The more impact companies have on climate change, the more likely they are to issue climate reports, a new study from Vienna University of Economics and Business (WU Vienna) has revealed.
According to the research, undertaken by Katrin Hummel, Head of the Accounting & Reporting Group at WU Vienna, and her colleague Emira Jasari (University of Zurich), by voluntarily reporting on their climate impact, companies actively try to appear “greener” on paper than they actually are.
The study also found, however, that investors are not fooled by this strategy and only consider the disclosure of legally required, mandatory environmental data as positive.
In undertaking the research, Hummel and her colleagues examined the impact of mandatory climate reporting. Specifically, she investigated which climate data companies share within the framework of their reporting obligations and how investors evaluate this information, looking at the firms in the UK.
Current regulation in Britain states that large, listed companies must report on their environmental data since the fiscal year of 2013.
The results of the study show that the mandatory disclosure of environmental data does not correlate to a company’s actual climate impact, but that a positive relationship exists between the level of greenhouse gas emissions produced by a company and the voluntary disclosure of this information.
Reflecting on the study, Katrin Hummel, Head of the Accounting & Reporting Group at WU Vienna, and lead author of the research, says:
“More and more states are planning to make climate reporting mandatory for companies. In light of climate change, climate reporting is, understandably, also becoming increasingly important for investors. In recent years, however, we have seen that greenwashing significantly affects sustainability reporting.
“The study shows that a precise and accurate regulation can, at least partially, reduce potential greenwashing practices and increase a report’s informational value for investors. Both steps are important on the way to a climate-neutral economy.”