The determinants and impacts of carbon assurance : an international study

Abstract

Protecting the environment is now a major aspect of corporate social responsibility and there is an increasing interest in carbon emissions reporting due to the growing pressure from major initiatives such as the Carbon Disclosure Project (CDP) and Global Reporting Initiative (GRI), which have exerted increasing pressure on firms to be more transparent about their nonfinancial information, including carbon emissions. Moreover, emissions trading systems (ETS) and carbon taxes in many countries have emerged as key public policies for reducing carbon emissions. Consequently, carbon disclosure has become a critical part of annual business reporting. However, voluntary carbon disclosure includes private information on future sustainability that external stakeholders cannot easily verify. It is questioned that some of the disclosed information might be subject to manipulation (i.e. 'greenwashing') by managers. Consequently, strong demand is emerging for independent assurance on greenhouse gas (GHG) disclosure. However, the literature on the assurance of carbon emissions remains very sparse and prior studies have mainly focused on the incentives for voluntary adoption of carbon assurance from legitimacy and institutional perspectives, choice of assurance provider, the role of internal auditors in GHG reporting, the expertise required for GHG assurance and the development of an international standard for GHG assurance. Yet researchers' understanding of this new type of assurance is very limited given the scarcity of literature in this area. Thus, this thesis fills this gap by study carbon assurance from two perspectives, the determinants and the impacts of carbon assurance by utilising an international sample. Firstly, this study provides an insight into the determinants of carbon assurance from information asymmetry perspective. The study finds that firms with higher carbon information asymmetry between insiders and outsiders have greater incentives to voluntarily engage an external party for the independent assurance of their greenhouse gas statements. The second step of this study is to explore how firms benefit from the purchase of carbon assurance, specifically the role carbon assurance plays in firms' voluntary carbon disclosure quality. The results show that assured companies tend to have greater carbon disclosure in the year after they obtain assurance than unassured companies.

Date of Award	2021
Original language	English