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

Article

Arian, Adam and Sands, John Stephen. 2024. "Corporate climate risk disclosure: assessing materiality and stakeholder expectations for sustainable value creationUnited Kingdom ." Sustainability Accounting, Management and Policy Journal. 15 (2), pp. 457-481. https://doi.org/10.1108/SAMPJ-04-2023-0236
Article Title

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

ERA Journal ID123003
Article CategoryArticle
AuthorsArian, Adam and Sands, John Stephen
Journal TitleSustainability Accounting, Management and Policy Journal
Journal Citation15 (2), pp. 457-481
Number of Pages25
Year2024
PublisherEmerald
Place of PublicationUnited Kingdom
ISSN2040-8021
2040-803X
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
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)
Contains Sensitive ContentDoes not contain sensitive content
ANZSRC Field of Research 2020350202. Finance
Public NotesFiles associated with this item cannot be displayed due to copyright restrictions.
Byline AffiliationsSchool of Business
School of Commerce
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