Abstract/Summary

Purpose This paper aims to investigate the extent to which greenhouse gas (GHG) -sensitive companies in the FTSE 100 disclose carbon emission information in their annual reports and standalone reports during the period of 2004–2012, and how they respond to the launch of legally binding GHG reduction schemes – the EU Emission Trading Scheme (EU ETS) and the Climate Change Act (CCA). Design/methodology/approach A 42-item disclosure index is constructed to analyse the quality of corporate GHG disclosures. We initially chart the development of corporate GHG disclosure from 2004 to 2012, analyse the trend of disclosure development and compare variances for the convergence of disclosures. Subsequently we carry out a t-test to assess the significance of post-EU ETS and -CCA changes and the difference between GHG trading account holders and non-account holders. Findings The results show that GHG disclosures have been increasing over time, both in number of firms making disclosures and in the amount of information being reported, which indicates the movement towards normativity. We also find that the disclosures reach the peak after the enactment of EU ETS and CCA, and firms with carbon trading accounts are more responsive to these schemes than those without accounts. Nevertheless, the quality of the disclosure remains low, which may justify the further government intervention of mandating carbon reporting. Originality/value This is the first paper that has examined the regulatory effects on GHG disclosures in an environment where GHG emission triggers direct cost for companies.