The results of the study show that the mandatory disclosure of environmental data does not correlate to a company's actual climate impact. However, the researchers identified a positive relationship between the level of greenhouse gas emissions and the voluntary disclosure of these data – the more impact companies have on climate change, the more likely they are to issue climate reports. This suggests that companies try to appear "greener" on paper than they actually are. At the same time, the analysis shows that investors see through this strategy and only consider the disclosure of legally required, mandatory environmental data as positive.

The researchers investigated which climate data companies disclose within the framework of their reporting obligations and how investors evaluate this information. For this purpose, the researchers examined a regulation in the United Kingdom. The regulation states that large, listed companies must report on their environmental data since the fiscal year 2013. This regulation is very specific and therefore allows for a precise differentiation between the mandatory and voluntary disclosure of data.

State-regulated climate reporting?

The study provides initial empirical findings on mandatory climate reporting. It 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.

Background: Climate reporting in Austria

More and more states are planning to make climate reporting mandatory for companies (parallel to financial reporting). In the light of climate change, climate reporting is also becoming increasingly important for investors. At the same time, the past years have shown that greenwashing particularly affects sustainability reporting.

In Austria, capital market-oriented companies with an average of more than 500 employees are obliged to report on their environmental impact since the fiscal year 2017 as a result of the Austrian Sustainability and Diversity Improvement Act (Nachhaltigkeits- und Diversitätsverbesserungsgesetz; NaDiVeG). This currently affects around 100 companies. However, the requirements defined in the act are formulated in very general terms, which makes it difficult to compare the disclosed environmental data. This is why the EU is currently considering to tighten legislation, which would also provide for binding standards regarding sustainability and, in particular, climate reporting.

According to a study by EY, only 46% of Austria's top companies publish sustainability reports. Only about a third of Austria’s reporting companies has their environmental data externally audited, this is significantly less than in Germany (73%).

About Katrin Hummel

Katrin Hummel has been Professor of Accounting & Reporting at WU Vienna since 2021. She received her PhD in Business Administration from the University of Stuttgart before continuing her academic career as a postdoc at the University of Zurich. Her research addresses issues at the interface between accounting and sustainability with a particular focus on sustainability reporting and sustainability performance. Her research has been published in numerous prestigious international journals, including the European Accounting Review, Accounting and Business Research, Journal of Business Ethics, and the Journal of Accounting and Public Policy.

Katrin Hummel is a member of the editorial board of the journal Accounting Forum, a member of the Sustainability Reporting working group of the Austrian Financial Reporting and Auditing Committee (AFRAC), a jury member of the Austrian Sustainability Reporting Awards (ASRA) and a member of the scientific advisory board of the Austrian Institute of Certified Public Accountants (Institut Österreichischer Wirtschaftsprüfer:innen, iwp).

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Further information

Video: Katrin Hummel and her research
Katrin Hummel, Emira Jasari: GHG Emissions, GHG Disclosure and Firm Value: Disentangling the Mandatory and Voluntary Components of Disclosure http://dx.doi.org/10.2139/ssrn.4232142