Does the Voluntary Adoption of Corporate Governance Mechanisms Improve Environmental Risk Disclosures? Evidence from Greenhouse Gas Emission Accounting
56 Pages Posted: 17 Oct 2012 Last revised: 9 Jan 2013
Date Written: January 3, 2012
Prior research suggests that voluntary environmental governance mechanisms operate to manage a firm’s reputation as opposed to being a driver of proactive environmental performance activities. In understanding how such corporate governance mechanisms can operate as a symbolic practice, we investigate whether environmental corporate governance characteristics are associated with voluntary environmental disclosure. We examine an increasingly important attribute of a firm’s disclosure setting, namely the disclosure of greenhouse gas (GHG) accounting information. GHG information represents proprietary non-financial information about the firm’s exposure to environmental concerns and is related to the firm’s operations and future profitability. Thus, we expect governance participants would view such information as a potentially important strategic device for managing stakeholder impressions regarding environmental risks. We find that the presence of an environmental committee and a chief sustainability officer (CSO) is positively associated with the likelihood of GHG disclosure and that CSO’s are associated with increased disclosure transparency. Further analysis reveals that the likelihood of disclosure is associated with committee size, number of committee meetings, expertise of committee members and CSO, and overlap between the environmental committee and audit committee. Only expertise of the environmental committee members and the CSO are associated with GHG disclosure transparency, while larger committees tend to be associated with lower transparency. Our results are particularly important to those with interests in evaluating the potential role that corporate governance mechanisms play in responding to stakeholder concerns about environmental risks. Directors and officers who are considering appointment to similar governance positions, may wish to consider what attributes would make such governance positions more influential.
Keywords: Corporate Governance, Greenhouse Gas Disclosures, Corporate Sustainability Officer, Environmental Committees
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