Corporate governance and environmental reporting: an Australian study

TLDR

The study investigates how environmental reporting relates to corporate governance attributes among Australia’s largest listed firms. Using a quantitative analysis of 2008 annual reports from the top 100 Australian ASX companies, the authors compare environmental disclosure levels with various governance metrics. Results reveal a significant positive link between environmental reporting and the presence of independent and female directors, while also showing a positive rather than negative association with institutional investors and board size, suggesting governance structure influences disclosure.

Abstract

Purpose The purpose of this paper is to investigate the relationship between environmental reporting and corporate governance attributes of companies in Australia. Design/methodology/approach The paper adopts a quantitative analysis approach. It examines the 2008 annual reports of the largest 100 Australian firms listed on the Australian Stock Exchange (ASX) to determine the amount of environmental reporting – these data are compared with various corporate governance measures. Findings Analysis found a significant positive relationship between the extent of environmental reporting and the proportions of independent and female directors on a board. The analysis did not, however, support a negative relationship between the extent of environmental reporting and institutional investors and board size as has been previously predicted, rather, it showed a positive relationship. Originality/value This paper offers insights to both regulators and company strategists. Regulators such as the Australian Stock Exchange (ASX) could consider expanding its Corporate Governance Council guidelines to include consideration of the environment, which is increasingly considered to be an important aspect of corporate social responsibility, and one of the responsibilities of the board of directors. In addition, for companies which include a commitment to the environment in their mission and strategies, it suggests consideration of the impact of board structure and composition is important as both of these are shown to have a significant effect on the amount of environmental information disclosed by companies.