Industrial contribution to activities that have fuelled climate change
Industrial contribution to activities that have fuelled this fast change in ecological conditions leading to catastrophic implications for the future generations have been since then widely discussed and addressed across all spheres. Industrial role in curbing climate change is therefore pose to be one of the prime challenges today (Liesen et al. 2015). Taking into cognizance the social awareness as well as the real threat to the future implications, companies have been drawing up strategic policies that work to curb activities which are identified as the sources of the problem and committing to report on their activities as checks to such behaviour (Bebbington and Larrinaga 2014).
Greenhouse and carbon emission are one of the main information that many organizations are expected and encouraged to disclose as per of the carbon disclosure project (CDP). This is done with the motivation to reveal the strategies and commitment of the firms to reduce their carbon output which is one of the main avenues by which industries have affected climate (Hahn, Reimsbach and Schiemann 2015).
However not all the organizations have come on board yet and the impact is yet to be significant. It is of interest to understand just what drives an organization to commit to the cause to curb climate change. Stakeholder theory in this case is a viable option. Stakeholders are those with whom organizations have aligned interests. Influence of these groups can thus be expected to have an impact on organizational policies.
Theory
Stakeholder theory deals with the ethical aspect of the managerial division of a business or any other organization. It is a conceptual frame work for policy making that takes into account the moral accountability of the organization and its management (R Edward freeman). According to stakeholder view, an organization’s strategy ought to integrate with the market-based view and the resource-based view, a degree of socio-political caution (Hörisch, Freeman and Schaltegger 2014).
According to the normative theory of identifying stakeholders, any person or a group of people or another organisation who may or may not be an internal member of the organization with whom the organization’s interest ally is a stakeholder. They include consumers, shareholders as well as competitors and partners. The first people who come to mind when considering who holds the stakes at an organization are the shareholders.
However beside the obvious, stakeholders include all whose actions and contributions influence company performance, like employees, customers and business associates other than shareholders (Bridoux and Stoelhorst 2014). These people hold the position to continuously challenge the organisation in how they manage and allocate their resources thus influencing their operational policies (Herold, Lee and Gunarathne 2018).
Greenhouse and carbon emissions
The stakeholder salience theory speaks about how stakeholders influence the management in their decision making process. They argue that stakeholders such as the consumers, shareholders as well as competitors and partners who may build pressure on certain issues could influence management to come up with the disclosure data as a testament to their commitment (de Aguiar and Bebbington 2014). This can be attributed to the fact that this issues touches all of society including the stakeholders and the rising concern about climate change and the perceived accountability of the organizations by the stakeholders places certain expectations from stakeholders onto the company.
The organization in response to these expectations would give first priority to its stakeholders and align their operational strategy along the interest of the stakeholders (Herold, Lee, and Gunarathne 2018). Given the power that they hold on the company, the stakeholders are in a position to put pressure to respond to their concerns by means of environmental and social disclosure and this is supported by empirical evidence (Liesen et al. 2015). Stakeholders thus have a key role to play in how the organization performs or commits to perform on enforcing carbon friendly policies through their decisions and reporting.
Stakeholder research is hence a significant aspect in business management studies. An understanding of who the stakeholders of the firm are can help in giving insight about what drives the organization and how they would act in various situations (Hörisch, Freeman and Schaltegger 2014). The primary objective of the research methodology is then to identify who the stakeholders are and the direction and magnitude of their influence on the many levels of organizational activity. Environment disclosure is one of the most popular areas that seems to have been benefitted by the influence of stakeholders and thus serve as a validation of the stakeholder theory as a conceptual framework (Weber et al. 2016).
A number of literature is available which address the connection between carbon disclosure and environmental impact. However none of those have been seen to be consistent. Again, existing research, notable among which is Schreck and Raithel (2018) shows that firms commit to reporting on emissions out of the belief that by doing so they would establish image as environmentally conscious and therefore cater to the growing environmentally conscious consumers in the market.
Again, as per the Voluntary disclosure theory, it is asserted that firms which are superior in terms of performance are more likely to be aligned with environmental disclosure and thus this can form a basis to differentiate the superior firms from the inferior ones (Birchall, Murphy and Milne 2015). Liesen (2015) again showed that stakeholders have a significant impact on carbon disclosures of organizations in Europe. Hence all these elements may be of significance when considering the carbon disclosure by an organization. This study in particular makes use of stakeholder theory and statistical data analysis to explore the problem using empirical research.
Stakeholder theory in business management
The study here then takes as the variable of interest the attribute of a company to engage in voluntary disclosure as its relevance was explored by Lee, Park and Klassen (2015). The integration of climate change in the firm’s policies is taken as a predictor or independent variable (Weber et al. 2016). Additionally the analysis uses stakeholder research to identify the factors that may influence carbon disclosure, that is, whether the consumers as stakeholders in the firm have a hand in influencing firm’s disclosure policies(Lee, Park, and Klassen 2015).
A firm which feels obligated to cater to the growing demand for environmental friendly policies from consumers would be able to capture market advantage better than one which chooses to remain oblivious and this would naturally lead to financial implications given the impact on its market. This factor is then taken as control variables to the model. The following section shows the conceptual model of the study. The control variable for this case focuses on the market pressures from consumers that is experienced by the firms and how they may interact with the size of the firm in how it responds to the carbon disclosure project objectives and its ensuing performance.
Conceptual Model:
The following figure shows the conceptual model for the study. The IV is the independent variable which is the indicator of inclusion of climate change policy by the company, the CV is the control variable which is the indicator of whether company believes carbon emission report to have financial implication or not and DV is the dependent variables which is the carbon disclosure level.
Hypothesis
H1: Financial gain on account of being market leader influences organization’s carbon emission reporting.
H2: An organization that takes into account climate change into its business strategies has lower reported carbon emissions.
Proxy Measures for Theoretical Constructs
|
Theoretical Construct |
Proxy measure (From CDP survey provided) |
Dependent (DV) and Independent (IV). Control Variable (CV), Mediating Variable (MeV) or Moderating Variable (MoV). In a sentence explain why it is a DV, IV, CV, MeV or MoV |
Measurement Scale: Nominal, Ordinal, or Scale (Ratio) |
|
Voluntary carbon Disclosure level |
total revenue – Intensity figure in metric tonnes of CO2 emissions per unit |
DV because the topic under study is carbon emissions |
Ordinal or ratio Scale |
|
Integration of Climate change in policy |
Yes or No(2 levels) |
IV because carbon emission of a company may depend on their attitude towards climate change |
Ordinal Scale |
|
Financial Implication is present or not |
Presence of potential financial implications of the opportunity |
CV because a company which feels it will be benefitted financially by abiding by reporting policy will follow through |
Nominal |
Research Method:
The study collects data from the carbon disclosure project survey that is available in CDP’s website. The dataset is therefore secondary. The study proposes to consider 80 out of 5000 organizations who have taken part in the disclosure survey. The idea is to use the responses of these 80 companies as a basis for research. The study shall follow a descriptive study design. The study shall make use of the disclosure percentages and whether climate change has been integrated into their strategy or not and why not and the perception of pressure from consumers that the firm may have with respect to its market performance. The analysis will involve descriptive analysis as well as inferential statistical analysis of the data and seek to establish which factors have an impact on disclosure as well as how.
Stakeholder salience theory
The objective approach to the analysis will allow us a measurable view into how the independent variable is affecting the dependent variable. This way it would also be possible to measure any possible errors in the assumptions. The concern involved in this approach is the validity of the data. Since the companies have self-reported these statistics, it is speculated that the performance and disclosure might be biased in favour of the company. Also there may be countless other factors which are not being addressed in the model which cannot be easily measured such as external social and political influences.
Overall it is expected that by the end of the survey the question that whether a company which is larger in size is more likely to readily disclose their carbon emissions or not and whether a company which actively includes climate change in its strategy model is likely to cause more emissions or not could be answered.
Reference
Bebbington, J. and Larrinaga, C., 2014. Accounting and sustainable development: An exploration. Accounting, Organizations and Society, 39(6), pp.395-413.
Birchall, S.J., Murphy, M. and Milne, M.J., 2015. Evolution of the New Zealand Voluntary Carbon Market: An analysis of CarboNZero client disclosures. Social and Environmental Accountability Journal, 35(3), pp.142-156.
Bridoux, F. and Stoelhorst, J.W., 2014. Microfoundations for stakeholder theory: Managing stakeholders with heterogeneous motives. Strategic Management Journal, 35(1), pp.107-125.
de Aguiar, T.R.S. and Bebbington, J., 2014, December. Disclosure on climate change: Analysing the UK ETS effects. In Accounting forum (Vol. 38, No. 4, pp. 227-240). Elsevier.
Hahn, R., Reimsbach, D. and Schiemann, F., 2015. Organizations, climate change, and transparency: Reviewing the literature on carbon disclosure. Organization & Environment, 28(1), pp.80-102.
Herold, D.M., Lee, K.H. and Gunarathne, N., 2018, May. Carbon accounting in the global logistics industry: Categorising institutional and stakeholder pressures on carbon disclosure strategies. In 22nd EMAN Conference. Social Responsibility and Sustainability Accounting-Key Corporate Performance Drivers and Measures.
Hörisch, J., Freeman, R.E. and Schaltegger, S., 2014. Applying stakeholder theory in sustainability management: Links, similarities, dissimilarities, and a conceptual framework. Organization & Environment, 27(4), pp.328-346.
Lee, S.Y., Park, Y.S. and Klassen, R.D., 2015. Market responses to firms’ voluntary climate change information disclosure and carbon communication. Corporate Social Responsibility and Environmental Management, 22(1), pp.1-12.
Liesen, A., Hoepner, A.G., Patten, D.M. and Figge, F., 2015. Does stakeholder pressure influence corporate GHG emissions reporting? Empirical evidence from Europe. Accounting, Auditing & Accountability Journal, 28(7), pp.1047-1074.
Schreck, P. and Raithel, S., 2018. Corporate social performance, firm size, and organizational visibility: distinct and joint effects on voluntary sustainability reporting. Business & Society, 57(4), pp.742-778.
Weber, G., Schiemann, F., Guenther, T. and Guenther, E., 2016. Stakeholder Relevance for Reporting: Explanatory Factors of Carbon Disclosure.
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