Carbon emissions, carbon disclosure and organizational performance

This study draws on the multi-perspectives of organizational legitimacy theory to investigate the simultaneous association between corporate carbon emissions, carbon disclosure and organizational performance. Based on a sample of 62 UK Financial Times Stock Exchange (FTSE) 100 firms in carbon-sensitive sectors during 2010–2017, we find that carbon emissions are negatively associated with organizational performance, but firms with higher carbon emissions tend to employ more disclosure as a communicative legitimacy process to manage the legitimacy threat in order to conform to institutional pressures and protect the firm value. Cumulatively, carbon disclosure plays a mediating role in the relationship between carbon emissions and organizational performance. Most importantly, this legitimacy effect is more pronounced following the introduction of the UK mandatory carbon reporting regulation in 2013, as a result of the increased corporate capability of carbon disclosure. This study fills the literature gap in the value-protective attribute from resource-based view of organizational legitimacy by providing important insights into corporate carbon disclosure strategy over time.