The importance and significance of Corporate Social Responsibility Reporting


Bachelor Thesis, 2012
48 Pages, Grade: 1,3

Excerpt

Table of Content

List of Abbreviations

List of Figures

1 Introduction

2 Terminology
2.1 Corporate Social Responsibility
2.2 CorporateCitizenship
2.3 Corporate governance
2.4 Sustainable development

3 Reporting
3.1 History of CSR reporting

4 Discussion
4.1 Arguments in the statistic
4.1.1 Motivation for CSR reporting
4.1.2 Types of CSRreporting
4.1.3 Structure, function & content of CSR report
4.2 Arguments in the literature
4.3 Arguments at a political level
4.3.1 Regulation of CSR reporting
4.3.2 Standards and Guidelines for CSR reporting
4.3.3 Audit of CSR reports
4.3.4 Sustainability Indexes

5 Conclusion

References

List of Abbreviations

illustration not visible in this excerpt

List of Figures

Figure 1: Developments in CSR-related concepts

Figure 2: The pyramid of Corporate Social Responsibility by Carroll

Figure 3: The relationship between CSR, CC, corporate sustainability and sustainable development

1 Introduction

Corporate Social Responsibility (CSR) became the centre of attention once again after such corporate scandals like Enron, WorldCom1 2 3 and the collapse of Lehman Brothers which was accompanied with the crash of the global financial market. In addition, many environmental issues were raised after British Petroleum oil spill disaster and many concerns from the side of environmentalists like Greenpeace.4 All these events have strengthened the discussion on the CSR issues and made it clear that some urgent new regulations should be made to deal with the situation. In addition, at the G8 Summit in 2007, the world leaders promised to encourage and strengthen corporate and other areas of social responsibility contributing to the other priority issues with the need for action, through “internationally agreed Corporate Responsibility and labor standards.”5 Following Jones III and Jonas “no longer is it just GAAP (Generally Accepted Accounting Principles) and GAAS (Generally Accepted Auditing Standards) - there is now CSR and GRI (Global Reporting Initiative).”6 Nowadays the society faces the increase in discussion on CSR reporting on all levels, such as political, economical, environmental and community. The statistics also supports the view that more and more companies issue CSR reports or disclose some information about their CSR activities in their annual reports. The worldwide web-database of CSR information (CorporateRegister.com) has currently 39,747 reports from 9,025 various companies coming from 163 countries.7 And it is obvious that the amount of CSR information has increased in the past years, which shows that this topic gains more attention from the business side and it is likely that the level of interest in this area will continue rising in the future.8

In general, this paper seeks to add some clarity to the field of Corporate Social Responsibility and CSR reporting. However, the main goal of this paper is to prove by few supporting arguments that CSR reporting is an important issue now for all the players, such as corporations, government and society.

The research in this paper is limited to the main CSR reporting questions and problems. However, some topics or areas of social disclosures are not touched or do not go into deep, because this topic is very broad and on some aspects of CSR reporting separately long papers can be written, for example, CSR reporting in different countries or geographical areas, reporting guidelines and standards, sustainability ratings and rankings, CSR reporting in various industries, etc.

This paper has been organized in the following way, first, the terminology is discussed; the main CSR-related terms are defined and explained as well as the history of the CSR reporting is presented. Then, in the discussion part few arguments are presented to support the view that CSR reporting is a significant topic. In addition, different problems in various areas of CSR reporting are described and argued. In each part opposite opinions and views from the analyzed literature are compared, in some sections the arguments are proven with the help of quantitative data and, for illustration purposes, the real business world example, namely the CSR report of the large German telecommunication company Deutsche Telekom AG. At the end all the discussed information is summarized and concluded.

2 Terminology

Following Ulrich as the colors change in the fashion industry, the same ways the CSR terms change with the time. If two years ago they were speaking perhaps of sustainability and last year about Corporate Social Responsibility (CSR), then this time they use, for more or less the same content, the term Corporate Citizenship or vice versa.9

As a result in some papers and researches the terms that are related to Corporate Social Responsibility sometimes are considered to have the same definitions, for example, terms like Corporate Responsibility (CR), corporate governance (CG)10, Corporate Citizenship (CC)11 and sometimes also sustainability12, business ethics and social accountability13. However, in other literature these terms have own separate definitions.14 Following Karmasin & Litschka the definitions of the terms and their understanding depends on the disciplinary background of the authors; accordingly, clear definitions of the mentioned terms are not expected.15 In other cases, terms still do not have generally accepted definitions, for example sustainable management and corporate citizenship.16 In addition, how researchers and business people understand the concept differs in time and place.17

However, Figure 1 “Development in CSR-related concepts” has the evidence that “Corporate Social Responsibility” was used as one of the first terms and then, across time, other similar concepts were added to the continuing discussion regarding responsibilities of business, firms and their managers and, accordingly, all these further terms, like Corporate Social Responsiveness, Corporate Social Performance (CSP), Sustainable Development, Triple Bottom Line, Corporate Citizenship, were build on the notion of CSR.18

Figure 1: Developments in CSR-related concepts

illustration not visible in this excerpt

Source:followingMohan (2003;p. 74).

Additionally, in the academic literature CSR is used as an “umbrella term” to introduce a large number of ideas and concepts and/or as synonym with other concepts that are related to business and society.19 Therefore, the most often used terms are explained in the further sections and it is important to understand the differences between these social concepts, even though in general they have the same goal and end-effect. Further in this paper when speaking about CSR reporting these terms are used as synonyms.

2.1 Corporate Social Responsibility

Already in 1972 when the term Corporate Social Responsibility was still in development Votaw wrote a famous sentence that is often cited in the academic literature that “corporate social responsibility means something, but not always the same thing to everybody” 20 and even now there is only some unity about this concept, for which there is no generally accepted definition.21

One of the most cited22 definitions of CSR is the one of Carroll that states that “for a definition of social responsibility to fully address the entire range of obligations a business has to society, it must embody the economic, legal, ethical and discretionary categories of business performance.”23 (See Figure 2)

Figure 2: The pyramid of Corporate Social Responsibility by Carroll

illustration not visible in this excerpt

Source:following Carroll (1991;p. 42).

Some of the categories in Figure 2 “The pyramid of Corporate Social Responsibility by Carroll” are mandatory; others are just advantageous to include in business behavior.24 Accordingly, the most basic and essential social responsibilities are economic responsibilities, since the most important stakeholders are shareholders, because they are the actual owners of the company.25 This is also consistent with “agency theory”26 and with the Friedman’s position that the main reason to engage in any CSR activities is to increase the short-term or long-term profits of the company.27 Second level is legal responsibility, which means that companies must comply with the legal systems of their operation region.28 The next level is ethical responsibility that shows that ethical behavior is important for companies, although it is not a mandatory requirement.29 As for philanthropy and charity, as it is shown in the Figure 2 it is only a small part of social responsibilities of a company.30

Another but new definition of CSR is one of the European Union (EU) that defines CSR as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”.31 Further in the Green Paper of the European Commission is clarified that being socially responsible, “means going beyond compliance and investing more in human capital, the environment and relations with stakeholders”.32

The goal of CSR is to take responsibility for the actions of a corporation and to promote a positive impact by means of different activities for the benefit of company’s stakeholders, such as investors, shareholders, governmental bodies, consumers, employees, trade unions, environmentalists, non-profit organizations, business partners, communities and society in general.33 In other words CSR is when a corporation deliberately includes the interests of the society into its corporate decision-making, especially into its business model.34

Here are some real examples of CSR activities, executed by multinational corporations, to illustrate and explain the term of Corporate Social Responsibility:

- Every year KPMG Germany organizes a “Make a Difference Day” to get the staff involved into social projects of the company. In 2011 approximately 900 people followed this call. This volunteering day, for which employees are exempt from work, has been organized since 2005 and is getting integrated into a nationwide initiative. When selecting projects, KPMG has deliberately focused on the areas of environment, education and social integration.35
- Microband is a medium-size company based in Connecticut, USA that produces computer hardware. The company recruited “high-risk” categories of workforce with the help of education and training programs. The results of this program were positive and currently 30% of Microboard’s employees are successfully working even though they have been in prison before or had drug related problems.36
- Ecover (Belgium) is a worldwide known producer of ecological cleaning products. It became successful through having a clear focus on environmental product responsibility, meaning that their products have to have minimum impact on environment starting with production process and remaining the same way through its whole lifecycle. Clearly, the packaging of their products is environmentally friendly, but they have also built an ecological factory.37
- A more general but negative example of irresponsible activities of the company could be named profit laundering and tax avoidance. Taxes are seen as one of the direct and largest benefits that stakeholders, particularly government and society, receive from companies, meaning when government receives taxes it spends this money for the benefit of society. Or in other words tax is a governmentally administered CSR action. By aggressive tax-avoidance or tax minimization strategies companies engage in irresponsible activities.38

In some way CSR is a response to the growing importance of markets and globalization, because where the government steps aside from its role as a socially responsible actor, it is obvious that the companies should fill in this gap.39

In addition, the European Commission sees that although the main responsibility of a corporation is to generate profits for its shareholders, they can still in the meantime contribute to environmental and social goals. For that purpose companies can integrate CSR and see it as an important investment into their management, operations and business strategy.40 On the other hand, opposition of CSR argues that such activities might distract companies from the economic goal ofbusiness. Moreover, some see CSR as simply “window-dressing”.41 Yet there are many factors that motivate corporations to engage in CSR activities:

- new worries and expectations from investors, government, consumers and society,
- increasing impact on the investment decisions,
- growing media attention to the damage done to the environment by irresponsible actions of companies,
- transparency of company’s actions gained through media and new information technologies.42

Some benefits for the business to be socially responsible are a better environment on a workplace, which accordingly attracts more committed and productive employees, increase of interest from consumers and investors. CSR can also be an advantage in the competition with other companies, can lead to a better performance, can create space for future developments and can bring more profits to company’s shareholders.43 But the importance of implementing CSR for the business and whether to do it or not, will not be discussed in this paper, because it concentrates mainly on reporting part of the CSR and therefore on importance and problems of CSR reporting. However, reporting is in some way a result of CSR, the way company communicates its actions in this field, therefore they are closely linked and that is why the benefits for the company to report about its CSR actions are partly benefits for implementing CSR in company’s business objectives.

2.2 Corporate Citizenship

As already mentioned before Corporate Citizenship (CC) and CSR are often used interchangeably and they both assume similar intentions.44 But here are some definitions of CC from the academic literature, where it has its own and separate meaning. For example, as it is shown in Figure 2 “The pyramid of Corporate Social Responsibility by Carroll” corporate citizenship is defined as a fourth level of the CSR pyramid, meaning charitable donations and other corporate philanthropic activities.45 However, there is another point of view, for example, in 2002, the Economic and Social Council of the United Nations met with the number of developed companies from public and private sector, where the definitions of Corporate Social Responsibility and Corporate Citizenship were agreed that show differences between these two terms and assume CC to have a potentially broader scope than CSR, which implies that corporations have an active role as citizens in the society, that also means that they have both rights and responsibilities. In addition, corporate citizenship means adopting the business case and ways of corporate social responsibility and is directed to maximize the contributions to social development of private companies without distracting them from main business objectives.46

2.3 Corporate governance

A great number of multinational enterprises have a separate corporate governance chapter in their CSR reports47 or present clearly the link between corporate governance and CSR issues,48 which means that corporate governance can be seen as a part of CSR. In addition, the Karmasin & Litschka definition of corporate governance states that it is a legal, economic or ethical system of control and self-control of the company. There were repeated attempts to introduce national and international laws or policies that assure a responsible management. The examples are OECD Principles of Corporate Governance (1994 and 2004), "Sarbanes-Oxley Act" (USA 2002), the Austrian Corporate Governance Code (2002), and the German Corporate Governance Codex (2002).49

2.4 Sustainable development

Concerning the historical development of the terms like CSR and sustainable development (SD), it is clear and it was mentioned already before (Figure 1) that CSR was used first. The concept of sustainability evolved from the environmentalist discussions and was approved at the political level at the United Nations (UN) Earth Summit in Rio de Janeiro in 1992.50

The World Commission on Environment and Development (WCED) has defined sustainability as ,,meeting the needs of current generations without compromising the ability of future generations to meet their needs and aspirations“.51 It includes issues of ethics, environment and society, which all together is also labeled as “triple bottom line” (people, planet, profit)52.

On the one hand, in the modern literature the concepts of CSR and sustainable development are separate but they have many identical components and areas where they overlap.53 On the other hand, both terms are currently sometimes used as synonyms.54 In addition, from the other point of view CSR is considered to contribute to sustainable development and to be a part of it.55 For example, the CSR definition of World of Business Council on Sustainable Development (WBCSD) states that the CSR activities of business are the contributions to sustainable economic development, which means to produce the benefit for the employees, customers and society in general to improve the overall standards of life.56 Furthermore, Loew et al. have created a concept system (Figure 3 “The relationship between CSR, CC, corporate sustainability and sustainable development”) that integrates few official definitions. It again suggests that CSR and sustainable management contribute to overall social sustainable development.57 In other words companies following the CSR strategies and being good Corporate Citizens contribute in this way to the overall sustainable development of the society.

Figure 3: The relationship between CSR, CC, corporate sustainability and sustainable development

illustration not visible in this excerpt

Source:followingLoew etal. (2004;p. 13).

3 Reporting

Following Holder-Webb et al. all theoretical models of CSR conclude that it is not enough simply to engage into CSR activities, it is important and desirable then to make the information about these activities available to the stakeholders.58 Here CSR reporting is understood to be the “disclosures of financial and non-financial, quantitative and qualitative information”59 about the social responsibility activities of a corporation.

3.1 History of CSR reporting

The concept of Corporate Social Responsibility reporting dates back to the beginning of the 20th century.60 Such companies as Hadfields Ltd (UK), US Steel, Broken Hill Properties (Australia) and Shell were already issuing at least some social disclosures at that time, even though frequency of appearance of particular topics varied over time.61 But the importance of corporate social reporting was starting to be recognized only after the end of World War II.62 In 1953 Howard R. Bowen issued a book called “Social Responsibilities of the Businessman”, which is considered to be the starting point of the modern discussion on CSR.63

In the period between the late 1950s and the late 1960s public trust in government shrank due to failure of a number of government attempts to help the community, therefore society looked at corporations to solve these problems.64 Moreover, in this time attention to social issues was gained through the green movement, the nuclear disarmament protests, the 1968 Paris riots, labor debates as well as the increase in the work of the trade unions in the US.65

The public interest in CSR has increased in the 1970s and this term became very fashionable in business and political literature because of the criticism of the business of large corporations.66 In addition, this time played a crucial role in the development of CSR concept, because of the public pressure, which in turn was because a number of multinational corporations was growing and they were massively exploiting developing countries.67

Interest in CSR reporting diminished in the time between the late 1970s and the late 1990s, because the discussions moved from CSR to related and connected to CSR topics such as business ethics theory, stakeholder theory, corporate social performance and corporate citizenship.68 Additionally, the crash of former socialist economies resulted in these countries in actions of corporations to increase shareholder value at the expense of the society.69

The experienced corporate collapses in the 2000s, like Enron and Lehman Brothers, the global share market crisis of 2008 and increasing concern for environmental and social issues, such as climate change and product safety, have showed the need for a correct and credible Corporate Social Responsibility reporting.70 In addition, the development of the information technologies and media like internet made it simple for stakeholders to gain access to company's information, in particular concerning social and environmental performance issues, resulting in pressure from investors on companies to be more socially responsible.71

4 Discussion

The main question of the discussion in this paper is why Corporate Social Responsibility reporting is important and significant; therefore this topic will be viewed from different perspectives, such as why it is important to companies and their stakeholders. Some of the main arguments to support this hypothesis are presented here - the statistical data shows that CSR reporting is a widespread approach, the large amount of academic literature, which is still growing, on this topic, and the increasing discussion at the national and international political levels. However, CSR reporting still has many problems and stumbling points, which are also discussed further, such as various possible structures and content of the reports, measurability, regulation and credibility of the corporate social reporting. Many of the presented arguments here are illustrated with the help of real company and its CSR reporting. For this purpose a large German telecommunication company was chosen, namely Deutsche Telekom AG, which has received many awards for its CSR strategy and reporting as well as the first company, who’s CEO signed the Change-maker Manifesto of Utopia.72 73 In particular, the CR report 2010/2011 is reviewed here, which is a Group report and consists of all European and U.S. subsidiaries, where Deutsche Telekom AG has the majority of shares.

[...]


1 Cf. Tsai & Hsu (2008; p. 188).

2 Cf. Nehme & Wee (2008; p. 130).

3 Cf. Cherry & Sneirson (2011; p.983)

4 Cf. Greenpeace International (2002).

5 Cf. Nehme & Wee (2008; p. 162).

6 Jones III & Jonas (2011; p. 65).

7 Cf. CorporateRegister (April 28,2012).

8 Cf. CorporateRegister (April 28,2012).

9 Cf. Ulrich (2008; p. 94).

10 Cf. Karmasin & Litschka (2008; p. 148).

11 Cf. Carroll/Buchholtz (2006; p. 56), Schwerk (2008; p. 121), Egbringhoff & Mutz (2008; p. 220), Biedermann (2008; p. 292).

12 Cf. Kolk (2008; p. 2).

13 Cf. Googin & Rochlin (2008; p. 454), De Bakker, Groenewegen & Den Hond (2005; p. 288).

14 Cf. Karmasin & Litschka (2008; p. 148-153).

15 Cf. Karmasin & Litschka (2008; p. 148).

16 Cf. Loew et al. (2004; p. 12).

17 Cf. Mohan (2003) cited in De Bakker, Groenewegen & Den Hond (2005; p. 288).

18 Cf. De Bakker, Groenewegen & Den Hond (2005; p. 288).

19 Cf. Freeman & Reed (1983; p. 90), Matten & Crane (2005; p. 169).

20 Votaw (1972; p. 25).

21 Cf. Carroll (1979; p. 498), Loew et al. (2004; p. 18), Nehme & Wee (2008; p. 132).

22 Cf. Loew et al. (2004; p. 21), Nehme & Wee (2008; p. 137f), Reynolds & Yuthas (2008; p. 48).

23 Carroll (1979; p. 499).

24 Cf. Nehme & Wee (2008; p. 138).

25 Cf. Carroll (1991; p. 40).

26 Agency theory proposes that the agents (managers of a corporation) must keep the principals’ (shareholders’ or owners’) best economic interest in mind when making any decision.

27 Cf. Michael (2003; p. 115f).

28 Cf. Carroll (1991; p. 40).

29 Cf. Carroll (1991; p. 41).

30 Cf. Nehme & Wee (2008; pp. 138ff).

31 European Commission (2001; p. 6).

32 European Commission (2001; p. 6).

33 Cf. Pop, Dina & Martin (2011; p. 1021).

34 Cf. Pop, Dina & Martin (2011; p. 1021).

35 Cf. KPMG (2011).

36 Cf. Ashridge Centre for Business and Society (2005; p. 14).

37 Cf. Ashridge Centre for Business and Society (2005; p. 28).

38 Cf. Christensen & Murphy (2004; p. 37), Desai & Dharmapala (2006; p. 4).

39 Cf. Karmasin & Litschka (2008; p. 150).

40 Cf. European Commission (2001; p. 4).

41 Cf. Pop, Dina & Martin (2011; p. 1021).

42 Cf. European Commission (2001; p. 4).

43 Cf. European Commission (2001; pp. 6f).

44 Cf. Wieland (2008; p. 90), The Economic and Social Council of United Nations (2002) cited in Wieland (2008; p. 90).

45 Cf. Carroll (1991; p. 42).

46 The Economic and Social Council of United Nations (2002) cited in Wieland (2008; p. 90).

47 Cf. KPMG (2008; p. 43).

48 Cf. Kolk & Pinkse (2010; p. 24).

49 Cf. Karmasin & Litschka (2008; p. 149).

50 Cf. Loewetal. (2004; p. 11).

51 World Commission on Environment and Development (1987).

52 Kolk (2008; p. 2).

53 Cf. Loew etal. (2004; p. 11).

54 Cf. Loew et al. (2004; p. 32), Kolk (2008; p. 2).

55 Cf. Loew et al. (2004; p. 13), Tsai & Hsu (2008; p. 188).

56 Cf. World of Business Council on Sustainable Development (2000; p. 4).

57 Cf. Loew etal. (2004; p. 13).

58 Cf. Holder-Webb et al. (2009; p. 499).

59 Cf. Mathews (1993; p. 59).

60 Cf. Maltby (2004; p. 416), Hogner (1982), Guthrie & Parker (1989), Unerman (2003).

61 Cf. Maltby (2004; p. 419).

62 Cf. Nehme & Wee (2008; p. 144).

63 Cf. Carroll (1999; p. 269).

64 Cf. Nehme & Wee (2008; p. 146).

65 Cf. Gray (2002; pp. 687, 690), Moore & Newman (1975; p. 435).

66 Cf. Nehme & Wee (2008; p. 148).

67 Cf. Carty (2002; p. 129).

68 Cf. Carroll (1999; p. 292).

69 Cf. Antal et al. (2002; pp. 4f).

70 Cf. Nehme & Wee (2008; p. 155).

71 Cf. Antal et al. (2002; pp. 5f).

72 Utopia is the Internet platform for strategic consumption. (www.utopia.de).

73 Cf. Deutsche Telekom AG (2012).

Excerpt out of 48 pages

Details

Title
The importance and significance of Corporate Social Responsibility Reporting
College
Martin Luther University
Grade
1,3
Author
Year
2012
Pages
48
Catalog Number
V197210
ISBN (eBook)
9783656232520
ISBN (Book)
9783656232742
File size
721 KB
Language
English
Tags
CSR, CSR reporting
Quote paper
Marina Cuvilceva (Author), 2012, The importance and significance of Corporate Social Responsibility Reporting, Munich, GRIN Verlag, https://www.grin.com/document/197210

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