Solid waste environmental disclosures of public companies in Brazil of environmentally sensitive industries

Abstracts

Esta pesquisa tem como motivação a obrigatoriedade das empresas de apresentarem informações ambientais sobre os resíduos sólidos no ano de 2010. Parte da seguinte pergunta de pesquisa: como estão sendo evidenciadas as informações ambientais relativas aos resíduos sólidos das companhias abertas no Brasil potencialmente poluidoras no ano de 2010? Com vista a uma resolução plausível, tem-se como objetivo geral verificar a evidenciação ambiental quanto aos resíduos sólidos das companhias abertas no Brasil potencialmente poluidoras no ano de 2010. Para atingir esse objetivo, são estipulados os seguintes objetivos específicos: (i) propor um modelo para identificar itens de evidenciação ambiental dos resíduos sólidos; (ii) avaliar o nível da evidenciação ambiental e correlacioná-lo com variáveis financeiras. Para a análise dos dados é construído um modelo de análise da evidenciação ambiental dos resíduos sólidos (Waste-Ede), que compreende a junção das ideias contidas no modelo Environmental Disclosure Evaluation, na política nacional de resíduos sólidos (Lei Federal n. 12.305/2010) e nas diretrizes da Global Reporting Initiative (2006). Os resultados demonstram que a maioria das companhias não publicou o relatório de sustentabilidade. A amostra final não probabilística contemplou 86 companhias. Os resultados limitados a essa amostra revelam que as companhias estão evidenciando informações de resíduos sólidos no nível mercado (conforme modelo), com média de 12,44 pontos, e que há correlação significante em 95% do índice Waste-Ede com as variáveis financeiras: investimentos ambientais, ativo total, patrimônio líquido e receita bruta. Conclui-se que, no ano de 2010, as companhias abertas no Brasil potencialmente poluidoras que fizeram parte do estudo respeitaram, provavelmente, as pressões de seus investidores, uma vez que os reguladores não apresentaram poder de enforcement.

Evidenciação ambiental; Resíduos sólidos; Companhias abertas no Brasil potencialmente poluidoras

ARTICLES

^IPh.D., student in Graduate Program in Accountacy, University of São Paulo E-mail: [e-mail]

^IIPh.D., Department of Accounting Sciences, Federal University of Santa Catarina E-mail: [e-mail]

^IIIPost-Doctoral Scholar, Graduate Program in Accounting and Administration, Regional University of Blumenau E-mail: [e-mail]

^IVPh.D., Department of Accounting, Ribeirão Preto School of Economics, Administration and Accounting University of São Paulo E-mail:[e-mail]

ABSTRACT

This study is motivated by companies' obligations to submit environmental information on solid waste in 2010. The research question is as follows: how was environmental information related to the solid waste of public companies in Brazil of environmentally sensitive industries disclosed in 2010? The general method used to answer this question was an analysis of public companies in Brazil of environmentally sensitive industries about of solid waste environmental disclosures in 2010. The following specific objectives were set: (i) to propose a model to identify documents as solid waste environmental disclosures and (ii) to evaluate the level of environmental disclosure and correlate it with financial variables. An analytical model of the solid waste environmental disclosure (Waste-Ede) was constructed for data analysis, which combined the concepts contained in the Environmental Disclosure Evaluation model, national policies regarding solid waste (Federal Law. no. 12.305/2010) and the Global Reporting Initiative (GRI) (2006) guidelines. The results show that most companies did not publish a sustainability report. The non-probabilistic final sample included 86 companies. The results limited to this sample showed that companies are disclosing information on solid waste at the market level (according to the model), with a mean of 12.44 points, and that there was a significant correlation at the 95% level between the Waste-Ede index and the following financial variables: environmental investments, total assets, net equity and gross revenues. In conclusion, in 2010, public companies in Brazil of environmentally sensitive industries that were part of the study most likely complied with regulations because of pressure from investors, given that regulators had no power of enforcement.

Keywords: Environmental Disclosure. Solid Waste. Public Companies in Brazil of Environmentally Sensitive Industries.

1 Introduction

Rio+20 in 2012 gave rise to debates and discussions on climate change, environmental impact and world environmental education in Brazil. Issues such as how to reconcile consumption and development with sustainable environmental policies were widely debated. Among the subjects discussed was solid waste, an essential factor in a nation's economy. Questions on the topic include how to manage it, where to dispose of it, how to recycle it and which raw materials to use.

In 2010, the XII International Fair and Seminar for Industrial Environment and Sustainability (Feira e Seminário Internacional do Meio Ambiente Industrial e Sustentabilidade - FIMAI/SIMAI) offered courses dealing with the subject of solid waste. In 2011, the Brazilian Association of Solid Waste and Public Cleansing held the 3rd International Forum on Solid Waste. The increased public attention, availability of information and discussions on the topic from both a social and business perspective, especially following the adoption of Federal Law no. 12.305/2010, gave rise to this study of public Brazilian companies from an accounting perspective.

The influence of the abovementioned law, which addresses national policy on solid waste for both public and private entities, requires some reflection. Determining whether companies with a high degree of environmental impact reveal their environmental issues and how they do so is critical to determine whether this law has had an impact on company management. Based on the concept described by Rosa, Ferreira, Ensslin, and Ensslin (2010), environmental disclosure is a tool used to support management decisions regarding the environmental information disclosed.

In the context of previous studies, Cho and Patten (2007) discussed environmental disclosure as a tool used to legitimize organizational actions. Note that the focus there is on whether disclosure affects the social environment in which the company operates. Cho, Roberts, and Patten (2010) analyzed the language employed in environmental disclosures. Studies by Holder-Webb, Cohen, Nath and Wood (2009) and Reverte (2009) sought to relate environmental disclosure to corporate social responsibility. Jenkins and Yakovleva (2006) studied the communication of environmental impact. Neu, Warsame and Pedwell (1998) analyzed the role and functionality of environmental disclosures. Patten (2002) sought to relate environmental performance and environmental disclosure.

How much environmental information is disclosed has been discussed in an article by Zeng, Xu, Dong and Tam (2010), who argue that the relation of information is related to the type of business activity. In particular, disclosure is more likely in sectors where there is greater pressure from the government due to increased potential for environmental problems, such as the oil and gas industries. The conclusion of these authors is similar to that of Cho and Patten (2007): they found that companies with a higher potential to pollute had a higher level of environmental disclosure.

The definition of a polluting activity was based on Brazilian legislation, specifically Federal Law. 10,165 (Política Nacional do Meio Ambiente [National Environment Policy], 2000) and the registration manual of the Brazilian Institute of the Environment and Renewable Natural Resources (Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováveis - IBAMA) (2004). The list is neither exhaustive nor conclusive and requires constant analysis to be appropriate for the social state on which it is based.

Solid waste is most commonly garbage or dejects, i.e., material that is unwanted after consumption. Because this study deals with all public companies in Brazil, a definition that could encompass all types of waste was sought. Therefore, we used the following terminology from the Brazilian Technical Standards Association (Associação Brasileira de Normas Técnicas - ABNT) (2004): solid waste is waste in solid form that can result from industrial, domestic, commercial and other activities.

This study has limitations regarding the companies studied. Companies with shares traded on the BM&FBOVESPA (Bolsa de Valores, Mercadorias & Futuros de São Paulo - Securities, Commodities and Futures Exchange) were initially considered. However, due to the limited availability of information on solid waste, companies that manage and treat solid waste but do not disclose such information were not considered. The disclosure aspect is the point addressed in the study.

This article aims to fill the gap in research into environmental disclosure by focusing on solid waste from an accounting perspective. Studies of environmental disclosure in Brazilian accounting treat the subject as a whole; therefore, the gaps in Brazilian research can be filled by addressing the details of a particular area of environmental disclosure, such as solid waste. In this context, the question that guides this research is as follows: how was environmental information related to the solid waste of public companies in Brazil of environmentally sensitive industries disclosed in 2010? The general objective was to verify environmental disclosure regarding the solid waste of public companies in Brazil that may potentially be polluting in 2010. To achieve this goal, the following specific objectives were set: (i) to propose a model to identify documents as solid waste environmental disclosure and (ii) to evaluate levels of environmental disclosure and correlate them with financial variables. The methodology used was a systemic analysis based on content analysis to identify information on solid waste management in sustainability reports and on websites. The study was qualitative and quantitative, descriptive, practical, applied and deductive-inductive. Data were obtained from secondary sources.

2 Literature Review

The theoretical framework is based on Brazilian and international perspectives on environmental disclosure and solid waste.

2.1 Environmental Disclosure.

According to Voss (2012), environmental disclosure in Brazil between 2009 and 2010 can be divided into seven aspects: (1) disclosure practices, (2) disclosure relationships, (3) adherence to disclosure rules, (4) explanatory factors for disclosure, (5) levels of disclosure, (6) scientific production and (7) management models. This study links the explanatory factors for environmental disclosure (group 4) and levels of environmental disclosure (group 5).

According to Voss (2012), in quantitative studies using variables to understand the levels of disclosure, the following nine variables were highlighted between 2009 and 2010 for Brazil and are summarized in Figure 1: size, control source, internationalization, profitability, indebtedness, industry, governance, audits and share issuance.

The variable "size" is the most significant in studies of Brazilian companies, followed by internationalization, control source, profitability and indebtedness. Controlling interest is understood primarily as whether the controlling share is of national or foreign origin, whereas internationalization refers to the ownership of securities traded on stock exchanges in other countries.

Reverte's (2009) literature review shows that, at an international level, research into the corporate practices of social responsibility has produced different theoretical perspectives in support of social reporting, such as agency theory, legitimacy theory and stakeholder theory, among others. According to the same author, stakeholder theory deals explicitly with the impact of the expectations of different stakeholder groups within society on corporate disclosure policies. The central thesis in that study is that corporate disclosure is a management tool used to manage the information requirements of various powerful stakeholder groups such as employees, shareholders, investors, consumers, governments and non-governmental organizations (NGOs).

Voluntary initiatives that lead companies to disclose environmental issues are described in the study by Jenkins and Yakovleva (2006) on mining companies. Among the reasons outlined as causing a sense of corporate social responsibility and voluntary initiatives are the following: industry opinion, pressure groups, the financial sector and difficulties in obtaining an operating license. Figure 2 presents a summary of these motivations.

Patten (2002) states that causes of environmental or social disclosure are diverse and result in numerous theories of social disclosure. In discussing social disclosure, the author is also referring to environmental disclosure. Legitimacy and stakeholder theories, according to Gray, Kouhy and Lavers (1995a), are considered to be more overtly concerned with "mediation, modification and transformation". These authors assert that the stakeholder theory, from a bourgeois point of view, is strategically concerned with the continued success of the organization. With regard to legitimacy theory, Patten (2002) argued that a corporation's economic legitimacy is obtained by participating in public politics, of which a common method is the disclosure of financial reports. Other authors corroborate the previous idea, and Cho and Patten (2007) suggest that legitimacy theory predicts that companies with poor environmental performance would be expected to provide wider dissemination or positive environmental disclosure in their financial reports.

The study of Lindblom (1994 apud Gray, Kouhy, & Lavers, 1995a) identifies the following four strategies that organizations can adopt in terms of social and environmental disclosure to acquire legitimacy: (i) educating and informing the relevant public about changes in performance and activity, (ii) changing the perceptions of the relevant public about performance, (iii) diverting attention from important issues such as environmental pollution and (iv) changing external expectations about the organization's performance. Note that the goal of these strategies is to persuade users in favor of the organization's purposes.

According to Reverte (2009), social and environmental disclosure can be useful in determining the contractual bond, administrative compensation contracts or implicit political costs. However, as indicated by Cormier et al. (2005 apud Revert, 2009), agency theory, which focuses on monetary considerations or wealth, leads agents trading in efficient markets to intentionally limit the relevance of social and environmental disclosure because many potential users of such information (e.g., Greenpeace) cannot act in these markets.

The relationship between environmental disclosure and accounting information has been studied by several authors. The first example is the study of Francis, Nanda, and Olsson (2008), who investigated voluntary disclosure, earnings quality and cost of capital, while Francis, Khurana, and Pereira (2005) studied voluntary incentives and the effects of cost of capital in various business enterprises worldwide. The third example is that of Frederickson, Hodge, and Pratt (2006), who reported the results of experiments of enterprises related to voluntary disclosure. Continuing these studies, Holder-Webb et al. (2009) proposed the construction of a model based on previous work on disclosure as a component of corporate social responsibility and explored communication practices adopted by many U.S. companies, except those related to financial services, investment funds and monopolies.

Cho et al.'s (2010) article examines whether the biased language and verbal tone present in corporate environmental disclosures varies according to an individual company's environmental performance, specifically for the sector of businesses that have the potential to pollute. In an earlier study, Cho and Patten (2007) examined whether environmental disclosure is used as a legitimization tool.

Another example of a study of the potentially polluting sector in the U.S. is Cho, Patten, and Roberts' (2006) study on corporate political activity, which tried to determine whether this activity is consistent with the results of environmental disclosure, that is, whether companies that are worse in terms of environmental performance spend more on political activity that those with better performance. They also attempted to identify whether electoral campaign expenditure is related to the concomitant use of environmental disclosure in financial reports.

Jenkins and Yakovleva (2006) explored trends in communication regarding the impact on and challenges of the global mining industry. They studied the development of environmental and social communication media in the mining industry and factors driving the development of this disclosure.

Environmental disclosure can be measured using many criteria. Rosa, Ensslin and Ensslin (2012) identified studies in the period 1991-2010 that used the following criteria: management approach; voluntary actions for sustainable development; water; degraded areas; auditing; biodiversity; communication channels; climate; fossil fuels (transportation); communication; community, employees and consumers; legal compliance; conservation and preservation of natural resources; environmental accounting; effluents; Environmental Impact Assessment (EIA) and Environmental Impact Report (EIR); atmospheric emissions; energy; future legal requirements; impact management and emergency situations; expenditure and investments; legitimacy; materials; monitoring, life cycle assessment (LCA) and supply chain; objectives and targets; research and development of products and services; pendencies and sanctions; planning; politics; pollution; waste; professional liability; economic results; insurance and concessions; environmental management system and certifications; transport; impact treatment; training/education. A summary of the most frequently referenced of these criteria is presented in Figure 3.

Figure 3 shows that among the referenced criteria, the following are found most often: environmental policy (21), solid waste (19), expenditure and investment (18) and legal compliance (17).

Solid waste was the topic of studies in 1997, 1999, 2001, 2004, 2007, 2008 and 2010. It should be kept in mind that, in 2010, virtually all studies addressed solid waste as a criterion for the evaluation of environmental disclosure, thereby demonstrating the relevance and rationale of studies on solid waste.

2.2 Solid Waste.

Solid waste is not a new subject and is discussed widely in areas such as engineering. Tchobanoglous, Theisen and Eliassen (1977, p. 3) define solid waste as any waste arising from human and animal activities that are normally solid and are discarded due to their worthlessness or lack of need. These authors addressed the management of solid waste and discussed the following topics: (i) the impact on human health and the environment, (ii) the generation of solid waste in a technological society, (iii) the amount of solid waste generated, (iv) projections for the future and (v) the challenges and opportunities for solid waste management. It should be noted that the issues raised in the study are still without a definitive answer in Brazilian society.

According to the Brazilian Technical Standards Association (Associação Brasileira de Normas Técnicas - ABNT) definition (2004, p. 1), solid waste is "waste in a solid or semi-solid state that results from industrial, domestic, hospital, commercial, agricultural, service and public cleaning activities." Complementing this definition, Gomes Coelho, Erba, and Veronez (2001, p. 146) grouped together urban waste, sludge from water treatment plants (WTPs) and sludge from sewage treatment plants (STPs) as solid waste. According to ABNT (2004), solid waste is either hazardous or non-hazardous depending on the risk to health and the environment. Figure 4 illustrates this classification.

Classes are also defined by ABNT, with solid waste Class I (hazardous) encompassing waste that is hazardous due to its physical, chemical or infectious-contagious properties and that may present (1) a public health hazard, causing mortality, incidence of disease or increasing rates of such or (2) risk to the environment if the waste is managed improperly. Class II A waste (non-inert) may exhibit properties of biodegradability, flammability, and water solubility, and class II B waste (inert) is any waste that, when sampled in a representative manner and subjected to dynamic and static contact with distilled or deionized water at room temperature, has none of its constituents solubilized at concentrations above the standard for water potability, except for appearance, color, turbidity, hardness and taste.

The object and scope of Federal Law no. 12,305 (2010) are all physical or juridical persons directly or indirectly responsible for the generation of solid waste. These persons, according to this law, may be those who develop integrated management activities or management of solid waste, and both the consumption and the integrated management of waste are linked to municipal plans for the proper disposal of waste and the premise of sustainable development (economic, social and environmental).

The law holds that throughout a product's life cycle, responsibility is shared among manufacturers, importers, distributors, traders, consumers and holders of public urban sanitation and solid waste management contracts. It further holds that packaging should be manufactured in such a way that it can be reused or recycled. It also states that, regardless of the system of urban sanitation and solid waste management, there is an obligation to perform reverse logistics; manufacturers, importers, distributors and dealers of pesticides, batteries, tires, lubricants, fluorescent lamps and electronic products and their components are required to participate. The definition of reverse logistics in the aforementioned law consists of a set of actions aimed at the collection and proper disposal of solid waste.

According to Federal Law no. 12,305 (2010), solid waste generators (public and industrial sanitation, healthcare services and construction) are required to prepare a plan for solid waste management and cannot treat it in the same manner as household waste due to the nature or volume of waste involved. Article 21 of the Act addresses management plans for solid waste, the minimum requirements of which are as follows: description of the activity; diagnosis of solid waste generated or managed containing the origin, volume and waste characterization, including related environmental liabilities; actions relating to shared responsibility for the product life cycle and other remedial measures for related environmental liabilities.

3 Methodology

The study is methodologically classified as descriptive, deductive-inductive, applied, qualitative and quantitative and documentary. The data are secondary, and the systemic analysis is based on content analysis, as shown in Figure 5.

Gil (2002) defines the descriptive nature of the objective as seeking to describe a phenomenon. In this study, the phenomenon to be described is how environmental information relating to solid waste is disclosed. The logic of the research is deductive-inductive, as discussed by Richardson (1999), as it works both from the general to the specific and vice versa, i.e., both theory and practice are studied in both directions. The data used are secondary, as defined by Gil (2002). The approach to the problem is both qualitative and quantitative, according to the definition of Raupp and Beuren (2006). Collis and Hussey (2005) state that applied research with grounded theory aims to generate knowledge through case studies. This research is documentary because it makes use of company reports. Data analysis is performed using a systemic logic based on the technique of content analysis, inspired by the principles of Bardin (2010).

3.1 Procedures for Data Collection.

The study population consisted of Brazilian public companies listed on the BM&FBOVESPA on March 24, 2011. The sample was defined based on potentially polluting activities that utilize environmental resources covered by Federal Law No. 10,165 (2000) and those contained in the registration manual of potentially polluting activities included in the IBAMA table of activities. The final collection date was December 4, 2011.

The following are the requirements for a company to be included in the sample: (a) it must belong to the potentially polluting sector, (b) it must have shares traded on BM&FBOVESPA and (c) it must have information about solid waste. Table 1 lists the types of companies classified in this procedure.

At this point, it should be noted that the majority of potentially polluting public companies provided no information on solid waste, whether in report form or on their websites. The final sample included 86 companies, of which 39 published sustainability reports and disclosure on their electronic sites. The total number of companies that disclosed environmental information on their websites was 216, of which nearly 39% disclosed environmental information on solid waste. Data analysis based on Bardin's (2010) content analysis used the phrase as the unit of analysis and the theme as the semantic unit. The next section shows how the Waste-Ede model was built to evaluate solid waste environmental disclosure.

3.2 Waste-Ede Model Construction.

The Waste-Ede model construction is based on a previous study by Crespo Soler, Ripoll Feliu, Rosa and Lunkes (2011), which presented the Environmental Disclosure Evaluation (EDE) model for the evaluation of environmental disclosure based on the model of the Global Reporting Initiative (GRI) sustainability report. The content of this model was based on the perceptions of internal managers. The proposed model is based on an external view, i.e., using a non-management perspective.

The sources of the Waste-Ede model subareas are fundamentally the GRI and Law no. 12,305 (2010). The model can be viewed as consisting of both voluntary information, such as that provided by the GRI in its environmental performance indicators EN2, EN14, EN22, EN26, EN28 and EN30, and mandatory information provided by companies that generate non-household waste, as required by the aforementioned law. Figure 6 illustrates the documentary sources of the model.

The Waste-Ede model unites the EDE, GRI guidelines (2006) and Federal Law no. 12,305/2010. Information was obtained from the websites and sustainability reports of these sources to meet the objectives for each area. Figure 7 presents the specific objectives of each subarea.

The model therefore consists of four areas (diagnosis, legal compliance, environmental and economic aspects) and 10 subareas (characterization, disposal method, regulatory concerns, fines and sanctions, environmental education, recycling, reverse logistics, reduction, concern for environmental liabilities and investment in environmental protection). Each subarea has a specific scale. Some include the following impact levels: (D) declarative, (M) monetary, (Q) quantitative, or the combinations (D/M), (D/Q), (Q/M) and (D/Q/M) in accordance with Gray, Kouhy and Lavers' (1995b) research; others are dichotomous. The details of the scales are explained in the description of Figure 9.

The green, yellow and red colors represent how a company is classified based on the score obtained by the model, as shown in Figure 8.

The Waste-Ede model containing the four areas, 10 subareas and scales for each of these is shown in Figure 9.

The order and color of the scales depends on whether the level is excellent (green), market (yellow) or compromised (red). Semantic judgment was used to transform each of the ordinal scales into cardinal scales with the aid of M-Macbeth software version 2.3.0, which represents the difference in attractiveness between the levels. Judgment was performed internally between the scales, then between the subareas, and finally between the model areas.

3.3 Data Analysis Procedures.

Eighty-six companies were included in the final sample (Table 1). The analysis period was the year 2010, when the national solid waste policy law was passed. The financial data of these companies were examined to determine whether there was any relationship between the Waste-Ede index and appropriate listed financial data, and the annual financial statements ending 12/31/2010 were collected from the Brazilian Securities Commission (Comissão de Valores Mobiliários - CVM) database available on the BM&FBOVESPA website. Total investments and investment in solid waste were obtained from sustainability reports, as shown in Figure 10.

The determination of a possible association of the Waste-Ede index with financial variables was performed with the aid of the Statistica software v. 6.0.

4 Analysis of Results

The answer to the research question was obtained through achieving the two specific objectives that were previously described. Consequently, the results are divided into (i) the Waste-Ede model for identification of environmental disclosure items and (ii) the assessment of the level of environmental disclosure and correlation with financial variables.

4.1 Waste-Ede Model for Identification of Environmental Disclosure Items.

The ten Waste-Ede model subareas applied to the sampled companies provide quantification of qualitative information because the semantic judgment allowed the ordering and numerical representation of this classification. The model has a voluntary and compulsory nature. Five subareas of the model are supported in the legislation and four in GRI guidelines. One of the subareas, regulatory concern regarding solid waste, was interpreted based on industry standards. The application of the model to the study sample is presented in Table 2.

Table 2 is the result of applying the Waste-Ede model to the companies. The "score" column shows the company level (excellent, market or compromised). The third through twelfth columns symbolize the weighted measurement of the specific scale of each model subarea, which were defined in Figure 7. For example, one company reported its fines and sanctions on solid waste declaratively, quantitatively and in monetary terms (subarea 2.2). The total potential of the level of impact (D/Q/M) is 125 points, and there was 17.47% participation; the result is therefore 21.84 points. Positive values correspond to "market" or "excellent" impact levels, and negative relate to the "compromised" level.

The application of the model revealed that two exclusively regulatory subareas (reverse logistics and concern for environmental liabilities) did not have values below zero, and another area of both regulatory and voluntary nature (reducing solid waste) had the largest mean of the rest of the subareas. The disposal methods subarea was the next largest with 6.14 mean points. Subarea 2.2, which addresses fines and penalties, pulled the index below the mean. The mode of this subarea was -13.10 points. Waste characterization (subarea 1.1) showed the lowest value of -22.57. The mixed subareas, i.e., those of voluntary and mandatory sources, comprised 1.1, 3.2 and 3.4 and had a shared mean of 5.32 points. Exclusively voluntary subareas (1.1, 2.1, 2.2, 3.1 and 4.2) had a mean score of 6.82, while legislation subareas 3.3 and 4.1 had a mean share of 0.30. On average, one can see that company disclosure was 5.62% (mandatory) versus 6.82% (voluntary). The result is low but positive.

At this stage, the final sample was characterized to interpret the results. This procedure included 86 companies, with some sectors having no representation, such as iron and steel artifacts, footwear and meat and derivatives. Others had a low level of representation, particularly road materials (8%), various foods (17%), steel (17%) and petrochemicals (33%). Another aspect to be discussed is the number of companies in each sector; for example, the gas sector has two companies, one of which was included in the sample. The presence of few companies in the mining and iron industry and only two of the six petrochemical companies in the sample is worrying.

The companies in this sample have a mean performance regarding the appropriate publication of waste information of approximately 12%. This figure is lowered by companies that do not provide a sustainability report, as the information provided on the websites is insufficient in relation to solid waste. If we consider only companies that submitted a sustainability report according to the GRI model and in Portuguese, the mean performance rises to 60%.

A total of 47 companies from the agricultural, various food, weapons and munitions, fertilizers and pesticides, construction and agricultural machinery and equipment, petrochemical, water transport and road transport sectors are below the Waste-Ede index mean. Figure 11 shows the overall performance of listed companies by sector, and the orange band represents the mean.

Figure 11 shows that one of the two sugar and alcohol companies is at the market level (29%) and that the other is at the compromised level (-35%). The agriculture, weapons and munitions and various foods sectors are at the compromised level. Copper artifacts (32%) and cigarettes and tobacco companies (65%) are also at the market level. Performance is poor in construction. Only two of the seven companies in this sector are at the market level, and one is at the excellent level. Eight of the 29 electrical energy companies are at the compromised level. Basically, these are companies that only disclosed on their websites, while the other 16 companies are at the excellent level, one of which provided the best disclosure on solid waste in the study. The road operations sector exhibits a great contrast; one company is at the excellent level, and the remaining five are at the compromised level of disclosure. One exploration and/or refining company is at the excellent level, while the other is at the compromised level. The only gas company in the sample is at the excellent level. One road material company is at the beginning of the excellent range, close to 50%. One of the pulp and paper companies is at the compromised level (-35%), another is at the market level, and the remaining three are at the excellent level. The petrochemical companies exhibit poor disclosure and therefore are at the compromised level. The only steel company in the sample has excellent disclosure (85%).

The characterization of solid waste, also present in the GRI (EN22 indicator), is responsible for up to 28.21 points or 28.21% (42.10% x 67% x 100), and the minimum score possible is -22.57 (42.10% x 67% x -80). Note that companies are in compliance with the requirements of the GRI indicator and the Waste-Ede evaluation model. Most companies were rated as excellent, i.e., above 100%. Subarea 1.2 (disposal method) generally showed a positive result, although 48 companies in this subarea did not provide disclosure.

Declarative, quantitative and monetary analysis was conducted in subarea 2.2, and the result obtained was negative because 27 companies achieved the highest score but 54 did not provide disclosure. With regard to environmental education, 57 companies reported none or that they only invested in or supported the environmental education of their employees and did not extend this benefit to other stakeholders, such as suppliers, local communities, or investors, among others. Eighteen companies did not provide information about recycling. The result was negative with respect to reverse logistics; 74 companies did not provide any information. Those that did (12) belonged to the sugar and alcohol, construction, electrical energy, gas, aeronautical equipment, road materials, metal minerals and rail and water transportation sectors.

The maximum waste reduction compared with the previous year was 25%, and this situation occurred in five companies. The maximum score for environmental liabilities was exhibited by 10 companies, which belong to the following sectors: construction (2), electrical energy (3), road operations (1), building materials (1), road materials (2) and metal minerals (1). Investment in environmental protection with scales equal to those used by Gray et al. (1995b) was presented with complete information by 22 companies. Full disclosure was considered to be that which presents declarative, monetary and quantitative information. Conversely, 58 companies did not present any information. Another way to view the subareas disclosed and measured by the Waste-Ede model is presented in Table 3.

It should be noted that the sectors with greater representation in the sample were electrical energy, construction, road operations, road materials and paper and pulp. Few companies were at the market level because some scales, such as 1.2, 2.1, 3.2, 3.3 and 4.1, are of a dichotomous type, i.e., either at the excellent or compromised level. The mean Waste-Ede index was at the market level, although some information is at the compromised level. Of the 10 subareas, most companies (9) were at the compromised level. Only recycling was above a 50% disclosure level. The worst performances were found in the following subareas: (1) solid waste reduction (100% of companies), (2) concern for environmental liabilities (88%) and (3) reverse logistics (86%). The evaluation of a product's life cycle, according to Ekvall et al. (2007 apud Cleary, 2010), has as parameters solid waste reduction through prevention and reuse of products. Most companies seem to continue production without concern for reducing waste and, consequently, the product's life cycle.

There are problems associated with the environmental disclosure of reverse logistics because the subject is controversial (see coverage of this issue in the Fecomércio event in 2010) and complex, such as in regard to the determination of shared responsibility as described in Federal Law. 12,305/2010. The holistic approach in considering the product's life cycle, such as that proposed by Thorneloe, Weitz, and Jambeck (2007), was ignored because there was no information regarding related environmental liabilities. It is hoped that with greater technological advancement and regulations, waste can be reduced to a minimum and be consistent with sustainable development.

4.2 Assessment of the Level of Environmental Disclosure and Correlation with Financial Variables.

This section presents an assessment of the level of solid waste environmental disclosure of Brazilian public companies that may potentially pollute in the sample and the correlation of the Waste-Ede index with financial variables and also seeks explanations for the results. The Waste-Ede model was applied to the 86 companies in the sample, and a mean solid waste disclosure value of 12.44% was found. Most of the companies (59) were at the low level, i.e., less than 50%, as illustrated by Figure 12.

There are 16 companies at the medium level and 11 at the high level. Extremely negative results were obtained by weapons and munitions and road materials and operations companies with minimum scores of -45.69 points or -45.69%. The most extreme positive scores were obtained by electrical energy and road operations companies. The electric energy sector has greater representation in the sample. Eight companies are at the compromised level, i.e., below 0%; five are at the market level, i.e., up to 50%; and the remaining 16 are at the excellent level. This result demonstrates that even companies in the same sector, such as the electrical energy and road operations sectors, have large disparities regarding the disclosure of solid waste environmental information.

One of the reasons why the electrical energy sector provides the most comprehensive environmental information is the pressure exerted on it by its regulator, the National Energy Agency (Agência Nacional de Energia Elétrica - ANEEL). Road operations companies work in partnership with public authorities that impose certain contractual obligations. Reverte (2009) states that enterprises need to manage the information requirements of power groups associated with the organization. This may explain the high representation of the electrical energy sector in the sample.

The Waste-Ede index histogram is able to show the position of companies in the sample in relation to solid waste disclosure. Rosa et al. (2010) found that environmental disclosure involves a complex operation and that there may be conflicting pressures between the various entities involved. The frequency distribution of the Waste-Ede scores is shown in Figure 13.

Normal distribution of the data is indicated by a red line on the graph. It is clear from this figure that the Waste-Ede distribution is not normal. Due to this lack of normality, correlation of financial variables was performed using Spearman's nonparametric test. The objective of seeking a relationship with financial variables is similar to the objectives of previous Brazilian studies that primarily used regression analysis and found a relation between variable size and environmental disclosure. The histogram indicates that most companies' scores are between 40 and -20. Using Statistica software, a mode of -35.27 was obtained. The descriptive statistics of the variables analyzed complement this graph and are shown in Table 4.

The mean and median of each variable in this case are very far apart, and the standard deviations are high, which indicates the wide dispersion of the data. This finding confirms the non-normality of the variables, including the Waste-Ede index, as illustrated by Figure 13. The variables of environmental investment (EI) and environmental investment in solid waste (EI-Waste) were not available for all companies in the sample. The sample sizes for these variables were 26 and 15, respectively.

Spearman's nonparametric test aims to detect any non-parametric and non-linear relationship between variables. The results of this test are shown in Table 5.

The result of the Waste-Ede index correlation with all variables indicated that there was significant correlation at a confidence level of 95% for the variables environmental investments, total assets, net equity and gross revenues. Values ranged from 0.41 to 0.50, which is explained by the fact that a variation in the Waste-Ede index can be affected by up to 50% by these variables. This result is consistent with Brazilian studies that consider the variable "size" (a transformation of total assets) to be significant in explaining environmental disclosure in Brazilian public companies (Figure 1).

There is evidence that companies belonging to the potentially polluting sector in the study are pressured by their users, such as the government, through legislation and regulatory agencies, to disclose information regarding solid waste, as is the case for the electrical energy companies. The justification for this pressure is described in the literature, such as by Gray et al. (1995a), for companies displaying concern about continuous success. Cho et al. (2006) studied the relationship between environmental disclosure, political strategy and the potentially polluting sector in the U.S.A. Their study is similar to the present one in that it also sought theories to explain levels of disclosure in the same sectors. The stakeholder and legitimacy theories were among those considered to explain the relationship. Legitimacy theory is discussed by Gray et al. (1995a), Cho and Patten (2007), Reverte (2009) and Eugénio (2010).

5 Conclusion

In this study, a Waste-Ede model was constructed to evaluate solid waste environmental disclosure by public companies in Brazil of environmentally sensitive industries in 2010. The approach to the issue contained predominantly qualitative aspects but was also quantitative. After constructing the model, the level of environmental disclosure was evaluated and correlated with financial variables.

The non-probabilistic final sample included 86 public companies. The evaluation of environmental disclosure revealed that there was little participation according to the companies' mean values, and companies that provided a sustainability report according to GRI guidelines were the most participatory. The evaluation of company websites revealed that few companies use this medium to communicate solid waste disclosures. Voluntary participation exceeded, on average, mandatory participation. This is not surprising given that until 2009 there was no specific law for all solid waste in Brazil but only specific legislation for hazardous waste, for example, waste resulting from the use of batteries and fertilizers.

The power of Brazilian regulators to enforce the issue of solid waste in 2010 was low or almost null because this legislation was enacted without any punishment for non-compliance with the law. Furthermore, companies in general were not prepared to adhere to the standard. A possible explanation for the predominantly voluntary disclosure is therefore the role of other agents that exert pressure on companies to provide disclosures and perform other activities beyond those required by the regulators.

Legitimacy and stakeholder theories were considered to be consistent with the findings and explain the medium level and voluntary nature of participation in disclosure. Entities with greater environmental impact need to legitimize their actions by means of disclosure (legitimacy theory) and respect their powerful users (stakeholder theory). Regulatory pressures, such as the enactment of Federal Law no. 12.305/2010, shareholders and investors, among others, are responsible for most corporate transparency. In the hierarchy of stakeholders responsible for disclosure, regulators were not the main drivers of such disclosure. The most substantial influence may have been exerted by investors and creditors. All public companies seek investor resources, so this level of disclosure is therefore most likely caused by pressure from investors.

According to Eugénio (2010), there is a social contract between companies and society that requires certain behavior in order for the company to be accepted. Patten (2002) found that legitimacy theory strengthens the explanation of what environmental information is disclosed, which is consistent with this study.

The Waste-Ede model construction helped to transform attributes into numerical values through semantic judgment. Therefore, this study may aid further research about solid waste environmental disclosure.

Some issues were lacking or even absent from the solid waste environmental disclosure of various organizations, such as reduction of solid waste compared to the previous period, concern for environmental liabilities and reverse logistics. The low disclosure of reverse logistics is understandable due to the definition of shared responsibility. The reduction of solid waste is a global concern, which reflects an ignorance of (or disregard for) a product's life cycle. The lack of information on environmental liabilities may be seen as lack of understanding of or indifference to the fact that their activities may affect the environment on the part of these organizations. This is problematic because lack of interest in environmental issues can lead to unsustainable development.

The environmental impact associated with business activities can increase the risk of discontinuation of certain activities or even part of the environment. The lack of concordance of business activity with the environment can be dangerous and cause structural breaks. The social impact of a company being unable to operate or creating a contaminated environment can have a wide range of effects, including some on mankind.

This work provides an understanding of how environmental information can influence accounting information and alter the management of companies, investors' choices, public policies and societal attitudes. Qualitative information was therefore measured during construction of the Waste-Ede model. A significant correlation at the 95% level was found in the following variables: environmental investments, total assets, net equity and gross revenues. The conclusion drawn from this finding is that companies have a financial motivation for disclosing environmental information. Concern with solid waste is influenced by the size of the company. Investment in appropriate information systems, solid waste management plans and qualification of professionals may be influenced by economics. The finding of this research is that the solid waste environmental disclosure of the sampled companies is related to financial variables.

The electrical energy sector was the most representative, and an electrical energy company and a road operations company showed the largest Waste-Ede model index. The reasons why these sectors disclose the most information on solid waste can be attributed to the agents who exercise power in these companies, such as ANEEL and the government, in the form of contracts for road construction.

In terms of future research, there are several studies that have been performed elsewhere that would provide useful information if performed in Brazil. The first is the study of Cho et al. (2010), which sought to identify the tone of the language used in environmental disclosure. The second study is that of Hasseldine, Salama, and Toms (2005), which consists of studying whether organizational reputation has an effect on the quality of environmental information disclosure. The third study is by Francis, Nanda, and Olsson (2008), who investigated environmental disclosure and the implications on profit and cost of capital. Finally, based on the work of Jenkins and Yakovleva (2006), the association between environmental disclosure and environmental impact communication should be explored.

This study cannot be generalized. It is specific and applies only to the companies in the study and the year studied. It is important to take into account the maximum possible number of companies that have a high environmental impact and that are listed on the stock exchange.

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Solid waste environmental disclosures of public companies in Brazil of environmentally sensitive industries

Barbara de Lima Voss^I; Elisete Dahmer Pfitscher^II; Fabricia Silva da Rosa^III; Maisa de Souza Ribeiro^IV

Publication Dates

• Publication in this collection
  26 Aug 2013
• Date of issue
  Aug 2013

History

• Received
  26 Mar 2012
• Accepted
  28 Feb 2013