A Preliminary Analysis of Carbon Disclosure among the Electricity Generation Companies in Asia

Abstract

This research examines the carbon disclosure of 75 electricity generation companies in Asia. Using a self-developed carbon disclosure index to assess the disclosure made in the annual reports for the year 2013, we find low level of disclosure among the sample companies (i.e., average score = 12%). The highest level of disclosure is 60%, while 27 reports made no reference to climate change or carbon emissions. The level and extent of disclosure can be attributed to the companies' country of origin with Japan and Hong Kong reported the highest. Most of the disclosure were related to risks and opportunities and plans and strategies to reduce emissions. However, there still lack of quantitative data and, when disclosed, the data were not externally verified. This scenario indicates the need to revisit the reporting requirements pertaining to carbon information. Index Terms-Asia, carbon disclosure, electricity companies. I. INTRODUCTION The electricity sector accounts for a significant share of global carbon dioxide (CO 2) emissions. In year 2013, the industry accounted for 42-percent of CO 2 emissions which has seen an increase of 70 percent since year 1990 [1]. It is also documented that two-thirds of global emissions for 2013 originated from just ten countries in which six of them are Asian, namely China (ranked 1 st), India (3 rd) , Japan (5 th), Korea (7 th), Islamic Republic of Iran (9 th), and Saudi Arabia (10 th) [1]. Since greenhouse gas (GHG) emissions is the factor contributing to climate change (of which 77% is CO 2 emissions) [2], it is rational to pay special attention to the electricity sector and Asian countries. Carbon disclosure is the provision of information by corporations emphasising on concerns, initiatives, or performance related to carbon emissions/climate change [3]. This can be done using various media including annual reports, stand-alone sustainability reports, and corporate websites. Furthermore, legitimacy theory posits that companies would be more likely to provide disclosures when their operations are perceived as inconsistent with societal expectations [4]. Due to reputation as 'dirty' companies, it is expected that electricity companies in Asia would be more forthcoming in disclosing carbon disclosure. However, most Manuscript

Institutional Governance Perspectives of Carbon Emission Disclosures among Electricity Companies in Asia

“…This is due to the detailed guidelines on the climate change related indicators and management approaches available in the guideline. Companies in stronger law enforcement environment tended to have greater carbon disclosures, a finding rendering support to the previous studies [see 16,57]. In essence, countries that have greater government intervention particularly on regulations and enforcements may be forced to disclose more transparent information regarding the impact of their company's operation on the environment.…”

“…Large companies in UK were also found to have increased their GHG disclosures prior to the publication of 2009 DEFRA guidance [55]. Furthermore, regulatory enforcement was found to be related with firms voluntarily responding to an external carbon disclosure initiative [56], the extensiveness of firms' carbon disclosures [57], and firms' decision to have a thirdparty assurance for their sustainability reports [16]. Thus, the following hypothesis is developed: H7: Countries' strength of law enforcement is positively associated with greater extend of carbon emissions disclosures…”

“…The carbon emission disclosures is measured by the disclosure index which is based on [57]. The index originated from the work of [66] which derived the items largely from the CDP Annual Information Request sheets.…”

“…The index originated from the work of [66] which derived the items largely from the CDP Annual Information Request sheets. [66] developed an 18-item disclosure index and used a dichotomous scoring system (1=if disclosed, 0=not disclosed) and [57] refined the index to include two (2) items from [67] (the contribution of renewable electricity to the company's EBITDA in the current reporting year and at a given point in the future) and other items considered by [33] and [68], namely comparative figure for energy consumed; policy/mission/vision, stakeholder engagement program, supporting organizations promoting climate change, and awards received. Overall, the disclosure index used for this research contains 25 items.…”

“…The score for all items was summed up and converted into percentage. For the detailed list of items, refer to [57]. Table 1 below summarises the measures for independent variables and control variables.…”