The effect of audit committee effectiveness on climate change disclosure commitment: international evidence

Purpose Climate change is becoming one of the biggest and most pressing environmental challenges of the last century. As such, the board of directors and its sub-committees need to recognise and address climate change as a potential strategic risk for their companies, using a sustainable approach that prioritises this risk over other business-related risks. In this framework, this paper aims to examine the influence of audit committee characteristics and its effectiveness on the commitment to voluntary climate change disclosure. Design/methodology/approach Our sample covers 403 non-financial companies from 48 countries. These companies belong to the largest greenhouse gas (GHG) emitting sectors, namely oil and gas, chemicals and coal. We have used data from company responses to the Carbon Disclosure Project (CDP) survey for the years 2015–2021. The total number of observations for the seven-year periods is 2,821 firm years. Audit committee characteristics examined are size, independence, gender diversity and number of meetings. Regarding the effectiveness of the audit committee, it is measured using a composite index developed from its individual characteristics. Findings Our findings show that the number of meetings held by the audit committee affects positively the commitment to the CDP initiative. However, the effects of audit committee size, independence and the presence of women are statistically insignificant. Regarding the effectiveness of the audit committee, our results show that it has a positive and significant effect on the commitment to the CDP initiative. In addition, the results demonstrate that the audit committee diversity, measured using the Herfindahl index, had a positive and significant effect on climate change disclosure commitment. Practical implications This study offers new insights into the role of the audit committee in improving climate change disclosure. The findings indicate that companies can improve their sustainability and social responsibility by establishing an effective audit committee within their board of directors. Furthermore, investors and regulators must give great importance to the characteristics of the audit committee and its roles and duties in the fight against climate change. Originality/value In contrast to previous research, this study examines, simultaneously, the impact of individual characteristics and the effectiveness of the audit committee on the commitment to climate change disclosure.