Carbon Disclosure Quality

In the literature on carbon-related information, thereare few studies on how the quality of GHG disclosurehas been developed, evolved and improved (Comyns &Figge, 2015). A relevant study on the quality of suchinformation is carried out by Comyns and Figge (2015),in which they measure the quality of disclosure with aself-constructed index based on seven dimensions: i.Accuracy, ii. Integrity, iii. Consistency, iv. Credibility,v. Relevance, vi. Opportunity, and vii. Transparency.

From the social pressures on carbon and GHGemissions in general, companies began to take actions toreduce or offset their carbon footprint. Among theseactions are carbon disclosure and performance, however,the quality of both actions carried out by companies isunknown to stakeholders.

As Pitrakkos and Maroun (2019) well mention,'quantity' is not the same as 'quality', which is why theyconducted a study to measure the quality of the carboninformation reported by companies listed on theJohannesburg Stock Exchange, in where they measuredthe quality of their information through eightcharacteristics of their reports, among them: i. A densityindex, ii. Attribute, iii. Management orientation, iv.Integrated, v. Assurance, vi. Strategy, vii. Legibility andviii. Repetition. In the study, they found that the qualityof their disclosures is compromised depending on thelevel of carbon risk companies are exposed to, and theamount of disclosure varies according to the legitimacystrategy they use.

Consequences of Carbon Disclosure

The consequences and determinants of carbondisclosure have been studied interchangeably on manyoccasions, making it somewhat confusing to identify

when some variables are used as consequences andwhen as determinants. The CD by companies has beenstudied from the perspective of financial performancevariables such as return on equity (ROE), return onassets (ROA), Tobin’s Q, return on sales (ROS), amongothers, having inconclusive results.

On the one hand, it is reported that the reduction ofcarbon emissions results in a significant increase in thefinancial performance of companies (Gallego-Álvarez etal., 2015; Velte et al., 2020), generating greater value forthe public investor, showing that with sustainableactivities it is possible to economically reward theinvestments received; Moreover, different studies haveshown that carbon emission reductions haveunprofitable results for companies in the short term and,therefore, poor financial performance (Delmas et al.,2015; Ganda & Milondzo, 2018).

Other authors mention that companies can haveconsequences on their cost of capital depending onwhether they voluntarily report on their carbonperformance. The results have been similarly mixed onthis variable, since there are authors who mention thatthe cost of capital and carbon disclosure maintain anegative relationship, where public companies usecarbon disclosure to predispose the market and thus,obtain a lower capital cost rate (Lemma et al., 2019).

A different way of looking at it is that companies thatpractice carbon disclosure benefit from lower rates ontheir cost of capital, which helps them in their financialtransactions. Different authors find that the disclosure ofcarbon emissions affects the cost of capital of companiessince it increases when the company discloses carbonemissions, thus causing it to be more expensive toobtain financing and, therefore, make it morecomplicated the achievement of their corporatestrategies (Peters & Romi, 2014).

Cumpean, J., Briseño, A., y Zorrilla Del Castillo, A. L.

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Vol. 7, núm. 21 / septiembre – diciembre del 2022