Self-Reporting Firms: Are Emissions Truly Declining for Improved Financial Performance?

Organizations are reporting their environmental performance for many reasons; most of these are reports by the organizations themselves—a self-reporting. Self-reporting is not a panacea for good firm environmental stewardship. Our observations show that the financial performance of firms is improved despite increases in their emissions reporting. Policymakers can gain insights from our findings, but so can organizations. Concerted efforts must be made to institute mandates that truly influence market performance as a function of environmental stewardship; organizations that are serious about true environmental stewardship should be supporting such initiatives. In the absence of stringent measures to rein in firm-level emissions, the evident compensation for dirty behavior by firms will continue unabated. Policymakers should initiate a widespread effort to provide an equitable platform for all firms to help decarbonize the economy. The message for firms is that when true environmental stewardship is required or instituted, the seeming benefits of increasing emissions may result in negative and dire consequences on both their book and market values. Therefore, it is important for firms to make efforts to reduce their emissions in anticipation of mandates that will make their market or book performance to be reflective of their emissions reduction initiatives.