How government procurement shapes corporate climate disclosures, commitments, and actions
HKU Jockey Club Enterprise Sustainability Global Research Institute - Archive
Review of Accounting Studies, Forthcoming
74 Pages Posted: 11 Dec 2022 Last revised: 20 Jan 2025
Date Written: November 22, 2023
Abstract
This study examines how government procurement impacts firms' environmental disclosures and whether they have tangible effects. Using a triple-difference (DDD) research design that exploits the exogenous increase in federal funding allocations to counties based on population census revisions, we find that firms with high exposure to government contracts significantly increase climate disclosure following expanded procurement opportunities. We also document that enhanced disclosure is characterized by a positive tone that emphasizes firms' green investment and commitment to climate adaptation. The effect is more pronounced in counties with a greater increase in procurement volume and when firms have lower ex ante sustainability performance. Finally, we find firms that increase climate disclosure are more likely to earn government contracts, and they undertake real actions by reducing toxic emissions and enhancing the development of green products. Overall, our results suggest government procurement promotes corporate climate responsibility by incentivizing firms to undertake climate mitigation actions.
Keywords: Climate disclosure, Government procurement, Climate change, Census count, Federal spending JEL Classification: H57, M14, M40, O13, Q54
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