Companies headquartered in states that voted solidly for Donald Trump shared significantly less information about their potential impact and exposure to climate change following the 2016 presidential election than prior to Trump's surprise victory, according to new research analyzing corporate social responsibility reports. 

At the same time, firms in carbon-intensive industries such as oil and gas increased their climate disclosures in comparison to U.S. companies overall. 

The research, published April 8 in Accounting Forum, sheds light on how corporate America responded to the Trump presidency, during which the federal government slashed environmental regulations and protections while the public became more aware and energized about addressing climate change. 

These conflicting trends left companies in a strange position, said co-author Den Patten, a professor of accounting at Illinois State University. When the general public pays more attention to environmental issues, the government usually responds by enacting — or at least proposing — stricter regulations. Unlike previous administrations, this dynamic wasn't at play during the Trump era, the researchers said. 

"One of Trump's primary agendas was deregulating or trying to do away with anything that had to do with the environmental regulation of business," Patten told The Academic Times. "That was met with all kinds of backlash from society."

This tension manifested in strange ways. Even as Trump overturned environmental regulations and nominated former fossil fuel industry lobbyists to head regulators such as the Environmental Protection Agency, fossil fuel stocks sank and much of corporate America took to issuing statements in support of environmental protection. 

Work by other researchers published in World Development last year showed that sustainable stocks perform better when the general public pays attention to the environment — meaning that firms may benefit from signaling that they care about climate change even when regulators do not. 

To examine how businesses responded to Trump, Patten and his co-authors Carla Antonini, of the Universidad Autónoma de Madrid, and Wioleta Olczak, of Marquette University, looked at annual corporate social responsibility disclosures, through which companies voluntarily share information about their environmental and social performance, as well as their goals. 

Since social responsibility reports are made on a more voluntary and less regulated basis than annual financial disclosures, they can serve as a gauge of how concerned companies are about regulation and public backlash in response to their environmental impacts. 

"The voluntary nature of social and environmental disclosures allows corporations to use it as a tool of image enhancement, as a tool of transparency," Patten said. "They're not accounting reports — they're really public relations." 

The researchers examined disclosures for 2014 to 2015 and 2017 to 2018 from 170 publicly traded U.S. companies with annual revenues of more than $1 billion. They excluded 2016 because they couldn't determine whether companies had written reports for that year before Trump's electoral victory. They separated the companies based on their headquarters, categorizing "Trump states" as states that had voted for Trump by a margin of 5% or more in 2016. 

In aggregate, the amount of space companies devoted to climate performance and goals did not change significantly during the transition from Barack Obama's presidency to that of Trump. But companies in non-carbon-intensive industries in Trump states devoted about 4% less space within their corporate responsibility documents to climate disclosures — a statistically significant decrease. 

This decline was counteracted by an increase in disclosures among carbon-intensive industries, which Patten attributed to increased public attention toward climate change. Some institutional investors also fled fossil-fuel stocks during the Trump presidency. 

Patten said the fact that climate disclosures did not change overall can obscure significant shifts between industries and states. 

"When you dig a level or two deeper, you can see we have these major differences," he said. 

Evaluating companies' social reports is part of a broader idea called "legitimacy theory," which Patten has studied since the 1990s. 

Legitimacy theory comes out of the idea that corporations are "aware that they exist in society," he said.

"Any time that there is a potential that society will be concerned with an issue, it leads to the potential for political action or regulatory action," Patten said. "Companies use disclosure as a tool for addressing their exposures for potential social and political costs." 

For example, he pointed to oil companies' response to the 1989 Exxon Valdez oil spill in Alaska, among the worst environmental disasters in U.S. history. Oil companies that had no affiliation with Exxon increased their environmental disclosures the year after the spill, Patten said, potentially as a public relations move in response to the possibility of increased regulation. 

Companies that cut back on climate disclosures during the Trump administration will likely be incentivized to once again emphasize their climate plans under current President Joe Biden, the researcher said. 

"The Biden administration is very clearly taking a different stand," Patten said. "Because of that, I think there's going to be a lot of pressure really on all companies in the U.S. economy, to the extent that they may have disengaged, to re-engage with the issue of climate change." 

The paper, "Corporate climate change disclosure during the Trump administration: Evidence from standalone CSR reports," published April 8 in Accounting Forum, was authored by Carla Antonini, Universidad Autónoma de Madrid; Wioleta Olczak, Marquette University; and Den Patten, Illinois State University.