Determinants of the Quality of Corporate Carbon Management Systems: An International Study

Firms' carbon management systems play a key role in controlling greenhouse gas emissions, but very little research has focused on determinants of carbon management systems quality. This study uses the holistic approach used by Tang and Luo (2014) and data from large companies that participated in the Carbon Disclosure Project to measure the quality of carbon management systems. Our results show that the overall quality of carbon management systems improved in 2012 relative to 2011, and the quality of carbon management systems is associated with the presence of an emission trading scheme, competitor pressure, the nature of the legal system, and carbon exposure. In addition, these country-level and firm-level factors also impact the types of carbon management systems adopted by the firms in our sample. Our findings suggest that institutional theory explains our results well. Other theoretical perspectives such as a shareholder/stakeholder orientation provide additional elucidation. Given that the quality of carbon management systems is not directly observable, our results are potentially useful to outside stakeholders who are concerned about risks associated with GHG emissions of a firm.