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A Theory of Environmental Risk Disclosure

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  • Estelle Gozlan
  • Bernard Sinclair-Desgagné

Abstract

The regulation of environmental risks increasingly emphasizes the awareness and empowerment of stakeholders. The success of this approach, however, seems to depend crucially on the quality of environmental disclosures. In this paper we investigate the amount and quality of the information that would be voluntarily delivered to some stakeholder by a potential polluter. We find that information may be hazier when the stakeholder is confident (or naive) a priori, the cost of analyzing the received reports increases little with their complexity, or a polluter's net expected payoff from undertaking an industrial activity that would turn out to be unsafe is small. A worried stakeholder and a low cost of producing more accurate figures, on the other hand, may favor disclosure of high-quality information. By delivering information of very good quality, safe firms can set themselves apart more easily from the dangerous ones the higher the relative ex post payoff from their current industrial activity. The implications of this framework for the scope and design of public programs of environmental disclosure are briefly examined. La réglementation des risques environnementaux met de plus en plus l'accent sur l'information et la responsabilisation des parties prenantes. Le succès de cette approche repose toutefois largement sur la qualité de l'information fournie par les entreprises visées. Cet article porte sur la quantité et la qualité de l'information qui serait volontairement fournie à une partie prenante par un pollueur potentiel. On trouve que cette information sera moins précise lorsque la partie prenante est confiante (voire naïve) a priori, que le coût d'analyse de l'information livrée croît avec la complexité de celle-ci, ou que le revenu attendu par une entreprise se révélant être en non conformité est petit. En revanche, une partie prenante inquiète et un faible coût de production de données précises encouragent la livraison d'une information de meilleure qualité. La précision de l'information livrée permet à une firme sûre de se distinguer d'autant plus facilement d'une firme dangereuse que son revenu ex post est relativement plus élevé. À la lumière de notre modèle, on examine en terminant plusieurs principes se rapportant au design des programmes publics de révélation des risques à la santé et à l'environnement.

Suggested Citation

  • Estelle Gozlan & Bernard Sinclair-Desgagné, 2001. "A Theory of Environmental Risk Disclosure," CIRANO Working Papers 2001s-17, CIRANO.
  • Handle: RePEc:cir:cirwor:2001s-17
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Patricia Crifo & Vanina Forget, 2013. "La responsabilité sociale et environnementale des entreprises : mirage ou virage ?," Working Papers hal-00830642, HAL.
    2. Patricia Crifo & Vanina Forget, 2012. "The Economics of Corporate Social Responsibility: A Survey," Working Papers hal-00720640, HAL.
    3. Benjamin Ouvrard & Sandrine Spaeter, 2016. "Environmental Incentives: Nudge or Tax?," Working Papers of BETA 2016-23, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    4. Uwalomwa Nil Uwuigbe & Ben-Caleb Egbide & Akanbi Moses Ayokunle, 2011. "The Effect of Board Size and Board Composition on Firms Corporate Environmental Disclosure: A Study of Selected Firms in Nigeria," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 5(5), pages 164-176, October.
    5. Iwata, Hiroki, 2014. "Disclosure of environmental information and investments of firms," MPRA Paper 54784, University Library of Munich, Germany.
    6. Rick Harbaugh & John W. Maxwell & Beatrice Roussillon, 2011. "Label Confusion: The Groucho Effect of Uncertain Standards," Management Science, INFORMS, vol. 57(9), pages 1512-1527, February.
    7. repec:eee:crpeac:v:24:y:2013:i:4:p:350-359 is not listed on IDEAS
    8. Kessler, Denis, 2008. "Insurance market mechanisms and government interventions," Journal of Banking & Finance, Elsevier, vol. 32(1), pages 4-14, January.
    9. repec:eee:accfor:v:37:y:2013:i:3:p:231-243 is not listed on IDEAS
    10. repec:gam:jsusta:v:9:y:2017:i:11:p:1903-:d:117159 is not listed on IDEAS
    11. Breeda Comyns, 2016. "Determinants of GHG Reporting: An Analysis of Global Oil and Gas Companies," Journal of Business Ethics, Springer, vol. 136(2), pages 349-369, June.
    12. Caroline Orset, 2010. "Irreversible investment and information acquisition under uncertainty," Working Papers 2010/01, INRA, Economie Publique.
    13. Christian Langpap, 2015. "Voluntary agreements and private enforcement of environmental regulation," Journal of Regulatory Economics, Springer, vol. 47(1), pages 99-116, February.
    14. Ioannis E. Nikolaou & Konstantinos I. Evangelinos, 2010. "Classifying current social responsibility accounting methods for assisting a dialogue between business and society," Social Responsibility Journal, Emerald Group Publishing, vol. 6(4), pages 562-580, October.
    15. Kim, Eun-Hee & Lyon, Thomas P., 2011. "Strategic environmental disclosure: Evidence from the DOE's voluntary greenhouse gas registry," Journal of Environmental Economics and Management, Elsevier, vol. 61(3), pages 311-326, May.
    16. Johnstone, Nick & Labonne, Julien, 2009. "Why do manufacturing facilities introduce environmental management systems? Improving and/or signaling performance," Ecological Economics, Elsevier, vol. 68(3), pages 719-730, January.
    17. Denis Cormier & Pascale Lapointe-Antunes & Michel Magnan, 2015. "Does corporate governance enhance the appreciation of mandatory environmental disclosure by financial markets?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 19(4), pages 897-925, November.
    18. Zhu, Xufeng & Zhang, Chao, 2012. "Reducing information asymmetry in the power industry: Mandatory and voluntary information disclosure regulations of sulfur dioxide emission," Energy Policy, Elsevier, vol. 45(C), pages 704-713.
    19. Ioannis Nikolaou & Konstantinos Evangelinos, 2012. "Financial and non-financial environmental information: significant factors for corporate environmental performance measuring," International Journal of Managerial and Financial Accounting, Inderscience Enterprises Ltd, vol. 4(1), pages 61-77.
    20. Bernard Sinclair-Desgagné & Ingrid Peignier & Nathalie de Marcellis-Warin, 2003. "Informational Regulation of Industrial Safety - An Examination of the U.S. "Local Emergency Planning Committees"""," CIRANO Working Papers 2003s-03, CIRANO.
    21. Bernard Sinclair-Desgagné, 2004. "Corporate Strategies For Managing Environmental Risk (The International Library Of Environmental Economics And Policy Volume xx)," CIRANO Working Papers 2004s-43, CIRANO.
    22. Johansson-Stenman, Olof, 2006. "Mad Cows, Terrorism and Junk Food: Should Public Policy Reflect Subjective or Objective Risks?," Working Papers in Economics 194, University of Gothenburg, Department of Economics.
    23. repec:eee:jeeman:v:88:y:2018:i:c:p:396-410 is not listed on IDEAS
    24. Benjamin Ouvrard & Sandrine Spaeter, 2016. "Environmental Incentives: Nudge or Tax?," Working Papers 2016.15, FAERE - French Association of Environmental and Resource Economists.
    25. Anton, Wilma Rose Q., 2005. "The Choice of Management Practices: What Determines the Design of an Environmental Management System?," 2005 Annual meeting, July 24-27, Providence, RI 19503, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

    More about this item

    Keywords

    Environmental reporting; signalling; persuasion; informational regulation; Approche informationnelle de la réglementation; jeux de signaux; jeux de persuasion; études d'impact environnemental;

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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