Corporate climate risk disclosure : assessing materiality and stakeholder expectations for sustainable value creation

Journal article


Arian, Adam Gholami and Sands, John Stephen. (2023). Corporate climate risk disclosure : assessing materiality and stakeholder expectations for sustainable value creation. Sustainability Accounting, Management and Policy Journal. 15(2), pp. 457-481. https://doi.org/10.1108/SAMPJ-04-2023-0236
AuthorsArian, Adam Gholami and Sands, John Stephen
Abstract

Purpose: This study aims to evaluate the adequacy of climate risk disclosure by providing empirical evidence on whether corporate disclosure meets rising stakeholders’ demand for risk disclosure concerning climate change.

Design/methodology/approach: Drawing on a triangulated approach for collecting data from multiple sources in a longitudinal study, we perform a panel regression analysis on a sample of multinational firms between 2007 and 2021. Inspired by the Global Reporting Initiative (GRI) principles, our innovative and inclusive model of measuring firm-level climate risks underscores the urgent need to redefine materiality from a broader value creation (rather than only financial) perspective, including the impact on sustainable development.

Findings: The findings of this study provide evidence of limited corporate climate risk disclosure, indicating that organisations have yet to accept the reality of climate-related risks. An additional finding supports the existence of a nexus between higher corporate environmental disclosure and higher corporate resilience to material financial and environmental risks, rather than pervasive sustainability risk disclosure.

Practical implications: We argue that a mechanical process for climate-related risk disclosure can limit related disclosure variability, risk reporting priority selection, thereby broadening the short-term perspective on financial materiality assessment for disclosure.

Social implications: This study extends recent literature on the adequacy of corporate risk disclosure, highlighting the importance of disclosing material sustainability risks from the perspectives of different stakeholder groups for long-term success. Corporate management should place climate-related risks at the centre of their disclosure strategies. We argue that reducing the systematic underestimation of climate-related risks and variations in their disclosure practices may require regulations that enhance corporate perceptions and responses to these risks.

Originality/value: This study emphasises the importance of reconceptualising materiality from a multidimensional value creation standpoint, encapsulating financial and sustainable development considerations. This novel model of assessing firm-level climate risk, based on the GRI principles, underscores the necessity of developing a more comprehensive approach to evaluating materiality.

KeywordsClimate risk disclosure; Corporate sustainability; Financial materiality; Sustainable Development Goals (SDGs)
Year01 Jan 2023
JournalSustainability Accounting, Management and Policy Journal
Journal citation15 (2), pp. 457-481
PublisherEmerald Group Publishing Limited
ISSN2040-8021
Digital Object Identifier (DOI)https://doi.org/10.1108/SAMPJ-04-2023-0236
Web address (URL)https://www.emerald.com/insight/content/doi/10.1108/sampj-04-2023-0236/full/html
Open accessPublished as non-open access
Research or scholarlyResearch
Page range457-481
Publisher's version
License
All rights reserved
File Access Level
Controlled
Output statusPublished
Publication dates
Online15 Dec 2023
Publication process dates
Accepted29 Nov 2023
Deposited12 Nov 2024
Additional information

Copyright © 2023, Emerald Publishing Limited

Place of publicationUnited Kingdom
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https://acuresearchbank.acu.edu.au/item/910vw/corporate-climate-risk-disclosure-assessing-materiality-and-stakeholder-expectations-for-sustainable-value-creation

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