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Voluntary Disclosure of Greenhouse Gas Emissions: Contrasting the Carbon Disclosure Project and Corporate Reports

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Abstract

As global warming continues to attract growing levels of attention, various stakeholders (states, general public, investors, and lobbyists) have put climate change on corporate agendas and expect firms to disclose relevant greenhouse gas (GHG) information. In this paper, we investigate the consistency of the GHG information voluntarily disclosed by French listed firms through two different communication channels: corporate reports (CR) and the Carbon Disclosure Project (CDP). More precisely, we contrast the amounts of GHG emissions reported and the methodological explanations provided (named ‘traceability’) in each channel. Consistent with a stakeholder theory perspective, we find that GHG amounts are significantly lower in the CR than in the CDP. We also find that firms increase the CR figures’ traceability when there is a discrepancy between disclosures in the two channels. We suggest that the aim of this greater traceability is to enhance information credibility across the different channels used.

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Notes

  1. Ioannou and Serafeim (2011) report that only 29 countries have enacted any legal requirements concerning CSR (these may or may not incorporate GHG emissions disclosures).

  2. At the time the study was carried out, there was no French law requiring disclosure of information on firms’ GHG emissions. Since 2012, the “Grenelle II” law has required certain firms to disclose items on GHG emissions, but does not define how this information should be presented (emission sources, scope, calculation methods, protocol used, etc). The manager is thus given practically full latitude as regards the amounts and nature of the emissions to report.

  3. Research focusing on disclosures through websites has also been published (Gallego-Alvarez et al. 2011, for instance).

  4. The Kyoto Protocol capping GHG emissions came into effect in February 2005 and concerns (among others) the European Union countries, Canada, and Japan.

  5. See Appendix 1 for a presentation of possible emissions breakdowns.

  6. It should be noted that two statuses are available for CDP answers: (1) public and (2) confidential. In the first case, answers are publicly released on the CDP website. In the second case, access to answers is restricted to institutional investors that are members of the CDP.

  7. In this article, we presume that institutional investors are the main users of the CDP. It is however possible that other stakeholders with sufficient resources and a definite interest in GHG issues may have access to the CDP.

  8. The CDP’s timetable for collecting emissions for year N is as follows: the questionnaire is sent out in February N + 1, data are received in May N + 1 and published in September N + 1. This means that the data published in September 2007, 2008 and 2009 by the CDP relate respectively to the years 2006, 2007 and 2008. September 2007 was the first time methodologies used to estimate GHG emissions were required (Andrew and Cortese 2011).

  9. CR are considered a homogeneous channel in this article. This is justified by our empirical observations, as GHG figures are found in both documents in only 45 of 172 cases (26 %). Of those 45 cases, 37 report identical figures across CR. In the remaining 8 cases which report different figures in various CR, we use in our analysis the document with the fullest emission reporting.

  10. Two observations are dropped due to unusable data in the CDP. This reduces the number of observations to 101 instead of 103.

  11. To perform a Student test, data must be normally distributed. Due to the non-normality of the original data, we use a log transformation of the values. A Shapiro–Wilk test confirms the normality of the log-transformed data.

  12. A paired samples t-test is used when two observations per subject are available and the aim is to investigate whether the medians of these normally distributed variables are different.

  13. Firms are classified in this category if they use the term ‘scope 1’ or state that they are reporting direct emissions.

  14. This figure is different from 36 because one firm participating in the CDP and also reporting scope 1 emissions in its CR only reports a ‘total emission’ figure in the CDP (this observation is included in the first line of Table 6).

  15. This breakdown provides some clues to the selectivity applied. But there are limits to this exercise: full data from the firm’s carbon accounting is required for an exact comparison between the CDP and CR disclosures and accurate observation of the cherry-picking process. This point is presented in the conclusion as a limitation of this study.

  16. The data collected concerning two other potential areas for analysis, namely the breakdown by activity and/or country, are too limited for study. Of the 64 companies observed, only 16 provide a breakdown of GHG emissions by activity, and 8 report emissions by geographical area. Only one entity discloses its emissions for France and its emissions for the whole world. This is not sufficient to support a “local” corporate disclosure strategy.

  17. The sum of percentages may exceed 100 %, as certain firms give many sources simultaneously.

  18. This indication is not enough to compare figures between the CDP and the CR.

  19. In this case, a 2.5 % threshold is still used.

  20. We thank one of the reviewers for this additional interpretation of our results. The CDP and CR can be analysed as intermediary institutions between stakeholders and the firm. In this analysis, reporting would also be influenced by the nature of the intermediary institutions themselves.

Abbreviations

CDP:

Carbon Disclosure Project

CDSB:

Carbon Disclosure Standards Board

CR:

Corporate reports

CSR:

Corporate social responsibility

GHG:

Greenhouse gas

GRI:

Global Reporting Initiative

MD&A:

Management Discussion and Analysis

OLS:

Ordinary least squares

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Author information

Authors and Affiliations

  1. Université Paris Sud, RITM, 54 Boulevard Desgranges, 92331, Sceaux Cedex, France

    Florence Depoers

  2. ESSEC Business School, Avenue Bernard Hirsch, BP 50105, 95021, Cergy Pontoise Cedex, France

    Thomas Jeanjean

  3. HEC Paris, 1 Rue de la Libération, 78350, Jouy-en-Josas, France

    Tiphaine Jérôme

Authors
  1. Florence Depoers
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  2. Thomas Jeanjean
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  3. Tiphaine Jérôme
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Corresponding author

Correspondence to Thomas Jeanjean.

Appendices

Appendix 1: Presentation of GHG Emissions in the CDP (Scopes)

The CDP scope breakdown follows the recommendations of the GHG Protocol.

Scope 1 emissions relate to direct GHG emissions from sources that are owned or controlled by the company, for example from combustion in owned or controlled boilers or furnaces.

Scope 2 emissions relate to indirect GHG emissions from the generation of purchased electricity consumed by the company, heat or steam.

Scope 3 is an optional reporting category that allows other indirect emissions to be reported. Scope 3 emissions are a consequence of the activities of the company but occur from sources not owned or controlled by the company, for example employee business travel or outsourced business activities.

Appendix 2: Score Assessing the Traceability of GHG Figures Disclosed in CR

Score categories

Examplea

Scope (max. score is 4)

1. Reporting scope is indicated (0–1)

“Data concern all about Group within the group during the whole year” = 1 point (item 1)

2. Changes in reporting scope are indicated (0–1)

“Entities acquired in China at Sizhou and Wuhan and Ecotecnia in Spain in 2007 are now included” = 1 point (item 2)

3. Consolidation mode is indicated (0–1)

 

4. Exclusions are indicated (0–1)

“[…] with the exception of emissions from construction” = 1 point (item 4)

Gas features (max. score is 5)

1. Gas type/nature is indicated (0–1)

There is a table with a title including “CO 2 emissions” = 1 point (item 1)

2. Emissions breakdowns are indicated (0–4)b

Direct/indirect breakdown figures are given in the table = 1 point (item 2)

Methodology (max. score is 6)

1. Computation framework is indicated (0–1)

“A protocol to assess GHG emissions was created consistent with the protocol Developed by the World Business Council for Sustainable Development (WBCSD). Precise specifications for energy diagnostics were defined and submitted to ADEME (Agence de l’environnement et de la maîtrise de l’énergie) for advice” = 1 point (item 1)

2. Computation method is indicated (0–1)

3. Hypotheses are indicated (0–1)

4. Uncertainty sources are indicated (0–1)

5. Uncertainty margins are indicated (0–1)

6. Reporting tool is indicated (0–1)

Max. score = 15

Total score = 6 points

  1. aThe second column provides excerpts from an example CR and the related points attributed
  2. bThe scoring scale of emissions breakdowns is from 0 to 4. A zero score means only a total emissions figure is disclosed. One point is awarded if emissions are reported as direct and indirect. Two points are awarded if emissions are reported by scope. Three points are awarded if emissions are reported by source. One additional point is awarded if a breakdown of activities is also indicated. This coding rule reflects the precision of the breakdown

Appendix 3 Areva

Areva declares 771,648 tonnes of CO2 equivalent (teq CO2) for direct emissions in its CR published in 2009. The CDP provides a breakdown of the emissions by scope for a total of 1,270,824 teq CO2. Amounts provided in both channels are summarised in the table below.

Registration document published in 2009

 

CDP programme data published in 2009

Direct emissionsa

771,648

Scope 1

 

771,648

 

Scope 2

 

356,627

 

Scope 3

Employee business travel

52,143

 

Supply chain

90,406

Total

771,648

 

Total

1,270,824

  1. a Amounts are in tonnes of CO2 equivalent

The scope 1 figure reported in the CDP corresponds exactly to the amount of direct emissions reported in the CR. No selectivity occurs at this level. However, scopes 2 and 3, reported in the CDP, are not included in the CR. In this example, the data included in the CR is based on similar data. However, the omission of the last two scopes reduces the total amount reported. This presentation can meet two aims: (1) minimise emissions and (2) ensure consistency in reported data in the two channels.

Appendix 4 Vallourec

In its CR published in 2009, Vallourec reports a total of 976,209 tonnes of CO2 equivalent (teq CO2). The accompanying notes mention that “the 2007 figures include internally generated transport emissions and emissions from other energy sources (heating oil, propane, butane, etc), which were not previously included […] from 2008 another greenhouse gas, methane, is also included. It comes from the carbonisation process for charcoal used in V & M do Brasil. Methane represents between 25 and 35 % of the Group’s total emissions. This is still an approximation, which the Group will continue to narrow in 2009”. In the CDP data published in September 2009, three different figures are given: 1,002,994 teq CO2 for scope 1, 649,147 teq CO2 for scope 2 and 2,082,343 teq CO2 for scope 3. This information is summarised in the table below.

Registration document published in 2009

CDP programme data published in 2009

Total emissionsa

976,209

Scope 1

1,002,994

Scope 2

649,147

Scope 3

Employee business travel

28,755

External transport of goods

238,992

Disposal of waste

172,781

Supply chain

1,641,815

Total

976,209

 

Total

3,734,484

  1. aAmounts are in tonnes of CO2 equivalent

It is difficult to reconcile figures between the two channels. Total emissions according to the CDP (3,734,484) are much higher than the amount reported in the CR (976,209). This figure (976,209) corresponds neither to scope 1 nor to scope 2. However, the description of this figure in the notes possibly refers to the definition of scope 1. The CR also states that emissions subject to CO2 allowances “[…] amounted to 76,319 tonnes” (p. 181). Adding this number to the initial total of 976,209 generates an amount close to the scope 1 reported in the CDP, but still different (1,002,994 for scope 1 in the CDP and 1,052,528 for the new total in the CR). This example illustrates how the reporting of an aggregate amount allows managers to use their discretion in the CR. Despite the methodological information provided, the CR amount remains significantly lower than the CDP figure.

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Depoers, F., Jeanjean, T. & Jérôme, T. Voluntary Disclosure of Greenhouse Gas Emissions: Contrasting the Carbon Disclosure Project and Corporate Reports. J Bus Ethics 134, 445–461 (2016). https://doi.org/10.1007/s10551-014-2432-0

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