Mandated greenhouse gas emissions and required SEC climate change disclosures

• Published in: Journal of cleaner production 2020-02, Vol.247, p.119111, Article 119111
• Main Authors: Cong, Yu, Freedman, Martin, Park, Jin Dong
• Format: Article
• Language: English
• Subjects: Carbon emissions; Climate change disclosures; SEC reporting; Sustainability accounting
• ISSN: 0959-6526; 1879-1786
• DOI: 10.1016/j.jclepro.2019.119111

The U.S. federal government in 2010 required firms with industrial plants that emit carbon above a threshold amount to report these emissions to the Environmental Protection Agency (EPA) annually. Commencing in February 2010, the U.S. Securities and Exchange Commission (SEC) requires all of its registrants that are impacted by climate change to disclose the nature of this impact in filings with the SEC. These two actions stand in sharp contrast to a government that failed to ratify the Kyoto Protocol despite being the largest producer of greenhouse gases (GHG) at the time the Protocol was being ratified by most of the nations of the world. Ironically, by requiring both disclosures of GHG emissions by plants and climate change impacts by companies the U.S. government may be creating a system that actually mitigates any impact that disclosure of GHG emissions may have on the company. A company that emits a disproportionate amount of GHG may, through climate change disclosures, provide information that seems to lessen the impact of that disclosure. It is the intent of this study to determine if there is any relationship between the amount of GHG emissions and the extent of climate change disclosures. We found empirical evidence of a direct relationship between the amount of GHG emissions and the extensiveness of climate change disclosure. Firms maybe using the SEC climate change disclosures to obscure their climate change performance rather than to appropriately inform stakeholders of the impacts of climate change on their company then that would render these disclosures as being mere propaganda. This type of misinformation is termed “green-washing’ in the business ethics and environmental literature. •Using EPA mandated disclosures, GHG emissions for firms are calculated.•For the sample firms, disclosure extensiveness is determined based on the SEC Interpretive Release.•We found a direct relationship between total GHG emissions and the extensiveness of climate change disclosure.•Firms might use the SEC disclosures to obscure their climate change performance.•This would render these disclosures as being mere propaganda.