Practical Motivation
In the recent era of increased competition any modern business is deemed to implement low carbon strategies within their business plan. Most of the organizations these days desire to maintain their sustainable future through decreasing carbon emissions (Ehsani et al. 2018). This is for the reason that carbon emissions impact a company’s business environment along with effecting the finances and sustainability of all the businesses. However, to address such problem solutions like renewable energy along with free solar, decreasing carbon emissions turned out to be simpler.
It has been gathered from the “Carbon Major Reports” that more than 100 organizations have been the source of around 70% of the world’s greenhouse gas emissions. There are also three aspects which impact the atmospheric carbon dioxide growth rate (Hertwich et al. 2015). It can also be gathered that organizations serve as the largest carbon emissions source. The companies these days are recorded to produce 14% of global greenhouse emissions. Innovative carbon finance along with green finance can be used within green projects that include energy efficiency and environmental protection. Previous researches indicated that in a situation where companies fail to attain suitable carbon reduction, trading of carbon emissions might increase costs of the organizations along with decreasing its competitiveness (Huisingh et al. 2015). Organizations can decrease carbon emissions by means of technological transformation that accounts for reduction in emissions along with attaining gains from trading of emissions. In consideration to the same, the local organizations are focusing on generating stringent policies for decreasing use of energy and carbon emissions for the large as well small-medium organizations. Moreover, the trading of carbon emissions implements stricter requirements on timelines and accuracy of carbon emissions reports to address compliance needs along with supporting decision making of the management (Ioannou, Li and Serafeim 2015).
Stakeholder theory is deemed to be associated with explanations of social and especially environmental disclosures. It is also gathered that the previous researches had a drawback in explaining the stakeholder management gap. Such gap exists due the difference between organizational social performance and expectations of society that can be assumed not to be perceived or measured adequately (Khalek et al. 2015). Although considered as a stakeholder theory because of the under-development, it is considered to be justified to further use such theory in the area of social disclosure research. In explaining corporate disclosure, the stakeholder theory is deemed to be relied on two important ideas that consider organizations require better stakeholder management in their businesses. Another idea within stakeholder theory is that social disclosure is associated with social pressure. It is also argued by the previous researches that the stakeholder theory offers a comprehensive structure in elaborating the consequences and determinants of social disclosure (Lee, Min and Yook 2015). The explanation regarding the extent to which the voluntary disclosures indicate an attempt to close the perceived stakeholder gap. Specifically, it has been argued that in case of stakeholder-based organizations it is deemed that stakeholder management is observed to be attained in the viewpoint of certain constituencies. In such situation, the objective of the corporate disclosures can be simply to decrease damage or to convince the society that they are not deemed to be bad. It is also likely that organizations maintaining or repairing stakeholder management might consider discourse in a different manner from the one those have to establish it. It has also been gathered that the public disclosure of information from their annual reports can be used by the companies for implementing suitable stakeholder management strategies. The tactics and disclosure approaches used by the companies based on stakeholder theory rely on the characteristics and purpose of certain responses.
Theoretical Motivation
Robinson et al. (2015) indicated that stakeholder theory is a theory related to business ethics and organizational management for dealing with values and morals to manage an organization. There are several contributions to the theory that has been ensured by Salahuddin, Alam and Ozturk (2016) that are to be recognized properly. These researches also believe that the stakeholder theory is deemed to offer an effective technique releasing the voluntary environmental and social made by the organizations. Moreover, this type of the understanding might offer a medium for engaging in critical private debate. Another idea within stakeholder theory is that social disclosure is associated with social pressure. The stakeholder theory implies that the goal of a business organization is to develop the maximum possible value for the stakeholders. Schandl et al. (2016) indicated that in consideration to the accounting research stakeholder theory serves as a process though which a company attains approval from the societal groups.
From this point of view, for maintaining success and sustainability over time, executives need to keep the interests of the various stakeholders. There are different groups of stakeholders in business organizations, which include suppliers, customers, staffs, communities, shareholders and the governments. Schandl et al. (2016) also added that even the rivals are considered as stakeholders on certain occasions and their status is obtained from the capacity to influence the organizations and their stakeholders. Certain actions taken by the organizations have both direct and indirect impact on their stakeholders, which are considered to have adverse consequences for a company.
Figure 1: Stakeholder Theory
(Source: Sheldon 2017)
It is a widely known fact that the business organizations have always laid more emphasis on their shareholders in order to maximize their overall wealth. Therefore, the businesses are required to take into consideration more than their shareholders and more than increasing profit and in this case, the stakeholder theory concept has gained popularity in the global market. However, this theory suffers from certain drawbacks as well. The theory is challenging for those organizations, in which fiduciary obligations are applied. This often has raised objections on stakeholder theory, which argues that it is unethical to engage those influenced by or influencing the organizations. This is because it breaks the fiduciary responsibilities of the managers to their shareholders, which is often identified as the stakeholder paradox.
In the current research, the dependent variable is selected to be target disclosed within CDP and the independent variable is the stakeholder problem faced by the organizations. The CDP index is developed by the companies and can be evaluated in answering the following questions:
- Did the company have emission reduction target that might be active within the reporting year?
- What is the change within the total remission in the target indicates and what is the effect of actual carbon dioxide decrease, measurement done by the companies?
Literature Review
The research will explain through analyzing the CDP index that the historical carbon risk management if measured by its intensity of carbon emissions cannot be related with quality of disclosure regarding accounting standards and real emotions (Salahuddin, Alam and Ozturk 2016). The companies generally attempt to attain better stakeholder management that is confirmed by the society relied on social contact among them. Corporate disclosure focused on change in climate information is an emerging research interest. The research will investigate:
- Disclosure of risks and opportunities related to climate change
- A wider climate change disclosure set within the sustainability and annual reports
- Disclosures carried out in consideration to the CDP disclosure index along with analyzing the relationship between carbon disclosure and the level of carbon emissions.
The disclosure level of CDP indexes is associated with environmental regulations stringency by the government, environment responsiveness of private sector along with nation’s market structure (Salahuddin, Alam and Ozturk 2016). Data related with carbon disclosure and related risk management is deemed to be the drivers of environmental disclosure. When carbon risk management is controlled this is deemed to reject conjecture of stakeholder theory that inferior carbon risk performers offer positive carbon disclosures.
The independent variable is deemed to impact the dependent variable. In consideration to the research if the companies deal with issues related to its stakeholders along with having effective performance they will consider CDP indices disclosure (Robinson, Olson, Liu and Schauer 2015). Participating within the CDP can facilitate in enhancing organizational performance that facilitates them in increasing speed with which implementation of strategic changes can be observed. The CDP is deemed to expand its programs and the voluntary carbon disclosure has turned out to be important governance of institution. The CDP disclosures conducted by organizations increases awareness regarding changing climate, clean energy efficiency along with generating stakeholder management based on principle related with external accountability. An increase in voluntary carbon disclosure has indicated business feasibility along with advantages associated with carbon reporting and measurement that includes reputation and energy costs management (Robinson, Olson, Liu and Schauer 2015). This has further resulted in giving political advantages of carbon reporting and measurement that further mandates disclosure along with developing carbon accounting standards.
For this particular research, the following hypothesis is developed:
The business conducts of companies in dealing with the stakeholder problems are related with performance of the organizations.
References
Ehsani, M., Gao, Y., Longo, S. and Ebrahimi, K., 2018. Modern electric, hybrid electric, and fuel cell vehicles. CRC press.
Hertwich, E.G., Gibon, T., Bouman, E.A., Arvesen, A., Suh, S., Heath, G.A., Bergesen, J.D., Ramirez, A., Vega, M.I. and Shi, L., 2015. Integrated life-cycle assessment of electricity-supply scenarios confirms global environmental benefit of low-carbon technologies. Proceedings of the National Academy of Sciences, 112(20), pp.6277-6282.
Huisingh, D., Zhang, Z., Moore, J.C., Qiao, Q. and Li, Q., 2015. Recent advances in carbon emissions reduction: policies, technologies, monitoring, assessment and modeling. Journal of Cleaner Production, 103, pp.1-12.
Ioannou, I., Li, S.X. and Serafeim, G., 2015. The effect of target difficulty on target completion: The case of reducing carbon emissions. The Accounting Review, 91(5), pp.1467-1492.
Khalek, I.A., Blanks, M.G., Merritt, P.M. and Zielinska, B., 2015. Regulated and unregulated emissions from modern 2010 emissions-compliant heavy-duty on-highway diesel engines. Journal of the Air & Waste Management Association, 65(8), pp.987-1001.
Lee, K.H., Min, B. and Yook, K.H., 2015. The impacts of carbon (CO2) emissions and environmental research and development (R&D) investment on firm performance. International Journal of Production Economics, 167, pp.1-11.
MacDougall, A.H. and Friedlingstein, P., 2015. The origin and limits of the near proportionality between climate warming and cumulative CO2 emissions. Journal of Climate, 28(10), pp.4217-4230.
Robinson, M.A., Olson, M.R., Liu, Z.G. and Schauer, J.J., 2015. The effects of emission control strategies on light-absorbing carbon emissions from a modern heavy-duty diesel engine. Journal of the Air & Waste Management Association, 65(6), pp.759-766.
Salahuddin, M., Alam, K. and Ozturk, I., 2016. The effects of Internet usage and economic growth on CO2 emissions in OECD countries: A panel investigation. Renewable and Sustainable Energy Reviews, 62, pp.1226-1235.
Schandl, H., Hatfield-Dodds, S., Wiedmann, T., Geschke, A., Cai, Y., West, J., Newth, D., Baynes, T., Lenzen, M. and Owen, A., 2016. Decoupling global environmental pressure and economic growth: scenarios for energy use, materials use and carbon emissions. Journal of Cleaner Production, 132, pp.45-56.
Sheldon, T.L., 2017. Asymmetric effects of the business cycle on carbon dioxide emissions. Energy Economics, 61, pp.289-297.
Zeng, S., Nan, X., Liu, C. and Chen, J., 2017. The response of the Beijing carbon emissions allowance price (BJC) to macroeconomic and energy price indices. Energy Policy, 106, pp.111-121.
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