Events

Prof. Aaron Yoon
Associate Professor of Accounting & Information Management
Kellogg School of Management
Northwestern University

This paper analyzes firms’ restatements of their Scope 1 carbon emission numbers after the Securities and Exchange Commission’s request for public input on climate-related disclosure was announced in March 2021. Using the disclosures filed with the Carbon Disclosure Project, we find a marked increase in the frequency and magnitude of restatements by U.S. public firms, both relative to their previous restatement levels and to those of private firms not subject to SEC oversight. Firms with independently assured emission data, board-level oversight of climate-related issues, and high transition risk are significantly less likely to make upward but not downward revisions. These results are consistent with widespread weaknesses in firms’ carbon reporting infrastructures and with potential strategic motives to underreport among some firms. Our findings have important implications for regulators, investors, and standard setters by highlighting the need for robust carbon reporting, and the critical role of assurance in improving the credibility of sustainability disclosures.