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Abstract

Psychology and Psychotherapy: Research Study

Greenhouse Gas (GHG) Emissions Accounting Systems: Testing the Rationale Behind Corporate Verification Practices

  • Open or CloseMel Gabriel* and Jatin Nathwani

    Department of Management Sciences (MSCI), University of Waterloo, 200 University Avenue West Waterloo, Ontario, Canada N2L 3G1, Canada

    *Corresponding author: Mel Gabriel, Department of Management Sciences (MSCI), University of Waterloo, 200 University Avenue West Waterloo, Ontario, Canada N2L 3G1, Canada

Submission: May 31, 2021;Published: June 17, 2021

Abstract

The total quantity of GHG emissions produced within or beyond the boundaries of a firm’s business activities, owned or non-owned, is of a great concern with respect to verification. A carbon accounting system enables an organization to audit its GHG emissions inventory, and it is becoming a standard requirement for most businesses to shape future decision-making. Currently, corporations use GHG emissions inventory data for regulatory compliance, raising capital in the market and reputational assurance. The scholarly and non-academic body of knowledge that deals with the critical aspects of verifying GHG emissions inventories involves using a protocol or a standard to verify an entity’s reported inventory. Currently recognized GHG reporting protocols and standards specify acceptable verification methods and emphasize GHG emissions inventory assurance. The goal of this paper is to understand the rationale and relative importance of corporate verification of GHG emissions. We identify the potential drivers underlying corporate GHG emissions verification practices and highlight the governing principles to classify them based on the extant scholarly literature. We studied a sample of the S&P 500 companies that were recognized by the Carbon Disclosure Project (CDP) as best-in-industry for disclosure of GHG emissions information based on the Climate Disclosure Leadership Index (CDLI). A logit model was built to estimate the probability that a company would verify its GHG emissions given the values of the explanatory variables. GHG emissions verification practices data as well as its drivers were collected from the publicly available sustainability or corporate social responsibility reports. The analysis showed that the main drivers for corporate GHG emissions verification include meeting mandatory regulatory requirements and/or complying with voluntary GHG emissions reporting standards as well as responding to emerging requirements for GHG emissions trading programs and stakeholders demand for full disclosure of GHG emissions to demonstrate environmental stewardship and social responsibility.

Keywords: Greenhouse gas emissions; GHG; Verification; Carbon accounting system; Emissions inventory; Regulatory compliance; Corporate verification; Reporting protocols; Content analysis; Sustainability; Corporate social reasonability; Business ethics; Climate change; Corporate disclosure

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