Page 163 - IJES Special Issues for AIEC2016
P. 163
International Journal of Environment and Sustainability, 2016, 5(2): 61-71 63
3. Did the capital market respond to the com- Regulation theory states that a concentrated
pany’s action on the effort to reduce carbon economy is the reason for protecting public in-
emission? terest. In this theory, legislative authorities make
regulations to protect financial report users by
This research provides investigation results and improving economic performance. Regulation
empirical evidence on companies’ responses on theory is needed when failure occurs and when
the policy issued by the government related to information cannot be delivered by demand and
social responsibility. Furthermore, this research supply. This theory assumes that regulations and
aims to present a policy model related to corpo- conditions (including in accountancy) are
rate responsibility in Indonesia in creating sus- needed. The government’s role is needed to set
tainable development, not only for Indonesia but those conditions and to determine what a com-
for the world. The response of a capital market pany should do to provide the information. Con-
actor that will be evaluated from stock trading ditions are needed so that all users and present-
volume will be investigated as information that ers are able to get same and equal information.
deepens the evidence of community awareness
on sustainable development. 2.1 Previous Research and Hypothesis Devel-
opment
This research is important because although
there has been much government policy issued 2.1.1 Regulation plays a role in increasing
related to social and environmental responsibil- corporate obedience in allocating costs to re-
ity for companies, social and environmental is- duce corporate carbon emissions.
sues remain a serious problem in Indonesia. This
research tries to offer a model of government Even though some companies voluntarily con-
policy related to social and environmental re- duct environmental accountancy disclosure, the
sponsibility, specifically regarding its implemen- quality of disclosure has not been adequate. In
tation. With the success of this research, it is ex- such situations, the disclosure seems to be only a
pected to provide a policy model that can be of- social contract between the company and the
fered to the government as a contribution from surrounding community used to legitimize the
the accountancy community. company in the eyes of the community (Deegan,
2002; and O’Dwyer, 2003 in Lindrianasari,
2. Theoretical Framework 2007). The study done in Lampung Province
shows that companies tend to disclose profitable
This study uses two theories—legitimacy theory information (good news) but not less profitable
and regulation theory— underlying the issue be- information (bad news) (Lindrianasari, 2004). In
ing investigated that are related to regulation relation to government policy, this research aims
and the cost allocation of research and develop- to investigate the quality of disclosure that is
ment that aims to reduce corporate carbon emis- clear on environmental issues.
sions as a means of reducing social and environ-
mental impact. Lindrianasari (2007) explains In 2008, the level of CO2 in the atmosphere was
that even in a situation where there is no obliga- 385 ppm, and it increases 2 or 3 ppm each year.
tion from authority, many companies voluntarily To stop its increase to the level of 450 ppm—the
conduct environmental accountancy disclosure level that John D. Sterman, a scientist from MIT
(voluntary environmental disclosure). This is Sloan School of Management USA, considers very
done to maintain corporate reputation and to dangerous— the world has to reduce the emis-
avoid any form of community rejection. This ex- sion of CO2 by about 80 percent by 2050
planation is supported by legitimacy theory, (http://abaaaaaay.wordpress.com/2009/12/30
which provides an alternative reason why a com- /carbon-sink/). Scientists and researchers from
pany is encouraged to conduct environmental a number of fields have contributed their
disclosure. thoughts and analysis. Sterman (2012) argued
that most of the means companies, individuals,
and governments use related to sustainability
are directed for unsustainable activities, and
they do not help the cause. These means include
Science Target Inc. www.sciencetarget.com
