How does world economic policy uncertainty influence the carbon dioxide emission reporting and performance? Study of Fortune Global 500 firms

Abstract

This study contributes significantly to the field by utilising the World Economic Policy Uncertainty (WEPU) Index, as devised by (Ahir in Nat Bureau Econ Res 2022), to scrutinise its impact on carbon dioxide emission reporting and performance. Employing the generalised method of moments (GMM) on a substantial dataset of 604 Fortune Global 500 firms spanning from 2005 to 2020, our analysis reveals crucial insights. The research elucidates the dual influence of WEPU Index: a positive correlation with carbon dioxide emission reporting and a negative correlation aimed at mitigating adverse effects and promoting sustainable practices, thereby enhancing firm trust. Moreover, the findings shed light on how companies in emission-intensive industries tend to ramp up carbon dioxide emission reporting, potentially to bolster investor confidence, particularly during high WEPU Index periods. Furthermore, this study uncovers a compelling association between high emitters and lowered carbon dioxide emission performance, stemming from political and social pressures to integrate environmental considerations. Notably, this pressure intensifies during periods of increased WEPU Index. The empirical results presented in this study carry immediate practical implications. Specifically, they offer valuable insights for regulatory bodies and industry associations, guiding the development of enhanced environmental and social reporting regulations and guidelines, particularly concerning carbon emission reporting and performance.