Detecting Carbon Emission Disclosure Management

36 Pages Posted: 4 Jan 2018 Last revised: 7 Dec 2020

See all articles by Thomas Kaspereit

Thomas Kaspereit

Universite du Luxembourg

Kerstin Lopatta

University of Hamburg - Faculty of Business, Economics, and Social Sciences

Date Written: January 2, 2018


This paper measures empirically the extent to which firms manipulate their carbon emission disclosures. Whereas many studies provide empirical evidence for earnings management, the quantitative literature is silent with respect to firms’ intention to manage non-financial disclosures. We fill this gap and develop an empirical model to evaluate whether firms manipulate carbon disclosure in their favor after having incurred environmental controversy costs. Our analyses are based on all firms for which carbon emissions data are available in the Asset4 database. We measure carbon emission disclosure management in two ways: 1) as the (in)consistency between the sign of changes in cost of goods sold (input) and changes in carbon emissions (output), and 2) as the residual from a regression of changes in reported carbon emissions (outputs) on changes in cost of goods sold, depreciation, selling and general administrative expenses, and other operating expenses (inputs). We find support for our hypothesis that firms engage more frequently in decreasing emission disclosure management around years in which they incurred environmental controversy costs. We find no evidence that audits of sustainability reports prevent environmental disclosure management. Thus, external assurance is not able to mitigate the problem of biased environmental disclosures. We attribute this finding to the limited assurance of sustainability report audits. Our findings have implications for the audit profession, which should revise its practice of providing only limited assurance levels on CSR reports and ought to start to transition from a mere labelling to a thorough auditing process. Our results imply that investors and other stakeholders should treat carbon emission disclosures with caution.

Keywords: Sustainability Reporting, Carbon Emissions, CSR, Carbon Emission Disclosure Management

Suggested Citation

Kaspereit, Thomas and Lopatta, Kerstin, Detecting Carbon Emission Disclosure Management (January 2, 2018). Available at SSRN: or

Thomas Kaspereit (Contact Author)

Universite du Luxembourg ( email )

Université du Luxembourg
Campus Kirchberg
Luxembourg, 1359
+352 466644 6728 (Phone)

HOME PAGE: http://

Kerstin Lopatta

University of Hamburg - Faculty of Business, Economics, and Social Sciences ( email )

Von-Melle-Park 9
Hamburg, 20146

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