Accountability in Action or Accountability in Appearance?

Abstract

As sustainability reporting is entering a new era as a regulated framework for corporate reporting through the Corporate Sustainability Reporting Directive (CSRD), the communication of the companies’ performance in both financial, environmental, and social terms is under transformation. CSRD provides companies with reporting guidelines on climate-related matters in order to facilitate the transition to a more sustainable economy and provide stakeholders with useful information. At the same time, for the companies, internalizing the externalities related to climate change is related to a high degree of uncertainty that needs to be addressed through the identification and management of the physical and transition risks that arise from climate change. Companies need to implement strategies that ensure their robustness and resilience. Stakeholders need to be able to factor those strategies into decision-making through corporate annual reports.

This master's thesis seeks to investigate the phenomenon of corporate reporting on climate change by analysing disclosures on climate-related matters within the annual reports of 53 Norwegian public-listed companies operating in climate-intensive industries. Our study uses the publicly available corporate annual reports for the past two years (2022 and 2023).

Through the analysis of the quality of both financial and non- financial disclosure, we found out that companies manage to incorporate climate-related risks and opportunities within their financial reports and qualitative disclosures within sustainability reports. When it comes to quantification through metrics on energy consumption, carbon accounting, and relevant Key Performance Indicators the disclosure quality provided is still poor. Companies include climate change in their annual reports in order to communicate that they acknowledge their responsibility regarding climate change and further inform stakeholders about the actions they have taken to mitigate its impact. When companies do not succeed in providing a holistic picture of how they address the uncertainties that arise from climate change, then their legitimacy is threatened.