Does Carbon Disclosure Enhance Firm Performance? Evidence from Indian Corporate Firms

Abstract

Growing concerns over climate change and increasing stakeholder expectations have made carbon disclosure an essential component of corporate sustainability reporting. Although firms are increasingly disclosing carbon-related information, empirical evidence regarding its influence on financial performance remains inconclusive, particularly in emerging economies. This study investigates the impact of carbon disclosure on firm performance in the Indian context under the evolving sustainability reporting regime. The study employs a panel dataset of 73 non-financial companies from the BSE 100 Index over the period 2020–2025. Fixedeffects panel regression is employed after addressing diagnostic issues relating to heteroscedasticity, autocorrelation, and multicollinearity. The empirical findings reveal that carbon disclosure exerts a statistically significant negative effect on firm performance, indicating that the costs associated with environmental reporting and sustainability initiatives outweigh their short-term financial benefits. The study contributes to the literature by providing evidence from India's mandatory sustainability reporting framework and offers important implications for policymakers, corporate managers, and investors. The findings suggest that while carbon disclosure may reduce short-term profitability, it remains a critical strategic tool for enhancing transparency, strengthening stakeholder confidence, and fostering sustainable value creation in the long run.