An International Study of Determinants of Voluntary Carbon Assurance

Abstract

Driven by a scarcity of literature on the issue, this study investigates corporate incentives for external carbon emissions assurance. Our sample comprises 5,184 firm-year observations across 44 countries between 2010 and 2014. The descriptive result suggests that 66 percent of the sample firms received assurance and the number of firms that adopted carbon assurance increased during the period investigated. We find that firms exposed to higher carbon risks are more likely to voluntarily seek carbon assurance. Moreover, firms that had adopted carbon reduction initiatives, with an environmental committee, with carbon reduction incentives, or with higher carbon disclosure scores tend to obtain assurance. Our study is based on a number of corporate social responsibility theories; namely, legitimacy, signaling, information asymmetry, and institutional theory. This study contributes to the literature by empirically testing the validity and applicability of these theories in the emerging field of nonfinancial assurance services. JEL Classifications: M42; Q54; Q56.

Corporate choice of providers of voluntary carbon assurance

“…In summary, we are currently in the transition toward a carbon-neutral economy, and carbon assurance is no doubt one of the most powerful tools that is expected to play a critical role in achieving carbon-reduction targets (Datt et al, 2018;Datt et al, 2019;Tang, 2019 Note. For example, although CDP provides the most comprehensive and comparable database for an international study, its database is primarily based on voluntary participation of the companies.…”

“…Further, the study is based on a sample of the largest companies in the world, so careful consideration should be exercised when generalizing the results to small-and medium-sized entities. In summary, we are currently in the transition toward a carbon-neutral economy, and carbon assurance is no doubt one of the most powerful tools that is expected to play a critical role in achieving carbon-reduction targets (Datt et al, 2018;Datt et al, 2019;Tang, 2019). There are many future research opportunities here.…”

“…Next, we control for firm size. Large firms tend to receive intensified stakeholder scrutiny and media coverage; thus, they are more visible to the community and more politically sensitive (Bewley & Li, 2000;Brammer & Pavelin, 2006;Kang & Gray, 2011 (Datt et al, 2018;Hay, 2013;Hay, Knechel, & Wong, 2006), the specific direction of the association between the choice of assurer and these two variables is difficult to predict. Finally, year and nine sector-related dummy variables are included to control for any potential time and industry effects.…”

The direct and moderating effects of power distance on carbon transparency: An international investigation of cultural value and corporate social responsibility

“…Many studies on CSR examine the determinants that affect companies' commitment to environmental preservation (Carballo‐Penela & Castromán‐Diz, ; Caritte, Acha, & Shah, ; Glass, Cook, & Ingersoll, ; Habib & Bhuiyan, ; S. Wang, Li, & Zhao, ; Yu, Lo, & Li, ) and to social and environmental disclosure (D'Amico, Coluccia, Fontana, & Solimene, ; Galbreath, ; Gallego‐Alvarez, Ortas, Vicente‐Villardón, & Álvarez Etxeberria, ; Helfaya & Moussa, ; Jizi, ; Lokuwaduge & Heenetigala, ). Because carbon disclosure is voluntary, the reliability of CSR disclosure is a concern (Datt, Luo, & Tang, ; Datt, Luo, Tang, & Mallik, ; Luo & Tang, ). Thus, the practice of assurance and study of its determinants and effects on CSR reports is emerging (De Beelde & Tuybens, ; Kolk & Perego, ).…”

“…Wang, Li, & Zhao, 2018;Yu, Lo, & Li, 2017) and to social and environmental disclosure (D'Amico, Coluccia, Fontana, & Solimene, 2016;Galbreath, 2017;Gallego-Alvarez, Ortas, Vicente-Villardón, & Álvarez Etxeberria, 2017;Helfaya & Moussa, 2017;Jizi, 2017;Lokuwaduge & Heenetigala, 2017). Because carbon disclosure is voluntary, the reliability of CSR disclosure is a concern (Datt, Luo, & Tang, 2018a;Datt, Luo, Tang, & Mallik, 2018b;Luo & Tang, 2014). Thus, the practice of assurance and study of its determinants and effects on CSR reports is emerging (De Beelde & Tuybens, 2015;Kolk & Perego, 2010).…”