Corporate perspectives on CSR disclosure: audience, materiality, motivations

Abstract

The lack of uniform non-voluntary corporate social responsibility (CSR) disclosure standards and the complexity around different stakeholder demands have resulted in considerable flexibility in corporate compliance with CSR reporting. Covering a wide range of CSR dimensions, this paper investigates corporate views on CSR disclosure. Evidence presented is based on an online survey with 278 corporate professionals, who are familiar with corporate reporting in the UK, such as CSR professionals, managers, CEOs, CFOs and non-executive directors. The findings reveal the primacy of shareholder and institutional investor needs in CSR disclosure decisions. Some practitioners believe multiple reports are needed to ensure appropriate dissemination of CSR information. Fair business practice and environment-related information are perceived as the most important items to disclose. Whilst financial information remains paramount, the relative importance of reporting non-financial information has increased significantly, with the key areas relating to governance, health and safety, environmental impact and pollution control, and human rights information. For many participants, mandatory regulation is considered as the only way for CSR reporting to be taken seriously on the corporate level. This paper contributes to the limited studies that investigate the views of practitioners by means of primary data. The study complements the literature on CSR disclosure by intensifying the clarity of the understanding of corporate perspectives on CSR and by identifying potential factors that influence CSR reporting decisions in the UK context. The findings strengthen the arguments of prior studies about what items of information should be included in CSR reports and how to disclose the company’s CSR information in a more substantive way.

Appendices

Appendix A

Variables and statements

Variable	Items included	N of items included	Related H	Cronbach’s α
Audience
CSR: individual investors	Corporate social responsibility information is important for investment decisions of individual (PRIVATE) investors Individual (PRIVATE) investors rely on a company’s corporate social responsibility information in investment decision-making Corporate social responsibility information is material for individual (PRIVATE) investors	3 items	H1b	0.790
CSR: institutional investors	Corporate social responsibility information is important for investment decisions of institutional investors Institutional investors rely on a company’s corporate social responsibility information in investment decision-making Corporate social responsibility information is material for institutional investors	3 items	H1b	0.806
CSR audience factor	Existing shareholders Institutional (professional) investors Individual (private) investors Regulators Other stakeholders (e.g. employees, customers, suppliers, competitors, local community, creditors)	5 items	H1a	0.722a
6 CSR themes	environment, energy, human resources, products, community and fair business practice	6 items	H1c	0.788
Materiality
Materiality: financial vs non-financial information	Profits Net assets Cash flow disclosures Dividend payments Market share b Environmental impact/pollution control Health and safety issues Environmental policies Employee policies Human rights informationb Governanceb Cost of environmental programmes Product quality/safety-related information Product innovationb Cost of environmental compliance Community involvement	16 items	H2a	0.841
Materiality: companies’ responsibilities towards CSR	Business has social and environmental responsibilities beyond making a profit The fact that corporations have great economic power in society means that they have social and environmental responsibilities beyond the interests of their shareholders	2 items c	H2b	0.699
Materiality: cost of CSR information	The cost of providing information about a company’s social or environmental activities in publicly available sources is higher than the benefits of this to the company It is financially challenging for companies to provide external users with sufficient information about a company’s social and environmental activities Corporate social responsibility reporting is too costly for companies	3 items	H2h	0.814
Materiality: improvement of CSR information	Reliability of corporate social responsibility information has improved over the last 10 years Quality of corporate social responsibility information has improved over the last 10 years	2 items	H2e	0.873
Materiality: Regulation of CSR	Making environmental information as a mandatory and regulated component of corporate rereporting would be a positive change Making social information as a mandatory and regulated component of corporate rereporting would be a positive change Quality of corporate social responsibility rereporting will improve if rereporting is made mandatory for all companies Reliability of corporate social responsibility rereporting will improve if rereporting is made mandatory for all companies	4 items	H2f	0.801
Materiality: CSR activities	Ethics, governance, transparency, business relationships, financial return to investors and lenders, community involvement and economic development, value of products and services, employment practices, protection of the environment	9 items d	H2d	0.763
Materiality: high-risk vs low-risk industries	Engagement with social and environmental activities is more important for companies from high-risk industries Companies from high-risk industries should provide more social and environmental information in publicly available sources than low-risk companies Companies from high-risk industries should be more concerned about social and environmental activities than other companies	3 items	H2g	0.784
Materiality: CSR value in the long term	Engagement with corporate social responsibility activities creates long-term value for companies Investment in corporate social responsibility activities leads too positive outcomes in the long-term	2 items	H2c	0.730
Motivations
Investor influence	CSR reporting is a good way to influence investors’ opinions CSR reporting is a good way to enhance shareholder value CSR reporting is a good way to satisfy investors’ demands on CSR information	3 items	H3	0.812
Stakeholder influence	CSR reporting is a good way to influence stakeholder perceptions CSR reporting is a good way to manage important stakeholders CSR reporting is a good way to satisfy various stakeholders demands on CSR information	3 items	H3	0.749
Compliance	CSR reporting is a good way to comply with legal requirements CSR reporting is a good way to comply with industry requirements CSR reporting is a good way to comply with Global Reporting Initiative principles	3 items	H3	0.741
Corporate image and reputation	CSR reporting is a good way to receive positive publicity through demonstration of good citizenship CSR reporting is a good way to enhance corporate image CSR reporting is a good way to improve company’s reputation	3 items	H3	0.932
Financial	CSR reporting can lead to financial benefits CSR reporting can improve a company’s financial performance and economic success A company’s increased CSR reputation can lead to better financial performance	3 items	H3	0.889

1. ^aThe Cronbach’s alpha of investor-related users (items 1, 2, 3)
2. ^bThese four items were added in addition to 12 areas adapted from Deegan and Rankin (1997)
3. ^cAdapted from Huimin and Ryan (2011)
4. ^dAdapted from Epstein and Buhovac (2014)

Appendix B

Summary of hypotheses testing results

Hypotheses detail		Result
Audience
1a	CSR information in corporate reporting is primarily focused on existing shareholders and institutional investors rather than wider stakeholders	Supported
1b	CSR information in corporate reporting is more oriented towards institutional investors rather than individual investors	Supported
1c	Environment-related information is considered the most important content in CSR reporting when targeting private investors	Supported
Materiality
2a	Reporting of financial information is perceived by corporate managers in the UK as more important than reporting of social and environmental information	Supported
2b	Companies have social and environmental responsibilities beyond making a profit and the interests of their shareholders	Supported
2c	Engagement in CSR activities creates value for companies in the long term	Supported
2d	Environment protection is considered as the most important CSR activity	Partially supported
2e	CSR reporting in terms of quality and reliability has improved over the last 10 years	Supported
2f	CSR reporting will improve if it is made mandatory	Supported
2 g	CSR reporting is more important for companies from high-risk industries	Partially supported
2 h	CSR reporting is perceived as an extra cost for companies	Not supported
Motivations
3	Enhancing corporate public image is perceived by managers as the key motivation in CSR reporting	Supported

1. Source: compiled by the authors