The impact of carbon disclosure mandates on emissions and financial operating performance

Abstract

We examine the impact of a disclosure mandate for greenhouse gas emissions on firms’ subsequent emission levels and financial operating performance. For UK-incorporated listed firms a carbon disclosure mandate was adopted in 2013. Our difference-in-differences design shows that firms affected by the mandate reduced their emissions by about 8% relative to a control group of European firms. At the same time, our tests indicate that the treated firms experienced no significant changes in their gross margins. Taken together, our findings indicate that the reporting mandate had a real effect on the variable to be disclosed without adversely affecting the financial operating performance of the treated firms.

Executive Compensation Tied to ESG Performance: International Evidence

“…Finding that the result differs somewhat for the three ratings is perhaps not surprising given that prior literature documents a significant divergence across these metrics, including their coverage (e.g., Berg et al, 2020). 26 Recalling our finding above that ESG disclosure mandates tend to make the adoption of ESG pay more likely, the results obtained for equation ( 6) are aligned with earlier findings that firms located in countries with mandatory carbon reporting achieve incrementally lower carbon emissions (Grewal, 2021;Downar et al 2021). 27 Beyond having a smaller coverage of our sample firms, KLD ratings are only readily available until 2018.…”

Harmonizing corporate carbon footprints

“…Besides transparency for external stakeholders, binding mandates for scope 1 and 2 can also yield emission reductions without a negative effect on financial performance, as initial empirical evidence from the United Kingdom indicates 52 , 53 . Additionally, this would make it easier for companies to add up scope 1 and 2 emissions of all suppliers in order to obtain their scope 3 emissions.…”

Real Effects of a Widespread CSR Reporting Mandate: Evidence from the European Union's CSR Directive

“…[2017]), and for specific reporting outcomes such as greenhouse gas emissions (Jouvenot and Krueger, [2020], Downar et al. [2021], Tomar [2021]) or extraction payments (Rauter [2020]). Yet it is unclear whether and how these findings translate to other countries and industries.…”