Is Mandatory Carbon Disclosure Associated With Real Carbon Performance: A Study of South African Companies Listed on JSE

Thomas NYAHUNA; Mishelle DOORASAMY; Bomi NOMLALA

doi:10.38142/ijesss.v4i6.793

Authors

Thomas NYAHUNA University of Kwazulu Natal, South Africa
Mishelle DOORASAMY University of Kwazulu Natal, South Africa
Bomi NOMLALA University of Kwazulu Natal, South Africa

DOI:

https://doi.org/10.38142/ijesss.v4i6.793

Keywords:

Carbon Disclosure, Climate Change, Carbon Performance, Carbon Disclosure Project,, South Africa

Abstract

With the increasing importance of carbon disclosure as a tool to reduce carbon emissions, the enduring question remains whether carbon disclosure reduces carbon emissions. This paper analyzes the rapport between "carbon disclosure and carbon performance" of 82 Johannesburg Stock Exchange (JSE) listed mining and manufacturing firms grounded on data released from 2010 to 2021. The environmental disclosure index is used in this study to quantify carbon disclosure, and the carbon intensity of the selected firms is used to gauge carbon performance. Using IBM SPSS Statistics 26, the study discovers that carbon disclosure (p< -0.023) is negatively associated with carbon performance. It means that an increase in carbon disclosure minimizes carbon performance.

Additionally, the study finds that carbon disclosure improves financial performance proxied by return on assets. The findings strongly support King Code III and IV's position that companies can improve environmental and financial performance by extensively disclosing environmental impacts. In this case, carbon disclosure can act as an instrument to improve corporate sustainability and counteract climate change. In line with the research results, it is recommended that policymakers in South Africa promote and adopt policies that compel and regulate companies to disclose their environmental impacts.

Downloads

Download data is not yet available.

References

Alsaifi, K., Elnahass, M., & Salama, A. (2020). Carbon Disclosure and Financial Performance: UK Environmental Policy. Business Strategy and the Environment, 29(2), 711-726. https://doi.org/10.1002/bse.2426

Appannan, J. S., Said, R. M., Ong, T. S., & Senik, R. (2020). Environmental Proactivity on Environmental Performance: An Extension of Natural Resource-Based View Theory (NRBV). International Journal of Industrial Management, 5, 56- 65. https://doi.org/10.15282/ijim.5.0.2020.5622

Clarkson, P. M., Li, Y., Pinnuck, M. & Richardson, G. D. (2015). The Valuation Relevance of Greenhouse Gas Emissions Under the European Union Carbon Emissions Trading Scheme. European Accounting Review, pp. 24, 551–580. https://doi.org/10.1080/09638180.2014.927782

Clarkson, P. M., Li, Y., Richardson, G. D. & Vasvari, F. P. (2011). Does it Pay to be Green? Determinants and Consequences of Proactive Environmental Strategies. Journal of Accounting and Public Policy, pp. 30, 122–144. https://doi.org/10.1016/j.jaccpubpol.2010.09.013

Dahlmann, F., Branicki, L., & Brammer, S. (2019). Managing Carbon Aspirations: The Influence of Corporate Climate Change Targets on Environmental Performance. Journal of Business Ethics, 158(1), 1–24. https://doi.org/10.1007/s10551-017-3731-z

Delmas, M. A., Nairn-Birch, N., & Lim, J. (2015). Dynamics of Environmental and Financial Performance: The Case of Greenhouse Gas Emissions. Organization & Environment, 28(4), 374–393. https://doi.org/10.1177/1086026615620238

Dhaliwal, D. S., Li, O. Z., Tsang, A., & Yang, Y. G. (2011). Voluntary Nonfinancial Disclosure and the Cost of Equity Capital: The Initiation of Corporate Social Responsibility Reporting. The Accounting Review, 86(1), 59–100. https://doi.org/10.2308/accr.00000005

Doda, B., Gennaioli, C., Gunderson, A., Grover, D., & Sullivan, R. (2016). Are Corporate Carbon Management Practices Reducing Corporate Carbon Emissions? Corporate Social Responsibility and Environmental Management, 23(5), 257-270. https://doi.org/10.1002/csr.1369

Griffin, P. A., Lont, D. H., & Sun, E. Y. (2017). The Relevance to Investors of Greenhouse Gas Emission Disclosures. Contemporary Accounting Research, 34(2), 1265–1297. https://doi.org/10.1111/1911-3846.12298

Hassan, O. A., & Romilly, P. (2018). Relations Between Corporate Economic Performance, Environmental Disclosure, and Greenhouse Gas Emissions: New Insights. Business Strategy and the Environment, 27(7), 893–909. https://doi.org/10.1002/bse.2040

He, Y., Tang, Q., & Wang, K. (2013). Carbon Disclosure, Carbon Performance, and Cost of Capital. China Journal of Accounting Studies, 1(3–4), 190–220. https://doi.org/10.1080/21697221.2014.855976

Hummel, K., & Schlick, C. (2016). The Relationship Between Sustainability Performance and Disclosure–Reconciling Voluntary Disclosure Theory and Legitimacy Theory. Journal of Accounting and Public Policy, 35(5), 455–476. https://doi.org/10.1016/j.jaccpubpol.2016.06.001

Jaggi, B., Allini, A., Macchioni, R., & Zampella, A. (2018). Do Investors Find Carbon Information Useful? Evidence from Italian Firms. Review of Quantitative Finance and Accounting, 50(4), 1031–1056. https://doi.org/10.1007/s11156-017-0653-x

Knox-Hayes, J. & Levy, D. L. (2011). The Politics of Carbon Disclosure as Climate Governance. Strategic Organization, pp. 9, 91–99. https://doi.org/10.1177/1476127010395066

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. https://doi.org/10.1002/csr.1321

Lewandowski, S. (2017). Corporate Carbon and Financial Performance: The Role of Emission Reductions. Business Strategy and the Environment, 26, 1196-1211. https://doi.org/10.1002/bse.1978

Linnenluecke, M., Smith, T. & Whaley, R. (2018). "The Unpaid Social Cost of Carbon", Accounting Research Journal, 31(2), 122-134. https://doi.org/10.1108/ARJ-08-2017-0138

Li, D., Huang, M., Ren, S., Chen, X., & Ning, L. (2018). Environmental Legitimacy, Green Innovation, and Corporate Carbon Disclosure: Evidence from CDP China 100. Journal of Business Ethics, 150(4), 1089–1104. https://doi.org/10.1007/s10551-016-3187-6

Liesen, A., Hoepner, A. G., Patten, D. M., & Figge, F. (2015). Does Stakeholder Pressure Influence Corporate GHG Emissions Reporting? Empirical Evidence from Europe. Accounting, Auditing & Accountability Journal, 28(7), 1047–1074. https://doi.org/10.1108/AAAJ-12-2013-1547

Luo, L. & Tang, Q. (2014). Does Voluntary Carbon Disclosure Reflect Underlying Carbon Performance? Journal of Contemporary Accounting & Economics, 10, 191-205. https://doi.org/10.1016/j.jcae.2014.08.003

Luo, L. (2015). The Influence of Institutional Contexts on the Relationship Between Voluntary Carbon Disclosure and Carbon Emission Performance. Accounting & Finance, 59(2), 1235–1264. https://doi.org/10.1111/acfi.12267

Meng, X., Zeng, S., Shi, J. J., Qi, G., & Zhang, Z. (2014). The Relationship Between Corporate Environmental Performance and Environmental Disclosure: An Empirical Study in China. Journal of Environmental Management, 145, 357–367. https://doi.org/10.1016/j.jenvman.2014.07.009

Mikial, M., Marwa, T., Fuada, L. L. & Meutia, I. (2019). The Effects of Environmental Performance and Environmental Information Disclosure on Financial Performance in Companies Listed on the Indonesia Stock Exchange. Archives of Business Research, 7(11), 67-77. https://doi.org/10.14738/abr.711.7379

Mokhtar, N., Jusoh, R. & Zulkifli, N. (2016). Corporate Characteristics and Environmental Management Accounting (EMA) Implementation: Evidence from Malaysian Public Listed Companies (PLCs). Journal of Cleaner Production, 136:111-122. https://doi.org/10.1016/j.jclepro.2016.01.085

Mungai, E. M., Ndiritu, W., & Rajwani, T. (2020). Do Voluntary Environmental Management Systems Improve Environmental Performance? Evidence from Waste Management by Kenyan Firms. Journal of Cleaner Production, 265, 121636. https://doi.org/10.1016/j

Neto, G., Vendrametto, O., Naas, I. A., Palmeri, N. L. & Wagner, L. (2016). Environmental Impact Reduction as a Result of Cleaner Production Implementation: A Case Study in the Truck Industry. Journal of Cleaner Production, 129(2016):681-692. https://doi.org/10.1016/j.jclepro.2016.03.086

Ong, J., Noordin, R. & Jaidi, J. (2020). Environmental Management Accounting in the Malaysian Manufacturing Sector. Asian Journal of Accounting Perspective, 13(1):85-103. https://doi.org/10.22452/AJAP.vol13no1.5

Nishitani, K., Jannah, K., Kaneko, S. & Hardinsyah, J. (2017). Does Corporate Environmental Performance Enhance Financial Performance? An Empirical Study of Indonesian Firms. Environmental Development, 23(2017):10-21. https://doi.org/10.1016/j.envdev.2017.06.003

Peng, J., Sun, J., & Luo, R. (2015). Corporate Voluntary Carbon Information Disclosure: Evidence from China’s Listed Companies. The World Economy, 38(1), 91–109. https://doi.org/10.1111/twec.12187

Qian, W. & Schaltegger, S. (2017). Revisiting Carbon Disclosure and Performance: Legitimacy and Management Views. The British Accounting Review, 49(2017): 365-379. https://doi.org/10.1016/j.bar.2017.05.005

RASTUTI, T. (2022). Principles Of Appropriateness In The Indonesian Insurance Legal System: Study On Demutualization In The Globalization Flow. International Journal of Environmental, Sustainability, and Social Science, 3(1), 179–188. https://doi.org/10.38142/ijesss.v3i1.206

Shen, F., Ma, Y., & Wang, R. (2019). Does Environmental Performance Affect Financial Performance? Evidence from Chinese Listed Companies in Heavily Polluting Industries. Quality and Quantity, 53, 1941–1958. https://doi.org/10.1007/s11135-019-00849-x

Siddique, N., Paheding, S., Elkin, C. P., & Devabhaktuni, V. (2021). U-net and its Variants for Medical Image Segmentation: A Review of Theory and Applications. Ieee Access, p. 9, 82031–82057. https://doi.org/10.1109/ACCESS.2021.3086020

Sutantoputra, A. W., M. Lindorff, & E. P. Johnson. (2012). The Relationship Between Environmental Performance and Environmental Disclosure, Australasian Journal of Environmental Management, 19, 51–65. https://doi.org/10.1080/14486563.2011.646752

Tang, S., & Demeritt, D. (2018). Climate Change and Mandatory Carbon Reporting: Impacts on Business Process and Performance. Business Strategy and the Environment, 27(4), 437–455. https://doi.org/10.1002/bse.1985

Uyar, A., Karaman, A. S., & Kilic, M. (2020). Is Corporate Social Responsibility Reporting a Tool of Signalling or Greenwashing? Evidence from the Worldwide Logistics Sector. Journal of Cleaner Production, 253, 119997. https://doi.org/10.1016/j.jclepro.2020.119997

Velte, P., Stawinoga, M., & Lueg, R. (2020). Carbon Performance and Disclosure: A Systematic Review of Governance-Related Determinants and Financial Consequences. Journal of Cleaner Production, 253, 120063. https://doi.org/10.1016/j.jclepro.2020.120063

Zhang, C. (2017). Political Connections and Corporate Environmental Responsibility: Adopting or Escaping? Energy Economics, 68:539–547. https://doi.org/10.1016/j.eneco.2017.10.036