The Relationship Between UN Global Compact, the Carbon Disclosure Project, and Corporate Environmental Performance
As the effects of climate change become increasingly apparent, the world continues to search for ways to collectively combat this issue. Companies are being held responsible for their impact on the air, water, and land. Yet, the most effective way to control these companies’ impacts is still unclear. A debate regarding this topic revolves around the efficacy of government-enforced environmental regulations vs. market-based initiatives. As governments discuss the possibilities and merits of a binding international climate agreement, this debate has more relevance and importance than ever.
I hope to contribute to this debate by examining two of the largest market-based initiatives in order to help to answer and address the following question: Can voluntary market-based programs effectively improve environmental performance? Based on that overarching question, I examine the following questions: Do companies that participate in more than one of these programs have stronger or weaker performance than those who do not participate in any of these programs or only one of them? Does the order of participation in these programs matter? Is there a significant spillover effect between the programs?
The two programs that I will review to answer these questions are the UN Global Compact (UNGC) and the Carbon Disclosure Project (CDP). These programs are two of the largest and most influential platforms for corporate environmental performance disclosure. Over 8,000 companies are a part of the UNGC and roughly 5,600 companies disclose to the CDP.