The real effects of ESG reporting and GRI standards on carbon mitigation: International evidence

Abstract This study explores the real effects of environmental, social, and governance (ESG) reporting and the adoption of global reporting initiative (GRI) standards on carbon mitigation. Using a sample of large international companies, our empirical evidence does not show that a general form of ESG reporting is associated with carbon mitigation. However, after controlling for ESG reporting, firms that follow GRI standards when preparing their ESG reports are more likely to achieve greater carbon mitigation. Channel tests show that such firms tend to set more proactive carbon strategies and policies, make environmental investments, and actively engage with stakeholders. Finally, we find that the real effects of GRI standards tend to occur mainly in weak institutional settings (e.g., countries with less stringent carbon regulations, lower climate consciousness, and weaker legal enforcement). Overall, the central insight of the study is that standardized ESG reporting under GRI plays a soft substituting role in promoting green aspirations in an institution void of a high degree of global warming awareness.