An Empirical Investigation of U.K. Environmental Targets Disclosure : The Role of Environmental Governance and Performance

While there is an increasing number of companies publicly declare environmental targets, very little is known about this area. This paper, therefore, investigates the historical timeline of companies’ environmental targets disclosures (ETDs) and empirically examines whether firms’ environmental governance mechanisms and environmental performance influence ETDs by UK companies over the 2005 – 2013 period. We find that firms show a large degree of variability and inconsistency in their reporting of environmental targets. The results also indicate that most companies, particularly environmentally-sensitive firms, are likely to disclose more soft qualitative targets as a symbolic act to manage the perceptions of their stakeholders and legitimise their existence. Additionally, this study documents a positive relation between the existence of a sustainability committee, use of the Global Reporting Initiative (GRI), sustainability assurance and the extent of ETDs. The results also show that firms with good environmental performance are likely to set and disclose quantitative and hard environmental targets. These results lend support to the stakeholder and legitimacy theories. We suggest that there is a real need for prescribed regulation, which will not only enhance the usefulness of ETDs but also encourages companies to take serious proactive action towards reducing their negative environmental impacts, possibly creating a ‘win-win’ solution. Our findings have important implications for public policy-makers and various stakeholder groups