which have adopted the same, are making higher pollution disclosures. However, the disclosures need to be consistent to meet the information requirements of the stakeholders.
Kolk A., Levy, D. & Pinkse, J.	2008	European Accounting Review	Corporate Responses in an Emerging Climate Regime: The Institutionalization and Commensuration of Carbon Disclosure	Journal	No	This article investigates the responses of the corporate organisations regarding climate change associated with the creation of reporting mechanisms for GHG. The theories pertaining to governance and institutionalisation are illustrated to gain an insight into the research topic. In this case, the country wise corporate disclosures have been made using the process of descriptive analysis. From the evaluation, it has been inferred that the carbon disclosure projects have compelled the instructional investors to urge firms to make relevant environmental disclosures relating to the activities of climate change. However, this research could be improved further with the help of trading regimes related to carbon emissions in future, which would help in examining the disclosures accurately.
Luo L., Tang, Q. & Lan Y.C.	2013	Accounting Research Journal	Comparison of propensity for carbon disclosure between developing and developed countries	Journal	No	The journal concentrates on investigating the variations in carbon disclosures between developed and developing nations and the function of availability of resources to describe such variations. The resource-constraint theory has been described to construct the literature of this research. From the findings, it has been inferred that the organisations in developing nations are highly ineffective in making carbon disclosures due to non-availability of financial resources. However, the firms selected in this research are large; thus, the small and medium-sized firms are ignored in this research.
Iatridis, G.E.	2013	Emerging Markets Review	Environmental disclosure quality: Evidence on environmental performance, corporate governance and value relevance	Journal	No	The research paper concentrates on measuring the quality of environmental disclosure in an advanced emerging nation of Malaysia. In addition, it examines the association between the quality of disclosure, corporate governance and its influence on the perceptions of the investors. It has been found that the environmental disclosures are positively correlated with corporate governance, which add relevant values and improve the perceptions of the investors.
Lee, S. Y., Park, Y. S., & Klassen, R. D.	2015	Corporate Social Responsibility and Environmental Management	Market responses to firms’ voluntary climate change information disclosure and carbon communication	Journal	No	This paper concentrates on evaluating the impact of voluntary carbon disclosures of the firms on capital markets on Korea between 2008 -2009. From the results obtained, it has been found that the CDP of disclosures of the firms have negative relationship with the market. This implies that there investors do not consider the carbon disclosures as a major factor, instead, they are worried about the costs of organisations in order to address global warming. The researchers have also that the Korean firms could mitigate such market shocks through release of the news in media.
Andrew, J. & Cortese, C.L.	2012	Australasian Accounting, Business and Finance Journal	Carbon disclosures: comparability, the carbon disclosure project and the greenhouse gas protocol	Journal	No	The current research has aimed to evaluate the carbon disclosures from the different Australian companies. It has been observed that the data production help in assisting the Australian companies to set their positions in the market. It has been claimed that the disclosure process could make the market sensitive to the international environment problems like climate change. It has been found that Australian firms have not been effective in making relevant financial disclosures, as the Kyoto Protocol has not been adopted.

According to Freedman & Jaggi (2005), the Kyoto Protocol has been highly effective in making relevant financial disclosures. The sample size selected for the research comprises of 120 organisations from 20 nations. The pollution disclosures are chosen as the dependent variable and the remaining as the independent variables. In order to test the variables, regression analysis has been utilised to ascertain the effects of the emissions of carbon dioxide on the pollution disclosures of the Kyoto organisations. It has been obtained that Kyoto Protocol has been highly effective, as the firms, which have adopted the same, are making higher pollution disclosures. However, the disclosures need to be consistent to meet the information requirements of the stakeholders.

Theoretical structure

As cited by Luo, Tang & Lan (2013), the researchers have distinguished between developing and developed countries to assess the quality of carbon disclosures. 15 developed and developing nations have been selected for this research having different legal and socio-political environments. The carbon disclosure has been taken as the dependent variable and the developing nations and financial resources are selected as the independent variables. From the findings, it has been inferred that the organisations in developing nations are highly ineffective in making carbon disclosures due to non-availability of financial resources. However, the firms selected in this research are large; thus, the small and medium-sized firms are ignored in this research. Therefore, this research could be improved further by taking into account the different firm sizes for making better inferences.

Null Hypothesis, H₀: The environmental disclosures of the countries have no relationship with the CDP disclosures

Alternative Hypothesis, H₁: The environmental disclosures of the countries have significant relationship with the CDP disclosures

References:

Andrew, J. & Cortese, C.L. (2012). Carbon disclosures: comparability, the carbon disclosure project and the greenhouse gas protocol. Australasian Accounting, Business and Finance Journal, 5(4), 5-18.

Depoers, F., Jeanjean T. & Jérôme T. (2014). Voluntary Disclosure of Greenhouse Gas Emissions: Contrasting the Carbon Disclosure Project and Corporate Reports. Journal of Business Ethics, 134(3), 445-461.

Eleftheriadis, I. M. & Anagnostopoulou E. G. (2014). Relationship between corporate climate change disclosures and firm factors. Business Strategy and the Environment, 24(8), 780-789.

Freedman, M. & Jaggi, B. (2005). Global warming, commitment to the Kyoto protocol, and accounting disclosures by the largest global public firms from polluting industries. The International Journal of Accounting, 40(3), 215-232.

Iatridis, G.E. (2013). Environmental disclosure quality: Evidence on environmental performance, corporate governance and value relevance. Emerging Markets Review, 14, 55-75.

Kolk A., Levy, D. & Pinkse, J. (2008). Corporate Responses in an Emerging Climate Regime: The Institutionalization and Commensuration of Carbon Disclosure. European Accounting Review, 17(4), 719-745.

Lee, S. Y., Park, Y. S., & Klassen, R. D. (2015). Market responses to firms’ voluntary climate change information disclosure and carbon communication. Corporate Social Responsibility and Environmental Management, 22(1), 1-12.

Luo L., Tang, Q. & Lan Y.C. (2013). Comparison of propensity for carbon disclosure between developing and developed countries. Accounting Research Journal, 26(1), 6-34.

Luo, L., & Tang, Q. (2014). Carbon tax, corporate carbon profile and financial return. Pacific Accounting Review, 26(3), 351-373.

Rankin M., Windsor C. & Wahyuni D. (2011). An investigation of voluntary corporate greenhouse gas emissions reporting in a market governance system: Australian evidence. Accounting, Auditing & Accountability Journal, 24(8), 1037-1070.

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