Academic journal article SAM Advanced Management Journal

Antecedents and Consequences of Corporate Social Responsibility Reporting by Corporations: The Role of Management Strategy and Organizational Characteristics

Academic journal article SAM Advanced Management Journal

Antecedents and Consequences of Corporate Social Responsibility Reporting by Corporations: The Role of Management Strategy and Organizational Characteristics

Article excerpt

In recent decades, awareness of sustainability issues and the impact that business has on the natural environment and communities has been of growing concern to consumers. Customers are expecting that the businesses they patronize will be responsible corporate citizens while providing goods and services in an efficient and economic manner. Corporations have responded to these demands and pressures by engaging in voluntary corporate social responsibility (CSR) activities, and then as part of their stakeholder communication initiatives, they are reporting on the CSR participation. However, there are questions about the benefits to a corporate entity of engaging in CSR initiatives and questions about the benefits of reporting on those activities. Investors are not completely convinced that CSR engagement is the best use of corporate resources, and critics of voluntary reporting often cite concerns about disclosing sensitive information to competitors and regulators. Literature on the benefits of reporting is inconclusive, mostly due to variations in research methods. Some corporations and even some business sectors appear to benefit more than others. This paper provides a conceptual framework addressing the relationships between antecedents and consequences of voluntary CSR reporting. The proposed model helps in understanding the role of organizational characteristics and management strategy as antecedents in determining if a corporation will engage in voluntary reporting. The relationship between reporting and two expected outcomes of reporting--reputation and financial performance--are also delineated in the framework.

Introduction

In every business sector, firms are engaging in sustainability efforts aimed at limiting the environmental impact of operations; improving the quality of life of employees, customers, and the community; and improving their reputation with regulators and stakeholders. Alonso-Almeida et al. (2014) report that global reporting initiative (GRI) reporting has increased each year since 1999, and there has been an upward trend in the number of companies adopting the GRI framework in every sector and region. In order to communicate these activities to internal and external stakeholders, companies are increasingly reporting on their sustainability initiatives. Firms use a number of sustainability reporting tools (SRTs)--including the Carbon Disclosure Project (www.cdp.net), GRI and the United Nations Global Compact (www.unglobalcompact.org)--to communicate their progress on achieving sustainability goals (Siew, 2015). These SRTs have been developed over the past couple of decades in response to stakeholders' demand for better transparency and disclosure on social and environmental concerns. Among all the SR initiatives, the GRI is the most widely used global standard for sustainability reporting (Skouloudis et al., 2009; Prado-Lorenzo et al., 2009; Tsang et al., 2009; Brown et al., 2009; Rasche, 2009; Levy et al., 2010; Roca & Searcy, 2012; Marimon et al, 2012).

Extant literature is replete with research assessing the outcome of sustainability reporting, but to date, the results have been, at best, ambiguous and inconsistent (Romero et al., 2014). Ameer and Othman (2012) found a positive relationship between sustainability reporting and financial performance measures, such as return on assets, cash flow from operations, and income before taxes. Positive associations were also reported by Jeffers and DeGaetano (2013) from their study of sustainable initiatives and several accounting metrics, including price-to-book ratio, earnings, and book value. However, Jooh et al. (2011) reported a negative relationship between reporting and financial performance.

The lack of a clear link of sustainability engagement and reporting with outcomes may result in management being hesitant to commit resources to corporate social responsibility (CSR) and its reporting. Corporate management and investors are sometimes cautious about disclosing information on sustainability performance to minimize transparency to regulators and competitors. …

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