The development of a decision-useful measure of corporate environmental commitment and its relationship with corporate environmental disclosures
Creators: name: HUTCHINGS, Glen
Publisher: name: RMIT University
Year: 2024
Subjects: classificationCode: 350199
subject: Accounting, auditing and accountability not elsewhere classified
classificationCode: 4104
subject: Environmental management
classificationCode: 410404
subject: Environmental management

description: External stakeholders are increasingly using corporate environmental disclosures to inform their investment and lending decisions and/or to hold companies accountable for their environmental management. However, evidence suggests that these disclosures are generally of limited quality and may be failing to meet stakeholder's needs. In response, this study has developed and tested a new metric for the Australian mining industry; the Environmental Commitment Index (ECI). The ECI quantifies the otherwise intangible quality of environmental commitment through commensuration of a mine site's environmental management system (EMS). The findings presented in this study suggest that the ECI can discriminate between the environmental commitment of mine sites and has the capacity (within the context of the mining industry) to better inform the decisions of interested stakeholders. 

This study contains three inter-related research stages. In stage one, the environmental management practices that a mine site must implement, in order to minimise its environmental impact, were identified in collaboration with experienced environmental practitioners. The importance of each environmental management practice was then verified through a national survey of environmental auditors. Finally, a scoring system was developed to enable an ECI score (out of 100) to be calculated for each mine site. As will be demonstrated within the thesis, the ECI possesses the fundamental and enhancing qualitative characteristics of useful information, goes well beyond the requirements of the ISO 14001 standard and is, as far as is known, the most comprehensive measure of environmental commitment ever developed for the mining industry. 

The second stage of this study tested the ability of the ECI to discriminate between the environmental commitment of thirty mine sites operating in Australia. Based on responses to a questionnaire completed by site-level environmental personnel, an ECI was calculated for each mine site, with higher scores representing the existence of a more comprehensive EMS and therefore stronger environmental commitment. The ECI for the sample ranged from 26.9 to 95.8, with a mean of 63.3 and median of 63.9. The results indicate that there is considerable variation between the environmental commitment of mine sites in Australia, even among sites belonging to the same corporate entity and operating within the same geographic region. The results also confirm that the ECI can be used by external stakeholders to assess and compare the environmental commitment of different mine sites/companies, including those with ISO 14001 certification. If accepted by industry, an independently audited and publicly disclosed ECI could therefore reduce information asymmetry, in the context of environmental commitment within the mining industry, reduce the opportunity for `greenwashing¿ strategies and better inform stakeholder decisions. The ECI may also benefit mining companies by providing them with the ability to benchmark their environmental management against industry peers and, for mining companies with strong environmental commitment, the ability to convey this commitment in a simple, credible and cost-effective way. 

The final stage of this study identified a trend in the Australian mining industry toward self-declaring conformance with the ISO 14001 standard. ISO 14001 allows companies (or sites thereof) to make a self-determination and, if appropriate, to self-declare their conformance to the ISO 14001 standard. An ISO 14001 self-declaration therefore implies that a mine site meets at least the minimum requirements of the ISO 14001 standard. However, a test of environmental commitment (using the ECI) found that the majority of ISO 14001 self-declaring sites in the sample had ECIs that were well below that of ISO 14001 certified sites. This suggests that ISO 14001 self-declarations in the mining industry are generally symbolic and not a reliable signal of strong environmental commitment. However, a self-declaration may sustain the belief of satisfactory environmental commitment due to its credible sounding nature and link to ISO 14001. In the long term, this has the potential to damage the credibility of the ISO 14001 standard and therefore the results of this study may have implications for the International Organization for Standardization (ISO).