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Risk regulation, community pressure and the use of management accounting in managing climate change risk: Australian evidence

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  • Kumarasiri, Jayanthi
  • Gunasekarage, Abeyratna

Abstract

This exploratory study is amongst the first to investigate how companies perceive the regulation of carbon emissions and the pressure exerted by the community in an environment characterised by risk and uncertainty. Semi-structured interviews were conducted among 39 executives who were directly involved in carbon emissions management in 18 large listed Australian companies. Consistent with Prospect Theory, we find that decision-makers are threat biased and are more likely to take immediate actions when climate change issues are framed as threats as opposed to opportunities. From the interview data, it is seen that managers use management accounting techniques as a risk management tool in mitigating risks associated climate change issues. Furthermore, this use of management accounting appears to be driven primarily by the protection of economic interests, regulatory pressure and reputational pressure. The study provides insights into how perceptions of climate change uncertainties and external pressure for disclosure of emissions information influence companies to use management accounting in managing climate change risk.

Suggested Citation

  • Kumarasiri, Jayanthi & Gunasekarage, Abeyratna, 2017. "Risk regulation, community pressure and the use of management accounting in managing climate change risk: Australian evidence," The British Accounting Review, Elsevier, vol. 49(1), pages 25-38.
    • Handle: RePEc:eee:bracre:v:49:y:2017:i:1:p:25-38
    DOI: 10.1016/j.bar.2016.10.009
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    Cited by:

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    2. Yong Liu, 2018. "Exploring the Relationship between External Positive–Negative Pressures and the Carbon Management Behaviour of Industrial Firms," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 25(4), pages 628-641, July.
    3. Maryam Safari & Jacqueline Birt & Yi Xiang, 2022. "The sociology of compensation inequality in upper‐echelon positions: evidence from Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(2), pages 2615-2649, June.
    4. Olivier Boiral & David Talbot & Marie‐Christine Brotherton, 2020. "Measuring sustainability risks: A rational myth?," Business Strategy and the Environment, Wiley Blackwell, vol. 29(6), pages 2557-2571, September.
    5. Rong He & Le Luo & Abul Shamsuddin & Qingliang Tang, 2022. "Corporate carbon accounting: a literature review of carbon accounting research from the Kyoto Protocol to the Paris Agreement," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(1), pages 261-298, March.
    6. Giuseppe Forino & Jason von Meding, 2021. "Climate change adaptation across businesses in Australia: interpretations, implementations, and interactions," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(12), pages 18540-18555, December.
    7. Binh Bui & Carolyn Fowler, 2022. "Carbon controls in a New Zealand electricity utility: An application of theoretical triangulation," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(4), pages 4423-4451, December.
    8. Ling Jin & Jun-Hyeok Choi & Saerona Kim & Dong-Hoon Yang, 2021. "Government Environmental Pressure and Market Response to Carbon Disclosure: A Study of the Early Chinese ETS Implementation," Sustainability, MDPI, vol. 13(24), pages 1-18, December.
    9. Chourou, Lamia & Himick, Darlene & Saadi, Samir, 2023. "Regulatory uncertainty and corporate social responsibility," Finance Research Letters, Elsevier, vol. 55(PB).
    10. Shams, Syed & Gunaskerage, Abeyratna & Velayutham, Eswaran, 2022. "Economic policy uncertainty and acquisition performance: Australian evidence," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 286-308.

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