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The evolution of globalization in the past two decade has seen positive trends the way business being done globally (e.g. new or existing business being set up in other regions/markets) and one of the major focus for companies in their annual financial reporting are in the area of CSR(Corporate Social Responsibility). Recent outbreaks of ethical failings and revelations about questionable or abusive practices like Enron collapse, questionable compensation packages for Tyco and Disney executive, charges of fraud at WorldCom, have led to fresh concerns of corporation responsibility towards society. There are concerns that corporations globally (especially the MNCs, SME, etc) in their drive for profitability may have overlooked the vulnerable workforce, environment and so on thus perception of neglecting CSR (Corporate Social Responsibility).
CSR reporting has evolved from a fringe activity pioneered by socially conscious companies into a credible practice embraced by a number of major corporations. There has been increase in CSR reporting globally in less than a decade since 2003,with 600 percent increase in non-financial hard-copy reporting (600 reports in 2003) and 1,300 reporting electronically(Bebbington, Higgins, and Frame,2008).Major corporations emphasis strongly on CSR as it is important to its corporate image as it has impact on the society where it operates and therefore when business leaders are making business decisions, they have to take into account the interest of its stakeholders including shareholders, customers, employees, suppliers, business partners, local communities and other organization. In Malaysia for example, a study by Teoh and Thong(1984) that lack of reporting has keep the public ignorant of the contributions made for CSR even though Malaysia being recognized as being the most active emerging economies in relation to CSR development(Zulkilfi & Amran,2006). As disclosure are not required by legislation, corporations find there are no tangible benefits in disclosing extensively in the annual reports. Studies has shown among accounting professional there is a lack of understanding and awareness of the concept of CSR and SEA(Social and Environmental Accounting) and because of intense competition-both domestic and global-corporations are increased pressure to focus on financial performance(Zulkilfi and Amran,2006;Ibrahim et al,2006).
Corporations reporting on the issues of CSR is to minimize risk to their reputations as its reputation among its economically powerful stakeholders is a valuable asset which need protection and development. The stakeholder's perception of the corporations CSR-policies, practices and outcomes meet stakeholder's social and environmental values and expectations, and makes CSR reporting a powerful medium to influence these perceptions and maximizing the earning potential of their reputation. (Unerman, 2008).
As the CSR reporting are more of voluntary, steps has been taken to develop a standard. In 1999 the AA1000 Assurance Standard and GRI(Global Reporting Initiative) was developed. AA1000 and GRI standards are closely aligned but GRI focus on the specific part of the social and environmental accounting and reporting process, namely reporting. AA100 standards assist users to establish a systematic stakeholder engagement process that generates the indicators, targets, and reporting systems to ensure effective overall organizational performance. It does not prescribe what should be reported rather the "how", thereby giving flexibility to accommodate the diverse interests of all organizations for disclosure. GRI provides globally applicable guidelines for reporting on sustainable development that emphasizes on stakeholder engagement in both its development and content. (Aras and Crowther, 2008).
3.0 - Discussion and integration
The review of the 10 articles above with relation to CSR reporting has identified the following key issues :
1) Perception of the Accounting professional of CSR reporting
2) Common standards for CSR reporting
3) Positive impact of CSR reporting for organizations
4) Stakeholder, politics, cultures, etc effects on CSR reporting
3.1 Perception of the Accounting professional of CSR reporting
Deegan et al. (1996) mentioned that accountant were pessimistic in their capacity to provide information with regards to social and environment issues as they assumed it did not come within the purview of their job scope.
Country of origin, corporate size, and corporate culture have impact on CSR and business entity's perception of accountants as the legitimate person to carry out the data gathering task has impact how accountants respond to CSR.
For example, in Malaysia, there are positive attitudes towards CSR among accounting-related professional but the awareness and understanding of the concepts of SEA and/or CSR is low(Zulkilfi and Amran,2006).
Goodwin and Seow(1998) found that South East Asian companies( including Malaysia) tend to lag behind in CSR disclosures compared to their other Asian ,Europe and American counterparts.
Research has shown that globally current young accounting professionals are more receptive towards CSR and represent a new source of CSR practitioners but on the other hand as these young professionals go through the process of organizational socialization, they could find themselves in a state of dissonance (ones belief and ones action) due to the surrounding organizational culture that are incompatible with their outlook. These could be a possible catalyst for these accountants to deviate their CSR values and get closely aligned to existing managerial values. As there are positive signs that these young accountants tend to show a higher alignment to CSR values, teaching of CSR in business school should continue and educators continue develop future accounting professional awareness in this area(Ibrahim, Angelidis, and Howard,2006).
3.2 Common standards for CSR reporting
Aras and Crowther(2008) mentions that standards that evolve through consensus rather than imposition is sustainable. The contrasts between these two types standards is wide- between hegemonic imposition for exploitative purposes and flexible voluntariness- and the latter is sustainable means of development.
As we know that CSR reporting is voluntary rather than mandatory and this voluntary approach expressed the reality of enterprises beginning to take responsibility for their true social impact and recognizes larger pressure exerted by various stakeholders groupings in addition to the traditional ones of share holders and investors.
Voluntary reporting is gaining the upper hand globally as it reflects a recognition that social well being is dependent on economic growth. Corporations in their journey towards being fully socially accountable has recognized that CSR has many facets and needs to be interpreted differently for each organization and with recognition of globalization by recognizing organizational boundary is permeable and they are accountable for the behavior of other organization in the value chain.
GRI and AA1000 standards provide set of tools to assist organization manage, measure, and communicate overall sustainability performance :social, environmental, and economic. The amount of CSR reported has gradually increased and more meaningful without any imposition of standards and CSR reporting standards are evolving to address the requirements of interested parties(stakeholders,etc).
(Aras and Crowther,2008)
Other than GRI & AA1000, the other CSR reporting standards in the global market are : Social Accountability International's SA8000 standard and the ISO 14000 environmental management standard(Chen and Bouvain,2008).
Three categories of CSR instruments that requires to the information structure are:
Codes of Conduct
Accounting/Reporting standards and there are several attributes that information offered by these instruments should fulfill: clarity, transparency, completeness, reliability, consistency, measurability, verifiability, and comparability.
(Blanco and Souto, 2009)
3.3 Positive impact of CSR reporting on organization
The WBSCD(World Business Council for Sustainable Development) (2003, p.15) identifies the following benefits from sustainable development reporting (CSR and SEA):
1) Creating financial value
2) Attracting long term capital and favorable financing conditions
3) Raising awareness, motivating and aligning staff, and attracting talent
4) Reliable management systems
5) Risk Awareness
6) Promoting innovation
7) Continuous improvement
8) Enhancing reputation
9) Transparency to stakeholders
10) Maintaining license to operate
Top level executives are giving more focus towards this responsibility of CSR reporting as it help companies to counter risk ,protect corporate image, and gain competitive advantage. Corporates are responsible for the intense use of financial, human and community resources entrusted to them and affected parties need to safeguard against potential abuse of corporate power, and CSR reporting is viewed as providing important monitoring role in this process. Stakeholders has information rights (Brown and Fraser, 2006).
Future development for CSR/SEA reporting:
More focus on development of performance measures
Intervention by regulatory bodies required for accountability measures
Organization whose values and perspective are predominantly capital orientated the CSR/SEA will be more aligned to organization managerial values therefore stakeholders are better off relying on externally prepared reports which are independent and free from influence of the internal power brokers
(Blanco and Souto, 2009)
3.4 Stakeholder, politics, cultures, etc effects on CSR reporting
Stakeholders (shareholders, employees, creditors, suppliers, customers, government, and local community) influence on an organization is critical and corporations, or more precisely managers and entrepreneurs must take account into the legitimate interest of this groups. These stakeholders have implicit rights for information regarding the organization activities even though they may not have any direct influence on the organization survival (Bebbington, Higgins and Frame, 2009). Unique stakeholder expectations in a particular country lead to different CSR reporting practices between countries.CSR activities that are institutionalized results in an improved amount and quality of disclosure.CSR activities that are related to institutionalized values and cultural variables like corporate structure and ownership structure has influence on this values (Waldman, 2006).Therefore possibility of culture moderate these variables that will effect CSR reporting.
Hofstede expresses culture in five dimension which are: a) power distance, b) individualism, c) avoidance uncertainty, d) masculinity, and e) long term versus short term orientation. Based on Hofstede's(2001) masculinity-feminity concept, masculine society are more concerned with power and economic status whereas feminine society are more concerned with social goals therefore CSR reporting are expected to be better in a feminine society. Good example are that Scandinavian companies tend to have more depth and quality in CSR reporting compared to USA. Gray (1988) states that disclosures relates to secrecy, and it increases with uncertainty avoidance, power distance, and decrease with individualism and masculinity. This assumption suggest that culture plays a role influencing the different types of corporate disclosures all around the world. Supporting this, research shows that Asian managers tend to be more secretive and collective and high tendency for uncertainty avoidance. Therefore financial reporting by Asian corporations tend to contain less voluntary information (Orij, 2010).
4.0 - Conclusion and Salient Points
The evolution of CSR reporting is on an exponentially social growing path and companies are increasingly focusing this portion of reporting as it has economic benefits to the organization in present and future. Future trends shall include standardization of the reporting and it assurance. Entities in future that preparing CSR reporting under standards that will be subsequently assured will be qualified as Ethical, Ecological, or Socially Responsible.