Carbon performance, carbon disclosure, and economic performance: the mediating role of carbon (media) legitimacy in the UK

  • Authors

    • Alireza Rohani Middlesex University
    • Mirna Jabbour The University of Sheffield
    • Magdy Abdel-Kader Cairo University
  • Carbon Performance, Carbon Disclosure, Carbon (Media) Legitimacy, Economic Performance, Legitimacy Theory.
  • There has been a continuous and controversial debate about the relationship between carbon performance, carbon disclosure, and economic performance. This study investigates whether corporate economic performance is influenced by carbon performance and disclosure and whether carbon (media) legitimacy mediates such relationships. This study provides a broader understanding of the relationship between carbon performance, disclosure, and economic performance by investigating the mediating role of carbon (media) legitimacy, and offers further evidence from the UK context. Based on a balanced panel data of 95 UK firms between 2009 and 2014 (amounting to 475 observations in total) and using path analysis, we find that improving the company’s carbon performance is not financed by shareholders, and carbon (media) legitimacy as an intangible asset enhances the economic performance of the firm. We also find that while carbon disclosure does not directly improve economic performance, it indirectly does so via carbon (media) legitimacy. Finally, the results show while carbon performance is not reflected in carbon (media) legitimacy, carbon disclosure as a legitimizing tool strongly enhances carbon (media) legitimacy. Overall, our results suggest that voluntary carbon disclosure, regardless of the firm’s underlying carbon performance, is an effective tool to manage corporate (media) legitimacy, and subsequently improve economic performance. Thus, voluntary carbon disclosure in the UK may hinder future improvements in a firm’s carbon performance.




  • References

    1. [1] Abdel-Maksoud, A., Jabbour, M., & Abdel-Kader, M. (2020). Stakeholder pressure, eco-control systems, and firms’ performance: empirical evidence from UK manufacturers. Accounting Forum,

      [2] Ader, C.R. (1995). A longitudinal study of agenda setting for the issue of environmental pollution. Journalism & Mass Communication Quarterly, 72(2), 300-311.

      [3] Aerts, W., & Cormier, D. (2009). Media legitimacy and corporate environmental communication. Accounting, Organization, and Society, 34(1), 1–27.

      [4] Alewine, H.C. (2010). A model for conducting experimental environmental accounting research. Sustainability Accounting, Management and Policy Journal, 1(2), 256–291.

      [5] Al-Tuwaijri, S.A., Christensen, T.E., & Hughes II, K. (2004). The relations among environmental disclosure, environmental performance, and economic performance: a simultaneous equations approach. Accounting. Organization. and Society, 29(5-6), 447–471.

      [6] Anderson, D., Sweeney, D., Williams, T., Camm, J., & Cochran, J. (2013). Statistics for business & economics. Boston: Cengage Learning.

      [7] Andrew, J., & Cortese, C. (2010). Greenhouse gas reporting and the Carbon Disclosure Project. Paper Presented at the Sixth Asia Pacific Interdisciplinary Research in Accounting (APIRA) Conference, Sydney, Australia. Available at:

      [8] Bansal, P., & Clelland, I. (2004), Talking trash: Legitimacy, impression management, and unsystematic risk in the context of the natural environment. Academy of Management Journal, 47(1), 93-104.

      [9] Baum, J.A.C., & Powell, W.W. (1995). Cultivating an Institutional Ecology of Organizations: Comment on Hannan, Carroll, Dundon, and Torres. American Sociological Review, 60, 529–538.

      [10] Berthelot, S., Coulmont, M. & Serret, V. (2012). Do investors value sustainability reports? A Canadian study. Corporate Social Responsibility and Environmental Management, 19(6), 355-363.

      [11] Brinkman, M.W., Hoffman, N., & Oppenheim, J.M. (2008). How climate change could affect corporate valuations. McKinsey Quarterly, 29, 1-7.

      [12] Busch, T., & Hoffmann, V.H. (2011). How Hot Is Your Bottom Line? Linking Carbon and Financial Performance. Business and Society, 50(2), 233-265.

      [13] Carbon Disclosure Project. Carbon Disclosure Project 2009 Global 500 Report. Accessed [15.10.14].

      [14] Chapple L., Clarkson P., & Gold D. (2013). The cost of carbon: capital market effects of the proposed emission trading scheme (ETS). Abacus, 49(1), 1-33.

      [15] Castelo Branco, M., & Rodrigues, L.L. (2006). Corporate social responsibility and resource-based perspectives. Journal of Business Ethics, 69, 111-132.

      [16] Chen, M.C., Cheng, S.J., & Hwang, Y. (2005). An empirical investigation of the relationship between intellectual capital and firms’ market value and financial performance. Journal of intellectual capital, 6(2), 159-176.

      [17] Cho, C.H., Guidry, R.P., Hageman, A.M., & Patten, D.M. (2012). Do actions speak louder than words? An empirical investigation of corporate environmental reputation. Accounting, Organization, and Society, 37, 14–25.

      [18] Cho, C.H., & Patten, D.M. (2007). The role of environmental disclosures as tools of legitimacy: A research note. Accounting, Organization, and Society, 32, 639–647.

      [19] Cho, C.H., & Roberts, R.W. (2010). Environmental reporting on the internet by America’s Toxic 100: Legitimacy and self-presentation. International Journal of Accounting and Information Systems. 11(1), 1–16.

      [20] Clarkson, P.M., Li, Y., Pinnuck, M. and Richardson, G.D. (2015). The valuation relevance of greenhouse gas emissions under the European Union carbon emissions trading scheme. European Accounting Review, 24(3), 551-580.

      [21] Clarkson, P.M., Li, Y., Richardson, G.D., & Vasvari, F.P. (2008). Revisiting the relation between environmental performance and environmental disclosure: An empirical analysis. Accounting, Organization, and Society, 33(4-5), 303–327.

      [22] Clarkson, P.M., Overell, M.B., & Chapple, L. (2011). Environmental Reporting and its Relation to Corporate Environmental Performance. Abacus, 47(1), 27–60.

      [23] Cormier, D., & Magnan, M. (2015). The economic relevance of environmental disclosure and its impact on corporate legitimacy: An empirical investigation. Business Strategy and the Environment, 24(6), 431-450.

      [24] Cotter, J., & Najah, M.M. (2012). Institutional investor influence on global climate change disclosure practices. Australian Journal of Management, 37(2), 169-187.

      [25] Datt, R., Luo, L., and Tang, Q. (2019). The Impact of Legitimacy Threat on the Choice of External Carbon Assurance: Evidence from the United States. Accounting Research Journal (2019), 32(2), 181-202.

      [26] Deegan, C. (2002). Introduction: The legitimising effect of social and environmental disclosures – a theoretical foundation. Accounting, Auditing & Accountability Journal, 15(3), 282–311.

      [27] Deegan, C., & Unerman, J. (2011). Financial Accounting Theory. London: McGraw-Hill Education Publisher.

      [28] Deephouse, D.L. (2000). Media Reputation as a Strategic Resource: An Integration of Mass Communication and Resource-Based Theories. Journal of Management, 26(6), 1091.

      [29] Deephouse, D.L., & Carter, S.M. (2005), An Examination of Differences Between Organizational Legitimacy and Organizational Reputation. Journal of Management Studies, 42(2), 329-60.

      [30] Delmas, M.A., & Nairn-Birch, N.S. (2011). Is the Tail Wagging the Dog? An Empirical Aanalysis of Corporate Carbon Footprints and Financial Performance. Working Paper. UCLA Institute of the Environment and Sustainability Working Paper Series. University of California, Los Angeles.

      [31] De Villiers, C., & Van Staden, C.J. (2010). Shareholders’ requirements for corporate environmental disclosures: A cross country comparison. The British Accounting Review, 42(4), 227-240.

      [32] Fanelli, A., & Misangyi, V.F. (2006), Bringing out charisma: CEO charisma and external stakeholders. The Academy of Management Review, 31(4), 1049-1061.

      [33] Fombrun, C. J. (1996). Reputation: Realizing value from the corporate image. Boston, MA: Harvard Business School Press.

      [34] Frost, G., Jones, S., Loftus, J., & Laan, S. (2005), A survey of sustainability reporting practices of Australian reporting entities. Australian Accounting Review, 15(35), 89-96.

      [35] Gallego-Alvarez, I. (2012). Impact of CO2 Emission Variation on Firm Performance. Business Strategy and the Environment, 21, 435-454.

      [36] Gamson, W.A., Croteau, D., Hoynes, W., & Sasson, T. (1992). Media images and the social construction of reality. Annual review of sociology, 18(1), 373-393.

      [37] Giannarakis, G., Zafeiriou, E., & Sariannidis, N. (2017). The impact of carbon performance on climate change disclosure. Business Strategy and the Environment, 26(8), 1078-1094.

      [38] Gray, R., Kouhy, R., & Lavers, S. (1995). Corporate social and environmental reporting: a review of the literature and a longitudinal study of UK disclosure. Accounting, Auditing & Accountability Journal. 8(2), 47-77.

      [39] Green, W., and Zhou, S. (2013). An International Examination of Assurance Practices on Carbon Emissions Disclosures. Australian Accounting Review, 23(1), 54-66.

      [40] Günther, E., Hoppe, H., & Endrikat J., (2012), Corporate financial performance and corporate environmental performance: a perfect match? Zeitschrift für Umweltpolitik und Umweltrecht, 34, 279-296.

      [41] Hair Jr, J.F., Black, W.C., Babin, B.J., & Anderson, R.E. (2009). Multivariate Data Analysis. (7th edition). Prentice Hall, Upper Saddle River, NJ.

      [42] Hahn, R., Reimsbach, D., & Schiemann, F. (2015). Organizations, Climate Change, and Transparency: Reviewing the Literature on Carbon Disclosure. Organization and Environment, 28(1), 80-102.

      [43] Haque, F. (2017), The Effects of Board Characteristics and Sustainable Compensation Policy on Carbon Performance of UK Firms. The British Accounting Review, 49(3), 347-64.

      [44] Hassan, A., & Kouhy, R. (2014). Time-series cross-sectional environmental performance and disclosure relationship: specific evidence from a less-developed country. International Journal of Accounting and Economics Studies, 2(2), 60-73.

      [45] Hasseldine, J., Salama, A.I., & Toms, J.S. (2005). Quantity versus quality: the impact of environmental disclosures on the reputations of UK Plcs. British Accounting Review, 37(2), 231–248.

      [46] Hatakeda, T., Kokubu, K., Kajiwara, T., & Nishitani, K. (2012), Factors influencing corporate environmental protection activities for greenhouse gas emission reductions: The relationship between environmental and financial performance. Environmental Resource Economics, 53, 455-481.

      [47] Hopwood, A.G. (2009). Accounting and the environment. Accounting, Organization, and Society. 34(3-4), 433–439.

      [48] Hörisch, J. (2013), Combating Climate Change through Organisational Innovation: An Empirical Analysis of Internal Emission Trading Schemes. Corporate Governance, 13(5), 569-582.

      [49] Hrasky, S. (2011). Carbon footprints and legitimation strategies: symbolism or action? Accounting, Auditing and Accountability Journal. 25(1), 174–198.

      [50] Hu, L.T., & Bentler, P.M. (1999). Cutoff criteria for fit indexes in covariance structure analysis: Conventional criteria versus new alternatives. Structural equation modeling: a multidisciplinary journal, 6(1), 1-55.

      [51] Hughes, S.B., Anderson, A., & Golden, S. (2001). Corporate environmental disclosures: are they useful in determining environmental performance? Journal of Accounting and Public Policy, 20, 217–240.

      [52] Hummel, K., & Roetzel, P. (2019). Mandating the sustainability disclosure in annual reports - evidence from the United Kingdom. Schmalenbach Business Review, 71, 205-247.

      [53] Ilhan, E., Krueger, P., Sautner, Z. and Starks, L.T. (2019). Institutional investors’ views and preferences on climate risk disclosure. Available at SSRN 3437178.

      [54] Iwata, H., & Okada, K. (2011). How does environmental performance affect financial performance? Evidence from Japanese manufacturing firms. Ecological Economics, 70, 1691-1700.

      [55] Jones, P., Wynn, M., Hillier, D., & Comfort, D. (2017), The sustainable development goals and information and communication technologies. Indonesian Journal of Sustainability Accounting and Management, 1(1), 1-15.

      [56] Kalu, J.U., Buang, A. & Aliagha, G.U. (2016). Determinants of voluntary carbon disclosure in the corporate real estate sector of Malaysia. Journal of environmental management, 182, pp.519-524.

      [57] Kim, E., & Lyon, T. (2011). When does institutional investor activism increase shareholder value?: the carbon disclosure project. The BE Journal of Economic Analysis and Policy,11(1), 1-27.

      [58] Kolk, A., Levy, D., & Pinkse, J. (2008). Corporate responses in an emerging climate regime: The institutionalization and commensuration of carbon disclosure. European Accounting Review, 17(4), 719-745.

      [59] KPMG. 2013. The KPMG Survey of Corporate Responsibility Reporting 2013. Available at: Accessed 15.10. 2020.

      [60] Lee, S., Park, Y., & Klassen R.D. (2015). Market Responses to Firms’ Voluntary Climate Change Information Disclosure and Carbon Communication. Corporate Social Responsibility and Environmental Management, 22, 1-12.

      [61] Lewandowski, S. (2017). Corporate Carbon and Financial Performance: The Role of Emission Reductions. Business Strategy and the Environment, 26, 1196-1211.

      [62] Li, D., Huang, M., Ren, S., Chen, X., & Ning, L. (2018). Environmental legitimacy, green innovation, and corporate carbon disclosure: Evidence from CDP China 100. Journal of Business Ethics, 150(4), 1089-1104.

      [63] Liao, L., Luo, L., & Tang, Q. (2014). Gender diversity, board independence, environmental committee and greenhouse gas disclosure. British Accounting Review, 47, 409-424.

      [64] Lindblom, C.K. (1994). The implications of organisational legitimacy for corporate social performance and disclosure, paper presented at the Critical Perspectives on Accounting Conference, New York, NY.

      [65] Liu, Y.S., Zhou, X., Yang, J.H., & Hoepner, A.G.F. (2016). Corporate Carbon Emission and Financial Performance: Does Carbon Disclosure Mediate the Relationship in the UK? Discussion Paper, Number: ICM-2016-03. ICMA Centre, Henley Business School, University of Reading.

      [66] Luo, L., & Tang, Q. (2014). Does voluntary carbon disclosure reflect underlying carbon performance? Journal of Contemporary Accounting and Economics, 10(3), 191–205.

      [67] Luo, L., Lan, Y.C., & Tang, Q. (2012). Corporate incentives to disclose carbon information: evidence from the CDP global 500 report. Journal of International Financial Management and Accounting, 23(2), 93–120

      [68] Luo, L., Tang, Q., & Lan, Y.C. (2013). Comparison of propensity for carbon disclosure between developing and developed countries: a resource constraint perspective. Accounting Research Journal, 26, 6–34.

      [69] Margolis, J.D., Elfenbein, H.A., & Walsh, J.P. (2009). Does it pay to be good... and does it matter? A meta-analysis of the relationship between corporate social and financial performance. Available at SSRN:

      [70] Mathur, S., & Kenyon, A. (2008). Creating Valuable Business Strategies. Routledge.

      [71] Matsumura, E.M., Prakash, R., & Vera-MunËœoz, S.C. (2014). Firm-Value Effects of Carbon Emissions and Carbon Disclosures. The Accounting Review, 89(2), 695-724.

      [72] Meng, X.H., Zeng, S.X., Shi, J.J., Qi, G.Y. & Zhang, Z.B. (2014). The relationship between corporate environmental performance and environmental disclosure: An empirical study in China. Journal of environmental management, 145, 357-367.

      [73] Michelon, G., Pilonato, S., & Ricceri, F. (2015). CSR reporting practices and the quality of disclosure: An empirical analysis. Critical Perspectives on Accounting, 33, 59-78.

      [74] Moneva, J.M., & Ortas, E. (2010). Corporate environmental and financial performance: a multivariate approach. Industrial Management and Data Systems, 110(2), 193-210.

      [75] Neu, D., Warsame, H., & Pedwell, K. (1998). Managing Public Impressions: Environmental Disclosures in Annual Reports. Accounting, Organizations and Society, 23(3), 265–282.

      [76] Ngwakwe, C.C., & Msweli, P. (2013). On carbon emission reduction and firm performance: example from 3M Company. Environmental Economics, 4(2), 54-61.

      [77] Okereke, C. (2007). An exploration of motivations, drivers and barriers to carbon management: the UK FTSE 100. European Management Journal, 25, 475-486.

      [78] Patten, D.M. (2002). The relation between environmental performance and environmental disclosure: a research note. Accounting, Organization, and Society, 27(8), 763–773.

      [79] Qian, W., & Schaltegger, S. (2017). Revisiting carbon disclosure and performance: Legitimacy and management views. The British Accounting Review, 49(4), 365-379.

      [80] Renukappa, S., Akintoye, A., Egbu, C., & Goulding, J. (2013). Carbon Emission Reduction Strategies in the UK Industrial Sectors: An Empirical Study. International Journal of Climate Change Strategies and Management, 5(3), 304-23.

      [81] Roberts, P.W., & Dowling, G.R. (2002). Corporate Reputation and Sustained Superior Financial Performance. Strategic Management Journal, 23, 1077-1093.

      [82] Rokhmawati, A., & Gunardi, A. (2017), Is going green good for profit? Empirical evidence from listed manufacturing firms in Indonesia. International Journal of Energy Economics and Policy, 7(4), 181-192.

      [83] Rokhmawati, A., Sathye, M., & Sathye, S. (2015), The effect of GHG emission, environmental performance, and social performance on financial performance of listed manufacturing firms in Indonesia. Procedia Social and Behavioral Sciences, 211, 461-470.

      [84] Russo, M., & Minto, A. (2012), Competitive strategy and the environment: a field of inquiry emerges. In The Oxford Handbook of Business and the Natural Environment, Bansal P., and Hoffman A.J. (eds). Oxford University Press: New York; 29-49.

      [85] Saka, C., & Oshika, T. (2014). Disclosure effects, carbon emissions and corporate value. Sustainability Accounting, Management and Policy Journal, 5(1), 22-45.

      [86] Schumacker, R. E., & Lomax, R. G. (2004). A beginner’s guide to structural equation modeling. Mahwah, NJ: Lawrence Erlbaum Associates.

      [87] Sharfman, M. P., & Fernando, C.S. (2008). Environmental risk management and the cost of capital. Strategic Management Journal, 29, 569-592.

      [88] Slawinski, N., Pinkse, J., Busch, T., & Banerjee, SB. (2015). The role of short-termism and uncertainty avoidance in organizational inaction on climate change a multi-level framework. Business and Society, 56(2): 253–282.

      [89] Stolowy, H. (2017). Letter from the Editor: Why Are Papers Desk Rejected at European Accounting Review? European Accounting Review, 26(3), 411-418.

      [90] Wang, L., Li, S., & Gao, S. (2014), Do Greenhouse Gas Emissions Affect Financial Performance? An Empirical Examination of Australian Public Firms. Business Strategy and the Environment, 23, 505-519.

      [91] Weber, R.P. (1990). Basic Content Analysis. 2 edition ed. Thousand Oaks: Sage Publications Ltd.

      [92] West, S. G., Finch, J. F., & Curran, P. J. (1995). Structural equation models with non-normal variables: Problems and remedies. In R. Hoyle (Ed.), Structural equation modeling: Concepts, issues and applications (56–75). Newbury Park, CA: Sage.

      [93] Woodward, D.G., Edwards, P., & Birkin, F. (1996). Organizational Legitimacy and Stakeholder Information Provision 1. British Journal of Management, 7(4), 329–347.

  • Downloads

    Additional Files

  • How to Cite

    Rohani, A., Jabbour, M., & Abdel-Kader, M. (2021). Carbon performance, carbon disclosure, and economic performance: the mediating role of carbon (media) legitimacy in the UK. International Journal of Accounting and Economics Studies, 9(1), 8-20.