Indonesian Journal of Sustainability Accounting and Management

ISSN 2597–6214 | e–ISSN 2597–6222

https://ijsam.org/index.php/ijsam
DOI: 10.28992/ijsam.v8i1.888

The Effect of Corporate Performance and Corporate Governance

on Manufacturing Company Carbon Emission Disclosure

Ryan Bagas Wikantyoso1 * | Robiyanto Robiyanto2 | Budi Frensidy3

1
Universitas Kristen Satya Wacana, Faculty of Economics and Business, Salatiga, Indonesia
2
Universitas Kristen Satya Wacana, Faculty of Economics and Business, Salatiga, Indonesia
3
Universitas Indonesia, Faculty of Economics and Business, Depok, Indonesia

*Correspondence to: Robiyanto Robiyanto, Faculty of Economics and Business, Department

of Management, Universitas Kristen Satya Wacana, Jalan Diponegoro No.52-60, Kec. Sidorejo,
Salatiga, Indonesia.
E-mail: [email protected]

Abstract: The aim of this study is to examine the effect of company performance and corporate
governance on the disclosure of carbon emissions of manufacturing companies. This study uses
secondary data in the form of financial reports and sustainability reports from manufacturing companies
that have been listed on the Indonesia Stock Exchange (IDX) for the period 2015 -2022. The data collection
technique used a purposive sampling method with a sample of 93 companies. Data analyzed by using
panel regression method. The results of this study show that company performance variables have a
significant positive effect on disclosure of carbon emissions, but corporate governance variables do not
have a significant negative effect on carbon emissions. The study suggests corporate governance will
reduce the company’s carbon emission levels. Hence, it is very important to enhance the company’s
corporate governance practices beyond the mandatory matters. This study is one among few studies
which have been conducted in Indonesia to examine company performance and corporate governance
regarding carbon emissions in the manufacturing industry in Indonesia. This study focuses on examining
the manufacturing industry in Indonesia and this research has different results and points of view from
previous researches.

Keywords: carbon disclosure, carbon emissions, corporate governance, corporate performance,

Indonesia Stock Exchange (IDX).

Article info: Received 7 November 2023 | revised 16 January 2024 | accepted 29 February 2024

Recommended citation: Wikantyoso, R. B., Robiyanto, R., & Frensidy, B. (2024). The Effect of Corporate
Performance and Corporate Governance on Manufacturing Company Carbon Emission Disclosure.
Indonesian Journal of Sustainability Accounting and Management, 8(1), 125–137. https://doi.org/10.28992/
ijsam.v8i1.888

INTRODUCTION

Global warming and climate change have become a problem that continues to grow as a problem for the world
(Kılıç & Kuzey, 2019). Greenhouse gas emissions, especially carbon dioxide, are a major cause of climate change
(Shen et al., 2020). Continuous weather changes can cause a global warming phenomenon that is triggered by
the irregular accumulation of greenhouse gas emissions into the atmosphere, which is potentially disruptive
and irreplaceable (Gabrielle & Toly, 2019). Moreover, the problem of global warming can be influenced by an
increase in human population which causes the production of carbon emissions and CO2 carbon dioxide to

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126 Wikantyoso et al.

increase (Gobel et al., 2019). Carbon emissions influenced by humans have increased to more than 400 billion
tons/CO2 since 1751 based on the results of research conducted by the Carbon Dioxide Information Analysis
Center (Hilmi et al., 2020).
Furthermore, based on the results of data processing carried out by IQAir in 2020, Bangladesh is the country
with the highest air pollution, with an average of 77.10 μg/m3 and several other countries have carbon emission
values that fall into the unhealthy for sensitive groups category (Suwandi et al., 2022). and according to World
Bank data in 2020, the value of carbon emissions throughout the world has increased drastically by 93.51% from
1970–2012 (Noor & Saputra, 2020). Therefore, the problem of greenhouse gas emissions needs to be considered
and studied in stages and one of the keys to reducing carbon dioxide emissions is implementing good weather
change management (Shen et al., 2020).
Weather changes that often occur can put pressure on systems, populations, and regions (Ebi, 2020; Tong
& Ebi, 2019; Watts et al., 2018) which are seen as reducing the health of the world’s people and have become
an important problem for the whole world (Butler, 2018). Therefore, an international organization was formed,
namely the Intergovernmental Panel on Climate Change (IPCC) an organization that was built thanks to the
collaboration of the United Nations (UN) and the World Meteorological Organization which aims to tackle
weather problems (Nasih et al., 2019). From 1906 to 2005, the IPCC has collected data explaining that global
temperatures have increased by a range of 0.74°C, the level of land surface temperatures exceeds that of the
oceans, and in the last 50 years the temperature level has doubled by 100 last year (IPCC-Intergovernmental
Panel on Climate Change, 2009).
Observing these facts, the Government of Indonesia is obliged to pay attention to this to minimize changes
in global temperature. Indonesia is the fourth highest per capita emission contributor country in the world after
China, the United States, and the European Union in 2005 (Freedman & Jaggi, 2011). Apart from that, in 2019,
according to data held by the World Bank, in 2022, Indonesia has recorded 2.50 billion tons/CO2 (Karunia et al.,
2023). Countries that have high carbon emissions can have an impact on the sustainability of domestic companies,
for example in terms of finance and determining the company’s market base (Miah et al., 2021). For domestic
companies, carbon emissions are a form of disclosure (voluntary disclosure) owned by the company to be a way
for the company to reveal the efforts the company is making to deal with environmental factors, especially the
impact of carbon emissions (Trufvisa & Ardiyanto, 2019). Companies that disclose carbon emissions information
tend to apply sustainability processes or principles into company strategy and operations so that investors can
consider information about carbon emissions as important information in determining investment decisions
(Park et al., 2014).
Furthermore, industries with large carbon profiles are required to pay a higher carbon premium from the
Emission Trading Scheme (ETS) (Miah et al., 2021). Not only that, people are increasingly paying attention to
the environment and social issues in using products and services from companies (Frias-Aceituno et al., 2013).
Environmental issues are an important component of organizational governance goals to be able to maintain
the climate and ethics as a whole (Peters & Romi, 2014). This is in line with the Instrumental Stakeholder Theory
(IST) which stated high ethical relationship of the firms with their stakeholders are characterized by high levels
of information sharing, cooperation, and trust (Jones et al., 2018). IST also argue that firms’ ability to manage
their stakeholders can provide a competitive advantage which ensures their performance in the long-run
(Daromes et al., 2023; Laplume, 2021; Rukmiyati et al., 2023; Verma & Mukhtaruddin, 2023).
Thus, in this case the company must pay attention to how to manage information about the company’s
strategy and activities, both in terms of performance and other factors such as the environment. Based on the
results of some studies above, it is necessary to looking at the impact of carbon emissions on the company’s

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The Effect of Corporate Performance and Corporate Governance on Manufacturing Company Carbon Emission Disclosure 127

financial performance and market base. Apart from that, companies that experience an increase in profitability
will encourage companies to make disclosures, one of which is disclosing carbon emissions to gain interest
from investors (Florencia & Handoko, 2021; Javed et al., 2023). Issues regarding carbon emissions carried out by
Gonzalez & Ramírez (2016) and Kılıç & Kuzey (2019) using the objects of developed countries such as Turkey and
Spain where in developed countries, most are already aware of the responsibility for increasing carbon stocks
in the atmosphere (Miah et al., 2021). Meanwhile, developing countries such as China (BRICs), India and Russia
have faced rapid spikes in GDP growth rates resulting from higher productivity and economies that require
large energy inputs to maintain a steady pace of economic growth (Miah et al., 2021). These combined effects
lead to higher carbon emissions in the atmosphere (Appiah et al., 2019; Sadorsky, 2014).
Research on carbon emissions, corporate governance and company performance conducted by Nasih et al.
(2019) and Trireksani & Djajadikerta (2016) using industrial types such as mining and agriculture in Indonesia where
the mining industry such as oil, coal and gas is the highest contributor to carbon emissions in developing countries
including Indonesia while the agricultural industry has contributed to the growth of carbon emission levels by
54% since 2000 (Nasih et al., 2019). There is still limited research that examines this, especially in other sectors
such as manufacturing in Indonesia. Therefore, this study focuses on examining the manufacturing industry
in Indonesia and this research has different results and points of view from previous researches because the
manufacturing industrial sector is an industry that implements different carbon emission management because
manufacturing companies have activities that can affect the surrounding environment and Manufacturing
companies have a relatively large number in Indonesia compared to other companies (Urmila & Mertha, 2017),
coupled with the pressure arising from society where people will hesitate to use products and services that are
not friendly to the environment.
Previous research was conducted by Gonzalez & Ramírez (2016) using a research sample of companies in
Spain listed in the FT500, DJSI and IBEX 35 indexes, further research was conducted by Odoemelam & Okafor
(2018) using research samples of companies listed on the Nigeria Stock Exchange (NSE). In addition, research
conducted by Miah et al. (2021) researched the financial and non-financial sectors using research samples in
developing countries recorded from the Datastream database from the 2011–2020 period. Whereas in this study
specifically focuses on manufacturing industry companies in Indonesia that are listed on the Indonesia Stock
Exchange (IDX) throughout 2015–2022.
The problem of this study is whether company performance and corporate governance can influence
carbon emissions in manufacturing industrial companies. Therefore, the issues in this study are: (1) Can company
performance influence the carbon emissions of manufacturing industrial companies? and (2) Can corporate
governance influence the carbon emissions of manufacturing industry companies? This study has a specific
objective, namely, to examine company performance and corporate governance regarding carbon emissions in
the manufacturing industry in Indonesia. Apart from that, the industrial side is intended to be used as material
for correcting, improving, maximizing, motivating and increasing the value of the company as well as managing
carbon emissions well in the coming year.

METHODS

The population in this study are all companies in the manufacturing sector that are listed on the Indonesia Stock
Exchange (IDX) during the 2015–2022 period. In ascertaining the sample, this study used a purposive sampling
method, namely a technique in obtaining a sample by reviewing several specific parameters to be placed as a
sample. The sample selection procedure for manufacturing sector companies can be seen in Table 1.

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128 Wikantyoso et al.

Table 1 Sample Selecting Procedure

Company
No Criteria
Totals
1 Manufacturing sector companies listed on the Indonesia Stock Exchange in 2015–2022. 204
2 Manufacturing sector companies have published audited financial statements for the period 2015–2022. 93
Final sample total 93
Observation year 8
Total observations 744

The type of approach in this study is a quantitative approach. The type of data taken in the quantitative
approach is the type of data that can be obtained directly either in the form of data or descriptions which can
be expressed in a number or number. This study uses panel data types where the data used uses a combination
of time series and cross-section. The data used for this research is secondary data which retrieves data from the
financial reports of manufacturing companies listed on the Indonesia Stock Exchange (IDX) for the 2015–2022
period, through intermediary information media that contains processed data on ROE, KI and CO2 variables.
Data is obtained through the Indonesia Stock Exchange (IDX) website which can be accessed via www.idx.co.id.
Apart from that, carbon emission variables are obtained from annual reports or sustainability reports via the
Indonesia Stock Exchange (IDX) and company websites.
The independent variable in this study is the company’s performance which is calculated in the ratio of
return on equity (ROE) which calculates the company’s equity ability to earn profits and shows how the industry
is effective in using its assets and capital. (Márcio, 2018). By using the formula (Mayasari et al., 2018)
Net Profit After Tax
ROE =
Total Equity

The second independent variable in this study is corporate governance. Corporate governance is used to
maintain relationships between decision makers and parties who supervise decision makers (Hapsoro & Hartomo,
2016; Hidayat & Muliasari, 2020). Corporate governance can be calculated with independent commissioners,
where independent commissioners are commissioners who have no relationship with company management
and no business relationships which can be a tool to be able to do things independently for the benefit of the
company (Putra, 2016; Hidayat & Muliasari, 2020). The independent commissioner’s calculations are as follows
(Prasatya et al., 2020).
Indepenent Commissioner
KI =
Total Commissioner
The dependent variable in this study is the amount of carbon emissions (CO2) obtained through
manufacturing companies’ sustainability reports for 2015–2022. Apart from that, the data obtained from the
company’s sustainability report will be transformed into a logarithmic transformation which aims to change the
original data into data that can meet the expected assumptions.
The variables to be tested in this study are divided into two independent variables, namely company
performance and corporate governance, while the dependent variable is disclosure of carbon emissions.
Secondary data from several variables were obtained from the financial reports of manufacturing industry

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The Effect of Corporate Performance and Corporate Governance on Manufacturing Company Carbon Emission Disclosure 129

companies from 2015-2022, after which they were processed and analyzed using panel data regression via
Eviews 12. The following research equation is as follows:
CO2it = αit + β1ROEit + β2Klit + εit (1)
Where:
CO2it = Index of disclosure of carbon emissions of a company i for year t
ROEit = Return on equity of company i for year t
Klit = Corporate governance of company i for year t
α = Constant
β = Regression coefficient
ε = Error
The analysis technique in this study uses the panel regression analysis method. Panel data method selection
can be done by using 3 (three) tests, namely: (1) Chow test is a test to ascertain the Common Effect (CEM)
and Fixed Effect (FEM) models to estimate panel data. The assessment of the results of the Chow Test is as
follows: a) If the p-value is 0.05, it can be ascertained that the test technique used is Common Effect (CEM), b)
If the p-value is <0.05, then the model used is Fixed Effect. (2) Hausman test. The Hausman test is one of the
measuring tools used to determine the use of either Fixed Effect or Random Effect (REM) models. Through
parameters such as: a) If the p-value is 0.05 then the model used is Random Effect, b) If the p-value < 0.05 the
model used is Fixed Effect. (3) Test Lagrange Multiplier. The Lagrange Multiplier (LM) test is a test to reveal
the test comparison method between the common effect and random effect methods. Through the following
criteria: a) If the cross section score in Breusch-Pagan > sig 0.05, it can be said that the method is appropriate,
namely the common effect, b) Meanwhile, if the score from the cross section in Breusch-Pagan < sig 0.05, it can
be said that the method is accurate namely random effects (Fajaryani & Suryani, 2018).

RESULTS AND DISCUSSION

The descriptive statistical analysis shown is the basic statistics formed from the mean, standard deviation,
minimum and maximum can be seen in Table 2.

Table 2 Descriptive Statistics

Variable Obs Mean Std. Dev. Min Max

CO2 262 3.00 2.64 (-4.94) 7.09
ROE 262 9.83 16.38 (-88.00) 86.00
KI 262 0.37 0.11 0.14 0.83

Source: Secondary data, analyzed.

Table 2 shows that the average of carbon emissions as measured by carbon emissions (CO2) is 3.00. The
minimum results for the carbon emission variable (CO2) are at the Darya Varia Laboratoria Tbk. (DVLA) in 2022
is (–4.94). Meanwhile, the maximum value lies with the company Japfa Comfeed Indonesia Tbk. (JPFA) which
is 7.09 in 2022. A large level of carbon emissions (CO2) can show that the company must have improvements in
monitoring the company’s carbon emissions so that the level of carbon emissions can decrease and maintain
the sustainability of the surrounding environment and the continuity of the company.

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130 Wikantyoso et al.

The average result in company performance as measured by the ROE ratio is 9.83. The minimum result
of the ROE variable is at the company Prasidha Aneka Niaga Tbk. (PSDN) in 2021 is (–88.00). Meanwhile, the
maximum value of the ROE variable is 86.00 by the company Multi Bintang Indonesia Tbk. (MLBI) in 2022. An
increasing ROE variable can show that the profits achieved by the company from funding sources owned by
each investor and shareholder can be managed well.
The average value of corporate governance studied using independent commissioners (KI) is 0.37. The
minimum value of the KI variable is 0.14 for the Indah Kiat Pulp & Paper Tbk (INKP) company in 2021. Meanwhile,
the maximum value of 0.83 is for Suparma Tbk (SPMA) company in 2019 and 2020. A high KI value can show that
the company has implemented and implemented good corporate governance through continuous improvement
by carrying out evaluations and conducting benchmarking.
The Chow test is used to be able to determine between the common effect method and the fixed effect
when using the Chow test, by observing the probability F. By looking at the results in Table 3 show a Prob < F
value of 0.0000 less than sig 0.05, it can be concluded that the Chow method is the best while the fixed effect.

Table 3 Chow Test Results

Common Effect (within) regression

Prob < F = 0.0000

Source: Secondary data analyzed.

The Hausman test is used to see which method is more suitable to use between the fixed effect and the
random effect. Based on Table 4 the probability value > chi-squared is equal to 0.8879 from sig 0.05 which can
be concluded that the better method is the random effect.

Table 4 Hausman Test Results

Hausman FE, RE
Prob < Chi-squared = 0.8879

Source: Secondary data analyzed.

The Lagrange Multiplier test is used to find out which tests are more precise between the common effect
and random effect models. The results of the Lagrange Multiplier test shown in Table 5 state that the Breusch-
Pagan value is < chi-squared = 0.0000 so the method used is the random effect method.

Table 5 Lagrange Multiplier Test Results

Lagrange Multiplier, cross section

Breusch-Pagan < chi-squared = 0.0000

Source: Secondary data analyzed.

Based on the test results, random effect was chosen as the best method in estimating the effect of
variables on company performance, corporate governance and disclosure of carbon emissions in manufacturing
companies. Then after having the right method to do the classical assumption test.

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The Effect of Corporate Performance and Corporate Governance on Manufacturing Company Carbon Emission Disclosure 131

The normality test is used to see whether the residual values are normally distributed or not. Therefore,
based on Table 6 it can be studied that the probability value is 0.0000 < sig. 0.05 so it can be concluded that the
data is not normally distributed.

Table 6 Normality Test Results

Prob
Prob > Asym Sig2 Tailed = 0.0000

Source: Secondary data analyzed.

The multicollinearity test has the goal of knowing whether the data used has multicollinearity constraints
or not. Based on the results of Table 7, the correlation values X and X2 are 0.019530 <0.85, so there is no
multicollinearity.

Table 7 Multicollinearity Test Results

X1 X2
X1 1.000000 0.019530
X2 0.019530 1.000000

Source: Secondary data analyzed.

The autocorrelation test is used to be able to test whether the data used has autocorrelation problems.
The autocorrelation test in this study was studied using the Durbin Watson test. The Durbin-Watson test result
based on Table 8 is 2.166. It can be interpreted that in this study there is no autocorrelation problem because
the Durbin Watson value is greater than -2 and less than 2.

Table 8 Autocorrelation Test Results

Durbin-Watson 2.166

Source: Secondary data analyzed.

The heteroscedasticity test has benefits in testing, namely whether in a study there are differences in the
variance of some residuals. The results of the heteroscedasticity test using the Glejser method in Table 9 show
the values of the variables X1 and X2 having a probability of 0.2331 > sig. 0.05 and 0.3021 > sig 0.05 so there is no
problem with the heteroscedasticity test.

Table 9 Results of the Glejser Heteroscedasticity Test

Variable Prob.
X1 0.2331
X2 0.3021

Source: Secondary data, analyzed.

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132 Wikantyoso et al.

Based on the results of the three correlation tests which show that there is no effect between the
multicollinearity test, the autocorrelation test and the heteroscedasticity test, the next thing is to examine the
regression data with a random effect model. The results of data processing the regression with the random
effect are presented in Table 10.

Table 10 Regression Results with Random Effects

Variable Coefficient Std. Error t-Statistic Prob.

C 4.3083 0.5346 8.0586 0.0000
X1 0.0157 0.0062 2.5157 0.0125
X2 -3.6191 1.1828 -3.0597 0.0024

Source: Secondary data, analyzed.

Based on the regression results with the random effect model, the research formula model that can be
studied is as follows (Fitrianto & Musakkal, 2016):
γit = α + xit β + (νi + νit) (2)
Where:
γit = Dependent variable value
xit = Independent variable
β = Unit coefficients
νit = Variant random disturbance, σ2
νi = Individual-specific effects unobserved
Based on the panel data regression results in Table 10, H1 is proven which states that company performance
has a positive effect on carbon emissions, with a significance level of 95% (alpha = 5%), with a significance value
of the company performance variable of 0.0125 and a coefficient level of 0.0157. So, it can be concluded that
company performance has a significant positive effect on carbon emissions.
H2 reveals that corporate governance has a negative effect on carbon emissions, with a significance level of
95% (alpha = 5%), with a significance value for the corporate governance variable of 0.0024 and a coefficient value
of –3.6191. So, it can be seen that corporate governance has a significant negative effect on carbon emissions.
Company performance in this study uses one profitability ratio, namely Return on Equity (ROE). The
probability result is 0.0157 and the variable significance level is 0.05 (alpha = 5%) which can show that the
company performance variable has a significant positive effect on the carbon emissions of manufacturing
companies listed on the Indonesia Stock Exchange (BEI).
The results of this research are in line with those carried out by Bae Choi et al. (2013); Wang et al. (2014);
Jannah & Muid (2014); Cahya (2016); Apriliana (2019) which states that the company’s performance ratio has a
positive effect on increasing carbon emissions. This indicates that company performance calculated using one
of the profitability ratios is directly proportional to carbon emissions. When Return on Equity (ROE) increases,
the company’s carbon emissions will increase and vice versa.
The greater the level of profitability that a company has, the more likely the company is to care and pay
attention to environmental aspects by disclosing good news in the form of mandatory disclosures and voluntary
disclosures such as carbon emissions disclosures which cause investors to be interested in placing their funds in

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The Effect of Corporate Performance and Corporate Governance on Manufacturing Company Carbon Emission Disclosure 133

company. On the other hand, companies that have a low profitability value focus on how the company increases
profits and manages company assets effectively and efficiently compared to paying attention to social aspects
such as carbon emissions because this will increase the company’s operational costs.
Apart from that, these results can clarify the legitimacy theory and stakeholder theory, where the legitimacy
theory states that companies that have good financial performance will receive pressure from investors to
provide information about environmental issues. Then, stakeholder theory states that companies will not
always prioritize company profits but can provide benefits to the environment and social society.
Corporate governance is measured by Independent Commissioners (KI), where corporate governance is
one of the activities carried out by the company to encourage the company to be more open in providing
information to the public (Herawaty et al., 2021) and will increase the level of efficiency in using company assets
for investment if the company implements good governance manage the company well (Firmansyah & Triastie,
2020). The results of the hypothesis study show that corporate governance has a probability coefficient of 0.0024
and a coefficient value of –3.6191, which means that the probability level is greater than the significance level
of 0.05, so the corporate governance variable measured by commissioners independent (KI) has a significant
negative effect on carbon emissions.
This shows that better corporate governance or increasing the proportion of independent commissioners
will reduce and minimize the company’s carbon emissions, because most independent commissioners owned
by companies come from professional circles who have interests not only in the company but also pay attention
to the interests of investors or society in general. Apart from that, these results can show that independent
commissioners tend to encourage companies to care more about the environment. The study also suggests that
corporate governance will reduce the company’s carbon emission levels. Hence, it is very important to enhance
the company’s corporate governance practices beyond the mandatory matters. Furthermore, these results can
also support legitimacy and stakeholder theory, where legitimacy and stakeholder theory both emphasize that
companies must pay attention to and display responsibility for environmental issues that occur. This study also
supports the IST in term of high ethical relationship of the firms with their stakeholders are characterized by
high levels of information sharing, cooperation, and trust (Jones et al., 2018).

CONCLUSION

This research aims to find out whether company performance and corporate governance can influence the
carbon emissions of manufacturing sector companies that have been listed on the Indonesia Stock Exchange
(IDX) from 2015 to 2022 in a sustainable manner, with a sample size of 93 companies that meet the criteria. From
the results that have been studied, it can be concluded that good company performance has a positive effect on
carbon emissions. This can show that the better the company’s performance, the higher the company’s carbon
emissions. Corporate governance has a negative effect on a company’s carbon emissions. It can be concluded
that corporate governance will reduce the company’s carbon emission levels. A limitation in this research is that
one of the test tools used is the normality test, where the test aims to see whether the data used is normally
distributed or not. In this research, the data used is data that is not normally distributed, which indicates that
the data used has subjectivity constraints in data collection and interpretation of the value of carbon emissions.
This can arise because in determining the value of carbon emissions, each researcher has a different point of
view in assessing carbon emissions and in this research, not all manufacturing companies in 2015-2022 registered
on the IDX have carbon emission values in their sustainability report. Future research can add several other

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134 Wikantyoso et al.

measurement variables such as company size and media exposure. Further research can consider that the
profitability variable can be used as a moderate variable for carbon emissions. Apart from that, further research
can use other sector companies and use a longer time in order to get more comprehensive results.

ORCID

Robiyanto Robiyanto https://orcid.org/0000-0003-3565-1594

Budi Frensidy https://orcid.org/0000-0002-4287-2144

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