Climate Change Risk-related Disclosures in Extractive Industries

Baboukardos, Diogenis; Dionysiou, Dionysia; Slack, R. Douglas; Tsalavoutas, Ioannis; Tsoligkas, Fanis

doi:10.36399/gla.pubs.234936

Cited by 7 publications

(9 citation statements)

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“…In developing this point, Tucker & Lowe (2014: 406) argued that "professional accounting bodies act as mediators between academia and practice ...". Indeed, recent examples of this dynamic related to our topic include Adams (2017Adams ( , 2020Adams et al, 2020) and Baboukardos et al (2021), all reports that have been published by professional accounting bodies. Furthermore, professional accounting bodies have worked collaboratively on these matters through the Accounting Bodies Network of the Prince of Wales' Accounting for Sustainability charity 3 .…”

Section: Introductionmentioning

confidence: 98%

Academics and policymakers at odds: the case of the IFRS Foundation Trustees’ consultation paper on sustainability reporting

Adams

Mueller

2022

SAMPJ

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Purpose This paper aims to examine the nature of academic engagement with policy and the (lack of) responsiveness by policymakers to the scientific community through the development of the International Financial Reporting Standards (IFRS) Foundation Trustees’ Consultation Paper on Sustainability Reporting (IFRS Foundation, 2020). Design/methodology/approach The 577 submissions to the IFRS Foundation consultation were reviewed, and 39 were identified as being submitted by academics. These 39 included collectively 104 academic signatories from 74 organisations or networks and 20 countries. They were analysed using NVivo. Drawing on the literature on techniques used to discredit or credit arguments, we examine the academic responses to the consultation questions, particularly those concerning: the role of the IFRS Foundation; perceptions of the “investor perspective”; the audience for reporting; the definition of materiality; and a climate first approach. Findings The majority (72%) of academic submissions were opposed to the IFRS Foundation Trustees’ proposals on key issues. This dissenting majority collectively have substantial research records in sustainability reporting and its outcomes. Those supportive were significantly less likely to reference research or state their credentials and, despite being supportive, nevertheless raised concerns with the proposals. Practical implications Senior academics undertaking research in the field have engaged, in unusually high numbers, with a policy development they believe will not work and maybe counter to achieving sustainable development. The findings underscore the importance of highlighting the discrediting strategies and tactics used in this discursive “battle”. The findings have implications for the legitimacy of policymakers on sustainability-related initiatives which are not engaging with the relevant scientific community. Social implications Policy initiatives that are judged as potentially harmful to sustainable development attract more intense, activist and sustained engagement supported by research evidence. Originality/value The paper identifies the importance of evidence-based academic engagement and highlights strategies that engaging academics need to persist over. It highlights the collective view of academics in the field on the IFRS Foundation consultation paper.

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Section: Introductionmentioning

confidence: 98%

Academics and policymakers at odds: the case of the IFRS Foundation Trustees’ consultation paper on sustainability reporting

Adams

Mueller

2022

SAMPJ

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“…We do acknowledge, however, that these pressures are unlikely to be uniform across industries and sectors or even across firms. Prior research has shown that the amount of carbon information a firm discloses tends to correspond to their industry's carbon profile and the associated public perceptions to do 'what is right' (Comyns, 2016;Baboukardos et al, 2021a). Therefore, cognitive legitimacy may mean different industries to make different disclosures.…”

Section: Medar 323mentioning

confidence: 99%

“…That said, the empirical evidence on climate-related disclosures is somewhat limited (Baboukardos et al, 2021a(Baboukardos et al, , 2021b. Significant gaps exist in terms of the status quo reporting practices, the best practices firms should implement to fulfil their stakeholders' information needs and how firms might go about transitioning to a "net zero" carbon strategy (Scholten et al, 2020).…”

Section: Introductionmentioning

confidence: 99%

The disclosure of climate-related risks and opportunities in financial statements: the UK’s FTSE 100

Borghei,

Linnenluecke,

Bui

2023

MEDAR

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Purpose This paper aims to explore current trends in how companies disclose climate-related risks and opportunities in their financial statements. As part of the authors’ analysis, they examine: whether forward-looking assumptions and judgements are typically considered in reporting climate-related risks/opportunities; whether there are differences in the reporting practices of firms in carbon-intensive industries versus non-carbon-intensive industries; and whether negative media reports have an influence on the levels of disclosure a firm makes. Design/methodology/approach The authors chose content analysis as their methodology and examined the financial statements published by firms listed on the UK’s FTSE 100 between 2016 and 2020. This analysis is framed by Suchman’s three dimensions of legitimacy, being pragmatic, cognitive and moral. Findings Climate-related disclosures in the notes and financial accounts of these firms did increase over the period. Yet, overall, the level the disclosures was inadequate and the quality was inconsistent. From this, the authors conclude that pragmatic legitimacy is not a particularly strong driving factor in compelling organisations to disclose climate-related information. The firms in carbon-intensive industries do provide greater levels of disclosure, including both qualitative and quantitative (monetary) content, which is consistent with cognitive legitimacy. However, from a moral legitimacy perspective, this study finds that firms did not adapt responsively to negative media coverage as a way of reflecting their accountability to broader public norms and values. Overall, this analysis suggests that regulatory enforcement and a systematic reporting framework with adequate guidance is going to be critical to developing transparent climate-related reporting in future. Originality/value This paper contributes to existing studies on climate-related disclosures, which have mainly examined the ‘front-half’ of annual reports. Conversely, this study aims to shed light on these practices in the “back-half” of these reports, exploring the underlying reasons for reporting climate-related risks and opportunities in financial accounts. The authors’ insights into the current disclosure practices make a theoretical contribution to the literature. Practitioners can also draw on these insights to improve how they report on climate-related risks and opportunities in their financial statements.

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“…For example, firms disclose significant value through their reserves which are at risk of becoming 'stranded' or impaired due to steps taken to combat climate change. Baboukardos et al (2021) found that only 60 percent of firms in the extractive industries provide a reserves/resources statement, 10 percent include climate change risks in future cash flow estimations as part of impairment calculations, and no firms identify climate change risk as important in determining assets' useful lives. Besides indicating that firms need to do much more to recognise climate change risks in financial reporting, these results also signal prospective amendments to accounting standards such as IAS 36 (Impairment of Assets) and IAS 37 (Provisions, Contingent Liabilities and Contingent Assets).…”

Section: Introductionmentioning

confidence: 99%

Is the extractive industries standard still fit for purpose?

Cortese

Moerman

Chang

2021

Accounting & Finance

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The application of AASB 6 by extractive industries firms is examined to determine the issues and challenges faced by financial statement preparers when applying the standard. The results show that while the area‐of‐interest method is extensively chosen to account for exploration and evaluation costs, there was lack of consistency in its description. Interviews revealed that while preparers reported flexibility in the application of AASB 6, they sought more guidance to reduce reliance on external publications. The findings show that while preparers supported the retention of AASB 6, more guidance on its application was needed, especially in its interaction with new accounting standards and regulations.

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Climate Change Risk-related Disclosures in Extractive Industries

Cited by 7 publications

References 0 publications

Academics and policymakers at odds: the case of the IFRS Foundation Trustees’ consultation paper on sustainability reporting

Academics and policymakers at odds: the case of the IFRS Foundation Trustees’ consultation paper on sustainability reporting

The disclosure of climate-related risks and opportunities in financial statements: the UK’s FTSE 100

Is the extractive industries standard still fit for purpose?

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