Corporate incentives for external carbon emissions assurance: an international study

RR Datt - 2016 - search.proquest.com
2016search.proquest.com
This thesis contributes to the growing literature on sustainability assurance by examining the
determinants of voluntary carbon emissions assurance and the managerial choice of carbon
assurance providers. Carbon emissions assurance is predominantly voluntary, and only a
limited number of studies have attempted to address these issues: the decision to assure
and the choice of provider. Global warming and climate change is a hot topic at the moment,
and it has been for some time. The effect of climate change is a concern for businesses and …
Abstract
This thesis contributes to the growing literature on sustainability assurance by examining the determinants of voluntary carbon emissions assurance and the managerial choice of carbon assurance providers. Carbon emissions assurance is predominantly voluntary, and only a limited number of studies have attempted to address these issues: the decision to assure and the choice of provider. Global warming and climate change is a hot topic at the moment, and it has been for some time. The effect of climate change is a concern for businesses and also the public at large. With the current interest and research in climate change, it is coming to be seen as a complex phenomenon (Weinhofer and Hoffman 2010) that creates serious challenges for both businesses and human beings. Business needs to incorporate and integrate strategies to reduce carbon emissions in order to respond to stakeholders’ demands. One way of meeting these demands is for businesses to disclose their carbon emissions and to have their report on carbon emissions externally assured. Unlike the generic category of sustainability, carbon emissions represent a specific, concrete, and much more imminent environmental risk. As greenhouse gas statements include managers’ private information, it is difficult for external stakeholders to have any consistency across the reports or to verify the statements. The uncertainty about what is reported in these in-house reports significantly increases legitimacy pressures on firms’ governance. These pressures to legitimise the operations of an organisation motivate managers to undertake specific actions to address public concerns regarding their firm’s responses to climate change. They can regain legitimacy in the eyes of stakeholders and the public by not only disclosing their carbon emissions but by also having this information verified and assured by an independent third party. In summary, the findings of the thesis suggest that high levels of carbon emissions lead to greater opacity of information asymmetry in a company’s sustainability activities. Hence, carbon assurance is necessary to reduce the carbon information asymmetry and to reduce ecological uncertainty as opposed to financial uncertainty. Carbon assurance is complementary to the traditional financial auditing, and this study found that companies purchased carbon assurance even though their financial information was deemed transparent. Thus, this thesis contributes to the literature by empirically testing legitimacy, stakeholder, institutional, and signalling theory. Additionally, this study provides important new information and insights for policy makers, international carbon emissions assurance standards setters, regulatory bodies, and assurance providers who face enormous challenges in this new and emerging market.
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