A Comparison of Voluntary and Mandated Climate Change-Related Disclosure

Journal of Contemporary Accounting and Economics 15 (2019) 243–266
Contents lists available at ScienceDirect
Journal of Contemporary
Accounting and Economics
journal homepage: www.elsevier.com/locate/jcae
A comparison of voluntary and mandated climate

change-related disclosure
Luckmika Perera a,⇑, Christine Jubb b, Sandeep Gopalan c
a
Department of Accounting, Deakin Business School, Deakin University, 221, Burwood Highway, Burwood, VIC 3125, Australia
b
Centre for Transformative Innovation, Faculty of Business and Enterprise, Swinburne University, John Street, Hawthorn, VIC 3122, Australia
c
Deakin Law School, Deakin University, 221, Burwood Highway, Burwood, VIC 3125, Australia
a r t i c l e i n f o a b s t r a c t
Article history: This study draws on legitimacy theory to investigate the relationship between mandatory
Received 2 September 2018 disclosure of greenhouse gas emissions by companies that are subject to specific environ-
Revised 2 May 2019 mental legislation (the Australian National Greenhouse Energy Reporting Act 2007) and the
Accepted 7 May 2019
level of voluntary environmental disclosures. Using a sample of 535 observations, we find
Available online 8 June 2019
that i) Overall, legislation-affected companies increase their disclosures compared with
non-affected companies, ii) As many companies reduce their disclosures as increase them,
JEL code:
iii) there is an increase in the level of emissions volume disclosures in legislation-affected
M14
M41
companies compared with the same company pre-implementation, iv) legislation-affected
M48 higher emitters have higher levels of voluntary disclosures. These findings are consistent
with legitimacy theory, which predicts differential disclosures in circumstances to avoid
Keywords: scrutiny.
Environmental legislation Crown Copyright Ó 2019 Published by Elsevier Ltd. All rights reserved.
Voluntary disclosure
Environmental disclosures
Greenhouse gas emissions
Greenwashing
1. Introduction
The introduction of targeted environmental performance disclosure legislation for high greenhouse gas (GHG) emitters
can be expected to have a significant effect on companies that are subject to that legislation. The resulting increase in polit-
ical visibility and the potentially damaged legitimacy from public availability of actual emissions data can be expected to
influence voluntary environmental disclosure decisions by these companies (Berthelot et al., 2003). This study examines
whether these a priori expectations hold.
The legislative context is the implementation of Australia’s National Greenhouse and Energy Reporting Act 2007 (‘the NGER
Act’) effective from 1 July 2008. The NGER Act is applicable to any entity, regardless of its legal structure, that emitted carbon
dioxide (CO2) at or above certain thresholds that reduced each year between 2009 and 2011 inclusive and then stabilised. We
investigate the relationship between environmental performance and voluntary environmental disclosures over this period.
We expect the NGER Act to affect this relationship because of the higher political visibility of companies required to
disclose their emissions to a centralised government repository under the Act. Data within this repository, comprised of each
⇑ Corresponding author.
E-mail address: luckmika.perera@deakin.edu.au (L. Perera).
https://doi.org/10.1016/j.jcae.2019.100157
1815-5669/Crown Copyright Ó 2019 Published by Elsevier Ltd. All rights reserved.
244 L. Perera et al. / Journal of Contemporary Accounting and Economics 15 (2019) 243–266
reporting organisation’s identity and volume of emissions, are made publicly available online annually. There is no financial
or other penalty imposed under the NGER Act connected with the level of emissions itself. In Australia, environmental dis-
closure in annual or other types of corporate reports is voluntary.
Research is emerging on the relationship between voluntary environmental disclosure and an objective measure of GHG
emissions performance (e.g., Braam et al., 2016; Meng et al., 2014; Giannarakis et al., 2014, 2017a,b, 2018), or some other
objective measure of environmental performance (e.g. Clarkson et al., 2011). Some studies are limited by reliance on data
provided voluntarily to the Carbon Disclosure Project (CDP), or on infrequent corporate voluntary public disclosure of GHG
emissions. Companies making these voluntary choices to disclose actual emissions may not be representative, particularly
of high emitters (Ilinitch et al., 1998), and CDP emission disclosures are not necessarily consistent with disclosures in cor-
porate reports (Depoers et al., 2016).
The study is motivated by the mixed results in the literature on the relationship between emissions disclosures and vol-
untary environmental disclosures. Taking advantage of a research setting in which listed companies meeting a minimum
volume of emissions are mandated to report actual emissions to government under a condition of random audit—which
increases incentives for accurate disclosures—overcomes the issues with measuring environmental performance noted by
Ilinitch et al. (1998).
Legitimacy theory is used as the lens through which to examine—for listed high emitters subject to the NGER Act—(i) any
change in voluntary environmental disclosure following the Act’s implementation, (ii) the relationship between these disclo-
sures and GHG emissions for these companies, and (iii) the relationship between voluntary disclosure of GHG emission levels
in corporate reports and actual GHG emissions.
The objectives of this study are to i) enhance current understanding of the effects of environmental legislation on
legislation-affected firms’ voluntary environmental disclosures; and ii) provide evidence for evaluating the public policy
merits of this type of legislation. Crucially, although the law purports to be ‘hard’ in mandating companies’ emissions dis-
closure to the government, in substance it is ‘soft’ since negative consequences of actual emissions performance are not
penalised, and there is no mandated requirement to replicate the disclosure in corporate reports (Fontana et al., 2015;
Pedersen et al., 2013).
This study contributes to the literature given that, with the exception of Patten (2002), Al-Tuwaijri et al. (2004) and
Clarkson et al. (2008), research examining the relationship between voluntary and mandated disclosure resulting from leg-
islation is scant. Additionally, it enables evaluation of the efficacy of this type of legislation that mandates indirect reporting
of one aspect of corporate environmental performance publicly through a government agency. If legislation that is bereft of
penalties and enforcement costs can achieve significant results, it offers a low-cost avenue to enhance corporate environ-
mental performance.
Crucially, the incremental cost of disclosure of emissions through annual or sustainability reports (hereafter annual
reports) for legislation-affected companies is comparatively low. Business processes and systems are needed to collect
the required data for compliance purposes and so publication of these data in corporate reports is facilitated. Thus, the leg-
islation provides a natural research setting in which to examine the relationship between enforced business-to-government
disclosure of environmental performance—subsequently made public with company attribution—and disclosure of a volun-
tary nature. Examining the relationship between voluntary and mandatory disclosure in an environmental context is of
interest to theorists, those interested in environmental issues, those with financial stakes in organisations, regulators and
those engaged with public policy on GHGs and climate change issues. Whether voluntary environmental disclosure
increases, decreases or remains constant when mandatory environmental performance disclosure is introduced is an impor-
tant public policy issue (de Villiers and van Staden, 2006; Walden and Schwartz, 1997). As Mobus (2005, p. 492) notes, it is
unlikely that voluntary disclosure alone will inform relevant and interested stakeholders reliably about organisational envi-
ronmental performance. However, we argue that it is important to evaluate the effects of legislation (e.g., Mulherin, 2007)
and, if the level of voluntary environmental disclosure in annual reports decreases in the presence of mandated environmen-
tal disclosure, then important public policy questions arise. The relationship between voluntary and compelled disclosure is
important because environmental information disclosed voluntarily can be selective or inadequate and, hence should be
treated with some scepticism (e.g., Deegan and Rankin, 1996; Hahn and Lülfs, 2014; Ramus and Montiel, 2005). Alterna-
tively, some firms may seek to avoid negative consequences even in the presence of a poor environmental record
(Freedman and Stagliano, 2008b) by using pro-active disclosures.
Findings reveal a complex reaction to the legislation. While overall, there is a positive and significant association between
legislation-affected companies and environmental disclosure, additional analysis reveals that a similar number of companies
reduced their disclosures as increased it, thereby balancing out the overall change in disclosures. A similar positive result is
found when environmental performance disclosures are compared with those of a random sample of non-NGER companies.
The results hold when comparing the environmental performance disclosures for NGER-affected companies in each NGER
reporting year with those of a prior year. In terms of the relationship, there is clear evidence that environmental disclosures
generally increase as GHG emissions increase; similarly, specific disclosure of actual emissions in corporate annual reports is
more frequent as emissions increase.
In the next section, we present the background to the NGER Act and the theoretical framework used in the study, as well
as a review of the relevant literature. This is followed by hypothesis development, an explanation of the research design,
presentation of results and the conclusion section, which discusses the results, limitations and ideas for future research.
L. Perera et al. / Journal of Contemporary Accounting and Economics 15 (2019) 243–266 245
2. Theoretical framework and literature review
2.1. Background to the national greenhouse energy reporting Act 2007
The passage of the NGER Act represents the enactment of an expressive law, which is typically a piece of legislation
framed to express a pro-social goal or hitherto latent consensus on contentious issues (Sunstein, 2000). The Act’s Explanatory
Memoranda explains that the NGER Act’s purpose was to create a national framework for the disclosure and reporting of GHG
emissions, to ‘inform government policy; inform the Australian public; help meet Australia’s international reporting obliga-
tions; assist Commonwealth, State and Territory government programmes and activities, and avoid duplication of similar
reporting requirements in the states and territories’ (NGER Act, s.3). The Act’s Appendix 1 details the reducing thresholds
for GHG emissions over the years 2009–11 that brought entities within the ambit of the Act, after which the thresholds
remained constant.1
2.2. Theoretical framework: legitimacy theory
Through a legitimacy theory lens, environmental performance is considered a significant component contributing to the
level of legitimacy enjoyed by an organisation (Carey et al., 2017; Merkl-Davies and Brennan, 2007). Several studies have
used legitimacy theory to evaluate voluntary disclosures (e.g., Cho and Patten, 2007) based on the framework proposed
by Dowling and Pfeffer (1975) and Lindblom (1993). Dowling and Pfeffer (1975) argue that organisations seek to establish
congruence between their social values and activities, and those of the social system in which they operate. Suchman’s
(1995) extension to these early works has been used in explaining organisational legitimacy in an environmental disclosure
context (Mobus, 2005). Alrazi et al. (2015) provide an extensive review of this theory as applied to environmental legitimacy
and accountability; hence only a brief overview is provided here.
The theory posits that organisations may seek legitimacy for two main reasons: ensuring continuity or credibility of the
organisation; and seeking support from society (Suchman, 1995). Organisations can obtain both pragmatic and moral legit-
imacy through public discourse and interaction (Suchman, 1995). When operations are either problematic or poorly institu-
tionalised, substantial efforts are needed to build legitimacy. Once legitimacy is achieved, organisations must maintain it.
Repairing damaged legitimacy requires considerable effort by an organisation.
Companies have a variety of reasons for seeking legitimacy; for instance, the desire to attract capital, enhance brand,
attract consumers, maintain social acceptability and recruit good employees. Therefore, companies have the incentive to dis-
close information to market participants for a variety of reasons, including to attract investors, enhance reputation, assuage
community activists, build social capital and generate or maintain legitimacy.
Organisations operating for some time can be argued to have gained a certain level of legitimacy. Managers of these
organisations are likely to be interested in sustaining ongoing legitimacy by protecting past achievements and maintaining
existing legitimacy through use of voluntary disclosures. Since organisations have a perceived responsibility to the environ-
ment, voluntary environmental disclosures are likely to play a significant role in achieving legitimacy.
Under legitimacy theory, it is not clear whether a positive or negative relationship can be expected between the NGER-
legislated environmental performance disclosed to government and separate voluntary environmental disclosures in corpo-
rate reports. On the one hand, a positive relationship can be expected since high-emitting firms may attempt to rationalise
their situation by providing higher levels of positive disclosures to protect both pragmatic and moral legitimacy (Cowan and
Deegan, 2011; Deegan, 2002; Deegan and Rankin, 1996; Deegan et al., 2002; Patten, 1992). Conversely, de Villiers and van
Staden (2006) point out salient situations in which a reduction or no change in voluntary environmental disclosure might
occur. For instance, the notion that managers may reduce or desist from disclosure in the hope it will assist in reducing
the importance of the issue is plausible in the GHG emissions context of this study.
Managers may also engage in creative compliance. De Villiers and van Staden (2006) explain that, particularly for certain
industries, avoidance tactics such as ceremonial conformity, symbolic gestures of compliance and restricted access to infor-
mation on the company’s practices (i.e. concealment), may occur. For instance, in seeking information about environmental
disclosures, O’Dwyer (2002) interviewed Irish managers who pointed out that reacting to particular social or environmental
concerns using disclosures can provide implicit legitimacy to some stakeholders’ claims. This may cause concern among
powerful stakeholders, such as fund managers. However, refraining from reacting can assist in making such concerns disap-
pear. That study further found that managers refrained from some forms of environmental disclosures because the disclo-
sures were perceived to be ineffective as a legitimisation strategy. De Villiers and van Staden (2006) also identify moving
from a strategy of (re)gaining legitimacy to one of maintaining it as a potentially disclosure-reducing scenario, since the lat-
ter is easier than the former (O’Donovan, 2002).
De Villiers and van Staden (2006, p. 767) report that the most important reason given by companies for not disclosing
environmental information is a reluctance to report sensitive information. Disclosing sensitive information can, in itself,
become a legitimacy threat, and particular types of social information may become sensitive as societal norms or legislation
change. Indeed, this scenario is highly relevant to the context of this current study. Stubbs et al. (2013, p. 464) highlight that
1
(http://www.climatechange.gov.au/en/government/initiatives/national-greenhouse-energy-reporting/publication-of-data.aspx).
in their interviews with 23 of Australia’s top 200 companies not producing sustainability reports, ‘some perceived that
greater disclosure raised more risks than benefits. A miner and retailer believed that disclosing too much information is risky
as it may draw unwanted attention to the company’.
The current research is conducted in a setting that challenges legitimacy through public disclosure of actual GHG perfor-
mance. This measure is used as an objective quantification of one aspect of environmental performance, to examine whether
companies respond to NGER in terms of their separate voluntary sustainability-related information and, if so, how. It is dif-
ficult to acquire data for corporate environmental performance that uses objective, verifiable measures. Commercial prod-
ucts such as Bloomberg’s KLD and Thomson Reuters’ ASSET4 that provide environmental, social and governance scores
use proprietary methods that mix corporate disclosure with other disclosures and create ambiguity between these scores
as a performance or disclosure measure (de Villiers et al., 2017). Nazari et al. (2017) analyse the relationship between cor-
porate social responsibility (CSR) disclosure and CSR performance. They find that a higher level of disclosure is positively
associated with stronger CSR performance. Clear, transparent language used in disclosures increases transparency of a firm’s
performance (i.e. substantive disclosures), while less readable language reduces transparency.
2.3. The literature and hypothesis development
For studies that examine the relationship between GHG emissions and environmental disclosures, as does this study, one
problem is reliance on voluntarily disclosed emissions data. Liesen et al. (2015) find that voluntary disclosures are seldom
complete in a European setting. Giannarakis et al. (2017b) examine 119 United Kingdom (UK) FTSE 350 listed firms for 2014
using the CDP Climate Performance Leadership Index and Climate Disclosure Leadership Index. Using ordered logistic regres-
sion, they find that an increase in direct GHG emissions leads to dissemination of less rather than more information. The
authors conjecture this outcome to arise in order to attract less interest on behalf of investors, government authorities
and other stakeholders, giving the impression of an ‘average’ performance firm. Braam et al. (2016) examine environmental
reporting by Dutch private and public companies for 2009–11 in association with several measures of environmental per-
formance, including disclosure of GHG. They find a positive association between disclosure and emissions, consistent with
legitimacy theory.
Giannarakis et al. (2014) and Fontana et al. (2015) find no relationship between voluntarily disclosed GHG emissions and
environmental disclosure in United States (US) and Italian contexts, respectively. Giannarakis et al. (2014) examine the 100
US Fortune 500 companies that voluntarily disclose GHG emissions in their annual reports, in terms of the relationship
between their environmental, social and governance (ESG) Bloomberg rating, which is, in part, a function of voluntary dis-
closure. They find a positive relationship between GHG emissions and i) total ESG rating and ii) ratings for social and gov-
ernance indicators, but not the environmental rating. However, Giannarakis et al. (2017b) find higher GHG emissions are
negatively associated with carbon disclosure information, notwithstanding that companies with good average overall envi-
ronmental performance disseminate more carbon information.
Giannarakis et al. (2018), in a European context, find companies with lower GHG emissions within the sector disseminate
more climate change disclosure than those with poorer levels. Luo and Tang (2014), using data from CDP and a carbon per-
formance index, find a positive relationship between carbon disclosure and performance. Fontana et al. (2015) examine 44
listed Italian companies that voluntarily disclose GHG emissions, and score their environmental disclosures in corporate
annual, sustainability and governance reports, using the index (DI) developed by Clarkson et al. (2008). They find that large
firms and those producing high levels of emissions tend to disclose more than small and ‘virtuous’ ones. However, a self-
selection bias towards supporting the dependent variable is a weakness of these studies.
Jaggi et al. (2018) use weighted and unweighted carbon disclosure indices based on the Kyoto Protocol requirements to
examine five types of disclosures for 671 firm–years for Italian companies for 2010–13. The Italian Government has fully
implemented various European Union (EU) directives on GHGs that recommend the monitoring and reporting of carbon
emissions. The authors find that environmental committees, institutional shareholdings and board independence influence
carbon disclosure decisions, particularly in highly polluting industries.
Legitimacy theory predicts that when a firm is attempting to conform to social and environmental expectations, it will
disclose only what is necessary to avoid scrutiny (Stanny, 2013; Cowan and Deegan, 2011; Bebbington and Larrinaga,
2008; Cho & Patten, 2007; Deegan et al., 2002; Milne and Patten, 2002; O’Donovan, 2002; Patten, 2002). On the other hand,
companies with lower environmental performance, such as the high emitters examined in this study, may have incentives to
disclose more information to maintain their reputations. Regardless, it can be argued that there is a new political visibility
and sensitivity for affected organisations, leading to increased scrutiny and potential threats to legitimacy (Dawkins and
Fraas, 2011).
Some studies find that disclosure of GHG data by Australian companies can be explained by the desire for legitimacy
(Hrasky, 2012). For instance, Borghei-Ghomi and Leung (2013) find that Australian non-GHG-registered companies disclosed
more ‘hard to mimic’ items after the NGER Act. For companies operating in less carbon-intensive industries, the average level
of disclosure is significantly greater for non-GHG-registered firms, concluding that legitimacy theory is ‘not a dominant the-
ory’ explaining GHG disclosure. In contrast, non-GHG-registered firms operating in carbon-intensive sectors disclose signif-
icantly less than GHG-registered firms (Borghei-Ghomi and Leung, 2013).
In the context of our study, primary stakeholders with which organisations must interact for the purpose of pragmatic
legitimacy are the government and relevant legislative bodies, institutional investors and larger shareholders (Kolk and
Pinkse, 2007). Secondary stakeholders, from which organisations may derive moral legitimacy, include the general public,
smaller shareholders, environmental groups and activists.
Based on the competing arguments under legitimacy theory, it is unclear whether voluntary disclosures in corporate
reports are likely to increase, decrease or remain unchanged as a consequence of implementation of the NGER Act, in com-
parison with reports for the same companies prior to the Act’s implementation, or for companies not subject to the Act.
Given this, our first hypothesis represents a preliminary step to confirm the direction of general and GHG-specific environ-
mental disclosures pre- compared with post-implementation of Australia’s unique legislation mandating indirect disclosure
of GHG emissions data:
H1: The level of voluntary overall environmental disclosures in annual reports will change post the NGER Act for companies
subject to the Act, compared with the same companies prior to application of the Act or companies not subject to the Act.
Patten (2002) examines whether environmental performance measured using US Toxic Release Inventory data is associ-
ated with the extent of environmental disclosure in 131 annual reports. A positive association is found. Freedman and Patten
(2004) also did a similar study on the Toxic Release inventory and found markets react negatively to higher polluters and
similarly to lower level of disclosures. Al-Tuwaijri et al. (2004) measure environmental performance using the ratio of toxic
waste recycled to total toxic waste generated. They find a positive relationship between environmental and economic per-
formance, and also between these measures of performance and quantified environmental disclosures of specific pollution
measures and occurrences. Clarkson et al. (2008), using a sample of 191 firms from the five most polluting industries in the
US, find a positive association between environmental performance and the level of discretionary environmental disclosures.
Clarkson et al. (2011) use 51 firms reporting to Australia’s National Pollutant Inventory in both 2002 and 2006 and find that
firms with a higher pollution propensity disclose more environmental information and make more objective and verifiable
disclosures. We add to the literature by focusing on the relationship between legislated GHG environmental performance
disclosure and overall GHG-specific voluntary environmental disclosures within a legitimacy theory framework.
Mobus (2005) invokes legitimacy theory to investigate the relationship between mandated environmental disclosures in
the US and subsequent environmental regulatory compliance performance. She finds that if organisations violate environ-
mental legislation, the consequential mandated environmental disclosures limit the levels of positive, symbolic disclosures
that organisations make in annual reports. This result can be interpreted as managers resorting to higher levels of compli-
ance with regulation as a legitimisation tactic to maintain and defend organisational legitimacy.
Peters and Romi (2013) use accounting disclosure theory and investigate the determinants of compliance with mandatory
environmental disclosures where enforcement and penalties upon detection are apparently sometimes insufficient com-
pared with the benefits of non-disclosure. Consistent with legitimacy theory, evidence is found that incentives for withhold-
ing negative information can exceed the benefits in terms of organisational legitimacy. Freedman and Stagliano (2008b)
investigate the association between environmental disclosures and Phase 2 of the Clean Air Act 1963 (US) in the US electric
utilities sector. They find that limited environmental or financial disclosures occurred in response to this legislation, even
among named Phase 1 companies required to take some action to achieve Phase 2 compliance.
Given prior findings that voluntary environmental disclosures are positively associated with environmental performance
(e.g., Clarkson et al., 2008), a direction is predicted for the second hypothesis. A positive relationship between GHG emissions
disclosed to government under the NGER Act and voluntary environmental disclosure would support legitimacy theory:
H2: For companies subject to the NGER Act, the level of overall voluntary environmental disclosure in annual reports is posi-
tively associated with environmental performance measured as GHG emissions disclosed to government.
Evidence suggests that organisations with poor, rather than better, environmental performance provide more extensive
off-setting or positive environmental disclosures in an attempt to address the increased threat to their legitimacy (e.g.,
Patten, 1992, 2002; Cho and Patten, 2007; Cho et al., 2006, 2012, 2015). Entities’ disclosures play a key role in changing pub-
lic perceptions and opinions (Cho and Patten, 2007; O’Donovan, 1999), and environmental legislation targeting disclosure
can be seen as an attempt to use information as a regulatory tool to enable public decision making in relation to high emit-
ters (Freedman and Stagliano, 2008a).
Patten (2000) examines political pressure created on companies in relation to the US environmental superfund in the late
1980s–early 1990s by investigating disclosure of environmental information in 10 K reports. Based on a sample of 95 com-
panies, environmental information disclosures were more extensive in 1994 than in 1986. Patten’s (2000) study supports the
view that environmental (and social) disclosures are a function of the exposure companies face to the social and political
environment.
Disclosure practices of Australian organisations have previously been found to lag significantly behind global environ-
mental reporting trends (Cowan and Gadenne, 2005; Higgins et al., 2015; Stubbs et al., 2013; Tilt, 2001). Deegan and
Rankin (1996) note that, in the absence of specific environmental reporting requirements, organisations tend to present only
information that is favourable and self-laudatory (Deegan and Gordon, 1996; Dong and Burritt, 2010; Hrasky, 2012). Deegan
and Rankin (1996) note that shareholders and individuals in organisations tend to consider environmental information as
material, and that the majority of stakeholders find the information in annual reports the most significant in all communi-
cation media. De Villiers and van Staden (2011) support this latter finding.
Further, reporting emissions volume to government and having government release those disclosures in an Excel spread-
sheet by named legal entity (not necessarily a listed economic entity) 8 months later on a website that is difficult to navigate
is very different from disclosing emission volume in the traditional publicly available corporate communications of annual
reports targeted to existing and potential investors. The search costs for those accessing this emissions information is argued
to be lower if the information is located in traditional corporate reports, which are much more immediate and accessible
than the government website with its multitude of information. For reporters, the cost of voluntarily disclosing in traditional
communications that must be disclosed by law to government is minimal given that systems and processes to capture emis-
sions volumes exist. Hence examining the choice by high-emitting companies to voluntarily disclose GHG-specific environ-
mental information in corporate reports provides insights into their thinking in regard to transparency about their
environmental performance. This leads to the third hypothesis:
H3: For companies subject to the NGER Act, the presence (absence) of a specific disclosure in relation to GHG emissions volume
in annual reports is positively (negatively) associated with GHG emissions disclosed to government.
There is potential conflict between the true environmental performance picture of these organisations as revealed by the
mandatory disclosure and the previous image, creating an increased need for maintenance strategies in stabilising corporate
legitimacy. Voluntary disclosures could be used to manage legitimacy threats by increasing disclosures (e.g., Deegan and
Rankin, 1996), reducing them or maintaining the status quo (e.g., de Villiers and van Staden, 2006). However, given the pre-
ceding theoretical discussion; results from prior studies; the focus on pragmatic and moral legitimacy maintenance meth-
ods; and compliance systems required to measure emissions, we posit a positive relationship between voluntary
environmental disclosure in annual reports and GHG emissions. Given that reporting of GHG emissions to government
requires systems to be in place to measure these emissions; that higher GHG emissions are likely to be associated with larger
company size; and that larger size is likely to be associated with disproportionate economies compared with smaller com-
panies in terms of voluntary reporting, H3 also predicts direction.
3. Research method
We examine the environmental reporting behaviour of Australian listed companies required to disclose under the NGER
Act from 2009 to 2011—the years of decreasing emissions thresholds rendering emitters subject to the Act. In addition, we
collect comparative data for 2007 for companies that were the first reporters under the NGER Act for 2009. We omit data for
2008 since disclosures may have been influenced by companies’ readying to register and put in place systems to measure
emissions. For each of 2010 and 2011, as first-time NGER-affected companies were brought into the mandated disclosure
through the reducing threshold, the year immediately prior is used as a comparator.
The empirical examination that addresses the hypotheses is presented in two parts. We score and compare the voluntary
environmental disclosures for legislation-affected companies in the prior financial year and for a randomly selected sample
of listed companies to investigate the presence of differences attributable to implementation of the NGER Act (H1) using
ordinary least squares (OLS) and logistic regression models supported by univariate analysis. We test H2 and H3 using mul-
tivariate tests.
In multivariate analysis and using only post-NGER Act (2007) observations, we regress emissions and other variables
found in prior research to influence voluntary sustainability disclosures against a disclosure score created through content
analysis of environmental disclosures and (separately) an indicator variable for disclosure of GHG-specific volume informa-
tion in annual reports.
3.1. Sample selection
The total sample size is 535 firm–year observations. This includes 266 NGER-affected companies (68 in 2009, 86 in 2010
and 112 in 2011), 119 companies (68 in 2007, 18 in 2009, 33 in 2010) in the year prior to being captured under the NGER
Act,2 and 150 randomly selected non-NGER-affected companies (50 for each corresponding NGER year). The total sample indus-
try representation compared with the listed company population is presented in Table 1, Panel A. The industry proportions for
the sample are representative of the population.
The first government online public disclosure cycle under the NGER Act occurred in February 2010 in relation to the
2008/09 fiscal year. The second and third NGER year data are extracted similarly. Financial data for sample companies
are obtained through Morningstar DatAnalysis, and emissions-related and other sustainability disclosure and corporate gov-
ernance data are hand-collected from annual reports. Affected Australian Securities Exchange (ASX)-listed companies only
are included, despite the NGER Act applying to all legal forms of entity contingent on emissions volume, because of lack
of financial and governance data availability for non-listed entities.
The population of entities reporting under the NGER Act over the period 2009–11 consists of 948 entity–year observa-
tions, which includes listed and non-listed companies, public sector and other entities. The population of NGER reporters
for this study consists of all 266 NGER-affected listed company–year observations over the same period, representing 28
per cent of NGER reporters. Table 1, Panel B reports details for the sample by industry sector for NGER-affected companies.
Of these industries, energy, industrials, metals and mining, and utilities are considered environmentally sensitive.
As mentioned above, the industry representation of the 119 prior year NGER companies is reported in Table 1, Panel C.
Table 1, Panel D presents information for the sample of random non-NGER-affected companies. A matched pair design could
2
The prior-year NGER companies are the same companies that are affected by the Act in the subsequent year. The prior year captures a company’s disclosure
practices the year before it becomes affected by the NGER Act.
Table 1
NGER-affected listed company industry representation compared with population.
Industry Sector Total Sample NGER Discloser Prior Year NGER Random sample
Panel A sample sample Panel D
Panel B Panel C
Sample Prop. of Population Prop. Of Sample Prop. of Sample Prop. of Sample Prop. of
Sample Listed Sample Sample Sample
Consumer Discretionary 50 9 472 8 22 8 10 8 18 12
Consumer Staples 35 7 150 3 22 8 9 8 4 3
Energy 70 13 783 13 29 11 16 13 25 17
Financials 75 14 842 14 39 15 16 13 20 13
Health Care 27 5 416 7 6 2 4 3 17 11
Industrials 69 13 602 10 37 14 17 14 15 10
Information Technology 8 1 315 5 0 0 0 0 8 5
Materials 46 9 240 4 32 12 13 11 1 1
Metals & Mining 124 23 2,006 33 60 23 26 22 38 25
Telecommunication 9 2 78 1 4 1 2 2 3 2
Services
Utilities 22 4 96 2 15 6 6 5 1 1
Totals 535 100% 6,000 100% 266 100% 119 100% 150 100%
not be used because of the nature of the legislation, which affects only high emitters (most companies in the sector, for some
industries) and the difficulty in matching companies of a similar size and profitability.
3.2. Disclosure index
Clarkson et al.’s (2008) environmental disclosure index (DI) is adopted for scoring (see Appendix 2) and adjusted to elim-
inate any score attributable to GHG disclosure. This index is based on the widely adopted Global Reporting Initiative Guidelines
(GRI), part of which capture environmental disclosure quality in a relevant way. We therefore consider the DI as a combined
measure of quality and quantity of company disclosures. Clarkson et al. (2008) classify the factors into two categories: ‘hard’
(verifiable) disclosure items; and ‘soft’ (unverifiable) disclosures. Under each category, sub-items are provided for the pur-
pose of scoring disclosures (Clarkson et al., 2008, p. 311).
We use content analysis of annual reports to assess environmental disclosures. Appendix 2 provides a list of the items and
how each is scored in terms of the range of points awarded. The maximum possible score is 95. The scoring process was
undertaken independently by the first-named author and a research assistant. The inter-rater reliability of the scoring
was 99 per cent.
The DI was also calculated for the same first-year NGER-affected companies for annual reports from 2006 to 07, a period
before the Act was effective (penultimate year). Reports for 2008 were not scored because in that year eligible companies
were required to register under the Act and prepare to conduct the necessary measurements for compliance, which may
have confounded voluntary disclosures. The results from Choi et al. (2013) suggest this may indeed have occurred.
3.3. Mandated environmental performance disclosure—hypothesis variable
For the multivariate analyses, OLS regressions and logistic regressions are used to test the relationship between two
dependent variables: the DI score (H1 and H2), and whether or not the GHG volume (GHGD) is voluntarily disclosed (H1
and H3) in annual reports. The variable of interest are the NGER dummy (NGER) and GHG disclosure dummy (GHGD) for
H1. For H2 and H3, the variables of interest are, respectively, the mandated disclosure EMISSIONS measured as the natural
log of kilotonnes of GHG, and the GHGD.
3.4. Other factors potentially affecting the relationship
Firm size has been found to be a factor in voluntary environmental disclosures. Larger firms are observed to disclose more
extensively (Chithambo and Tauringana, 2014; Clarkson et al., 2008; Freedman and Jaggi, 2005; Luo et al., 2012). Larger
emitters are also likely to be larger companies. SIZE is measured as the natural log of year-end total assets. Arguably, com-
panies with higher debt-to-equity ratios will provide more extensive environmental disclosures to ensure that the height-
ened scrutiny by their primary and secondary stakeholders is satisfied. The LEV variable is measured as the debt-to-equity
ratio and is included since companies more proximate to their debt covenants are likely to be more subject to scrutiny. While
some environmental disclosure studied finds no association between leverage and voluntary environmental disclosure
(Freedman and Jaggi, 2005), others find a positive relationship (Chithambo and Tauringana, 2014; Clarkson et al., 2008).
Prior studies use return on assets (ROA) to control for financial performance (profitability) in disclosure-based studies
(e.g., Clarkson et al., 2008; de Villiers et al., 2011; Kathyayini et al., 2012; Magness, 2006). There are mixed results in the
literature. Some studies find no association (e.g., Chithambo and Tauringana 2014; Clarkson et al., 2008; Eng and Mak,
2003; Magness, 2006), while de Villiers et al. (2011) and Al-Tuwaijri et al. (2004) find a positive association, and Chen and
Jaggi (2000), a negative association. Consistent with the literature, the current study includes ROA as a control for
profitability.
Mixed results are reported in relevant research in relation to various corporate governance variables. Board size and the
number of independent directors have been found to be associated with CSR performance (Harjoto et al., 2015; Isidro and
Sobral, 2015; Sundarasen et al., 2016; Zhang et al., 2013); commercial ratings (such as KLD) (Deschênes et al., 2015;
Giannarakis et al., 2014); and environmental disclosure (Amran et al., 2014; Rao et al., 2012), including of GHG data. In terms
of the proportion of independent directors and CSR disclosures, Haniffa and Cooke (2005), Braam et al. (2016), Giannarakis
et al. (2014) and Chithambo and Tauringana (2017) fail to find a significant relationship. Nevertheless, the variable indepen-
dent directors (INDDIR) is included and is expected to be positively associated with GHG emissions.
As indicator of the effectiveness of the audit committee, the number of audit committee meetings (AUDCOM) is also
included (Barros et al., 2013; Ho and Wong, 2001; Khan et al., 2013; Trotman and Trotman, 2015). Audit committee effec-
tiveness was found by Jizi et al. (2014) to be significantly associated with CSR disclosure in the banking sector. Audit com-
mittee size has been found important to CSR disclosure in Saudi Arabia (Omair et al., 2016) and its presence is important to
CSR disclosure in Indonesia (Hapsoro and Fadhilla, 2017), Gulf countries (Garas and ElMassah, 2018) and Bangladesh (Khan
et al., 2013; Rouf, 2011). Kend (2015) finds that the size of the audit committee has a weakly significant effect in the issuance
of sustainability reports in an Australian setting. Audit quality is included also as an indicator of the presence of a Big 4 finan-
cial auditor. The financial auditor is responsible for assessing whether non-financial information presented with financial
information is consistent with that financial information. Fernandez-Feijoo et al. (2018) find higher levels of disclosure
and increased credibility of sustainability reports when the financial auditor is a Big 4 firm. They also report that companies
audited by a Big 4 firm are more likely to procure assurance on their sustainability reports than those audited by a non‐Big 4
company.
Industry sector (INDUSTRY) has been found to be a determinant of voluntary environmental disclosure in prior studies
(Freedman and Jaggi, 2005). Accordingly, we include indicator variables for industries traditionally considered more environ-
mentally sensitive (mining & metals; materials; energy; and industrials). Year indicator variables are included to control for
macroeconomic effects, including of the Global Financial Crisis (GFC), which arguably reached the Australian market in 2009,
reflected in 2010 financial reports, or on voluntary environmental disclosures. It is also important to control for YEAR since
the NGER Act was implemented with decreasing emissions thresholds over 3 years (2009–11), drawing more affected com-
panies under its purview each year until the threshold stabilised in fiscal year 2011.
Corporate participation in the CDP is controlled for also, since CDP reporters are likely to have systems and processes in
place to gather environmental information. CDP reporters signal their willingness to voluntarily disclose environmental
information by their membership of that organisation and willingness to submit their reports to it.
3.5. The models
A combination of OLS and logistic regression models are used in the analysis. All regressions are robust, adjusting for
White’s (1980) heteroscedasticity issues associated with panel data by clustering on company identity.
The model for testing H1 for NGER-affected companies’ environmental disclosure compared with non-NGER companies
uses the following equation. The same equation is used to compare the first tranche of disclosers with the same companies in
the penultimate year to the Act’s implementation:
DIit ¼ /i þ b1 NGERit þ b2 SIZEit þ b3 LEV it þ b4 ROAit þ b58 INDUSTRY it þ b911 YEARit þ b1215 CORPGOV it
þ b16 CDP it þ eit ð1Þ
where, for company i at time t:
DI =
Environmental DI score based on Clarkson et al. (2008)
NGER =
Dichotomous variable where 1 indicates an NGER company; 0 otherwise
SIZE =
Organisations’ size measured as natural log of total assets
LEV =
Debt-to-equity ratio, measured as total debt divided by total equity
ROA =
Return on assets
INDUSTRY =
Dichotomous variable indicating metals sector, mining sector, materials sector, energy sector and utility
sector organisations, where 1 indicates a specific sector; 0 otherwise
YEAR = Dichotomous variable indicating organisations’ reporting year, where 1 indicates a specific year; 0
otherwise
CORPGOV = Corporate governance variables consisting of square root of board size, square root of number of
independent directors, square root of number of audit committee meetings and an indicator for a Big 4
auditor (1 if the auditor is Big 4; 0 otherwise)
CDP Dichotomous variable where 1 indicates an organisation’s membership and reporting to the CDP; 0
otherwise
Additionally, to estimate the disclosure of emissions for NGER-affected compared with those for non-NGER companies, the
following logistic regression model is used. As before, the same equation is used to compare the first tranche of disclosers
with the same companies in the penultimate year to the Act’s implementation:
GHGDit ¼ /i þ b1 NGERit þ b2 SIZEit þ b3 LEV it þ b4 ROAit þ b58 INDUSTRY it þ b911 YEARit þ b1215 CORPGOV it
where for company i at time t variables are as defined previously, and:
GHGD = Indicator variable equal to 1 if the GHG-specific volume is disclosed in the company’s annual report; 0
otherwise
A separate robustness test is conducted to examine the direction of change in DI from one year to the next (i.e. change in
voluntary environmental disclosures compared with the prior NGER year):
DICHANGEit ¼ /i þ b1 NGERit þ b2 SIZEit þ b3 LEV it þ b4 ROAit þ b58 INDUSTRY it þ b910 YEARit þ b1114 CORPGOV it
where for company i at time t variables are as defined previously, and:
DICHANGE = Dichotomous variable equal to 1 if the NGER company increases its voluntary environmental disclosure
compared with the prior year; 0 otherwise
If some companies increase their voluntary disclosures while others reduce them as predicted by de Villiers and van Staden
(2006), then examining both increases and decreases in the DI is important to shed light on the effects of the legislation.
The model for testing H2 takes the following form where the coefficients for all independent variables are expected to be
positive:
DIit ¼ /i þ b1 EMISSIONSit þ b2 SIZEit þ b3 LEV it þ b4 ROAit þ b58 INDUSTRY it þ b910 YEARit þ b1114 CORPGOV it
where, for company i at time t variables are as defined previously, plus:
EMISSIONS = Natural log of total emissions reported to government under the NGER Act
The model for testing H3 takes the form:

GHGDit ¼ /i þ b1 EMISSIONSit þ b2 SIZEit þ b3 LEV it þ b4 ROAit þ b58 INDUSTRY it þ b910 YEARit þ b1114 CORPGOV it
where, for company i at time t variables are as defined previously. The models for H2 and H3 are applied only to companies
reporting under NGER, given that verifiable emissions are available only for these companies under the Act; that is,
voluntarily.
4. Results
4.1. Descriptive statistics
Table 2, Panels A, B and C provide descriptive statistics for variables used in the analyses. For the total sample (Panel A),
the mean DI is 13, with a minimum of 0 and maximum of 58 out of a possible 95. Only 31 per cent of sample companies
disclose the volume of emissions in either or both their annual or sustainability reports. Mean emissions are 1311 Megaton-
nes (Mt), with a minimum of 50 Mt and maximum of 18.10 Gigatonnes (Gt). Sample companies range in size (total assets)
from $0.01 M to $754,000 M, with a mean of $25,300 M. Their debt-to-equity (LEV) ratios range from 17.47 per cent to
28.65 per cent with a mean of 0.03. Their ROA ranges from –10.61 to 20.02 with a mean of 1.07.
Board size ranges from 0 to 20 directors, with a mean of 8. Independent director numbers range between 0 and 14, with a
mean of 5 directors. The number of audit committee meetings range between 0 and 14, with a mean of 4.3 In terms of indus-
3
Of the sample companies, 99 per cent have audit committees with separation between the chair of the board and of the audit committee, so this ‘chair’
variable is not included in the measure of audit committee effectiveness.
252
L. Perera et al. / Journal of Contemporary Accounting and Economics 15 (2019) 243–266
Table 2
Descriptive statistics.
Variables Total Sample NGER Reporter Population Prior Year NGER Sample Random Sample
Panel A (N = 535) Panel B (N = 266) Panel C (N = 119) Panel D (N = 150)
Min Max Mean Mdn Std. Dev. Min Max Mean Mdn Std. Dev. Min Max Mean Mdn Std. Dev. Min Max Mean Mdn Std. Dev.
DI 0 58 13 8 13 0 47 17.32 16 11.51 0 58 15.97 10 14.30 0 16 1.98 2 1.95
GHGD 0 1 0.31 0 0 1 0.50 0.50 0 1 0.26 0 0 1 0.01 0
DICHANGE 0 1 0.46 0 1 1 1 1
EMISSIONS (Mt) 50 18,100 1311 28 2756 50 18,100 1311 282 2756
SIZE ($M) 0.01 754,000 25,300 1410 101,000 5 754,000 40,000 4220 131,000 1 565,000 24,200 2920 82,100 0 3860 139 26 376
LEV% 17.47 28.65 0.03 0.35 1.65 10.61 18.73 1.33 0.44 3.39 2.98 20.02 1.49 0.51 3.48 5.85 7.93 0.27 0 1.22
ROA% 10.61 20.02 1.07 0.05 3.01 1.21 0.36 0.06 0.06 0.10 17.47 5.18 0.22 0.07 1.86 10.82 28.65 0.15 0.06 2.63
MINING 0 1 0.23 0 0 1 0.23 0 0 1 0.22 0 0 1 0.25 0
MATERIALS 0 1 0.09 0 0 1 0.12 0 0 1 0.11 0 0 1 0.01 0
ENERGY 0 1 0.17 0 0 1 0.17 0 0 1 0.18 0 0 1 0.17 0
INDRL 0 1 0.13 0 0 1 0.14 0 0 1 0.14 0 0 1 0.10 0
YR2010 0 1 0.32 0 0 1 0.32 0 0 1 0.28 0 0 1 0.33 0
YR2011 0 1 0.30 0 0 1 0.42 0 0 0 1 0.33 0
BDSIZE (no.) 0 20 8.24 8 3.15 4 20 9.34 9 2.82 0 19 8.89 8 3.08 0 16 5.79 5 2.32
INDDIR (no.) 0 14 5.16 5 2.63 0 14 6.21 6 2.32 0 13 5.67 5 2.57 0 10 2.88 3 1.64
AUDCOM (no.) 0 14 3.96 4 2.52 0 13 4.87 5 2.18 0 14 4.52 4 2.35 0 10 1.89 2 1.96
BIG4 0 1 0.76 1 0 1 0.92 1 0 1 0.86 1 0 1 0.41 0
CPD 0 1 0.32 0 0 1 0.46 0 0 1 0.39 0 0 1 0.03 0
try sector, mining represents 23 per cent, materials represents 9 per cent, energy represents 17 per cent, and industrials rep-
resent 13 per cent of the sample, with financials the remainder. Further, 76 per cent of the companies engage Big 4 auditors.
The sample is further partitioned into NGER-affected companies (Table 2, Panel B), prior year NGER-affected companies
(Table 2, Panel C) and random non-NGER-affected companies (Table 2, Panel D).
Pearson and Spearman correlations are reported in Table 3, Panels A (full sample), B (NGER Companies and Random Sam-
ple), C (NGER Companies and the same companies in the prior year) in relation to H1; and Panel D (NGER Companies only)
relating to H2 and H3. In terms of Table 3, Panel A and B, the highest correlations are between board size (BDSIZE) and num-
ber of independent directors (INDDIR) having 0.880 and 0.886 respectively; this is expected given the relationship between
the two variables. The variables of interest (NGER and GHGD) are positively correlated with the dependent variable (DI). For
Table 3, Panels C and D, the highest correlations are 0.855 and 0.857, respectively, between BDSIZE and INDDIR. The variables
of interest (EMISSIONS and GHGD) are positively correlated with the dependent variable (DI).
Table 4 reports DI averages for each industry across each of the initial 3 years of the Act’s operation and the overall aver-
age for that period (in further analysis of H1). The comparison among DIs is expressed in the form of a ratio.4 Scores greater
than 1 represent an increase in the quality and quantity of disclosures compared with the same company5 in a prior year when
the Act was not operative. It is important to note that in the multivariate analyses that follow, the actual DI for each observation,
not the ratio reported here, is used.6
Further analysis confirms 99 firm–year observations with increased voluntary environmental disclosures and 167 firm–
year observations with decreased disclosures. The total increase in disclosure score was 1266 points. The total reduction was
1221, resulting in a net increase of 45 points for NGER companies. Considering each sector within the NGER sample, com-
panies in the consumer discretionary sector had the largest reduction in disclosures, with a total increase of 27 points and a
total reduction of 198 points, giving a net reduction of 171 points. Companies in consumer staples had a total increase of 162
points and a total reduction of 137 points, with a net increase of 25 points. In the energy sector, the total increase was 119
points and the total decrease was 118 points, with a net increase of 1 point. The financial sector had a total increase of 166
points and total reduction of 159 points, with a net increase of 7 points. The health care sector had an increase of 1 point and
a reduction of 67 points with a total reduction of 66 points. The industrials sector had a total increase of 117 points and a
total reduction of 126 points, with a net reduction of 9 points. Interestingly, the materials sector (increase of 263 points and
reduction of 81 points) and the mining & metals sector (increase of 353 points and reduction of 216 points) had the largest
increases, of 182 and 137 points respectively. The telecommunications sector (increase of 14 points and reduction of 7
points) and utilities sector (increase of 44 points and reduction of 112 points) had an increase of 7 points and a decrease
of 68 points respectively.
Notable, however, is the decline in the ratio in 2010 (to an overall mean of 0.98 from 1.36 in 2009) and then an upturn in
2011 (to mean overall 1.06). The financial year 20107 was when the effect of the economic downturn associated with the GFC
was most felt in companies’ reported results in Australia. Hence, the drop in environmental disclosures may have been caused
by the incremental cost of those disclosures in a time of financial stringency. From a legitimacy perspective it could be argued
that stakeholders’ attention was on corporate survival, and companies felt they could maintain legitimacy without the need to
pay attention to non-financial externalities.
Further, to confirm the results a one-way ANOVA test is conducted to determine significant differences between disclo-
sures from 2007 to 2011. Levene’s test suggests that there is no homogeneity of variances. Welch’s F(3, 221.87) = 15.94
(p < 0.001), suggesting significant differences between the years.8 The ANOVA test result has a significant F value of 21.45
(p < 0.01). On a univariate basis, these findings support de Villiers and van Staden’s (2006) conjecture that companies seek
to avoid scrutiny by reducing their disclosures in an attempt to avoid attracting attention to issues that threaten their
legitimacy.
4.2. Regression results
Table 5, Panels A and C reports results for the test of H1; that is, voluntary environmental disclosure for NGER Act repor-
ters compared with random and prior year companies not subject to the NGER Act. Table 5, Panels B and D reports results for
the test of H1; that is, voluntary environmental disclosure for NGER Act reporters compared with the random companies
never subject to the NGER Act.
For the overall sample presented in Table 5, Panel A, the robust regression has an F value of 28.48 (p < 0.001) and an Adj.
R2 of 57 per cent. The VIF diagnostics show that multicollinearity is not at problematic levels, with a mean VIF value of 2.16.
The result for H1 with the DI as the dependent variable is positive and significantly associated with the indicator variable for
4
The DI ratio between a current and prior year is calculated as current year DI divided by the prior year DI (1 is added to both the numerator and
denominator to avoid a division-by-0 error).
5
For initial disclosers, the prior year is a non-NGER-affected year. For 2009, the first year of mandated reporting, all companies are initial disclosers.
6
The DI is calculable from publicly disclosed data using the methodology described.
7
The Gross Domestic Product (GDP) (US$ billion; current prices) for the period of this study are 2008, 1,034.2; 2009, 976.4; 2010, 1,244.8; and 2011, 1,491.0.
That is, there is a downturn in GDP growth in 2009 that would have been reflected in 2009/10 fiscal year corporate reports (Australian Bureau of Statistics,
2010).
8
The Games–Howell post hoc ANOVA results suggest that when comparing the DI across years, 2009, 2010 and 2011 differ significantly from 2007 (p < 0.01).
254
Table 3
Panel A – Pearson’s & Spearman’s Correlations for full sample (N = 535) – H1.
Variable DI NGER GHGD SIZE LEV ROA MINING MATERIAL ENERGY INDRL YR2007 YR2010 YR2011 BDSIZE INDDIR AUDCOM BIG4 CDP
DI 0.365** 0.666** 0.173** 0.124** 0.017 0.018 0.236** 0.017 0.048 0.319** 0.102* 0.133** 0.418** 0.491** 0.400** 0.439** 0.542**
NGER 0.458** 0.413** 0.144** 0.087* 0.013 0.015 0.122** 0.017 0.03 0.379** 0.016 0.256** 0.347** 0.398** 0.361** 0.370** 0.288**
GHGD 0.656** 0.413** 0.243** 0.179** 0.03 0.041 0.214** 0.079 0.093* 0.025 0.045 0.053 0.352** 0.405** 0.319** 0.344** 0.481**
SIZE 0.699** 0.524** 0.529** 0.890** 0.001 0.090* 0.065 0.095* 0.082 0.046 0.023 0.006 0.255** 0.296** 0.240** 0.137** 0.278**
LEV 0.348** 0.236** 0.277** 0.546** 0.036 0.137** 0.069 0.084 0.049 0.131** 0.024 0.067 0.198** 0.238** 0.255** 0.134** 0.231**
ROA 0.304** 0.209** 0.190** 0.327** 0.204** 0.037 0.054 0.039 0.009 0.007 0.006 0.061 0.075 0.018 0.018 0.02 0.001
MINING 0.014 0.015 0.041 0.173** 0.298** 0.007 0.168** 0.250** 0.211** 0.023 0.065 0.015 0.04 0.045 0.165** 0.193** 0.067
MATERIAL 0.236** 0.122** 0.214** 0.093* 0.043 0.066 0.168** 0.140** 0.118** 0.043 0.008 0.013 0.016 0.048 0 0.108* 0.059
0.017 0.079 0.056 0.118** 0.193** 0.250** 0.140** 0.175** 0.054 0.120** 0.084 0.071 0.014 0.093*

ENERGY 0.003 0.049 0.002
INDRL 0.055 0.03 0.093* 0.014 0.162** 0.024 0.211** 0.118** 0.175** 0.037 0.022 0.001 0.043 0.004 0.007 0.071 0.044
YR2007 0.299** 0.379** 0.025 0.204** 0.221** 0.092* 0.023 0.043 0.049 0.037 0.259** 0.251** 0.109* 0.127** 0.136** 0.173** 0.168**
YR2010 0.079 0.016 0.045 0.038 0.063 0.009 0.065 0.008 0.054 0.022 0.259** 0.448** 0.017 0.011 0.049 0.046 0.049
YR2011 0.094* 0.256** 0.053 0.054 0.142** 0.075 0.015 0.013 0.002 0.001 0.251** 0.448** 0.012 0.005 0.032 0.082 0.047
BDSIZE 0.480** 0.385** 0.365** 0.676** 0.329** 0.275** 0.081 0.041 0.109* 0.032 0.115** 0.011 0.007 0.880** 0.437** 0.371** 0.476**
INDDIR 0.563** 0.439** 0.423** 0.727** 0.375** 0.297** 0.087* 0.077 0.069 0.003 0.136** 0.001 0.005 0.869** 0.476** 0.439** 0.519**
AUDCOM 0.510** 0.378** 0.359** 0.601** 0.367** 0.254** 0.170** 0.013 0.051 0.013 0.145** 0.043 0.042 0.486** 0.524** 0.405** 0.319**
BIG4 0.497** 0.370** 0.344** 0.574** 0.301** 0.273** 0.193** 0.108* 0.014 0.071 0.173** 0.046 0.082 0.403** 0.471** 0.437** 0.282**
CDP 0.545** 0.288** 0.481** 0.656** 0.291** 0.193** 0.067 0.059 0.093* 0.044 0.168** 0.049 0.047 0.492** 0.525** 0.354** 0.282**
Panel B – Pearson’s & Spearman’s Correlations for NGER Affected companies and Random Non-NGER companies (N = 416) – H1
Variable DI NGER GHGD SIZE LEV ROA MINING MATERIAL ENERGY INDRL YR2010 YR2011 BDSIZE INDDIR AUDCOM BIG4 CDP
** ** ** ** ** * ** ** ** **
DI 0.623 0.734 0.217 0.189 0.042 0.008 0.270 0.024 0.012 0.003 0.108 0.479 0.576 0.494 0.468 0.596**
NGER 0.709** 0.507** 0.180** 0.179** 0.064 0.031 0.202** 0.01 0.057 0.01 0.086 0.543** 0.607** 0.563** 0.560** 0.443**
GHGD 0.706** 0.507** 0.266** 0.229** 0.037 0.067 0.216** 0.035 0.082 0.02 0.04 0.409** 0.474** 0.392** 0.378** 0.537**
SIZE 0.755** 0.793** 0.599** 0.911** 0.007 0.089 0.06 0.091 0.079 0 0.009 0.272** 0.322** 0.263** 0.143** 0.288**
LEV 0.389** 0.467** 0.341** 0.577** 0.017 0.140** 0.055 0.096* 0.044 0.013 0.052 0.229** 0.276** 0.266** 0.145** 0.241**
ROA 0.345** 0.432** 0.242** 0.395** 0.262** 0.033 0.013 0.043 0.003 0.015 0.049 0.063 0.007 0.039 0.017 0.001
MINING 0.003 0.031 0.067 0.152** 0.310** 0.012 0.163** 0.250** 0.210** 0.072 0.025 0.02 0.039 0.172** 0.181** 0.073
MATERIAL 0.256** 0.202** 0.216** 0.117* 0.053 0.074 0.163** 0.132** 0.111* 0.023 0.003 0.028 0.06 0.017 0.115* 0.095
ENERGY 0.004 0.01 0.035 0.041 0.127** 0.213** 0.250** 0.132** 0.170** 0.067 0.01 0.117* 0.099* 0.08 0.007 0.075
INDRL 0.031 0.057 0.082 0.019 0.169** 0.006 0.210** 0.111* 0.170** 0.015 0.011 0.048 0.018 0.033 0.078 0.034
YR2010 0.008 0.01 0.02 0.03 0.021 0.061 0.072 0.023 0.067 0.015 0.557** 0.049 0.056 0.047 0.011 0.005
YR2011 0.046 0.086 0.04 0.001 0.089 0.008 0.025 0.003 0.01 0.011 0.557** 0.062 0.038 0.012 0.047 0.026
BDSIZE 0.526** 0.595** 0.426** 0.707** 0.390** 0.322** 0.06 0.054 0.100* 0.042 0.047 0.057 0.886** 0.468** 0.375** 0.537**
INDDIR 0.613** 0.654** 0.485** 0.776** 0.436** 0.362** 0.081 0.088 0.083 0.028 0.054 0.039 0.882** 0.512** 0.462** 0.592**
AUDCOM 0.566** 0.586** 0.433** 0.673** 0.418** 0.328** 0.179** 0.035 0.058 0.045 0.026 0.001 0.511** 0.549** 0.450** 0.401**
BIG4 0.511** 0.560** 0.378** 0.604** 0.328** 0.301** 0.181** 0.115* 0.007 0.078 0.011 0.047 0.414** 0.497** 0.479** 0.315**
CDP 0.586** 0.443** 0.537** 0.668** 0.311** 0.228** 0.073 0.095 0.075 0.034 0.005 0.026 0.554** 0.594** 0.435** 0.315**
Panel C – Pearson’s & Spearman’s Correlations for NGER Affected companies and Prior Year NGER companies (N = 385) – H1
Variable DI NGER GHGD SIZE LEV ROA MINING MATERIAL ENERGY INDRL YR2010 YR2011 BDSIZE INDDIR AUDCOM BIG4 CDP
DI 0.05 0.581** 0.108* 0.045 0.044 0.045 0.173** 0.032 0.026 0.129* 0.165** 0.231** 0.305** 0.182** 0.307** 0.436**
NGER 0.096 0.224** 0.062 0.021 0.074 0.008 0.016 0.024 0.005 0.046 0.428** 0.072 0.103* 0.072 0.099 0.067
GHGD 0.601** 0.224** 0.200** 0.127* 0.001 0.033 0.161** 0.099 0.091 0.042 0.084 0.215** 0.264** 0.146** 0.232** 0.397**
SIZE 0.439** 0.132** 0.379** 0.909** 0.019 0.102* 0.096 0.113* 0.104* 0.023 0 0.232** 0.277** 0.215** 0.095 0.245**
LEV 0.120* 0.072 0.131* 0.372** 0.044 0.147** 0.104* 0.095 0.065 0.04 0.06 0.146** 0.190** 0.209** 0.057 0.193**
ROA 0.046 0.087 0.022 0.078 0.122* 0.037 0.130* 0.028 0.019 0.037 0.031 0.081 0.044 0.051 0.054 0.006
MINING 0.026 0.008 0.033 0.230** 0.329** 0.106* 0.195** 0.244** 0.217** 0.006 0.027 0.048 0.049 0.135** 0.220** 0.095
MATERIAL 0.176** 0.016 0.161** 0.062 0.036 0.006 0.195** 0.165** 0.147** 0.016 0.002 0.095 0.064 0.117* 0.039 0.01
ENERGY 0.028 0.024 0.099 0.088 0.122* 0.166** 0.244** 0.165** 0.184** 0.006 0.064 0.151** 0.092 0.066 0.034 0.122*
INDRL 0.039 0.005 0.091 0.057 0.177** 0.037 0.217** 0.147** 0.184** 0.011 0.012 0.013 0.051 0.074 0.033 0.037
*
YR2010 0.118 0.046 0.042 0.065 0.074 0.103* 0.006 0.016 0.006 0.011 0.428** 0.009 0.005 0.054 0.042 0.067
YR2011 0.143** 0.428** 0.084 0.02 0.086 0.006 0.027 0.002 0.064 0.012 0.428** 0.026 0.026 0.016 0.056 0.033
** ** ** **
BDSIZE 0.231 0.084 0.214 0.549 0.143 0.05 0.096 0.08 0.147** 0.013 0.013 0.023 0.855** 0.265** 0.164** 0.393**
INDDIR 0.334** 0.124* 0.285** 0.598** 0.200** 0.034 0.096 0.044 0.084 0.045 0.018 0.023 0.836** 0.261** 0.220** 0.431**
AUDCOM 0.227** 0.08 0.186** 0.333** 0.164** 0.048 0.140** 0.113* 0.035 0.067 0.052 0.019 0.321** 0.305** 0.132** 0.165**
BIG4 0.339** 0.099 0.232** 0.343** 0.069 0.03 0.220** 0.039 0.034 0.033 0.042 0.056 0.186** 0.242** 0.176** 0.116*
CDP 0.445** 0.067 0.397** 0.631** 0.177** 0.043 0.095 0.01 0.122* 0.037 0.067 0.033 0.410** 0.445** 0.190** 0.116*
Panel D – Pearson’s & Spearman’s Correlations for NGER Companies – H2 & H3 (N = 266)

Variable DI EMISSIONS GHGD SIZE LEV ROA MINING MATERIAL ENERGY INDRL YR2010 YR2011 BDSIZE INDDIR AUDCOM BIG4 CDP
DI 0.426** 0.620** 0.137* 0.106 0.124* 0.012 0.193** 0.044 0.036 0.001 0.269** 0.242** 0.353** 0.244** 0.292** 0.466**
EMISSIONS 0.520** 0.246** 0.002 0.104 0.049 0.252** 0.003 0.055 0.049 0.008 0.041 0.298** 0.378** 0.122* 0.099 0.205**
GHGD 0.634** 0.384** 0.207** 0.170** 0.083 0.072 0.139* 0.04 0.076 0.016 0.015 0.218** 0.280** 0.161** 0.209** 0.423**
SIZE 0.491** 0.410** 0.400** 0.940** 0.089 0.108 0.102 0.114 0.108 0.002 0.031 0.247** 0.307** 0.239** 0.086 0.244**
LEV 0.149* 0.009 0.166** 0.382** 0.065 0.157* 0.099 0.115 0.064 0.002 0.068 0.181** 0.237** 0.216** 0.053 0.197**
ROA 0.038 0.017 0.026 0.105 0.125* 0.099 0.015 0.193** 0.025 0.008 0.017 0.1 0.135* 0.007 0.022 0.111
MINING 0.007 0.006 0.072 0.219** 0.370** 0.168** 0.200** 0.240** 0.217** 0.008 0.032 0.021 0.045 0.137* 0.209** 0.118
MATERIAL 0.190** 0.189** 0.139* 0.085 0.047 0.021 0.200** 0.165** 0.149* 0.016 0.011 0.123* 0.094 0.137* 0.023 0.007
ENERGY 0.039 0.221** 0.04 0.065 0.129* 0.172** 0.240** 0.165** 0.179** 0.005 0.072 0.151* 0.115 0.071 0.02 0.105
INDRL 0.017 0.065 0.076 0.076 0.202** 0.098 0.217** 0.149* 0.179** 0.001 0.013 0.013 0.032 0.061 0.037 0.022
YR2010 0.012 0.059 0.016 0.029 0.011 0.039 0.008 0.016 0.005 0.001 0.589** 0.045 0.048 0.069 0.083 0.007
YR2011 0.259** 0.243** 0.015 0.101 0.074 0.061 0.032 0.011 0.072 0.013 0.589** 0.006 0.025 0.064 0.146* 0.082
BDSIZE 0.239** 0.184** 0.221** 0.584** 0.219** 0.079 0.074 0.109 0.143* 0.01 0.057 0.016 0.857** 0.251** 0.06 0.457**
INDDIR 0.366** 0.301** 0.305** 0.673** 0.288** 0.073 0.092 0.075 0.104 0.033 0.048 0.04 0.842** 0.230** 0.153* 0.510**
AUDCOM 0.262** 0.113 0.208** 0.385** 0.197** 0.022 0.137* 0.130* 0.041 0.046 0.046 0.071 0.295** 0.253** 0.117 0.236**
BIG4 0.308** 0.160** 0.209** 0.296** 0.057 0.01 0.209** 0.023 0.02 0.037 0.083 0.146* 0.092 0.174** 0.148* 0.102
CDP 0.474** 0.366** 0.423** 0.651** 0.176** 0.056 0.118 0.007 0.105 0.022 0.007 0.082 0.486** 0.538** 0.263** 0.102
Note: Pearson’s correlations bolded and Spearman’s correlation in non-bolded. ***=significant at 1%, **=significant at 5%, *=significant at 10%. All standard errors are robust. DI = Disclosure Index score based on
Clarkson et al. (2008); NGER = NGER Dummy, where 1 is an NGER affected company; GHGD = provision of emissions on annual (or sustainability) reports; SIZE = Company size; LEV = Debt (short-term + long-term
debt) to equity ratio (%); ROA = Return on assets (%);Industry sector dummies (Mining, Materials, Energy and Industrials); BDSIZE = Number of members on the board; INDDIR = Number of independent directors
on the board; AUDCOM = Number of audit committee meetings;BIG4 = Big4 Dummy.
255
Table 4
256
Ratio of later (NGER) year to prior (Non-NGER) year of NGER Companies.
Company Industry Overall DI Overall DI Overall Average DI Average DI Average DI Overall Average
Ratio 2009 Ratio 2010 DI Ratio 2011 Ratio 2009 Ratio 2010 Ratio 2011 Industry average
(DI2009/DI2007) (DI2010/DI2009) (DI2011/DI2010) DI Ratio
Crown Limited Consumer Discretionary 2.43 0.71 0.50 1.48 1.16 1.06 1.23
Harvey Norman Holdings Limited Consumer Discretionary 0.67 1.50 1.00
Tabcorp Holdings Limited Consumer Discretionary 1.33 1.08 0.46
Amalgamated Holdings Limited Consumer Discretionary 1.25 0.40
David Jones Limited Consumer Discretionary 1.27 0.79
Fairfax Media Limited Consumer Discretionary 1.29 1.11
Myer Holdings Limited Consumer Discretionary 1.14

News Corporation Consumer Discretionary 1.00 1.00
Ardent Leisure Group Consumer Discretionary 0.88
Automotive Holdings Group Limited Consumer Discretionary 2.33
Super Retail Group Limited Consumer Discretionary 2.00
Coca-Cola Amatil Limited Consumer Staples 2.60 0.85 2.09 2.44 0.76 1.03 1.41
Foster’s Group Limited Consumer Staples 0.88 0.57 1.00
Goodman Fielder Limited Consumer Staples 1.40 0.82 0.65
Graincorp Limited Consumer Staples 1.80 0.56 1.00
Wesfarmers Limited Consumer Staples 0.97 0.92 0.79
Woolworths Limited Consumer Staples 7.00 0.83 0.77
Elders Limited Consumer Staples 0.80
Metcash Limited Consumer Staples 1.22
Ridley Corporation Limited Consumer Staples 1.20
Warrnambool Cheese and Butter Factory Company Consumer Staples 0.80
Arrow Energy Limited Energy 1.14 1.26 0.90 1.35 1.17
Centennial Coal Company Limited Energy 0.69 0.07
Caltex Australia Limited Energy 0.33 1.13 1.06
Felix Resources Limited Energy 2.60
New Hope Corporation Limited Energy 0.50 1.13
Origin Energy Limited Energy 0.52 1.47 0.68
Roc Oil Company Limited Energy 3.40 1.24 0.05
Santos Limited Energy 0.87 1.06 1.00
Whitehaven Coal Limited Energy 1.40 0.71 0.80
Woodside Petroleum Limited Energy 1.15 0.83 1.00
Caledon Resources PLC Energy 0.50 0.50
Eastern Star Gas Limited Energy 2.67
ERM Power Limited Energy 6.00
Gloucester Coal Ltd Energy 0.80
Washington H. Soul Pattinson and Company Limited Energy 1.00
Westside Corporation Limited Energy 0.67
AMP Limited Financials 1.75 0.86 0.67 2.03 1.07 1.35 1.49
ANZ Financials 1.81 0.89 0.76
Commonwealth Bank of Australia Financials 3.17 0.79 0.87
GPT Group Financials 3.45 0.82 0.97
Mirvac Group Financials 0.78 1.10 1.13
Macquarie Group Limited Financials 3.80 0.74 1.43
National Australia Bank Limited Financials 1.23 0.69 0.73
Stockland Corporation Ltd Financials 0.73 1.28 0.81
Westpac Banking Corporation Financials 2.80 0.79 0.86
Westfield Group Financials 0.80 0.95 0.95
Centro Retail Group Financials 1.00 1.50
Dexus Property Group Financials 2.80 0.86
Lend Lease Group Financials 1.20 0.83
Charter Hall Group Financials 0.63
Suncorp Group Limited Financials 8.00
Thakral Holdings Limited Financials 0.67
Ramsay Health Care Limited Health Care 1.00 0.43 0.67 1.00 0.47 0.77 0.74
Healthscope Limited Health Care 0.50 1.00
CSL Limited Health Care 0.64
Sonic Healthcare Limited Health Care 0.75
Bradken Limited Industrials 0.88 0.93 0.71 0.72 1.38 0.95 1.02
Downer EDI Limited Industrials 0.75 0.94 0.77

Leighton Holdings Limited Industrials 0.50 1.52 0.97
PMP Limited Industrials 1.56 0.57 1.38
PaperlinX Limited Industrials 0.74 1.00 0.03
Qantas Airways Limited Industrials 0.74 1.04 1.00
Toll Holdings Limited Industrials 0.73 0.82 0.67
Transpacific Industries Group Ltd Industrials 0.50 1.38 0.67
Transfield Services Limited Industrials 0.62 0.50 1.83
Virgin Australia Holdings Limited Industrials 0.13 4.50 2.00
Asciano Limited Industrials 1.57 1.45
Crane Group Limited Industrials 1.83 0.09
Lindsay Australia Limited Industrials 1.00
QR National Limited Industrials
Regional Express Holdings Ltd Industrials 1.00
Seven Group Holdings Limited Industrials 1.00
Spotless Group Limited Industrials 0.63
Adelaide Brighton Limited Materials 2.25 0.89 0.88 1.28 1.04 1.08 1.13
Amcor Limited Materials 3.22 0.76 1.27
Brickworks Limited Materials 0.44 1.36 1.00
Boral Limited Materials 1.07 0.85 0.60
CSR Limited Materials 0.84 0.82 0.81
Incitec Pivot Limited Materials 0.48 1.82 1.45
Orica Limited Materials 0.81 0.95 1.00
Penrice Soda Holdings Limited Materials 1.15 0.79 1.00
Fletcher Building Limited Materials 1.11 1.50
Gujarat Nre Coking Coal Limited Materials 1.00 1.00
James Hardie Industries SE Materials 1.11 1.40
Gunns Limited Materials 1.05
Nufarm Limited Materials 1.08
Aditya Birla Minerals Limited Metals & Mining 1.44 0.81 0.62 1.03 1.57 0.94 1.18
OneSteel Limited Metals & Mining 1.11 0.69 1.11
BHP Billiton Limited Metals & Mining 0.98 0.81 0.79
BlueScope Steel Limited Metals & Mining 0.60 1.31 0.50
Fortescue Metals Group Ltd Metals & Mining 1.43 1.40 1.43
Grange Resources Limited Metals & Mining 2.33 0.71 0.80
Iluka Resources Limited Metals & Mining 0.11 7.33 0.18
Macarthur Coal Limited Metals & Mining 1.14 0.35 0.50
Minara Resources Limited Metals & Mining 0.84 0.50
Newcrest Mining Limited Metals & Mining 1.35 0.81 0.71
OZ Minerals Limited Metals & Mining 0.19 4.50 0.78
Rio Tinto Limited Metals & Mining 0.83 0.88 0.88
Resolute Mining Limited Metals & Mining 1.17 0.61 1.00
257
(continued on next page)
258
Table 4 (continued)
Company Industry Overall DI Overall DI Overall Average DI Average DI Average DI Overall Average
Ratio 2009 Ratio 2010 DI Ratio 2011 Ratio 2009 Ratio 2010 Ratio 2011 Industry average
(DI2009/DI2007) (DI2010/DI2009) (DI2011/DI2010) DI Ratio
St Barbara Limited Metals & Mining 0.92 0.91 0.80
AngloGold Ashanti Limited Metals & Mining 0.77
Kalgoorlie Mining Company Ltd Metals & Mining 1.00 1.00
Mount Gibson Iron Limited Metals & Mining 3.67 1.00
Norton Gold Fields Limited Metals & Mining 0.80 0.75
Perilya Limited Metals & Mining 1.14 0.88
Alcoa Inc. Metals & Mining 2.78
Independence Group NL Metals & Mining 0.86

Kagara Ltd Metals & Mining 1.75
Navigator Resources Ltd Metals & Mining 0.60
Panoramic Resources Limited Metals & Mining 0.56
Saracen Mineral Holdings Metals & Mining 1.00
Sims Metal Management Limited Metals & Mining 0.96
Straits Resources Limited Metals & Mining
Western Areas NL Metals & Mining 1.33
Telstra Corporation Limited Telecommunication Services 0.92 0.88 1.00 0.92 0.88 1.28 1.03
Singapore Telecommunications Limited Telecommunication Services 1.56
AGL Energy Limited Utilities 2.21 0.74 1.17 1.41 0.57 0.81 0.93
Energy Developments Limited Utilities 0.80 0.61 0.82
Envestra Limited Utilities 1.35 0.52 0.83
Prime Infrastructure Group Utilities 0.90 0.22
SP Australia Networks (Transmission) Ltd Utilities 1.77 0.77 0.93
Redbank Energy Limited Utilities 0.29
Mean DI Ratios 1.36 0.98 1.06 1.13
Scores greater than 1 (one) represent an increase in the level of disclosure in the later year compared to the same company in the earlier year, based on the Clarkson et al. (2008) Disclosure Index.
Table 5
Regressions of Disclosures compared for NGER and Random Non-NGER Companies.
Variables Dependent Variable = DI (OLS) Dependent Variable = DI (OLS) Dependent Variable = GHGD Dependent Variable = GHGD
Panel A: Total Sample Panel B: NGER and Random (Logistic) (Logistic)
(N = 535; 270 Clusters) – H1 Sample (N = 416; 270 Clusters) Panel C: Total Sample Panel D: NGER and Random
– H1 (N = 535; 270 Clusters) – H1 Sample (N = 416; 270 Clusters)
– H1
Coeff. Std. Err. t Coeff. Std. Err. t Coeff. Std. Err. z Coeff. Std. Err. z
NGER 5.46 1.29 4.22*** 3.64 1.63 2.24** 1.10 0.43 2.53** 2.20 1.30 1.69*
SIZE 0.75 0.37 2.05** 0.99 0.36 2.71*** 0.39 0.17 2.28** 0.39 0.22 1.79*
LEV 0.29 0.23 1.28 0.14 0.26 0.53 0.02 0.05 0.30 0.02 0.07 0.28
ROA 0.12 0.16 0.76 0.16 0.16 1.02 0.25 0.06 3.83*** 0.22 0.07 3.29***
MINING 5.26 1.62 3.25*** 4.35 1.45 2.99*** 1.55 0.52 2.96*** 1.23 0.53 2.33**
MATERIAL 8.89 2.66 3.34*** 9.23 2.80 3.29*** 2.59 0.73 3.55*** 2.17 0.64 3.39***
ENERGY 3.30 1.55 2.13** 2.87 1.57 1.82* 0.74 0.51 1.45 1.02 0.56 1.82*
INDRL 3.10 1.65 1.88* 1.69 1.64 1.03 1.67 0.60 2.78*** 1.46 0.65 2.25**
YR2007 8.43 1.78 4.73*** 0.20 0.48 0.42
YR2010 2.42 0.66 3.67*** 3.15 0.74 4.24*** 0.11 0.30 0.37 0.12 0.34 0.35
YR2011 3.78 0.81 4.64*** 4.42 0.85 5.17*** 0.44 0.34 1.27 0.49 0.35 1.42
BDSIZE 0.55 1.44 0.38 1.35 1.46 0.92 0.01 0.57 0.02 0.05 0.65 0.08
INDDIR 1.62 1.37 1.19 2.49 1.47 1.70* 0.01 0.47 0.03 0.20 0.60 0.33
AUDCOM 1.07 0.86 1.25 1.04 0.80 1.30 0.62 0.30 2.05** 0.45 0.34 1.30
BIG4 2.35 1.15 2.05** 1.57 1.07 1.46 2.22 0.69 3.20*** 1.85 0.72 2.58**
CDP 7.28 1.67 4.36*** 7.26 1.71 4.25*** 1.23 0.45 2.73*** 1.33 0.47 2.81***
_constant 15.35 6.03 2.55** 17.04 6.44 2.64*** 14.92 3.00 4.98*** 14.63 3.22 4.55***
F-Statistic 28.48 28.43
Wald Chi2 116.72 78.35
Prob 0.001 0.001 0.001 0.001
Adj. R2 0.57 0.61
Pseudo. R2 0.41 0.44
Mean VIF 2.16 2.43
***=significant at 1%, **=significant at 5%, *=significant at 10%. All standard errors are robust. DI = Disclosure Index score based on Clarkson et al. (2008);
GHGD = Dummy where 1 = disclosure of the GHG-specific volume in a company’s annual or sustainability report, 0 otherwise; NGER = Dummy, where 1 is
an NGER affected company, 0 otherwise; SIZE = Natural log of company size; LEV = Debt (short-term + long-term debt) to equity ratio (%); ROA = Return on
assets (%); Industry sector dummies (Mining, Materials, Energy and Industrials); BDSIZE = Square root of the number of members on the board;
INDDIR = Square root of the number of independent directors on the board; AUDCOM = Square root of the number of audit committee meetings, BIG4 = Big
4 dummy, where 1 is a Big4 auditor, 0 otherwise. All regressions are robust, adjusting for White’s (1980) heteroscedasticity issues associated with panel
data by clustering on company identity.
NGER-affected companies. That is, companies affected by the NGER Act have an overall higher level of environmental dis-
closures compared with companies not subject to the Act. However, the year control variables for 2010 and 2011 are neg-
ative and significant. While overall there is a positive association, during 2010 and 2011 there is a negative association with
the DI, confirming the results in Table 4. This association remains when comparing NGER companies with randomly sampled
companies (Table 5, Panel B). This finding is consistent with those of de Villiers and van Staden (2006) who offer several jus-
tifications for reductions in disclosure, some of which are relevant to the context examined in this study.
In terms of H1, disclosure of specific emission volumes (GHGD) increased, consistent with the notion that the NGER Act
requires systems and processes to collect the data, whose voluntary disclosure in annual reports is relatively costless. When
further analysing the first tranche of reporters before and after implementation of the NGER Act, as reported in Table 5, Panel
C and D, the results are positive and significant in both instances.
Table 5, Panel C compares NGER-affected companies with the random and prior year companies, where the dependent
variable is disclosure of the volume of emissions (GHG). The robust logistic regression has a Wald chi-square value of
116.72 (p < 0.001) and a pseudo R2 of 41 per cent. Similarly, when further analysing the NGER reporters compared with
the random sample only, the results remain significant. The robust logistic regression has a Wald chi-square value of
78.35 (p < 0.001) and a pseudo R2 of 44 per cent.
Results of additional tests conducted are presented in Table 6, Panels A and B, which report the results for the test of H1,
where the DI for each NGER Act reporter is compared with its DI in the prior year before operation of the NGER Act. Results
remain consistent with those reported in Table 5. Again, the year variables are negative and significant.
Table 7 explores the change in DI (DICHANGE) for NGER companies between the current and prior non-NGER year. The
sample size is reduced to 381 company–years with data for two consecutive years. The logistic regression has a Wald chi-
square value of 32.30 (p < 0.010) and a Pseudo R2 of 29 per cent. The results show a negative association between NGER and
DICHANGE, confirming the univariate analysis provided in Table 4 where 167 companies are observed to reduce disclosures.
This confirms the univariate finding that as many companies reduce the level of their voluntary environmental disclosure as
increase it post-NGER.
Table 8 (Panels A and B, respectively) reports results for the tests of H2 and H3, focusing on NGER-affected companies.
Table 8, Panel A reports the OLS regression results for DI as the dependent variable for the pooled sample over the first
Table 6
Regressions of Disclosures and NGER Affected and same companies in the prior year.
Variables Dependent Variable = DI (OLS) Dependent Variable = GHGD (Logistic)

Panel A: NGER Sample with prior year (N = 385; 123 Panel B: NGER Sample with prior year (N = 385; 123
Clusters) – H1 clusters) – H1
Coeff. Std. Err. t Coeff. Std. Err. z
NGER 1.96 1.18 1.66* 0.91 0.28 3.28***
SIZE 1.62 0.66 2.45** 0.28 0.18 1.53
LEV 0.41 0.26 1.58 0.01 0.06 0.23
ROA 0.07 0.70 0.10 0.30 0.21 1.42
MINING 9.74 2.13 4.57*** 1.53 0.53 2.88***
MATERIAL 11.66 2.95 3.95*** 2.51 0.72 3.47***
ENERGY 5.97 2.25 2.65*** 0.79 0.52 1.51
INDRL 6.32 2.27 2.78*** 1.65 0.61 2.70***
YR2010 4.99 1.05 4.75*** 0.13 0.33 0.39
YR2011 7.00 1.25 5.59*** 0.43 0.37 1.16
BDSIZE 2.36 2.08 1.13 0.03 0.58 0.06
INDDIR 3.28 1.87 1.76* 0.11 0.48 0.24
AUDCOM 2.62 1.30 2.01** 0.55 0.30 1.81**
BIG4 7.87 1.78 4.43*** 2.26 0.70 3.22***
CDP 6.59 1.87 3.53*** 1.39 0.46 2.99***
_constant 37.66 11.18 3.37*** 12.51 3.38 3.70***
F-Statistic 16.33
Wald Chi2 76.81
Prob 0.001 0.001
Adj. R2 0.45
Pseudo. R2 0.27
Mean VIF 1.82
GHGD = Dummy where 1 = disclosure of the GHG-specific volume in a company’s annual or sustainability report, 0 otherwise. NGER = Dummy, where 1 is
assets (%); Year dummies (2009, 2010, 2011); Industry sector dummies (Mining, Materials, Energy and Industrials); BDSIZE = Square root of the number of
members on the board; INDDIR = Square root of the number of independent directors on the board; AUDCOM = Square root of the number of audit
committee meetings, BIG4 = Big 4 dummy, where 1 is a Big4 auditor, 0 otherwise; CDP = Carbon Disclosure Project reporting dummy where 1 = company is
a CDP reporter, 0 otherwise.
Table 7
Comparison of change in disclosures compared to prior year for NGER affected companies.
Variables Dependent Variable = DICHANGE (Logistic Regression)

Panel A: Total Sample- (N = 381; 123 Clusters) – H1
Coeff. Std. Err. z
NGER 4.83 1.04 4.65***
SIZE 0.10 0.14 0.74
LEV 0.01 0.04 0.33
ROA 0.07 0.11 0.64
MINING 0.57 0.35 1.63
MATERIAL 0.11 0.40 0.28
ENERGY 0.30 0.35 0.85
INDRL 0.17 0.41 0.41
YR2010 0.49 0.40 1.23
YR2011 0.33 0.34 0.96
BDSIZE 0.37 0.50 0.75
INDDIR 0.02 0.46 0.05
AUDCOM 0.44 0.27 1.65*
BIG4 0.94 0.64 1.47
CDP 0.23 0.32 0.72
_constant 5.96 3.15 1.89*
Wald Chi2 32.30
Prob 0.006
Pseudo. R2 0.29
***=significant at 1%, **=significant at 5%, *=significant at 10%. All standard errors are robust.
DICHANGE = Dummy where 1 = increase or stayed the same in disclosure compared to prior year, 0
otherwise. EMISSIONS = Natural log of total emissions (kilotonnes); SIZE = Natural log of company size;
LEV = Debt (short-term + long-term debt) to equity ratio (%); ROA = Return on assets (%);Year dummies
(2009, 2010, 2011); Industry sector dummies (Mining, Materials, Energy and Industrials); BDSIZE = Square
root of the number of members on the board; INDDIR = Square root of the number of independent directors
on the board; AUDCOM = Square root of the number of audit committee meetings, BIG4 = Big 4 dummy,
where 1 is a Big4 auditor, 0 otherwise; CDP = Carbon Disclosure Project reporting dummy where 1 = com-
pany is a CDP reporter, 0 otherwise.
Table 8
Regressions of Disclosures and Emissions for NGER-Affected Companies.
Variables Dependent Variable = DI (OLS) Dependent Variable = GHGD (Logistic)

Panel A: Total Sample- (N = 266; 123 Clusters) H2 Panel B: Total Sample (N = 266; 123 clusters) H3
Coeff. Std. Err. t Coeff. Std. Err. z
EMISSIONS 2.38 0.58 4.08*** 0.39 0.20 2.00**
SIZE 0.52 0.72 0.72 0.14 0.22 0.61
LEV 0.06 0.34 0.19 0.11 0.07 1.41
ROA 6.92 4.01 1.73* 2.55 3.47 0.74
MINING 4.17 2.13 1.96* 0.65 0.60 1.08
MATERIAL 6.89 2.58 2.68*** 1.53 0.65 2.36**
ENERGY 0.06 2.48 0.02 0.47 0.62 0.76
INDRL 0.43 2.65 0.16 1.00 0.74 1.35
YR2010 4.25 1.11 3.81*** 0.20 0.36 0.55
YR2011 5.94 1.26 4.73*** 0.62 0.39 1.59
BDSIZE 3.40 2.47 1.38 0.05 0.62 0.08
INDDIR 4.37 2.56 1.70* 0.27 0.56 0.48
AUDCOM 2.34 1.23 1.91* 0.30 0.37 0.83
BIG4 7.19 2.16 3.33*** 1.89 0.76 2.50**
CDP 4.97 1.96 2.53** 1.36 0.51 2.68***
_constant 37.85 11.15 3.39*** 11.75 3.87 3.04***
F-Statistic 19.34
Wald Chi2 56.93
Prob 0.001 0.001
Adj. R2 0.53
Pseudo. R2 0.26
Mean VIF 2.15
GHGD = Dummy where 1 = disclosure of the GHG-specific volume in a company’s annual or sustainability report, 0 otherwise; NGER = Dummy, where 1 is
assets (%);Year dummies (2009, 2010, 2011); Industry sector dummies (Mining, Materials, Energy and Industrials); BDSIZE = Square root of the number of
members on the board; INDDIR = Square root of the number of independent directors on the board; AUDCOM = Square root of the number of audit
committee meetings, BIG4 = Big 4 dummy, where 1 is a Big4 auditor, 0 otherwise; CDP = Carbon Disclosure Project reporting dummy where 1 = company is
a CDP reporter, 0 otherwise.
3 years (2009–11) of NGER operation. The robust regression has an F value of 19.34 (p < 0.001) and an Adj. R2 of 53 per cent.
The VIF diagnostics show that multicollinearity is not at problematic levels, with a mean VIF of 2.15.
The volume of emissions (EMISSIONS) is positive and significant at p < 0.001, suggesting a strong association with DI. That
is, consistent with H2, a positive relationship is found between the volume of emissions and the level of voluntary environ-
mental disclosures in annual reports. While overall the annual disclosure indices reduce after implementation of the NGER
Act, within the population of companies affected by the Act, there is a strong relationship between higher emissions and the
level of disclosures. That is, higher emitters tend to exhibit higher DI scores.
Table 8, Panel B reports logistic regression results for the dependent variable measured as an indicator of whether the
quantity of GHG emissions reported to government is reported also in annual reports (GHGD), for the pooled sample
(2009–11). The robust regression has a Wald chi-squared value of 56.93 (p < 0.001) and a Pseudo R2 value of 25 per cent.
Emissions volume (EMISSIONS) is positive and significant and therefore H3 is supported. That is, mandated disclosure to gov-
ernment of emissions is associated with voluntary reporting of that performance in annual reports.
5. Discussion
This study finds evidence to support the proposition that organisations use disclosure practices as a tool to engage society
and stakeholders in gaining, managing and defending organisational legitimacy.
The analysis suggests that there is a significant effect on the corporate reporting of voluntary environmental disclosures
associated with implementation of the NGER Act. From analysis of the ratios of later to prior year DI scores, reported in
Table 4, it is clear that almost as many companies reduced the level of their voluntary environmental disclosure as increased
it post-NGER, and this univariate observation is supported by the logistic regression results reported in Table 7. Further, as
reported in Table 4, there is a tendency for NGER-affected companies that previously provided little to no voluntary environ-
mental disclosure to increase it, and other companies with significant disclosures to decrease it. The overall outcome is a
moderate increase in voluntary environmental disclosures.
As noted above, having both mandated and voluntary disclosures potentially creates a conflict in organisational character.
This may explain the variances in disclosures across the comparison period for companies that reduced their disclosures. The
findings are consistent with those of Mobus (2005), and with results for other organisations using voluntary disclosures to
minimise negative externalities and maintain organisational legitimacy (see Cho and Patten, 2007; Cho et al., 2006; Deegan
and Rankin, 1996; Mobus, 2005; O’Donovan, 2002). Because of the nature of the mandated disclosures, organisations may
come under increased media/political scrutiny and must be strategic in their voluntary disclosures to ensure consistency
with mandated performance disclosure requirements.
The level of voluntary disclosures, both quantitative and qualitative, seems to be reactive in nature to the legislation and
contingent on mandated disclosures made by the company. Based on the results and the discussion above, H1 is supported in
terms of changes in disclosures in association with implementation of the NGER Act.
Organisations tend to react to environmental legislation via strategic management of disclosure practices. In this context,
this study provides evidence that compliance with legislation is used as one of the strategies, together with the use of vol-
untary disclosures, to limit and manage the negative implications of mandated disclosures.
For companies whose mandatorily reported emissions were lower than public expectations, managers may have felt that
legitimacy had actually increased rather than been threatened. This might be especially so if strategies to reduce emissions
below reporting thresholds are expected to have an effect in future years, eliminating the future need to report under NGER.
In such circumstances, incorporating hard disclosures, such as the GHG number, into other voluntary disclosure contexts is
likely to create a positive environmental reputation and other benefits. For companies that had not seriously engaged with
voluntary environmental disclosure prior to the Act, the requirement to register and report emissions may have forced a
choice: merely comply with the mandatory disclosure, or include related information in separate voluntary disclosures at
minimal incremental cost. The choice is not entirely free—it might come with threats to legitimacy.
Alternatively, managers may perceive GHG emissions to have become ‘sensitive’, so reducing disclosure might reduce the
perceived importance or sensitivity of the issue. Under that scenario, managers might resort to mere compliance with the
disclosure regulation while seeking to draw minimal attention to the actual emissions. Managers may also perceive separate
voluntary disclosure to be useless as a legitimation exercise if it becomes difficult to put a positive spin on the company’s
environmental efforts in light of a publicly known high level of emissions.
Legitimacy building in a true sense may require a different strategy, such as taking substantive emission-lowering
actions; thereby demonstrating initiative towards better environmental performance. That is, the dynamics of gaining legit-
imacy may have changed as primary stakeholders must be engaged beyond cosmetic, positive voluntary disclosures because
of their knowledge of GHG data. Some organisations may be content with maintaining legitimacy with symbolic disclosures,
which may partly negate the negative consequences of the mandated disclosures that primary and secondary stakeholders
may or may not have accessed, become aware of or relied upon. As intermediaries correct for this problem by disseminating
mandatory disclosure content more widely, the stakes for securing true legitimacy increase.
Secondary stakeholders who confer moral legitimacy may also be inclined to relax scrutiny once legitimacy is granted.
However, in this case, while there is an event that may lead to renewed scrutiny, access to the mandated information
requires effort, so reliance on symbolic disclosures made through voluntary reporting processes may act as a substitute.
While secondary stakeholders may not be happy with poor GHG performance recorded under the Act, overall moral legiti-
macy may not be affected unless activists are able to leverage other influential stakeholders to question overall organisa-
tional legitimacy. As this is a dynamic process with activist groups using a variety of communication media and
corporate governance tools, voluntary disclosures offer an avenue for the company to resist threats to its legitimacy.
Regulatory compliance alone may not be sufficient to obtain organisational legitimacy; an organisation must also be seen
to gain dispositional legitimacy (under pragmatic legitimacy), whereby it is seen to share the values and expectations of the
primary stakeholder. The organisation will also need to satisfy the moral strand of legitimacy by adhering to procedures,
where the stakeholders are not focused on the outcomes of legislative events or activities, but on whether morally it is
the right thing to do based on society’s normative judgments (Suchman, 1995).
Given the public availability of NGER GHG data, a possible expectation by the government is that the legislation serves as
a tool to influence organisations to minimise their environmental impacts, and provides an incentive for more accurate dis-
closures of their environmental performance in other media. In other words, the NGER Act is an expressive law. It is unclear
whether the legislation’s reporting requirements alone can induce high-emitting organisations to reduce emissions, as man-
dated disclosures are but one aspect of environmental management policies and procedures.
Companies affected by the legislation seem to use voluntary environmental disclosures to manage perceptions, rather
than as a tool for full disclosure of actual environmental performance. However, the ability to use disclosures as a manipu-
lative tool is constrained given the presence of mandated disclosure requirements. The risk of a credibility gap between
actual performance as compulsorily disclosed and the greenwashing of voluntary environmental disclosures may be a bridge
too far and may serve to reduce voluntarily provided environmental information. This implies that there is room to clarify
the law’s expressive dimensions and socialise targets about the NGER Act’s goals to improve disclosure quality and reduce
emissions.
6. Conclusion
Mandated disclosures play a key role in how an organisation is perceived within the society in which it operates. Such
disclosures bring political visibility and, as suggested by the results of this study, affect organisations’ ability or willingness
to use voluntary disclosure as a symbolic means of communication in managing organisational legitimacy. The presence of
mandated disclosures also creates a dilemma for managers because of a potential gap between actual environmental perfor-
mance and self-serving disclosures that could threaten organisational legitimacy. In other words, our study shows that a
mandatory legal obligation imposes a choice in relation to the use of separate voluntary disclosures.
Consistent with Mobus (2005), we also conclude that organisations using voluntary disclosures to manipulate public per-
ceptions could, in the presence of mandated disclosure, experience intractable legitimacy threats as there could be inconsis-
tencies between actual performance and the symbolic environmental disclosures used as a tool for managing legitimacy.
Faced with such a situation, the best organisational strategy may be to withdraw from, or lessen, reliance on symbolic means
of impression management. For many affected companies, this seems to have been the approach taken despite the growing
demand for and trend to provide more rather than less information on environmental matters.
As with similar studies, this one has limitations, not the least of which its limited sample size; however, we have captured
the listed population of NGER Act-affected companies. The lack of independent verification of emissions disclosed to govern-
ment can be considered another limitation, but complying organisations are subject to random audits initiated by a govern-
ment officer. Further, we have not been able to explore the nature of the methodologies underpinning GHG voluntary
disclosure, and whether these follow the NGER Act methodologies and guidelines. Different reporting dates, especially for
sustainability reports, makes reconciliation of the mandatory and voluntarily disclosed emissions volumes difficult.
Further work could be undertaken involving a more ethnographic analysis of underlying company reporting practices to
illuminate these issues. Future research could further delve into the hard and soft disclosures as partitioned in the Clarkson
et al. (2008) DI to investigate the specific nature of the change in disclosures across these categories. Further work could also
extend the range of communication media considered by researchers beyond annual and sustainability reports. Compulsory
disclosure requirements might affect reporting behaviour in newer media spaces. Additionally, research could investigate
the effectiveness of the legislation in influencing consumer behaviour towards lower emitters where a choice of supply
exists—one of the stated aims of the NGER Act.
As a study in a setting that creates a natural experiment, we provide some insights into the nature of voluntary disclo-
sures in the presence of mandated environmental legislation in the form of the NGER Act.
Acknowledgements
We would like to acknowledge the feedback given and thank Prof. Ferdinand Gul, Prof. Peter Clarkson, Prof. Charl de Vil-
liers, Prof. Keith Houghton, Prof. Simon Fung, Prof. Roger Simnett, Prof. Steven Dellaportas and Late Prof. Kerry Jacobs. Also,
we would like to acknowledge and thank JCAE Conference Participants and the research seminar participants at the Aus-
tralian National University, Deakin University, Macquarie University and Swinburne University.
Appendix 1
The National greenhouse Energy reporting Act (2007)
The National Greenhouse Energy Reporting Act 2007 was the first of its kind in Australia to combine all prior state and fed-
eral legislation in Australia under one common reporting scheme whereby organizations are required to disclose greenhouse
gas emissions to the public through the Department of Climate Change. The timeframe and reporting requirement thresholds
under the Act are highlighted in the table below, which gives an overview of the significant deadlines, facility thresholds and
the corporate group thresholds, which reduced over time.
Facility threshold 25 Kilotonnes (kt)/100 Terra Joules (TJ)

Corporate group First reporting year Second reporting year Third reporting year Fourth reporting year
threshold 2008/2009 2009/2010 87.5 kt/350TJ 2010/2011 50 kt/200TJ 2011/2012 onwards
125 kt/500TJ
Entities to apply 31st August 2009 31st August 2010 31st August 2011 31st August 2011
for registration
by
Entities to provide 31st October 2009 31st October 2010 31st October 2011 31st October 2012 and
data report by yearly there after
Government to 28th February 2010 28th February 2011 28th February 2012 28th February 2013
publish data by and yearly there after
Environmental legislation disclosures threshold levels
(Source: National Greenhouse and Energy Reporting Guideline, Department of Climate Change)
Corporations are required to register and report if the facilities they control emit 25 kilotonnes or more of greenhouse gas
(CO2 equivalent), or produce/consume 100 terajoules or more of energy per annual period; or their corporate group emits
125 kilotonnes or more of greenhouse gas (CO2 equivalent), or produces/consumes 500 terajoules or more of energy per
annual period.
Appendix 2. Environmental disclosure Index based on Clarkson et al. (2008)
Hard (verifiable) disclosure items Map to GRI

(A1) Governance structure and management systems (max score is 6)
1. Existence of a Dept for pollution control and/or management positions for env. management (0–1) 3.1
2. Existence of an environmental and/or a public issues committee in the board (0–1) 3.1
3. Existence of terms/conditions applicable to suppliers and/or customers regarding env. practices (0–1) 3.16
4. Stakeholder involvement in setting corporate environmental policies (0–1) 1.1, 3.10
5. Implementation of ISO14001 at the plant and/or firm level (0–1) 3.14, 3.20
6. Executive compensation is linked to environmental performance (0–1) 3.5
(A2) Credibility (max score is 10)
1. Adoption of GRI sustainability reporting guidelines or provision of a CERES report (0–1) 3.14
2. Independent verification/assurance about environmental information disclosed (0–1) 2.20, 2.21
3. Periodic independent verification/audit on environmental performance and/or systems (0–1) 3.19
4. Certification of environmental programs by independent agencies (0–1) 3.2
5. Product Certification with respect to environmental impact (0–1) 3.16
6. External environmental performance awards and/or inclusion in a sustainability index (0–1)
7. Stakeholder involvement in the environmental disclosure process (0–1) 1.1, 3.10
8. Participation in voluntary environmental initiatives endorsed by EPA or Department of Energy (0–1) 3.15
9. Participation in industry specific associations/initiatives to improve environmental practices (0–1) 3.15
10. Participation in other env. org./assoc. to improve. environmental practices (0–1) 3.15
(A3) Environmental performance indicators (EPI) (max score is 60)
1. EPI on energy use and/or energy efficiency (0–6) EN3, 4, 17
2. EPI on water use and/or water use efficiency (0–6) EN5, 17
3. EPI on greenhouse gas emissions (0–6) EN8
4. EPI on other air emissions (0–6) EN9,10
5. EPI on TRI (land, water, air) (0–6) EN11
6. EPI on other discharges, releases and/or spills (not TRI) (0–6) EN12, 13
7. EPI on waste generation and/or management (recycling, re-use, reducing, treatment and disposal) (0–6) EN11
8. EPI on land and resources use, biodiversity and conservation (0–6) EN6, 7
9. EPI on environmental impacts of products and services (0–6) EN14
10. EPI on compliance performance (e.g., exceedances, reportable incidents) (0–6) EN16
(A4) Environmental spending (max score is 3)
1. Summary of dollar savings arising from environment initiatives to the company (0–1)
2. Amount spent on technologies, R&D and/or innovations to enhance environ. perf. and/or efficiency (0–1) EN35
3. Amount spent on fines related to environmental issues (0–1) EN16
Soft (unverifiable) disclosure items
(A5) Vision and strategy claims (max score is 6) 1.1, 1.2
1. CEO statement on environmental performance in letter to shareholders and/or stakeholders (0–1)
2. A statement of corporate environmental policy, values and principles, environ. codes of conduct (0–1) 1.1, 1.2, 3.7
3. A statement about formal management systems regarding environmental risk and performance (0–1) 3.19
4. A statement that the firm undertakes periodic reviews and evaluations of its environ. performance (0–1) 3.19
5. A statement of measurable goals in terms of future env. performance (if not awarded under A3) (0–1) 1.1, 1.2
6. A statement about specific environmental innovations and/or new technologies (0–1) 1.1, 1.2
(A6) Environmental profile (max score is 4)
1. A statement about the firm’s compliance (or lack thereof) with specific environmental standards (0–1) GN 8
2. An overview of environmental impact of the industry (0–1) GN 8
3. An overview of how the business operations and/or products and services impact the environment. (0–1) GN 8
4. An overview of corporate environmental performance relative to industry peers (0–1) GN 8
(A7) Environmental initiatives (max score is 6)
1. A substantive description of employee training in environmental management and operations (0–1) 3.19
2. Existence of response plans in case of environmental accidents (0–1)
3. Internal environmental awards (0–1)
4. Internal environmental audits (0–1) 3.19 3.20

5. Internal certification of environmental programs (0–1) 3.19
6. Community involvement and/or donations related to environ. (if not awarded under A1.4 or A2.7) (0–1) SO1, EC10
References
Al-Tuwaijri, S., Christensen, T., Hughes II, K., 2004. The relations among environmental disclosure, environmental performance, and economic performance:
a simultaneous equations approach? Account. Organ. Soc. 29, 447–471.
Alrazi, B., de Villiers, C., van Staden, C.J., 2015. A comprehensive literature review on, and the construction of a framework for, environmental legitimacy,
accountability and proactivity. J. Clean. Prod. 102, 44–57.
Amran, A., Periasamy, V., Zulkafli, A.H., 2014. Determinants of climate change disclosure by developed and emerging countries in Asia Pacific. Sustain. Dev.
22 (3), 188–204.
Australian Bureau of Statistics, 2010. The Global Financial Crisis and its impact on Australia accessed 16 February 2018 http://www.abs.gov.au/AUSSTATS/
abs@.nsf/Lookup/1301.0Chapter27092009%E2%80%9310, .
Barros, C.P., Boubaker, S., Hamrouni, A., 2013. Corporate governance and voluntary disclosure in France. J. Appl. Bus. Res. 29 (2), 561–577.
Bebbington, J., Larrinaga, C., 2008. Carbon trading: accounting and reporting issues. Eur. Account. Rev. 17 (4), 697–717.
Berthelot, S., Cormier, D., Magnan, M., 2003. Environmental disclosure research: review and synthesis. J. Account. Lit. 22, 1–44.
Borghei-Ghomi, Z., Leung, P., 2013. An empirical analysis of the determinants of greenhouse gas voluntary disclosure in Australia. Account. Fin. Res. 2 (1),
110.
Braam, G.J.M., Uit De Weerd, L., Hauck, M., Huijbregts, M.A.J., 2016. Determinants of corporate environmental reporting: the importance of environmental
performance and assurance. J. Clean. Prod. 129, 724–734.
Carey, P., Liu, L., Qu, W., 2017. Voluntary corporate social responsibility reporting and financial statement auditing in China. J. Contemp. Account. Econ. 13,
244–262.
Chen, C.J.P., Jaggi, B., 2000. Association between independent non-executive directors, family control and financial disclosures in Hong Kong. J. Account.
Publ. Pol. 19, 285–310.
Chithambo, L., Tauringana, V., 2014. Company specific determinants of greenhouse gases disclosures. J. Appl. Account. Res. 15 (3), 323–338.
Chithambo, L., Tauringana, V., 2017. Corporate governance and greenhouse gas disclosure: a mixed-methods approach. Corp. Gov. 17 (4), 678–699.
Cho, C.H., Patten, D.M., 2007. The role of environmental disclosures as tools of legitimacy: a research note. Account. Organ. Soc. 32 (7), 639–647.
Cho, C.H., Patten, D.M., Roberts, R.W., 2006. Corporate political strategy: an examination of the relation between political expenditures, environmental
performance, and environmental disclosure. J. Bus. Eth. 67 (2), 139–154.
Cho, C.H., Guidry, R.P., Hageman, A.M., Patten, D.M., 2012. Do actions speak louder than words? An empirical investigation of corporate environmental
reputation. Account. Organ. Soc. 37 (1), 14–25.
Cho, C.H., Michelon, G., Patten, D.M., Roberts, R.W., 2015. CSR disclosure: the more things change. . .? Account. Audit. Account. J. 28 (1), 14–35.
Choi, B., Lee, D., Psaros, J., 2013. An analysis of Australian company carbon emission disclosures. Pac. Account. Rev. 25 (1), 58–79.
Clarkson, P.M., Li, Y., Richardson, G.D., Vasvari, F.P., 2008. Revisiting the relation between environmental performance and environmental disclosure: an
empirical analysis. Account. Organ. Soc. 33 (4), 303–327.
Clarkson, P.M., Overell, M.B., Chapple, L., 2011. Environmental reporting and its relation to corporate environmental performance. Abacus 47 (1), 27–60.
Cowan, S., Deegan, C., 2011. Corporate disclosure reactions to Australia’s first national emission reporting scheme. Account. Fin. 51 (2), 409–436.
Cowan, S., Gadenne, D., 2005. Australian corporate environmental reporting: a comparative analysis of disclosure practices across voluntary and mandatory
disclosure systems. J. Account. Organ. Change 1 (2), 165–179.
Dawkins, C., Fraas, J.W., 2011. Coming clean: the impact of environmental performance and visibility on corporate climate change disclosure. J. Bus. Eth. 100
(2), 303–322.
de Villiers, C., Van Staden, C.J., 2006. Can less environmental disclosure have a legitimising effect? Evidence from Africa. Account. Organ. Soc. 31 (8), 763–
781.
de Villiers, C., van Staden, C., 2011. Shareholder requirements for compulsory environmental information in annual reports and on websites. Aust. Account.
Rev. 21 (4), 317–326.
de Villiers, C., Naiker, V., van Staden, C.J., 2011. The effect of board characteristics on firm environmental performance. J. Manage. 37 (6), 1636–1663.
de Villiers, C., Venter, E.R., Hsiao, P.-C., 2017. Integrated reporting: background, measurement issues, approaches and an agenda for future research.
Account. Fin. 57, 937–959.
Deegan, C., 2002. Introduction: the legitimising effect of social and environmental disclosures—a theoretical foundation. Account. Audit. Account. J. 15 (3),
282–311.
Deegan, C., Gordon, B., 1996. A study of the environmental disclosure practices of Australian corporations. Account. Bus. Res. 26 (3), 187–199.
Deegan, C., Rankin, M., 1996. Do Australian companies report environmental news objectively? An analysis of environmental disclosures by firms
prosecuted successfully by the Environmental Protection Authority. Account. Audit. Account. J. 9 (2), 50–67.
Deegan, C., Rankin, M., Tobin, J., 2002. An examination of the corporate social and environmental disclosures of BHP from 1983–1997: a test of legitimacy
theory. Account. Audit. Account. J. 15 (3), 312–343.
Depoers, F., Jeanjean, T., Jérôme, T., 2016. Voluntary disclosure of greenhouse gas emissions: contrasting the carbon disclosure project and corporate reports.
J. Bus. Eth. 134 (3), 445–461.
Deschênes, S., Rojas, M., Boubacar, H., Prud’homme, B., Ouedraogo, A., 2015. The impact of board traits on the social performance of Canadian firms. Corp.
Gov. 15 (3), 293–305.
Dong, S., Burritt, R., 2010. Cross-sectional benchmarking of social and environmental reporting practice in the Australian oil and gas industry. Sustain. Dev.
18 (2), 108–118.
Eng, L., Mak, Y.T., 2003. Corporate governance and voluntary disclosure. J. Account. Publ. Pol. 22, 325–345.
Freedman, M., Jaggi, B., 2005. Global warming, commitment to the Kyoto Protocol, and accounting disclosures by the largest global public firms from
polluting industries. Int. J. Account. 40, 215–232.
Freedman, M., Patten, D.M., 2004. Evidence on the pernicious effect of financial report environmental disclosure? Account. Forum 28 (1), 27–41.
Freedman, M., Stagliano, A., 2008a. Accounting disclosures of toxics release inventory for 2002. Account. Publ. Interest 8 (1), 21–38.
Freedman, M., Stagliano, A., 2008b. Environmental disclosures: electric utilities and Phase 2 of the Clean Air Act. Crit. Perspect. Account. 19 (4), 466–486.
Garas, S., ElMassah, S., 2018. Corporate governance and corporate social responsibility disclosures: the case of GCC countries. Critic. Perspect. Internatl.
Business 14 (1), 2–26.
Giannarakis, G., Konteos, G., Sariannidis, N., 2014. Financial, governance and environmental determinants of corporate social responsible disclosure.
Manage. Decis. 52 (10), 1928–1951.
Giannarakis, G., Zafeiriou, E., Sariannidis, N., 2017a. The impact of carbon performance on climate change disclosure. Bus. Strat. Environ. 26 (8), 1078–1094.
Giannarakis, G., Konteos, G., Sariannidis, N., Chaitidis, G., 2017b. The relation between voluntary carbon disclosure and environmental performance. Int. J.
Law Manage. 59 (6), 784–803.
Giannarakis, G., Zafeiriou, E., Arabatzis, G., Partalidou, X., 2018. Determinants of corporate climate change disclosure for European firms. Corp. Soc.
Responsib. Environ. Manage. 25 (3), 281–294.
Hahn, R., Lülfs, R., 2014. Legitimizing negative aspects in GRI-oriented sustainability reporting: a qualitative analysis of corporate disclosure strategies. J.
Bus. Eth. 123 (3), 401–420.
Haniffa, R.M., Cooke, T.E., 2005. The impact of culture and governance on corporate social reporting. J. Account. Publ. Pol. 24 (5), 391–430.
Hapsoro, D., Fadhilla, A.F., 2017. Relationship analysis of corporate governance, corporate social responsibility disclosure and economic consequences:
empirical study of Indonesia capital market. S. East Asian J. Manag. 11 (2), 164–182.
Harjoto, M., Laksmana, I., Lee, R., 2015. Board diversity and corporate social responsibility. J. Bus. Eth. 132 (4), 641–660.
Fernandez-Feijoo, B., Romero, S., Ruiz, S., 2018. Financial auditor and sustainability reporting: does it matter? Corporate Soc. Responsibil. Environ. Manage.
25 (3), 209–224.
Higgins, C., Milne, M.J., van Gramberg, B., 2015. The uptake of sustainability reporting in Australia. J. Bus. Eth. 129 (2), 445–468.
Ho, S.M., Wong, K.S., 2001. A study of the relationship between corporate governance structures and the extent of voluntary disclosure. J. Int. Account. Audit.
Tax. 10, 139–156.
Hrasky, S., 2012. Visual disclosure strategies adopted by more and less sustainability-driven companies. Account. Forum, 154–165.
Ilinitch, A.Y., Sodenstrom, N.S., Thomas, T.E., 1998. Measuring corporate environmental performance. J. Account. Public Policy 17 (4–5), 383–408.
Isidro, H., Sobral, M., 2015. The effects of women on corporate boards on firm value, financial performance, and ethical and social compliance. J. Bus. Eth. 132
(1), 1–19.
Jaggi, B., Allini, A., Macchioni, R., Zagaria, C., 2018. The factors motivating voluntary disclosure of carbon information: evidence based on Italian listed
companies. Organ. Environ. 31 (2), 178–202.
Jizi, M., Salama, A., Dixon, R., Stratling, R., 2014. Corporate governance and corporate social responsibility disclosure: evidence from the US banking sector. J.
Bus. Eth. 125 (4), 601–615.
Kathyayini, K., Tilt, C.A., Lester, L.H., 2012. Corporate governance and environmental reporting: an Australian study. Corp. Gov. 12 (2), 143–163.
Kend, M., 2015. Governance, firm-level characteristics and their impact on the client’s voluntary sustainability disclosures and assurance decisions. Sustain.
Account. Manag. Pol. J. 6 (1), 54–78.
Khan, A., Muttakin, M.B., Siddiqui, J., 2013. Corporate governance and corporate social responsibility disclosures: evidence from an emerging economy. J.
Bus. Eth. 114, 207–223.
Kolk, A., Pinkse, J., 2007. Towards strategic stakeholder management? Integrating perspectives on sustainability challenges such as corporate responses to
climate change. Corp. Gov. 7 (4), 370.
Liesen, A., Hoepner, A.G., Patten, D.M., Figge, F., 2015. Does stakeholder pressure influence corporate GHG emissions reporting? Empirical evidence from
Europe. Account. Audit. Account. J. 28 (7), 1047–1074.
Lindblom, C.K., 1993. The implications of organisational legitimacy for corporate social performance and disclosure. Paper presented at the Critical
Perspectives on Accounting, New York, NY.
Luo, L., Tang, Q., 2014. Does voluntary carbon disclosure reflect underlying carbon performance? J. Contemp. Account. Econ. 10, 191–205.
Luo, L., Lan, Y., Tang, Q., 2012. Corporate incentives to disclose carbon information: evidence from the CDP Global 500 report. J. Int. Fin. Manag. Account. 23
(2), 93–120.
Magness, V., 2006. Strategic posture, financial performance and environmental disclosure: an empirical test of legitimacy theory. Account. Audit. Account. J.
19 (4), 540–563.
Meng, X.H., Zeng, S.X., Shi, J.J., Qi, G.Y., Zhang, Z.B., 2014. The relationship between corporate environmental performance and environmental disclosure: an
empirical study in China. J. Environ. Manag. 145, 357–367.
Merkl-Davies, D.M., Brennan, N., 2007. Discretionary disclosure strategies in corporate narratives: incremental information or impression management? J.
Account. Lit. 26, 116–194.
Milne, M.J., Patten, D.M., 2002. Securing organizational legitimacy: an experimental decision case examining the impact of environmental disclosures.
Account. Audit. Account. J. 15 (3), 372–405.
Mobus, J.L., 2005. Mandatory environmental disclosures in a legitimacy theory context. Account. Audit. Account. J. 18 (4), 492–517.
Mulherin, H., 2007. Measuring the costs and benefits of regulation: conceptual issues in securities markets. J. Corp. Fin. 13 (2–3), 421–437.
Nazari, J.A., Hrazdil, K., Mahmoudian, F., 2017. Assessing social and environmental performance through narrative complexity in CSR reports. J. Contemp.
Account. Econ. 13, 166–178.
O’Donovan, G., 1999. Managing legitimacy through increased corporate environmental reporting: an exploratory study. Interdisciplinary Environ. Rev. 1 (1),
63–99.
O’Donovan, G., 2002. Environmental disclosures in the annual report: extending the applicability and predictive power of legitimacy theory. Account. Audit.
Account. J. 15 (3), 344–371.
O’Dwyer, B., 2002. Managerial perceptions of corporate social disclosure: an Irish story. Account. Audit. Account. J. 15 (3), 406–436.
Omair Alotaibi, K., Hussainey, K., 2016. Determinants of CSR disclosure quantity and quality: evidence from non-financial listed firms in Saudi Arabia. Int. J.
Discl. Gov. 13 (4), 364–393.
Patten, D., 1992. Intra-industry environmental disclosures in response to the Alaskan oil spill: a note on legitimacy theory. Account. Organ. Soc. 17 (5), 471–
475.
Patten, D., 2000. Changing Superfund disclosure and its relation to the provision of other environmental information. Adv. Environ. Account. Manage. 1,
101–121.
Patten, D.M., 2002. The relation between environmental performance and environmental disclosure: a research note. Account. Organ. Soc. 27, 763–773.
Pedersen, E.R.G., Neergaard, P., Pedersen, J.T., Gwozdz, W., 2013. Conformance and deviance: company responses to institutional pressures for corporate
social responsibility reporting. Bus. Strat. Environ. 22 (6), 357–373.
Peters, G.F., Romi, A.M., 2013. Discretionary compliance with mandatory environmental disclosures: evidence from SEC filings. J. Account. Publ. Pol. 32 (4),
213–236.
Pfeffer, J.D.J., 1975. Organizational legitimacy: social values and organizational behavior. Pac. Soc. Rev. 18 (1), 122–136.
Ramus, C.A., Montiel, I., 2005. When are corporate environmental policies a form of greenwashing? Bus. Soc. 44 (4), 377–414.
Rao, K., Tilt, C.A., Lester, L.H., 2012. Corporate governance and environmental reporting: an Australian study. Corp. Gov. 12 (2), 143–163.
Rouf, A., 2011. The corporate social responsibility disclosure: a study of listed companies in Bangladesh. Bus. Econ. Res. J. 2 (3), 19–32.
Stanny, E., 2013. Voluntary disclosures of emissions by US firms. Bus. Strat. Environ. 22 (3), 145–158.
Stubbs, W., Higgins, C., Milne, M., 2013. Why do companies not produce sustainability reports? Bus. Strat. Environ. 22 (7), 456–470.
Suchman, M., 1995. Managing legitimacy: strategic and institutional approaches. Acad. Manag. Rev. 20 (3), 571–610.
Sundarasen, S.D., Je-Yen, T., Rajangam, N., 2016. Board composition and corporate social responsibility in an emerging market. Corp. Gov. 16 (1), 35–53.
Sunstein, C.R., 2000. Deliberative trouble? Why groups go to extremes. Yale Law J. 110 (1), 71–119.
Tilt, C.A., 2001. The content and disclosure of Australian corporate environmental policies. Account. Audit. Account. J. 14 (2), 190–212.
Trotman, A.J., Trotman, K.T., 2015. Internal audit’s role in GHG emissions and energy reporting: evidence from audit committees, senior accountants, and
internal auditors. Audit 34 (1), 199–230.
Walden, W.D., Schwartz, B.N., 1997. Environmental disclosures and public policy pressure. J. Account. Publ. Pol. 16, 125–154.
White, H., 1980. A heteroscedasticity-consistent covariance matrix estimator and a direct test for heteroscedasticity. Econometrica 48 (4), 817–838.
Zhang, J.Q., Zhu, H., Ding, H.-B., 2013. Board composition and corporate social responsibility: an empirical investigation in the post Sarbanes-Oxley era. J.
Bus. Eth. 114 (3), 381–392.

A Comparison of Voluntary and Mandated Climate Change-Related Disclosure

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

A Comparison of Voluntary and Mandated Climate Change-Related Disclosure

Uploaded by

Copyright:

Available Formats

Journal of Contemporary Accounting and Economics 15 (2019) 243–266

Contents lists available at ScienceDirect

A comparison of voluntary and mandated climate

2. Theoretical framework and literature review

2.1. Background to the national greenhouse energy reporting Act 2007

2.2. Theoretical framework: legitimacy theory

2.3. The literature and hypothesis development

3.1. Sample selection

3.2. Disclosure index

3.3. Mandated environmental performance disclosure—hypothesis variable

3.4. Other factors potentially affecting the relationship

3.5. The models

The model for testing H3 takes the form:

4.1. Descriptive statistics

4.2. Regression results

L. Perera et al. / Journal of Contemporary Accounting and Economics 15 (2019) 243–266

L. Perera et al. / Journal of Contemporary Accounting and Economics 15 (2019) 243–266

L. Perera et al. / Journal of Contemporary Accounting and Economics 15 (2019) 243–266

L. Perera et al. / Journal of Contemporary Accounting and Economics 15 (2019) 243–266

L. Perera et al. / Journal of Contemporary Accounting and Economics 15 (2019) 243–266

Variables Dependent Variable = DI (OLS) Dependent Variable = GHGD (Logistic)

Variables Dependent Variable = DICHANGE (Logistic Regression)

Variables Dependent Variable = DI (OLS) Dependent Variable = GHGD (Logistic)

The National greenhouse Energy reporting Act (2007)

Facility threshold 25 Kilotonnes (kt)/100 Terra Joules (TJ)

Environmental legislation disclosures threshold levels

Appendix 2. Environmental disclosure Index based on Clarkson et al. (2008)

Hard (verifiable) disclosure items Map to GRI

4. Internal environmental audits (0–1) 3.19 3.20

You might also like