Corporate Social Reporting and Disclosure: A Review of the Literature

CMA Dr. Meenu Maheshwari
Puja Kaura
Corporate Social Reporting and Disclosure

In modern era much attention by companies and researchers has been given to Corporate Social Reporting and Disclosure (CSRD) and considered as an important aspect of concern for all of us. Being the contemporary area of discussion in many countries around the world, it arose as a companion to the social responsibility’s discussion   in 1960’s and early 1970’s. Globalization has brought with it a wide realization that companies do not operate in isolation, but can have marked impact on the environment and the people at local, national and global level. However, with the enhancement standards of living, social conditions and cognitive level, stakeholders became aware and compelled their organizations to disclose their accountability towards society. The aim of this paper is to briefly review the literature available on CSRD both in developed and developing countries. Further, this paper aims to contribute to the limited literature of researches available corporate social reporting and disclosure. As concluded, researcher found that, in spite of growing interest for corporate social reporting and disclosure practices, it has been noted that much of the research on corporate social disclosure practice has been in developed countries where as research studies on  corporate social reporting and disclosure in developing economies is still limited and has received little attention.
  1. Introduction
A business enterprise is considered as a social unit which conducts its activities within the society therefore it is perceived that business houses should fulfil its responsibilities towards society. Traditional management approaches regarded the business unit as a robust economic engine which drives shareholders wealth. But modern management approach holds that transparent economic and social progress should go hand in hand. This concept led to the emergence of Corporate Social Reporting and Disclosure (CSRD). It has been noticed that the earlier studies prior to 1980’s resulted in normative statements about the kinds of measuring and reporting systems that should be employed by companies. However, as a result of the world recession of the mid-late 1970s, the location for such disclosures became part of company’s annual/financial report (American Institute of Certified Public Accounting, 1977; Schreuder, 1979), but the information that was disclosed in this period in general terms considered to be incomplete and imprecise. Reporting and disclosure seemed to decline, both as a phenomenon and as an area of academic activity (Harte & Owen, 1991; Mathews, 1997). In recent years, all themes of corporate social disclosure, including environmental issue, concerned many researchers for conducting a large number of academic studies and this changed the view of companies’ responsibility towards society as now the business has shifted its approach from profit maximization to stakeholders’ maximization approach. The aim of this paper is to review the literature available on CSRD both in developed and developing countries. Further, this paper aims to contribute to the limited literature of researches available corporate social reporting and disclosure.
  1. A Review of Corporate Social Reporting Studies
This section deals with the review of literature related to corporate social reporting and disclosure. For reviewing the literature related to corporate social reporting and disclosure practices categorization has been done into two time periods (period before 1990) and (period after 1990).
2.1 Pre –Economic Liberalization Literature:
 It was the time when subject was originated and studies were not focused. The attempts were made to develop the theoretical models. Linowes, [1968] first created the term 'socio-economic accounting' in order to emphasize the sociological, political and economic aspects of accounting that had a considerably broaden the scope than conventional accounting paradigm. In 1971, Ross selected the term which can be used in place of social responsibility accounting term. In 1973, Marlin found relationship of social accounting with pollution accounting. Rabun and Williams (1974) instituted the relationship of social accounting with role of accountant. In 1976 Ramanathan emphasized the concepts essential for accounting: A social income, a social overhead, social constituents, social transaction, net social asset and social equity. Ernst & Ernst (1978) aimed at investigating the CSRD practices in USA by analyzing the 500 fortune US companies’ annual reports in their study. The results of the study indicated that there was decrease in disclosure practices from 91.2% to 89.25%.Trotman (1979) conducted the study in Australia. The study concluded that the Australian companies disclosed social responsibility activities with the human resource and environment as the most frequent measurement themes in their annual report. Singh and Ahuja (1983) conducted the simple descriptive study to investigate the extent of CSRD in Indian public companies annual reports and found that the manufacturing companies make more disclosure than the service companies. Patten (1990) investigated that whether investors use the social information in making investment decisions by adapting model based mythology employed Beaver in 1986. Guthrie and  Parker (1990) conducted a longitudinal study covering 50 largest companies for period of 100 years in UK, US and Australia. Their study revealed that due to economic, political, social ,geographical, environmental, regulatory and cultural differences it could not be appropriate to generalize the result of studies of developed nations to new developed countries.
2.2 Post Economic Liberalization Literature (Period after 1990)
This period is enriched with social accounting literature. Basically, two methods – content analysis and measurement method were primarily used by most of research studies conducted during this period.
Panda (1991) propounded that the challenge to bring in practicability in social accounting still remains unaccomplished job before the academics and practicing accountant. Tilt (1994) used theoretical framework of legitimacy  to discuss corporate environmental and social disclosure practices. Lavers (1995) asserted economy theory believed that the economic takes place within political, social and institutional framework. Hegde (1997) conducted a micro level study on Corporate Social Disclosures in India on SAIL and found that company has disclosed social balance sheet and social income statement. William (1999) conducted the study to provide empirical evidence on the significant cross country variables that may assist in explaining variables in the quantity of voluntary environmental and social accounting disclosure information provided by companies’ annual reports across national boundaries. Abhur Belal  (1999) conducted the study in Bangladesh and found that most of the companies in Bangladesh disclose mainly information on employees followed by the environmental information and very less emphasis were paid on ethical information. Campbell (2000)   asserted that the incentives are the important factors in studying the CSRD. He also emphasized the agency theory in his study. Carol (2001) conducted study on the company named Alpha in which he used the case study analysis approach. The researcher recommended the need of reporting guidelines along with the change in corporate governance system. Belal (2001) conducted study in the Bangladesh. In his study he pointed the lack of adequate research in CSRD in developing countries. Adams (2002) undertook the study with the aim of identifying any internal contextual factors which influenced the extent and nature of corporate social reporting. Douglas (2003) deliberated through his research that a company operating in a more developed country is likely to disclose more than the company operating in lesser developed countries. Cowen (2004) studied the trend patterns, nature and frequency of CSRD and concluded the existence of positive relationship of CSRD with corporate size and profitability. KPMG (2005) carried on the survey on two set of companies. First set of companies consisted of 250 companies listed in global fortune 500 and second set consist of top 100 companies (N100) in 16 countries- Norway , Italy, Canada, Australia, Finland, Germany, France, Japan, Belgium, Netherland ,Sweden, Denmark, South Africa , Spain, USA, UK. It conducted the parallel analysis created in his research. Raman (2006) conducted study on the basis of annual reports of top 50 companies in India. But his study was only confined to chairmen’s message and letters to shareholders sections in the annual reports. Raghu (2006) undertook the study to analyze chairmen’s message of annual reports of top 50 companies in India. In order to find the extent of nature of social reporting he had used the content analysis. Gupta (2007) conducted an explorative research for knowing the social responsibility of corporate sector in India. He found that trends in socially responsible initiatives are increasing as well as crucial in India. Chaudhary and Wang (2007) found that the corporates in India are lack in proactive CSR communication and they found that companies perform CSR activities but did not disclose them properly. Nazli (2007) carried out the study in Malaysia by using company annual reports. His study was aimed at finding out association between ownership structure and extent of CSR disclosure. Islam & Deegan (2008) described and explain the social and environmental reporting practices of a major garment export companies in Bangladesh. In another study sector specific study was conducted by Vijaya Murthy (2008) on 16 top software firms in India. The study concluded that in annual reports  human resource category was most commonly reported attributes followed by community development activities and environmental activities were least reported. Planken et al (2010) conducted the study on the Indian companies and pointed out that selected Indian companies perform the philanthropic activities which were mainly directed towards community development. Guidry (2010) examined whether there is a difference between market reactions with the quality of the sustainability report and found that there is no significant relationship between them. Sharma (2011) conducted a research study on the initiatives taken by Indian companies to determine their responsibilities towards different stakeholders and found that most companies spent little towards social responsibility. Oza (2012) discussed how the sustainability reporting frameworks helps the top management to report strategic management for sustainable development of business enterprise taking sample of four Indian companies.
In the past, maximization of profit was seen as foremost objectives of the companies. However, with the improvement in social conditions and rising standards of living, stakeholders compelled their companies to disclose their accountability towards society. It attracted rife and noteworthy attention during the early to mid-1970s. By reviewing the literature it has been found that most of the academic studies about CSRD have been in related to  developed countries where as research studies on CSRD in developing economies is still limited and has received little attention. After reviewing the studies related to the development of CSRD practices at corporate level, it was determined that some corporate attributes such as profitability, company size and type of industry affect the CSRD practices. In addition to this result, the some studies stated that a company which operates in developed country is likely to disclose more thoroughly than in the developing or undeveloped country.
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