Designing Sustainability Reporting Systems to Maximize Dynamic Stakeholder Agility

The Role of CSR
  • Stephanie WattsEmail author
Living reference work entry


Most large companies file standardized corporate social responsibility (CSR) reports with organizations such as the Global Reporting Initiative and others. The information in these reports is in the public domain once filed, and it informs sustainability analysts’ ratings of the reporting company; these ratings in turn affect assessment for inclusion of the company’s shares in socially responsible investment funds. Inclusion in socially responsible investment funds generally lowers companies’ borrowing costs and hence can increase profits. For this reason, companies’ CSR reports are more than just advertising vehicles. The databases embedded in the software used to produce these reports are designed most effectively when the different subunits that provide the data and produce the reports share similar norms of organizational transparency. Also, electronic back-end integration of these databases with other company databases company can increase the timeliness and accuracy of the data released in CSR reports. This chapter explains the importance of CSR reporting for effective stakeholder engagement and for organizational agility – the capability of the company to respond most effectively to stakeholders’ information needs. For companies to reap the benefits of their sustainability efforts, they need to communicate them effectively. Thus CSR reporting is integral to achieving organizational sustainability benefits, which is why it is important to understand the practices and benefits of effective CSR reporting.


Sustainability reporting CSR reporting Organizational transparency Database design Electronic integration Stakeholder engagement Organizational agility Norms 


In 2013, 93% of the 250 largest corporations in the Fortune Global 500 filed corporate social responsibility (CSR) reports with formal standards organizations, 82% of these specifically with the Global Reporting Initiative (GRI), and 56% with external auditor assurance (KPMG 2013). This is a significant increase from the 33% of large corporations that filed CSR (also called sustainability) reports in 2005 and which is increasing still (Deloitte 2015). CSR reporting has become the cost of doing business: both Coca-Cola and Pepsi file reports with the GRI, as do UPS and FedEx, Boeing and Lockheed Martin, AT&T and Verizon, Walmart and Target, and Microsoft and IBM. All major industries are represented in the public GRI database of CSR reports: ExxonMobil files GRI reports, as does Dow, Merck, Kellogg, Johnson and Johnson, McDonalds, Citibank, and General Motors, and thousands of others, drawing their competitors and suppliers along with them. The GRI voluntary reporting standard includes up to 91 specific indicators, many requiring quantitative data on operating resource usage, waste and emissions, employee statistics, product impacts, etc., as well as qualitative information on issues such as human rights, corruption, political influence, ecosystem impacts, etc., but reporting firms are not required to report on every indicator. Even so, these reports are very resource intensive to produce, reflecting months of data and information collection, usually by the firm’s sustainability function. Importantly, the GRI rewards firms for their transparency, not for their CSR practices, and firms are able to achieve a higher ranking over time if they release successively more data and information annually. Due to the magnitude of this voluntary reporting endeavor, companies use software to aggregate and store their CSR data and information and to produce the actual reports. GRI reporting firms select this software from the list of GRI-approved vendors. This computer software application and its integrated database function as a boundary-spanning information technology (IT) artifact . The boundaries that it spans are those between the sustainability department and the other business units that supply the information needed to populate it on the input side and with the corporate communications department on the output side.

Notably, firms’ CSR reports are in the public domain once they have been submitted to the GRI or other standards organizations. They correspond in varying degrees to the illustrated narrative versions of firms’ sustainability reports displayed on their websites and produced by their corporate communications departments. Relative to these public relations reports, standardized CSR reports such as those in GRI format tend to be harder to locate online and are of sufficient detail to be daunting to comprehend except by those trained to do so. In many organizations, those in the corporate communications department serve as gatekeepers such that it is their responsibility to vet the standardized CSR report before it is publicly released. This reflects some marketing scholars’ view that the marketing department should have a coordinating role in the production of CSR reports (Nikolaeva and Bicho 2011).

The GRI is the world’s most widely used voluntary sustainability reporting framework (Levy et al. 2010; Manetti and Becatti 2009; Reynolds and Yuthas 2008) and has become the de facto standard. Because the GRI is designed to reward transparency , a company in a dirty industry, or a firm that is not sustainable yet but has committed to working toward being so, can get a high score from the GRI. In addition to the GRI, firms report to other standards organizations, such as the Carbon Disclosure Project, the United Nations Global Compact, the Dow Jones Sustainability Index, the Sustainability Accounting Standards Board, and others. The software applications used for reporting have multiple templates, making it easy for firms to report to multiple standards organizations once they have collected the necessary data. The widespread availability of CSR reports has created vast quantities of data, data that is easily searched and analyzed because it is submitted in a standardized tagging taxonomy called XBRL. Secondary markets for this data have emerged in the form of sustainability analyst reports and the databases that aggregate them for the SRI community, along with other aggregators serving consumers’ and researchers’ needs such as,, and

CSR reporting is important because it is the principal mechanism by which companies’ CSR practices are recognized and rewarded by their stakeholders. And the rewards can be significant: Over the long term, sustainability improves firm performance (Eccles et al. 2014; see Albertini (2013) and Orlitzky et al. (2003) for meta-analyses). Sustainability has also been found to increase customer loyalty (e.g., Du et al. 2007), lower firm-idiosyncratic risk (e.g., Luo and Bhattacharya 2009), and attract and retain talent (e.g., Greening and Turban 2000). Importantly, a stream of financial research finds that firms with high sustainability ratings have a lower cost of capital (Dhaliwal et al. 2011; El Ghoul et al. 2011): firms with high sustainability ratings are able to borrow funds for expansion, research and development, etc., at lower interest rates than firms with lower sustainability ratings. In sum, firms are engaging in sustainable practices both because their stakeholders expect it and because they acknowledge it can create organizational value (Klettner et al. 2014), value that depends on the ongoing production of CSR reports.

An important factor underlying the lower cost of capital for sustainable firms is the socially responsible investing (SRI) movement. By 2012, there were $13.6 trillion worth of sustainable investment assets worldwide (GSIA 2012). As of year-end 2011, 49% of all invested assets in the E.U. were invested along a responsible investment strategy, with Africa at 35.2%, Canada at 20.2%, Australia and Zealand at 18%, and the USA at 11.2% (Scholtens 2014). In the USA, $6.57 trillion was invested in SRI funds by the beginning of 2014 (USSIF 2014). Those that manage these funds use the information produced by sustainability analysts – in the form of ratings reports – to determine which companies’ stocks to include in their SRI portfolios. And much of the information that sustainability analysts use to create these ratings reports comes from companies’ own voluntary CSR reports, especially when they are GRI-formatted and have been audited. High GRI scores read favorably to CSR analysts that produce the sustainability reports that the socially responsible investment (SRI) community relies on to assess firms for inclusion in or exclusion from their financial products. Thus it is not just sustainability practices that affect firms’ cost of capital, but sustainability reporting as well. CSR reporting can result in significant premiums in financial markets (Berthelot et al. 2012).

Clearly then, but only very recently, voluntary CSR reporting and the CSR practices they report on are beginning to have a major impact on firms, including resource allocation moves and new conceptions of risk and reputation management. This reflects a shift away from a shareholder primacy perspective toward a stakeholder view of business strategy (Klettner et al. 2014). Because the many benefits that CSR practices can confer to firms depend on the capability to communicate them to stakeholders, stakeholder communications is becoming a critical organizational capability. Dynamic Stakeholder Agility is the ability of the firm to quickly and accurately meet all stakeholders’ information needs and to learn from doing so to increase the likelihood of being able to do so in the future. By optimizing their Dynamic Stakeholder Agility, companies can increase the likelihood of successfully engaging their stakeholders and of maximizing their return on investment in CSR practices and communications. But such agility is challenging to achieve, since the various organizational subunits involved in CSR reporting may differ in how transparent they believe the organization ought to be: different subunits often have different transparency norms . When subunits need to work together to produce information products for the public, differences in this norm can create conflicts that can suboptimize a firm’s capability for Dynamic Stakeholder Agility, particularly at the boundary between the sustainability and corporate communications departments. At the same time, the boundary-spanning IT artifact can play an important role in optimizing Dynamic Stakeholder Agility, particularly when it is electronically integrated with other enterprise systems. However, such electronic integration will be difficult to achieve when there are conflicts around relational transparency norms .

Background: CSR Reporting and Organizational Strategy

Academics have two predominant ways of thinking about CSR behavior within the context of corporate strategy. Under the stakeholder view of the firm (Donaldson and Preston 1995; Freeman 1984), all the stakeholders of a company have needs that the company may fulfill when possible: the employees, the community, the environment, etc., not just the shareholders that have purchased company stock. This view stands counter to the nexus of contracts approach (Friedman 1970; Jensen 2002), in which shareholders should maintain financial primacy over other stakeholders, such as employees or the community. In this view, shareholder primacy prevents managers from misappropriating and misallocating funds for purposes of corporate social involvement (Margolis and Walsh 2003). However, as evidence accumulates that CSR practices improve firm performance over the long term and that CSR ratings affect the cost of capital in the short term, the inherent conflict between the stakeholder view and the nexus of contracts approach loses its potency. Further, legal scholars have found no legal precedence for requiring managers to maximize shareholder wealth relative to that of other stakeholders (Stout 2007, 2013), a conclusion recently confirmed by the US Supreme Court (Johnson and Millon 2015).

CSR reporting thus falls within the general framework of stakeholder theory (Freeman 1984; Donaldson and Preston 1995), where an activity is considered strategic to the extent that it is consequential for the strategic outcomes, directions, and survival and competitive advantage of the firm (Johnson et al. 2003). Thus strategy is not what an organization has, but what it does: strategy-as-practice, in this case the practice of agile stakeholder engagement. Despite their routinization, practices are diverse and variable, being combined and altered according to the uses to which they are put (Jarzabkowski et al. 2007). Paradox studies also apply here, since they explore how organizations can attend to competing demands simultaneously, as agile stakeholder engagement necessitates. Although choosing among competing tensions might aid short-term performance, a paradox perspective argues that long-term sustainability requires continuous efforts to meet multiple, divergent demands (Cameron 1986; Lewis 2000). The practices of cyclically responding to paradoxical tensions enable sustainable peak performance (Smith and Lewis 2011). Interacting with stakeholders requires constant learning, but these learnings need to be routinized by organizing. Organizational routines and capabilities seek stability, clarity, and efficiency while also enabling dynamic, flexible, and agile outcomes (e.g., Eisenhardt and Martin 2000; Teece et al. 1997).

Stakeholder Engagement

Stakeholder management is one of the three processes of corporate social responsiveness, along with environmental assessment and issues management (Wood 1991). Strong stakeholder engagement practices are associated with socially responsible companies (Sloan 2009). CSR itself can be conceptualized as corporate social responsiveness, since stakeholder engagement shows responsible commitment to stakeholders (Frederick 1994; Johansen and Nielsen 2012). Because organizations need to demonstrate to stakeholders that they are responding to their expectations, communication plays a central role in stakeholder engagement (Devin and Lane 2014). Stakeholder engagement should determine which information and data should be included in an organization’s CSR reporting (Gray 2000; Hartman et al. 2007; Manetti 2011; McWilliams et al. 2006). And it should also indicate which new data and information needs to be collected in newly routinized practices. Most of the research on stakeholder engagement comes from the perspective of signaling theory and the need to create organizational legitimacy. Hence stakeholder engagement has been conceptualized as a process of organizational identity construction that involves dynamic and iterative processes (Scott and Lane 2000). It has also been conceptualized as a mechanism for accountability, for consent, for control, and for cooperation, as a method of enhancing trust, as a substitute for trust, as a form of employee involvement and participation, as a discourse to enhance fairness, and as a mechanism of corporate governance (Devin and Lane 2014; Greenwood 2007). Organizations seek to establish the legitimacy of the engagement process in order to legitimize the organizational decisions that result (Devin and Lane 2014). In practice, this involves engaging stakeholders’ awareness of each other’s competing and interdependent goals, identifying their shared problems, and motivating them to work collaboratively (Saravanamuthu and Lehman 2013). It can involve community engagement, social media engagement, employee engagement, and CSR engagement.

Historically, interacting with stakeholders has been the responsibility of those in the customer-facing function of the corporate communications department. However, the emergent phenomenon of widespread CSR reporting means that those in the sustainability function of large firms are now also in a customer-facing role when they produce publicly available CSR reports and may engage organizational stakeholders in the process of producing them.

The agility view of stakeholder engagement presented here encompasses practices at the edges of the firm – communicative interactions between stakeholders and the corporate communications department and between stakeholders and the sustainability department. Information learned from these communicative interactions become routinized when it is entered into the boundary-spanning IT artifact, where it then serves as an information source going forward, at the ready to support agile stakeholder responsiveness in the future. In this view stakeholder engagement does more than secure organizational legitimacy; it enables agile authentic response to stakeholders’ needs and serves as an ongoing vehicle for organizational learning and innovation. It views stakeholder engagement not as a required response to external demands but as an opportunity to engage with the tensions and paradoxes that move the firm closer to sustainability. An agility perspective on stakeholder engagement suggests three aspects of engagement to be concerned with: the speed of response to stakeholder inquiries, the accuracy of the response, and, importantly, the routinization of new learnings to enable speedy, accurate future responses and to address potential information gatekeeping and bottlenecks.

Stakeholder Agility

Within the organization, the ability to detect changes in the environment and respond to them effectively with speed and surprise is called agility (Brown and Eisenhardt 1997; Christensen 1997; D’Aveni 1994; Goldman et al. 1995). The two components of organizational agility – sensing and responding – are key organizational capabilities that contribute to success in highly turbulent environments (Zaheer and Zaheer 1997). Agility underlies firms’ success by continually enhancing and redefining their value creation through innovation. Because stakeholders are at the boundaries of the organization, interacting with them generates recombinative knowledge across different domains and practices (Van de Ven et al. 1999). Communication with stakeholders generates novel ideas, and so increases the invention phase of innovation (Garud et al. 2013). Such interaction also supports firm agility, since cross-boundary knowledge movement enables the organization to sense and adapt to rapidly changing environments (Brown and Eisenhardt 1997). Agility and innovativeness are thus interdependent and mediated by effective stakeholder interactions.

Organizations interact with numerous stakeholders that relate to the firm variously in power, legitimacy, and urgency (Mitchell et al. 1997). Setting aside the shareholder relations that historically have dominated stakeholder engagement, the two stakeholder groups that have received the most attention for contributing to organizational agility are customers and suppliers. Customer agility is the ability to sense and respond to customers. In addition to providing revenue, customers can be put to work cocreating firm value (Payne et al. 2008; Zwick et al. 2008). Such customer “coproduction” entails the direct involvement of customers as they participate in the design, delivery, and marketing of a firm’s goods and services (Schultze and Bhappu 2007). It therefore implies a kind of partnership between the customer and the firm. Many companies have developed customer advisory panels to solicit ideas for new products, have built online customer communities to enable dialogue among customers, and have created toolkits that enable customers and engineers to codesign products (Schultze et al. 2007). However, such advisory panels and communities may not include customers whose participation goals do not align with those of the firm, for example, those representing the needs of the local community. Because the Internet and social media can give voice to disgruntled customers as easily as to supportive ones, customer agility needs to encompass all customers, not just those aligned with the agenda of the firm. By doing so, customer agility supports both risk mitigation and exploitation of customer learning opportunities.

In addition to customer agility, researchers have identified supply chain agility as the capability of the firm, both internally and with its key suppliers, to respond rapidly to marketplace changes and potential and actual supply chain disruptions (Braunscheidel and Suresh 2009). Like customers, suppliers can be engaged in interfirm collaboration for value cocreation (Cheung et al. 2010). Indeed, entire industries have been created around both customer relationship management and supply chain management systems for accomplishing these relationships and coordinating related interfirm processes. But as with customers, not all suppliers’ goals are necessarily aligned with those of the firm – some may not engage in CSR practices as specified in their firm contract, or may seek undesirably exclusive contracts, or form coalitions to increase their power relative to the firm. And the Internet and social media increase the likelihood that unethical supplier practices may negatively impact firm reputation and sustainability ratings. Thus supplier agility must encompass the capability for both mitigating risks and exploiting supplier-based learning opportunities.

In addition to customers and suppliers, other stakeholders are coming to the fore and demanding engagement with the firm, both because the Internet and social media are giving them voice and because of generally higher CSR expectations: consumer and community activists, sustainability analysts, corporate coalitions, awards organizations, environmental groups, employees, regulators, and others. These stakeholder groups may provide additional opportunities for agility and innovation but may also present material and intangible risks. Firms need to respond to their requests for information and action in timely and effective ways and ensure that they are exploiting and exploring the learning opportunities that these groups offer; they need to go beyond customer and supplier agility and respond with agility to the full range of their stakeholders, using practices that together comprise Dynamic Stakeholder Agility.

Companies have been engaging their stakeholders for as long as public relations departments have existed. CSR reporting is a newcomer to firms’ established routines for engaging their stakeholders.

Corporate Social Responsibility Reporting: Determinants and Impacts

CSR reporting can be conceived of as both an outcome and a part of reputation risk management processes (Hasseldine et al. 2005; Toms 2002). In general, large firms and publicly traded firms engage in more CSR reporting than smaller, privately held ones (Gallo and Christensen 2011), size and ownership being proxies for public pressure (Patten 1995). Similarly, high media exposure has been associated with CSR reporting (e.g., Haddock and Fraser 2008), as has firm financial performance and age of assets (e.g., Cochran and Wood 1984). Other studies have found that pressure from shareholders, regulators, and environmentalists leads to more reporting, with mixed results for the impact of pressure from the media (Neu et al. 1998). Internal determinants of reporting include systematic risk (e.g., Belkaoui and Karpik 1989) and the existence of a CSR committee (e.g., Cowen et al. 1987). Interested readers may want to see Fifka (2013) for a meta-analysis and Hahn and Kuehnen (2013) for a review of this literature. Private companies do CSR reporting to enhance brand value, reputation, and legitimacy, enable benchmarking, signal competitiveness, and motivate employees (Herzig and Schaltegger 2006). The reports themselves can provide early warnings about future mismanagement (Christofi et al. 2012; Bebbinton et al. 2008), be used to manage reputational risk (Legendre and Coderre 2013; Bebbinton et al. 2008), and reinforce relations between firms and local communities (Alonso-Almeida et al. 2014).

While some studies have found CSR reporting to be associated with strong CSR performance (e.g., Brammer and Pavelin 2008; Eccles et al. 2014; Gelb and Strawser 2001), other have not (see Clarkson et al. 2008). This discrepancy has been attributed to differing assumptions between the two dominant theoretical frameworks used to frame CSR reporting; the economic theory of signaling versus the sociopolitical theory of legitimacy (Nikolaeva and Bicho 2011). According to the economics-based perspective, good CSR performers have more incentive to report their “good” practices, resulting in a positive association between CSR performance and reporting. In contrast, early social accounting researchers cited legitimacy theory to explain that companies that are weaker CSR performers face more legitimacy pressures and so tend to be more active reporters in order to influence stakeholders’ perceptions (Brown and Deegan 1998; Clarkson et al. 2008; Deegan 2002; Deegan et al. 2002; Gray 2002; Milne and Patten 2002; O’Donovan 2002).

Because CSR reports are in the public domain, there is reason for those concerned about organizational legitimacy and reputation management to be concerned about their content. Green credentials can harm share prices (Fisher-Vanden and Thorburn 2011; Jacobs et al. 2010), and firms have incentives to exaggerate their environmental performance (i.e., to greenwash) (e.g., Kim and Lyon 2015). This reflects disclosure risk, whether it be because the issue revealed is immaterial to or misinterpreted by stakeholders or because the information released is inaccurate. On the other hand, CSR reporting and the CSR practices they report on are being assessed and rewarded separately, as distinct aspects of the socially responsible investing ecosystem (Watts 2015). Thus firms lagging in CSR practices can get a positive transparency assessment from the GRI, as long as reports include material CSR issues and plans to address them. Thus most large companies are now doing CSR reporting regardless of how mature their CSR practices are. Further, the design of the GRI has evolved to minimize opportunities for gaming it: Quantitative disclosure is rewarded over qualitative wherever possible; full disclosure is rewarded more than partial disclosure; and nondisclosure with explanation about plans for future disclosure is favored over nondisclosure alone. Assurance is rewarded as well. The recently released version of the GRI standard (4.0) places much emphasis on materiality: Corporations are now required to disclose their materiality priorities and assessment processes, so that if negative CSR behaviors are brought to light involving behaviors that have not been reported as being material, this is looked upon very unfavorably by CSR analysts. And because the Internet and social media have increased the likelihood that negative CSR behaviors will be revealed (O’Toole and Bennis 2009), it may be riskier for firms to withhold than to disclose information. Thus CSR-reporting standards have evolved to make it more difficult for weaker CSR performers to use CSR reporting to change stakeholders’ perceptions about their CSR activities without actually improving their CSR behavior. The increasing use of external assurance further inhibits this. Thus the economic perspective, that CSR practices and CSR reporting are generally aligned, seems to be overtaking the legitimacy perspective.

Dynamic Stakeholder Agility

Widespread adoption of CSR-reporting practices is a new phenomenon. From the economic perspective, strong CSR practices are associated with strong CSR reporting (Brammer and Pavelin 2008; Eccles et al. 2014; Gelb and Strawser 2001). And strong CSR practices have recently been found to be positively associated with firm performance in the short (i.e., due to reduced cost of capital (Dhaliwal et al. 2011; El Ghoul et al. 2011)) and long terms (e.g., Eccles et al. 2014). Therefore strong CSR reporting should also be associated with firm performance. To the extent that the capability for Dynamic Stakeholder Agility can engender strong CSR reporting by increasing the speed, accuracy, and routinization of agile stakeholder engagement , this capability can enhance firm performance in the short and long terms. Figure 1 illustrates the logic of the above discussions: The remainder of this chapter describes CSR-reporting practices that occur within the organization, within the dotted lines, comprised of the reciprocal interactions between those doing the CSR reporting in the sustainability function and those doing stakeholder engagement in the corporate communications department. Two categories of marketplace response to CSR practices can engender positive returns to firm performance – short-term impacts on capital costs and the bundle of various positive CSR impacts that take longer to manifest. But these rewards to CSR practices cannot be realized without communicating those practices. Thus the practices of dynamic stakeholder agility mediate firms’ CSR practices, marketplace recognition of these practices, and firm performance.
Fig. 1

The context and focus of the research (Watts 2016)

The Role of the Boundary-Spanning IT Artifact: CSR-Reporting Software

Within organizations, sustainability reporting software is used to gather, aggregate, and report the data and information needed to comply with formal reporting standards set by organizations such as the GRI. CSR-reporting software is not designed to measure nonfinancial information per se, as the technologies for doing so are still in a relatively nascent state of development (Simnett et al. 2009). They simply support the collection and storage of structured data and information from throughout the organization. For example, they are used to collect the (primarily) quantitative environmental measures of resource usage, waste and emissions from the firm’s environmental management systems. They amass labor statistics from the company’s human resource function, and supplier statistics from the supply chain managers, or suppliers can enter this data themselves over the Internet. Other data is collected from various other intraorganizational systems such as sustainability project management systems and others. Because the reporting indicators are broadly encompassing, ranging from environmental and labor practices to supply chain contracting and political engagement, the IT artifact supports data gathering from virtually all company functions.

CSR-reporting systems are designed for maximum flexibility, because the standards for reporting are evolving quickly and vary depending on the standards organization, and because newly reporting companies will store much less and data information in them than firms that are at higher levels of disclosure. Their flexible design means that companies do not have to use them to collect any data or information on indicators that they prefer not to. Companies can format fields for collecting data on new indicators that they are not currently reporting on, or on indicators that are not even included in standards’ templates, essentially “making up” new indicators. Depending on the software product used, there may be a limit to how granularly the data can be collected: Some have an inherent temporal periodicity of 1 month, such that data for these fields cannot be stored more frequently. Others allow for greater update frequency. This may be due to the legacy of financial accounting or the fact that CSR reports are usually produced annually. But in general, these systems are aggregation systems, designed for responding to requests for trend information derived from quantitative data over time, for example, improvements in emissions or a more diverse workforce. In this way they are platforms of social and technical arrangements that, with the appropriate processes, structures and cultures, can function as generative memories (Garud et al. 2011).

These systems serve three general purposes. First, they store data and information in order to produce current and future CSR reports for standards organizations such as the GRI, usually annually. Second, they store data and information so that those in the corporate communications function have a repository of content to access during stakeholder engagement and to use to respond to stakeholder requests for information. This secondary, unintended function can support corporate communications specialists as they practice ongoing engagement with current and new stakeholders. Third, the system serves as a boundary object that enables knowledge transfer and transformation among all functions involved in producing content for stakeholders: the sustainability and corporate communications functions and also the executive leadership and risk/compliance officers. This reflects the pragmatic view that the materials created and produced from the content in this system, whether CSR report or for another stakeholder interaction, are themselves a new product. For each of the functional units at its boundaries, this IT artifact is localized, embedded, and invested and as such is susceptible to the negative consequences that often arise at problematic knowledge boundaries (Carlile 2002). This artifact functions as a boundary object to enable representation, learning and knowledge transformation to resolve these negative consequences. Because the artifact is also an information technology (IT), it facilitates sharing of information (Fuller et al. 2009), makes the process environment conducive for value cocreation (Aarika-Stenroos and Jaakkola 2012), and can play an important role in enabling organizational agility (Sambamurthy et al. 2003).

Lack of sophisticated information technology systems has been identified as an impediment to successful CSR reporting (Eccles et al. 2014), but the software industry is a very fast-evolving one and the newest CSR-reporting applications are relatively sophisticated. Currently, it is not lack of IT systems, but lack of integration of the CSR-reporting system with other enterprise systems, that is a source of frustration with the information technology used by those in the sustainability function.

Figure 2 illustrates the front office and back office components of CSR reporting and stakeholder engagement as they are mediated by the artifact of the CSR database and reporting system , with the top double-sided arrow indicating a two-way flow of information providing feedback mechanisms between the two realms – front offices to back offices and forward again – that are necessary to move engagement from a legitimacy function at the front edge of the firm deeper into the organization in the form of routinized learning. By making CSR data and information readily available, this artifact can increase the speed and accuracy of the organization’s stakeholder responsiveness, increasing Dynamic Stakeholder Agility. And as a boundary object , it can make tacit learnings explicit and overcome inter-functional conflict to support the routinization of new learnings that emerge from the practices of sensing and responding to stakeholders
Fig. 2

Practices utilizing the boundary-spanning IT artifact (Watts 2016)

Challenges to Successfully Utilizing the IT Artifact

The CSR-reporting software application can effectively support Dynamic Stakeholder Agility by increasing the speed and accuracy of responses to stakeholder requests for information. But to do so requires navigating the cross-functional nature of the CSR-report design process, so that communication interactions with stakeholders become routinized in future versions of the database. Part of this navigation process necessitates negotiations regarding transparency norms , norms that are likely to differ between subunits. The collective perceptions of those in a subunit regarding how transparent the organization ought to be (i.e., its transparency norms) will affect how well that subunit is able to work with other subunits at tasks that involve the release of information to the public, such as CSR reporting and stakeholder engagement . Before we discuss that challenge, an obvious means for increasing the speed and accuracy of responses to stakeholder information requests – electronic integration – bears attention.

Electronic Integration of the CSR-Reporting Database with Other Enterprise Systems

Enterprise systems are large-scale application software packages used by organizations to run their operations. No large firm operates without one or more. As the name suggests, the single enterprise software application integrates all or most of the organizational functions that comprise the enterprise, and even many that are external to it as well, such as customer and supplier support. In addition to providing the software to perform each function (e.g., accounting, purchasing, manufacturing, etc.), these systems support information flows between the functions via a single integrated database, which also enables reporting and data analytics. Within each organizational function, viewing and accessing the data in the central database is generally limited to that of the particular function. Enterprise systems enable a high degree of internal integration that allows internal organizational units to work in tandem, as a unified whole, and to be responsive to each other (Barki and Pinsonneault 2005). Both internal and external electronic integration can enhance a firm’s agility (Nazir and Pinsonneault 2012).

Enterprise systems rely on a single underlying database in which to store enterprise-wide data collected by its various functional work modules. Standalone systems for each organizational function were common until the 1990s, before enterprise systems were invented to overcome the problems that resulted from storing data across the enterprise in multiple, separate databases. Now firms use enterprise systems to provide a single integrated view of their data, but these systems are not generally integrated with specialized and/or newly developed software applications such as CSR-reporting systems. And because CSR-reporting systems are not electronically integrated with their organization’s enterprise system, the data they produce are not available in the central enterprise database, nor can they electronically source data from the central enterprise-wide database.

CSR-reporting software systems are not designed to be electronically integrated with the enterprise system and the other systems that provide the data it needs for reporting. Rather, internal data is gathered from around the firm and entered by hand or through manually controlled downloading and uploading of spreadsheets. This is because different systems from different venders have different data standards and periodicity, such that integration requires customization that is complex and expensive. But this is not to say that they cannot be electronically integrated with the databases that provide their source data. There are various technical options for securing such integration, of various degrees of expense and complexity. But to the extent that they are not electronically integrated, they are not able to realize several of the advantages of enterprise systems related to agility, such as being able to respond rapidly to the needs of those in other organizational units to work in tandem (Barki and Pinsonneault 2005). Where agility requires inter-functional coordination , as it does in this context, internal systems integration can achieve this to positively impact a firm’s responsive capability (Roberts and Grover 2012). Automated information flows allow firms to quickly gain knowledge from their environments, and so sense impending changes. The close coordination enabled by internal integration, and access to up-to-date metrics, facilitates the firm’s ability to proactively respond to these changes. Thus electronic data integration between back-end source systems and the CSR-reporting artifact can enhance dynamic stakeholder agility by increasing the speed by which data can be collected and delivered, with the potential for increasing its periodicity.

Such electronic back-end data integration also supports increased data quality, because data that is untouched by human hands is less prone to errors (Srinivasan et al. 1994) and hence more accurate. Also, by speeding data delivery, electronic data integration increases the likelihood that the data and the information derived from it will be timely (i.e., not arriving too late). It also lowers the cost of data collection, since automation reduces labor costs. In these ways electronic integration of the CSR-reporting IT artifact supports Dynamic Stakeholder Agility by serving data that is accurate and current.

However, not all the data and information required to produce a CSR report is amenable to back-end electronic integration. In the current (G4) GRI reporting standard, 72 of the 91 indicators have at least some quantitative component. Given the expense of electronic integration, it makes little sense to electronically integrate indicators that are primarily qualitative. Further, the periodicity and granularity of the data required for GRI reporting varies. Highly granular, detailed data points are generally aggregated during the integration process, enabling innovation by harnessing rather than reducing complexity (Brown and Eisenhardt 1997; Van de Ven et al. 1999). Integration makes sense for these data points, and for those that are frequently updated, having high periodicity. Quantitative data points that change infrequently can be inexpensively updated manually, although this can introduce errors. And obviously data for which there is no existing source-data information technology in place cannot be electronically integrated. Thus part of the practice of populating the CSR-reporting software artifact is one of prioritizing which data can and should be electronically integrated with back-end systems. Quantitative data that is available in existing organizational systems, that is highly granular, and that changes frequently are most appropriate candidates for back-end electronic integration with the CSR IT artifact.

The IT function is responsible for doing this appropriate data integration and also plays an important role in ensuring the accuracy and security of the data that moves electronically and automatically between source-data systems and the CSR IT artifact. Therefore the IT function can increase stakeholder agility by enabling back-end, appropriate electronic data integration. Since electronic integration can enhance stakeholder agility and the IT function performs the electronic integration, attempts to increase stakeholder agility without the involvement of the IT function are less likely to succeed than those that do involve the IT function.

Inter-functional Coordination for Boundary Spanning

In addition to the need for involving the IT function in the process of producing CSR reports, it is important that those in the corporate communications (CC) function are involved as well, as follows: The CSR-reporting IT artifact consists of functionality for data entry and for producing reports and also a database of organization-specific content reflecting ongoing data collection efforts. This database is a repository of data and information – both current and historical trends – that may be sought by stakeholders and/or helpful for engaging them. This repository can be utilized both by those employees trained in sustainability reporting and those in the CC function to communicate with stakeholders. In this way the practice of CSR reporting and the practice of stakeholder engagement come together as those in these two functions utilize this shared boundary object for communicating with stakeholders. Just as customer agility requires inter-functional coordination (Roberts and Grover 2012), so too does dynamic stakeholder agility, specifically between the CSR (or sustainability) function and the CC function.

The CSR-reporting IT artifact is a boundary object, with one boundary at its input side and another at its output side. At the input side of the CSR-reporting system, two design practices must occur. First, the initial data collection and entry processes need to be designed, along with specification of the processes for ongoing data collection and entry. This design practice encompasses what needs to be collected and where it is to be collected from (e.g., which systems, internal and or external, or processes) and how it is to be collected, for example, via electronic integration or a specified process of manual loading. It also needs to specify how often this data is to be updated, with controls to ensure its quality and timeliness. This design process takes place after senior management and risk management officers have done an assessment of the materiality of the risks posed by each of the six GRI aspects, for the particular industry sector. It necessarily involves the sustainability officer, since the result of this process will determine the content of the CSR reports that are subsequently produced and therefore affect the GRI level attained, which in turn affect analysts’ sustainability ratings of the firm.

In addition to this initial design process, a second, meta-design activity is needed which specifies how the initial design will be modified, and how often, so that the content of the repository can evolve over time. Such ongoing modification enables routinization of emergent information needs in order to evolve sustainability disclosure by ensuring that historical data that will be needed in the future will be collected today. It also supports the future information needs of the CC function, information needs made apparent during current sense-and-respond stakeholder engagements . This is important because those in the CC function engage with stakeholders on an ongoing basis and so are well positioned to learn of current and future information needs that those in the sustainability function might not be aware of. In this way, those in the CC function play a critical role in designing for future information needs. By ensuring that representatives of the CC function are involved in these design practices, new learnings about stakeholders’ information needs that emerge during stakeholder engagements can be routinized. In this way information for meeting future stakeholder needs will be readily available in the CSR-reporting IT artifact. Thus it is important to include those in the CC function in the design evolution of CSR data collection and entry practices.

Two similar practices also reside at the output side of the CSR boundary object . The first of these is the ongoing provision of information to stakeholders in active engagement. The second is the meta-design of future stakeholder engagement practices based on data and information that will be available in the CSR-reporting IT artifact in the future, if the organization begins collecting it now. At the input side, these two practices are generally under the purview of the sustainability function, while at the output side, the two practices are generally the responsibility of the CC function. The IT artifact serves as a boundary object that mediates the interactions of these two functions as they negotiate during the design of both the back-end, input-side practices necessary for routinizing new learnings and the front-end, output-side practices for engaging and communicating with stakeholders. The CSR-reporting IT artifact makes tacit knowledge explicit in this process of negotiation. By demanding both design and meta-design practices at both the input side of the repository and at the output side, the artifact supports organizational learning and consequent agility. Clearly the sustainability and CC functions need to work together to share this boundary object as they use it to design the future information needs of both functions. For this reason, Dynamic Stakeholder Agility requires ongoing design negotiations among those in the sustainability function and those in the CC function. Certainly senior management and risk compliance officers need to be involved in these negotiations at a high level, and we have made the case above that the IT function should also participate. This is a more nuanced view of CSR reporting as the prerogative of marketing (Nikolaeva and Bicho 2011; Sweeney and Coughlan 2008), since it specifies the need for mutual, inter-functional design practices around the shared boundary object.

Shared Transparency Beliefs and Boundary Spanning

Shared vision is important for effective innovation (Pearce and Ensley 2004) and knowledge sharing (Abrams et al. 2003). Underlying the design practices described above are beliefs regarding how transparent the organization ought to be: To what extent should the company release information to the public versus keeping it within the organization? Since both the sustainability function and the CC function engage in innovative and routinized practices that release information to the public, divergent beliefs regarding how transparent the organization ought to be may create conflicts that can undermine effective knowledge sharing and innovativeness across this functional boundary.

Sustainability departments are a relatively new phenomenon in organizations, but firms have always released information to the public. In a practice sometimes called corporate social responsiveness, decision-makers work together anticipate, respond to, and manage the external impacts of organizational policies and practices (Epstein 1987; Strand 1983). Corporate social responsiveness has been characterized as a philosophy of response that can variously be reactive, proactive, or interactive (Carroll 1979) and is closely related to organizational “posture.” Basu and Palazzo (2008) derive three dominant types of postures from the literature: defensive, tentative, and open. Defensive organizations accept no external feedback, presume their decisions are right, and insulate themselves from alternative sources of inputs. Such organizations might take a tentative posture toward their stakeholders due to inexperience with an issue or because of uncertain consequences. Open-posture organizations take a learning orientation based on willingness to listen and respond to alternative perspectives offered by others. Similarly, Spar and LaMure (2003) identify capitulation, resistance, and preemption as the three dominant ways that corporations react to external criticism. In these views, an organization’s posture vis-à-vis stakeholders reflects a routinized approach to interacting with external critics (Basu and Palazzo 2008). However, the posture literature is limited for understanding corporate transparency today in two ways. First, posture is conceived of as a monolithic organizational construct reflecting the decision outcomes of senior management regarding the consistent face that the firm will present to external stakeholders. But, except in cases of a particularly large scandal, corporate transparency as it is practiced today involves the ongoing release of multitudes of small pieces of data and information, from both those in the sustainability function in the form of CSR reports, and from those in the CC function in the form of press releases, podcasts, social media interactions, etc. Second, because so much data and information are being released on a continual basis, and because speed of responsiveness is important for both stakeholder agility and to manage damage, it is unrealistic to conceptualize the process in terms of senior management decision-making. To engage senior management in the myriad of transparency, decisions that occur in large modern corporations would slow the process to the detriment of the organization’s capability for stakeholder agility and learning. Thus the literature on organizational posture doesn’t adequately characterize practices of organizational transparency in the context of widespread CSR reporting, practices that involve both the sustainability function and the CC function.

Transparency has traditionally been conceived of as a means for making governments accountable to their citizens. In the public sector, it enables public accountability and underlies recent recommendations for governments to regulate companies’ transparency rather than their activities (Fung et al. 2008). Indeed, the GRI has evolved as a means for assessing firms’ transparency, not their sustainability . Within for-profit organizations, transparency is one of the eight subdimensions of the measure of ethical organizational cultures called the Corporate Ethical Virtues Scale (Kapstein 2008). However, this measure conceives of organizational transparency as taking place within the company (i.e., either because the management is able to physically observe the behaviors of their employees or because the employees are able to observe each other’s behaviors), not between the company and its stakeholders. This reflects the view of transparency as accurate observability of an organization’s low-level activities, routines, behaviors, output, and performance (Bernstein 2012). But transparency as observability does not describe the transparency of CSR disclosure , which occurs between the organization and its external stakeholders. Similarly, Hofstede (1998) has identified open and closed systems within organizations at the function level of analysis. In open-system units, members consider both the organization and its people to be open to newcomers and outsiders. In closed-system units, the organization and its people are closed and secretive, even to insiders. But again, such open or closed systems lie within the organization and not at its boundaries with stakeholders. Or we might look to communication climate, a facet of the broader construct of psychological climate (James and Jones 1974), to shed light on the new transparency. Communication climate has subdimensions of openness and candor, participation in decision-making, and supportiveness (Guzley 1992; Poole 1985). But it too is conceived of as occurring within the organization. Other researchers have highlighted the importance of creating an internal corporate culture of candor (O’Toole and Bennis 2009), advising executives to set information free. But these studies do not address transparency as it is practiced at the organizational edges.

For individuals, relational transparency is one of the four dimensions of authentic leadership, along with internalized moral perspective, self-awareness, and balanced processing (Walumbwa et al. 2008). Relational transparency refers to presenting one’s authentic self to others. Such behavior promotes trust through disclosures that involve openly sharing information and expressions of one’s true thoughts and feelings (Kernis 2003). Also for individuals, some but not all measures of interpersonal trust include dimensions pertaining to transparency, such as truthfulness (Gurtman 1992) and openness (Clarck and Payne 1997). And certainly transparency depends on trust, defined as the willingness to be vulnerable (Dean et al. 1998). When a firm trusts that it will not be punished for being transparent, it will be more likely to be transparent. And nondisclosure can be risky too, especially when the marketplace punishes obfuscation. Applying the relational transparency construct to the firm, it follows that firms that are relationally transparent with their stakeholders openly share authentic information with them, and this disclosure promotes trust with them.

Within the firm, some organizational subunits may believe that the organization ought to be very transparent with the public, while other subunits may believe that the organization ought to be less transparent with the public. These beliefs come into play during the design practices described above, such that for some subunits, the default stance will be that information should be freely available to stakeholders, but for others, the default position will be that there is need information gatekeepers to prevent information disclosure to the public. Subunits within the organization vary in the extent that they believe in the need for the firm to behave in relationally transparent ways with stakeholders.

When organizational subunits differ significantly in their beliefs about how relationally transparent their firm ought to be, they lack a shared vision in this regard, which can create conflicts between these subunits during design of organizational disclosure practices and policies such as those described above. In particular, beliefs about the firm’s appropriate level of relational transparency held by those in the sustainability function may differ from those in the CC function: while some CC functions may believe in high relational transparency, following prescriptions to address tough issues head on and without greenwashing (Illia et al. 2013), this is a new prescription for public relations. According to agency theory (Eisenhardt 1989), executives have incentive to withhold information from shareholders and managers from employees, since this enables rent extraction and is a source of financial gain. Information obfuscation can raise profits by making customers less informed (Ellison and Ellison 2009). And increasingly, marketing and public relations practices are being called to task for presenting promotional information as independent, unbiased news and information (e.g., Stauber and Rampton 2002). Certainly there is a legitimate need for firms to protect their intellectual capital. Meanwhile, those in the sustainability function are often concerned about corporate externalities that harm the natural environment and society, and to the extent that CSR reporting can minimize these, they are likely to believe that more CSR disclosure is better than less. Their knowledge of the socially responsible investment industry may also make them more likely than those in the CC function to be aware that companies are being rewarded by the financial markets for being transparent as well as for being socially responsible. For these reasons, the sustainability subunit and the CC subunit may not share a vision of the firm’s optimal level of relational transparency, making it a challenge for them to collaborate effectively during design of practices that release organizational information to the public.

To the extent that those in the sustainability function believe in higher levels of relational transparency than do those in the CC function, they may view those in a CC function as barriers to appropriate information release, with consequent conflicts between these two subunits (Markus 1983). As it performs stakeholder engagement , the CC function serves as the ears of the firm when it hears about new stakeholder information needs. These new information needs can be effectively integrated into future design and meta-design of the information gathering processes that support the CSR-reporting IT artifact. However, where design practices are dominated by the sustainability function, and conflict between the two subunits exists, there may be a lack of feedback information from the CC function, impairing the capability for routinizing future stakeholder information needs into the CSR-reporting IT artifact.

At the same time, if these practices are dominated by the CC function, less information may be disclosed on CSR reports, to the potential detriment of the organization’s sustainability ratings, ratings that may affect their cost of capital (Dhaliwal et al. 2011; El Ghoul et al. 2011).

Where design practices are dominated by the CC function, there may be a lower likelihood of achieving high sustainability ratings due to lower levels of information disclosure.

These effects may complicate efforts at back-end electronic integration between the source-data systems and the CSR-reporting IT artifact. On the one hand, doing so can increase Dynamic Stakeholder Agility by speeding the data update and delivery process, and by increasing its accuracy and timeliness. However, removing the human hand from the process of populating the CSR-reporting artifact also removes the option for information gatekeeping at the input side, which may present a threat to those who prefer low levels of firm relational transparency. This reflects the tension in the paradox between the positive effects of back-end electronic data integration and the lack of human control that it represents. Where design practices are dominated by the CC subunit, there may be a lower likelihood that effort will be undertaken to electronically integrate source-data systems with the CSR-reporting IT artifact. Further, the benefits of electronic integration come with the additional need to negotiate with those in the IT subunit. If those in the IT subunit believe that high levels of relational transparency are appropriate and thus share a vision closer to that of those in the sustainability function than the CC function, coalitions may form and have negative consequences for the negotiations necessary for building Dynamic Stakeholder Agility.

Overall then, a shared vision of the appropriate level of relational transparency for the firm should improve communication and reduce conflict between the functions working together to design and practice transparency-related activities such as CSR reporting and stakeholder engagement. Figure 3 depicts the role of shared relational transparency vision in achieving Dynamic Stakeholder Agility.
Fig. 3

Achieving dynamic stakeholder agility


This explains the importance of effective design of CSR-reporting systems in the context of stakeholder engagement and organizational information disclosure practices. It extends the known advantages of organizational agility beyond customers and suppliers to the realm of all stakeholders. The CSR-reporting software application serves an important role as a boundary-spanning artifact, the effectiveness of which can be increased through appropriate back-end electronic integration. In today’s companies, information technologies play a crucial role that should not be ignored by sustainability proponents. In designing the repositories embedded in these technologies, multiple organizational subunits need to work together to ensure they meet the information needs of current and future stakeholders. In doing so, interunit differences in transparency norms may impede the negotiations that these design practices entail and may reduce the likelihood of achieving the benefits of electronic integration specifically and CSR reporting more generally. Well-designed CSR-reporting systems can enhance dynamic stakeholder agility, which in turn can positively affect firm performance.




The author would like to thank the Susilo Institute for Ethics in a Global Economy and its director, Laura Hartman, for the support and encouragement of this project.


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Copyright information

© Springer International Publishing AG 2018

Authors and Affiliations

  1. 1.Susilo Institute for Ethics in a Global Economy, Associate Professor of Information SystemsQuestrom School of Business at Boston UniversityBostonUSA

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