Academic journal article International Journal of Business

Does the 2010 SEC Climate Change Disclosure Guidance Change Firms' Corporate Social Responsibility Reporting?

Academic journal article International Journal of Business

Does the 2010 SEC Climate Change Disclosure Guidance Change Firms' Corporate Social Responsibility Reporting?

Article excerpt


There is an increasing public concern about climate change. As a response to such concern in the accounting field, in 2010, the Securities and Exchange Commission (SEC) announced the SEC 2010 Commission Guidance Regarding Disclosure Related to Climate Change (SEC 2010 Guidance), the first disclosure guidance issued by either the FASB or the SEC for U.S. listed companies. However, the publication provoked criticism and debate. Opponents point out that the SEC 2010 Guidance might have an adverse impact on corporate social responsibility (CSR) reporting "by registrants fearful of liability under securities laws for the contents of such disclosures" (Shorter, 2013). This study investigates (1) the relation between firms' climate change disclosure and corporate social responsibility (CSR) disclosures and (2) the impact of the passage of SEC 2010 Guidance on corporate social responsibility (CSR) reporting. The analysis results suggest that climate change disclosures are positively associated with corporate social responsibility concerns, strengths, and overall disclosure. In addition, we do not find empirical evidence that the SEC 2010 Guidance discourages firms' overall environmental and corporate social responsibility disclosures.

JEL Classification: M40

Keywords: climate change; sustainability reporting; corporate social responsibility


Climate change has emerged as a critical issue that is studied in relation to agriculture, terrestrial ecosystems, marine and fisheries, water, forestry, energy, tourism, economics, human health, and other areas. However, there is scarce research on the impact of climate change as it relates to accounting (e.g., climate change and firms' financial and environmental performance or climate change and corporate reporting), even though the generally accepted reality of climate change (i.e., ecological issues, economic concerns, and political agendas) has uncovered accounting issues that raises research questions for the academic accounting community.

Climate change threatens companies' operations, development, and profitability. A study by the consulting firm Mercer suggests that climate change could increase investment portfolio risk by 10% over the next two decades (Coburn, Donahue, and Jayanti, 2011). In addition, a global executive survey revealed that 50% of executives list environmental issues among the foremost risks that might hurt stockholder value (Bonini, Mendonca, and Rosenthal, 2008). Under these circumstances, stakeholders and investors encourage environmentally and socially responsible business practices, and are demanding sound environmental and social responsibility disclosure from corporations. For example, a group of investors including Ceres-led Investor Network on Climate Risk (INCR), BlackRock, British Columbia Investment Management Corporation, and the AFL-CIO Office of Investment has proposed a sustainability disclosure listing standards for U.S. and international stock exchanges in order to develop uniform sustainability reporting standards for all stock exchanges (EcoWatch, 2013).

Notably, on February 8, 2010, in response to the urgency of climate change and the increasing demand for climate change disclosure in the public interest, the SEC issued an interpretive release (Nos. 33-9106; 34-61469; FR-82) titled Commission Guidance Regarding Disclosure Related to Climate Change (hereafter, SEC 2010 Guidance). The SEC 2010 Guidance highlights public companies' obligations under securities laws and SEC regulations to disclose to investors material information concerning risks and opportunities related to climate change. Currently, this is the only U.S. accounting report standard that emphasizes climate change disclosure.

The SEC 2010 Guidance specifies that companies (registrants) should consider four main possible climate change impact criteria in determining whether the disclosure requirement has been triggered: (a) the impact of newly developed or updated climate change legislation and regulation; (b) the impacts of international accords on climate change; (c) the indirect consequences of regulations or business trends resulting from climate change; and (d) the physical impact of climate change. …

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