What Explains Participation and Effort in Voluntary Climate Action by Businesses?: Evidence from the Carbon Disclosure Project

In parallel with the top down, intergovernmental climate talks at the 2015 Paris Climate Conference, there was a “Climate Solutions Hub,” which showcased concrete climate actions by businesses, cities, states and provinces. According to a Yale University report, 2,138 companies from 145 countries representing $36.6 trillion USD in revenue, roughly equivalent to the combined GDPs of the U.S., China, Japan, Germany, and the UK have pledged climate action. Some businesses “talk a good game”, but which ones are actually contributing to meaningful climate change mitigation? Drawing on the private provision of public goods and the economics of corporate social responsibility literatures, this paper employs the Double-Hurdle model, which accounts for the related and sequential decisions of participation and effort by corporations to uncover the firm-level factors that differentiate leaders from greenwashers in proactive climate action. Based on an analysis of the participation of the Global 500 firms in the Carbon Disclosure Project during 2011-2015, preliminary results suggest that the existence of a senior manager or executive-level officer with direct responsibility for climate change is associated with higher participation in voluntary carbon disclosure. Notwithstanding, firms that have integrated climate change risks into their business operations, notably the adoption of emissions reduction targets are associated with higher levels of carbon disclosure: these companies not only voluntarily report their climate change strategies and carbon emissions but have verified their disclosures with thirdparty audits. By making use of President Obama’s announcement of a series of executive actions on climate change, which increased the likelihood of climate change regulation in the U.S. during the period under study, I find that firms based in the U.S. were more likely to participate and engaged in higher levels of carbon disclosure relative to other firms. JEL Codes: Q54, Q58, M10 ________________ *Hsueh: Corresponding Author, School of Public Affairs, Arizona State University [[email protected]]. Hsueh thanks Joshua Abbott, Kelly Bishop, Chris Herbst, Michael Hanemann, Nicolai Kuminoff, Andrew Waxman and participants at the ASU Environment, Resource and Energy Economics Seminar and the 2016 AERE summer conference for helpful comments.