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

Abstract

Using the measure of uncertainty, i.e., the World Economic Policy Uncertainty Index (WUI) developed by Ahir et al. (2018), this study analyses the effect of uncertainty on carbon dioxide emission reporting and performance. The methodological approach uses the Generalized Method of Moments (GMM), utilising a comprehensive set of 604 firms that are obtained from the Fortune Global 500 list and covering the period 2005–2020. We demonstrate that WUI positively influences carbon dioxide emission reporting and negatively influences carbon dioxide emission reporting in order to mitigate the negative effects of uncertainty and increase firm trust by engaging in more sustainable practices. Additionally, our findings illustrate that carbon dioxide emission reporting is greater in firms operating in emissions-intensive industries in order to strengthen investors’ confidence and trust, especially during periods of high WUI. Finally, the study finds that higher emitters have lower carbon dioxide emission performance due to political and social pressures on these firms to incorporate environmental considerations, especially during periods of high WUI. Particularly for the regulatory body and the industry association when creating improved legislation and recommendations on environmental and social reports relating carbon emission reporting and performance, our empirical findings should have urgent practical ramifications.