Annotated Literature Review

CSR Reporting and Disclosure Practices

Prepared by
Himanshu Lakhani
RMIT University

“The impacts of the scientific and technological development in

the last three decades have stimulated changes in all walks of
life. We can now begin to recognize that a new historic era has
begun. We are experiencing a combined economic, political,
sociological revolution, frequently termed “the post-industrial
era”, comparable to the agricultural and industrial revolution.
These impacts have resounded through all aspects of
management and have resulted in new demands on and
expectations from accounting” (Rabun and Williams, 1974: 3)

1
Contents
1. Introduction............................................................................................................ 3

2. Literature Search....................................................................................................4

3. Basis of grouping CSR themes................................................................................6

4. Annotated Literature Review..................................................................................7

4.1 CSR reporting by countries................................................................................7

4.2 CSR reporting by industry...............................................................................13

4.3 Relationship between CSR and financial performance and effect of other
variables................................................................................................................ 18

5. Conclusion............................................................................................................ 21

References...............................................................................................................23

2
1.Introduction
Corporate social responsibility (CSR) activity is an area of intense and
increasing interest both on the practice and academic fronts. Within the last
decade, CSR has been gaining momentum as a growing number of
companies began to recognise their impacts on not just the economy, but
also society and the environment. CSR stems from companies
acknowledging that they should be accountable not only for their financial
performance, but for the affect they have on society and/or the environment
that they operate in.

CSR is defined broadly as “including the concern for the impact of all of the
corporation’s activities on the total welfare of society”(Bowman and Haire,
1976). This assumes that the entity is influenced by, and in turn influences
the society in which it operates (Farook and Lanis, 2005). According to the
triple bottom line approach, organisations communicate not only their
profit/income figures with the stakeholders but also disclose information
regarding the company’s social and environmental performance. Companies
use their annual reports and/or websites as primary communication tools for
voluntary disclosure of their non-financial performance with different
stakeholder groups.

Business is already accountable for its activities over the diverse strands that
now come under the 'CSR' umbrella – such as human resources,
environmental issues, community and health and safety practices. This is
depicted in Figure 1 below.

3
Figure 1: CSR Variables

Depending on the nature of companies, CSR reports would focus on any of

these four variables to be a socially responsible organization and thereby
expand corporate image.

The next section discusses key word combinations that were used to explore
the vast literature available in the field of CSR. The third section provides the
basis on which the themes were categorized. Subsequently, the section of
annotated literature review looks at each particular theme in more detail and
provides a table of the annotated literature review of articles relevant to the
theme. Following the table, a comparative evaluation is provided that
highlights the similarities and differences between the articles in the table.
Finally, concluding comments are presented in the last section on the overall
extent and quality of prior research done in this field and also includes
identification of ‘research gaps’.

2.Literature Search
‘CSR reporting’, ‘social and environmental accountability’ and ‘social
performance’ were the first key words used to find literature available in this
area. To be able to condense the topic into appropriate themes or sub-topics,
the following key word combinations were applied:

• Corporate social responsibility reporting

• Non-financial information
• Corporate disclosure
• CSR in developing countries
• CSR practices in U.S.
• Industry
• Stakeholders
• CSR business ethics, and

4
 • Financial and environmental performance

Table 1 below shows the search results and provides the names of journals
(sources) from where each of the articles is taken.

Table 1: Number of articles in ranking journals

Name of Themes Total
Journal Countries Industries Determina
nts
Accounting, 1 1
Auditing and
Accountability
Journal
Critical 1 1
Perspectives on
Accounting
European Business 1 1
Review
Greener 1 1
Management
International: The
Journal of
Corporate
Environmental
Strategy and
Practice (GMI)
Industrial 1 1
Management &
Data Systems
International 1 1
Journal of
Contemporary
Hospitality
Management
Journal of Business 3 1 4
Ethics
Journal of Cleaner 1 1
Production
Journal of 1 1
Comparative

5
Economics
Journal of 1 1
Marketing
Communications
Managerial 1 1
Auditing Journal
Qualitative 1 1
Research in
Accounting &
Management
7 5 3 15

3.Basis of grouping CSR themes

For the purpose of this exercise, the broad area of CSR reporting and
disclosure has been divided into three key themes, namely:

• CSR reporting by countries

• CSR reporting by industries

• Relationship between CSR and financial performance and effect of other

variables

In general, the social responsibilities of a firm seem to arise from the

intersection and compatibility of the political and cultural system with the
economics system (Jones, 1983). The two most common theories in social
and environmental accounting research are legitimacy and stakeholder
theory. These theories consider management’s responsibility to cater to the
needs and expectations of various stakeholders and also be mindful of the
beliefs, norms and cultures of the society they operate in. The categorization
of the themes in the above manner is also supported by (Maignan and
Ralston, 2002). Previous studies suggested that there are country and
industry-specific differences in the extent of CSR reports. The last theme
analyses the determinants of CSR reporting, link between financial and non-
financial performance and effect of other factors such as ownership
structures and privatisation to understand the extent of, and the motivations
and incentives behind CSR disclosures. This application to the categorization
of themes covers important issues revolving around CSR reporting where
there is wide-range of literature available.

6
4.Annotated Literature Review
4.1 CSR reporting by countries
CSR reporting by countries interestingly considers differences in the extent
of disclosures in developing and developed nations in today’s global
economy. It encompasses motivations of companies in these different
economies to report on non-financial issues. The countries which formed part
of the research in the articles under this theme are: Bangladesh, Malaysia,
India, Thailand, USA, UK, Australia and Germany. Although the emphasis is
on the CSR reporting practices in a particular country, this theme overlaps
with categorization of reporting by industries. The articles that are included
in the literature review under this theme were taken from wide range of
journals. The most journal articles, that being 3, belonged to the Journal of
Business Ethics.

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 Table 2: Annotation of articles for CSR reporting by countries

Authors Research Theory/ Context Methods Findings/Conclusions

(Year) questions/Objective Concepts
s
Muhammad 1. What are the 1. Legitimacy A large export- 1. Conducting 1. Particular stakeholder
Azizul Islam factors that theory oriented clothing interviews groups placed
& Craig motivate 2. Stakeholder trade organization in with senior pressure on the
Deegan management to theory Bangladesh, called executives Bangladeshi clothing
(2007) report on 3. Institutional Bangladesh Garment of BGMEA industry in terms of its
environmental theory Manufacturers and 2. Content social performance
matter? (coercive Export Association analysis of 2. The clothing industry
2. Purpose is to isomorphis (BGMEA) operating in annual in Bangladesh directly
describe and m) a global community reports responded to the
explain the social released by social pressures as
and environmental BGMEA they were perceived
reporting practices Measurement from 1987 to exist by the
of a major garment method: to 2005 managers within the
export Number of industry
organization within words in the 3. The disclosure
a developing annual report appeared to be
country pertaining to motivated by survival
(Bangladesh) CSR disclosure considerations, rather
than any real
attempts to embrace
broader accountability
for their activities
Bikram Exploring the state of Legitimacy Top 39 Indian 1. Content 1. Although, there are no
Chaterjee & environmental theory companies by market analysis: regulations enforcing
Monir Zaman reporting by Indian (managing capitilisation as listen Websites of the disclosure of
Mir (2008) companies public on companies environmental
impression) www.indiainfoline.co 2. Content information, most of
m as on 31 analysis: the Indian companies
December, 2003. This Annual have disclosed
list excludes reports of environmental
Measurement companies in the companies information
method: financial sector 2. These companies
Number of provided more
sentences in environmental

8
 the annual information on their
report websites compared to
pertaining to the information
CSR disclosure provided in their
annual reports

Sunee Extent and nature of 1. Legitimacy Largest 40 companies Content 1. There is a trend of
Ratanajongk CSR practices in theory listen on the Stock analysis: increasing amounts of
ol, Howard Thailand Exchange of Thailand Annual reports corporate social
Davey & 2. Political as at 31 of companies disclosure
Mary Low economy December1997, 1999 2. CSR among Thai
(2006) and 2001 companies was found
theory
to be primarily
focused on human
Measurement
resources
method: 3. These companies
Number of primarily provided
words in the “declarative” good
annual report news
and web sites 4. The key areas of
pertaining to company social
exposure are reflected
CSR disclosure by CSR
and percentage
of total
disclosures

Y. Sumiani, 1. To explore the 1. Stakeholder Top 50 Malaysian Content 1. Trading/services

Y. Haslinda voluntary theory - public companies analysis: industry comprised
& G. Lehman environmental External from various Websites of the highest number of
(2006) reporting practices pressures industries listed on the companies companies that
of Malaysian for the Bursa Malaysia in voluntarily report
corporations companies the financial year environmental
2. Does certification to report 2003 information
of ISO 14000 environmen 2. ISO 14001
standards force tal certification has put
companies to information some pressure upon
report 2. Legitimacy the companies to
environmental theory - make some form of

9
 information? New environmental
developmen reporting (as all ISO
ts in the ISO companies reported
14000 some environmental
standards information)

Sukru Ozen Why some companies New Institutional effects of Content 1. Companies from
& in developing institutional market orientations, analysis developing countries
Fatma Kusku countries go beyond theory industry that are oriented
(2009) environmental concentrations, and toward market in
regulations when organisational developed countries
implementing their Institutional identity as factors would be at higher
corporate factors shaping CEC levels of CEC adoption
environmental social considered: behaviour in (i.e. normative or
responsibilities or developing countries cognitive) than
citizenship behavior? • Market inward-oriented
orientation companies, given the
• Industry higher level of
characteristi regulative and
c normative pressures
• Corporate for CEC behaviour in
identity developed countries.
2. Companies from
developing countries
that operate in highly
concentrated
industries would be at
higher levels of CEC
adoption companies
operating in low-
concentrated
industries, given the
lower level of (or
emerging) customer
expectations of CEC
behaviour in
developing countries.
3. Missionary
organisations within

10
 developing countries
would be at higher
levels of CEC adoption
than non-missionary
organisations.

Stephen Does the adoption of a Institutional Top listed firms in the 1. Content 1. Global Compact
Chen & Petra global CSR standard, theory US, UK, Australia and analysis membership has an
Bouvain such as the Global Germany (largest by software effect only in certain
(2008) Compact by firms market capitilisation): package areas of reporting,
affect firm’s reporting 151 firms in total called related to the
practices of CSR ‘Leximance environment and
performance? r’ – CSR workers
reports on 2. Businesses from
the different countries
websites of vary significantly in
the largest the extent to which
companies they promote CSR and
in different CSR issues that they
countries choose to emphasize
2. ANOVA in in their reports
SPSS 3. Global Contact
3. MANOVA in membership was
SPSS shown to have a
4. Linear significant effect on
regression the inclusion of
in SPSS measured CRS
performance statistics
in the report

Holder- 1. What CSR No theory Size-and industry- Content 1. 44 of 50 firms in the

Webb, reporting is being spelled out in stratified-sample of analysis of CSR sample provided some
Cohen, Nath provided by U.S. the journal 50 publicly traded disclosures CSR disclosures
& Wood firms? article U.S. firms during 2. The most common

11
(2009) 2. What reporting 2004 types of information
formats are U.S. Measurement disclosed pertained to
firms choosing to methods: community relations,
provide CSR Examining health ad safety
disclosures? websites, matters, and diversity,
annual reports, and HR
mandatory 3. Corporate website,
filings, CSR followed by press
reports, releases and by
governance mandatory filings, are
documents, the most popular
product fact avenue for publicizing
sheets and CSR disclosures
press releases 4. Use of websites is
positively related to
firm size, while the
use of mandatory
filings is negatively
related to firm size

12
In the paper written by Chatterjee and Mir (2008), there appeared a
significant weakness. The authors disregarded companies belonging to the
financial sector from the sample as they claimed that these companies do
not have any impact on the environment. This does not necessarily hold
true. There have been studies done in the past that consider environmental
reporting in the financial sector. One of them is Kolk et al. (2001), which
found that out of the largest 250 multinationals in the sample, reporting
frequencies were quite different in financial and non-financial sectors, at 15%
and 44% respectively. Ratanajongkol et al (2006) does consider the finance
sector in its study though. One of the findings in the paper by Chatterjee and
Mir (2008) was that companies disclosed more environmental information in
their websites compared to in the annual reports. This finding is different
from the findings of Cormier and Magnan (2005) where they found common
characteristics of print and web disclosure by a sample of companies on the
Toronto Stock Exchange.

The main drivers of CSR reporting in developing nations were found to be

cultural traditions, international standardization and socio-economic
priorities as opposed to drivers like community expectations and ethical
considerations in developed nations. The literature suggests that distinction
between liberal market economies and coordinated market economies may
be too simplistic to capture all differences in CSR reporting and a more
refined typology is required.

4.2 CSR reporting by industry

The literature involving CSR reporting by industries explores the different
extent of CSR reporting in different industries like oil and gas, financial,
mining, telecommunications, banking, and hospitality in line with the impact
of the companies’ activities on the society as a whole. The articles chosen
under this theme belong to a wide-range of journals.

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 Table 3: Annotation of articles for CSR reporting by industries

Authors Research Theory/ Context Methods Findings/Conclusions

(Year) questions/Objectives Concepts
Peter Exploring corporate No theory Top ten pub Case study- 1. Majority of the UK’s top
Jones, social responsibility spelled out in operators listed Search on the ten pub operators report
Daphne (CSR) issues addressed the journal in Leisure worldwide web on their commitment to
Comfort & and reported within the paper Review – UK and CSR
David pub sector of the (2005) Investigating 2. The pub operators that
Hillier hospitality industry CSR reporting websites of the report tend to cover
(2006) elements- leading pub similar sets of themes and
• Marketplace operators in the there are general
• Workplace UK commitments to different
• Environment CSR issues
• Community 3. CSR reports and
information posted on the
worldwide web by the pub
operators focus on their
aspirations rather than
operational imperatives
Christine How distance is created No theory Five banking Discourse The location of CSR
Coupland between CSR issues and spelled out in groups analysis information disclosures’ is
(2006) accounting practices in the journal operating in the Media analysis disguised on the web and the
the web-based literature article UK – Lloyds/TSB, Content information is peripheralised
of banking firms? The Royal Bank analysis and marginalised
How CSR is constructed of Scotland, Banks which are typically
as a concern of the Measurement HSBC, Barclays observed as profit-oriented
organisations and to method: and Co- organisations are beginning to
investigate how this is Examining operative Bank articulate a stance with
legitimated web-based regard to CSR, as increasingly
forms of the more attention is being paid
reports and CSR to social and environmental
documents of issues
firms
Edeltraud Overview of the current No theory 29 mining Quantitative The quantity of the reported
Guenther, status quo in spelled out in companies and and qualitative indicators vary, depending on
Holger environmental reporting the journal 19 oil and gas content factors such as the relevance
Hoppe & practices (quantity article companies analysis of the environmental aspects
Claudia aspect) of mining and oil registered with and impacts to the industry or

14
Poser and gas companies Measurement GRI for the company assessed
(2007) Testing the quality of the method: period 2005 Water and compliance are the
reports in line with the Adherence to two most reported categories
Global Reporting GRI Guidelines by the mining companies
Initiative (GRI) G2 Emissions, effluents, waste,
guidelines compliance and
transportation are the
categories most reported by
the oil and gas industry
In general, the mining
industry reports the
environmental indicators in a
higher or similar quantity to
the oil and gas industry. Only
transportation is not reported
by the mining industry
The percentage of the
‘completely reported’
indicators (all information
required by G2 was provided)
in relation to all indicators
reported is higher in the
mining industry
Hsiang-Lin What are the conditions No theory 520 financial Regression 1. Firms with larger size are
Chih, under which corporations spelled out in firms in 34 analysis more CSR minded, and the
Hsiang- may or may not act in the journal countries, which financial performance and
Hsuan socially responsible article are listen on the CSR are not related
Chih & ways? Dow Jones World 2. Firms would act in a more
Tzu-Yin Measurement Index and on the socially responsible ways
Chen method: DJSI World, to enhance their
(2009) Examining between the competitive advantages
annual reports years 2003 and when the market
of companies 2005 competitiveness is more
intense
3. Financial firms in countries
with stronger levels of
legal enforcement tend to
engage in more CSR
activities

15
 4. Financial firms in countries
with stronger stakeholder
rights tend to engage in
less CSR activities
5. Self-regulation within the
financial industry has a
significantly positive
impact on CSR
6. Financial firms in countries
with more cooperative
employer-employee
relations, higher quality
management schools and
a better macroeconomic
environment will be more
CSR minded
Lorraine 1. Do different industries Stakeholder Top 28 firms on Content Many of the organizations
Sweeney report CSR differently? theory the FTSE4Good analysis: studied had separate annual
& Joseph indices in UK, US Annual reports and CSR reports. They also
Coughlan 2. How organizations Measurement and Europe as at of the provided extra CSR
(2008) belonging to different method: December 2004, companies in information online and
industries take a focused Examining attributing to six the sample referred to it in their annual
stakeholder view of CSR? annual reports different reports
and CSR reports industries CSR activities were
of companies communicated as their
responsibilities and policies
with regard to their main
Main stakeholder groups
stakeholder Customers and communities
groups to which identified as primary
the CSR reports stakeholders in the financial
are focused – services industry
Customers Pharmaceutical industry
Employees focused substantially on the
Suppliers shareholders and not on
Shareholders environmental issues in their
Environment report
Community The growing
telecommunications industry

16
focused on customer
acquisition and retention and
not on environmental issues
The focus of CSR in
automobile industry as well as
oil and gas industry rest on
environmental performance
Companies operating in the
retail industry concentrated
on the customers and to a
lesser extent, the
environment

17
It was found that CSR disclosures varied greatly between industries. One of
the crucial factors impacting the extent of reporting was the level of impact
of the company’s activities on the environment. Companies in high-risk
industries like oil and gas and mining were more inclined to disclose CSR
information. The reported categories also varied among various industries,
depending on the relevance of the environmental aspects. The literature
suggested that the firms should focus on certain stakeholders more than
they should focus on others. One of the most interesting finding which is
consistent with all these articles under this theme was the lack of a clear
focus on the benefits of the shareholder as a specific stakeholder.

4.3 Relationship between CSR and financial performance

and effect of other variables
The final theme analyses the link between CSR and financial and economic
performance. It considers both directions of causality. The theme also
considers impact of ownership structures and privatisation on corporate
environmental performance. The article chosen under this theme belong to a
wide-range of journals.

18
 Table 4: Annotation of articles for Determinants of CSR performance

Authors Research Theory/ Context Methods Findings/Conclusions

(Year) questions/Objectives Concepts
Dietrich 1. Effects of different No theory 1. Firm data from 1. Standard 3. Successful financial
Earnhart ownership structures spelled out in the Czech unbalance performance improves
& Lubomir on standard the journal Republic d panel future environmental
Lizal measures of article between 1993 analysis performance
(2006) corporate financial and 1998 2. Regression 4. Increased state ownership
performance in the Model: 2. Database analysis improves environmental
transition economy 1. Assuming provided by the performance related to all
of Czech Republic ownership private vendor other ownership types
2. Link between and control Aspekt which 5. More concentrated
financial are not includes all ownership improves
performance and separated firms traded on environmental
environmental 2. Allowing for the Prague performance in Czech
performance separation Stock Exchange Republic
3. Impact of of ownership
privatisation on and control
corporate in private
environmental firms
performance 3. Examining
the impact
of liquidity
constraints
Jose M. 1. Evaluate the Stakeholder A sample of 230 Multivariate 1. Results indicate that firms
Moneva & significance of the analysis European analysis – that reached a high
Eduardo link between companies (2004- Partial least degree of corporate
Ortas corporate CEP 2007) squares model environmental
(2009) environmental and measurement (PLS) performance (CEP) in
financial method: social 2004 improved their
performance audit proxies internal efficiency and
2. Aim is to show obtained satisfactory
managers how an CFP corporate financial
adequate measurement performance (CFP) levels
management of method: in 2005-2007
environmental market-based 2. The link between CEP and
factors could and accounting- CFP was significant in all
contribute to the based measures the periods analysed

19
 financial success of showing that it was a
the firm persistent effect and not
based on short-term
issues

George Testing the relationship No theory 56 large UK 1. Regression 1. A combination of high

Balabanis, between CSR and spelled out in companies analysis CSR performance and
Hugh C. economic performance the journal selected based on 2. Principal disclosure found to have
Phillips & of corporations within a article the quotation on component a positive effect on firms’
Jonathan UK context the London Stock analysis overall profitability
Lyall Economic Exchange and the (PCA) 2. The reaction of the capital
(1998) performance availability of CSR 3. ANOVA markets in the
included: ratings by the New 4. Hierarchica subsequent period to
• Financial Consumer Group l multiple companies with high CSR
performance (NCG) – a UK regression disclosure was found to
(return on public-interest analysis be negative
capital organisation 3. The capital markets
employed, seemed to be indifferent
return on to firms that undertake
equity and some CSR activities
gross profit 4. Other factors than CSR
to sales performance were more
ratio), and important determinants
• Capital of investors’ behaviour
market 5. Firms with good
performance performance in terms of
(systematic CSR are more inclined to
risk and disclose more
excess
market
evaluation)

20
The link between social responsibility and financial performance suggests a
positive correlation between the two in the long run. Earnhart and Lizal
(2005) found that as financial performance improves, environmental
performance is also enhanced. As expected, state ownership of corporations
improves environmental performance considerably. The empirical research
in the relationship between corporate social responsibility and financial or
economic performance is unclear and not conclusive. One of the reasons for
obtaining the differences in the sign of the relationship could be the use of
different performance measures to evaluate financial and non-financial
performance. These measurement methods could be ROA, ROE, ROCE, etc.
for assessing financial performance and disclosures, CSR rankings, social
audits etc to measure social and environmental performance.

5.Conclusion
In the past, wealth maximization was considered as the main goal of
businesses. Growing concern about the environment and several social
issues surrounding us, however, has forced companies to disclose more than
just their financial performance. CSR is a concept that has attracted
worldwide attention and acquired fresh debate in the global economy. Social
and environmental performance is now seen as one of the biggest
challenges as well as an opportunity for companies to gain competitive
advantage. Thus, harming the society or environment and ignoring
environmental performance measures can be vital mistakes for
organisational managers.

Although there has been extensive research done in the area of social and
environmental reporting, the findings have proven to be inconclusive and at
times contradictory, especially when considering the link between financial
and non-financial performance of companies. There has been some ‘single
industry’ research in the CSR area. Prior research found that firms in a
particular industry may be more socially responsible due to the nature of
their activities. Research analysing the relationship between financial and
non-financial performance has been contradictory depending on the varying
time periods, geographies and the methodologies used in the research.

CSR reporting is a growing and dynamic area of investigation. The numerous

pressures and expectations from the society faced by today’s corporations
provide an important research area and further opportunities for
investigation. While social and environmental disclosures remain voluntary,

21
more research would be done to observe managerial practices. Future
research should help to further develop theory to explain social and
environmental reporting practices by corporations.

Since these reports are not audited, their verifiability can be questioned.
Thus, there lies ample scope for further research in testing the validity and
reliability of social and environmental reports. Careful study should also
include examine the accuracy of these reports and how they help in decision-
usefulness for the stakeholders.

Is CSR just another catchphrase, a senior management trend that will

disappear or be replaced over the next few years? Or is it a true change in
how companies are doing business, a new positive force in corporate
culture? There is much debate on the issue and future research would
consider such critical questions and optimistically, look for much needed
answers.

22
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