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Abstract: Perhaps the most profound and widespread legacy of the Bhopal
tragedy has been mandatory disclosure regimes such as the Toxic Release
Inventory in the United States and, subsequently, the phenomenon of
corporations voluntarily reporting on their environmental, societal, and
economic impacts, a practice known as corporate responsibility (CR)
reporting. Data is available on Western executives' experiences with CR
reporting but is scarce on Chinese and Indian executives' attitudes and
experiences. Analysis of cross-cultural differences in perspectives on CR and
CR reporting is also scarce. The authors interviewed executives in China,
India, and Japan to learn about their motivations for adopting CR reporting,
how it was implemented, and the impacts that resulted.

The authors' observations could assist managers and attorneys implementing

CR reporting; and investors, stakeholders, and scholars with interpreting CR
reporting in these countries. There are consistencies in terms of
implementation and positive impacts of CR reporting cross-nationally.
However, the Eastern respondents did not embrace the typical Western

* The research presented in this article was made possible by a Summer Research
Fellowship funded by the Charlton College of Business at the University of Massachusetts
Dartmouth. A preliminary draft was presented at the United Nations and Academy of
Management co-sponsored Business as an Agent of World Benefit Forum (less than 25%
acceptance rate). Business as an Agent of World Benefit Forum, http://www. (last visited May 14, 2008).
** Adam J. Sulkowski is an assistant professor of business law at the University of
Massachusetts Dartmouth, Charlton College of Business and a graduate of Boston College
Law School.
* Dr. S.P. Parashar is director of the Indian Institute of Management in Indore, India.
*** Dr. Lu Wei is an associate professor at the University of Science and Technology of
China and director of its MBA program in Hefei and Shanghai, China.

mantra that the ultimate motivations for CR and CR reporting are economic
benefits for their firm or shareholders, even as they agree that CR reporting
is a means to communicate with stakeholders that yields benefits for their
businesses. The authors suggest that Western companies tailor their rhetoric
when explaining motivations for CR and CR reporting to Eastern audiences
to reflect an appreciation for behaving responsibly for its own inherent

The Bhopal tragedy of 1984 catalyzed what has been called the third
generation of environmental legislation, known as "informational
regulation."' The most directly associated piece of legislation is the
Emergency Planning and Community Right-to-Know Act of 1986
(EPCRA), 2 which, rather than limiting behavior, only requires companies
to provide emergency response plans and the disclosure, through the Toxic
Release Inventory (TRI), of inventories of specified dangerous chemicals.3
In the ensuing two decades, voluntary corporate responsibility (CR)
reporting-companies publicly disclosing their environmental, societal,
and economic impacts and their efforts to mitigate negative impacts and
enhance positive impacts-has become widely adopted.4 It is alternatively
referred to as Corporate Social Responsibility (CSR) Reporting, Triple
Bottom Line (TBL) Reporting, Citizenship Reporting, or Sustainability
Reporting.5 Of the largest 250 corporations in the world, 64% have adopted

1. See David W. Case, Corporate Environmental Reporting as Informational

Regulation:A Law and Economics Perspective, 76 U. COLO. L. REv. 379, 384 (2005).
2. 42 U.S.C. 11001-50 (2000).
3. See id. 11003, 11022-23.
4.This paper hereinafter will use the term corporate responsibility (CR) reporting
rather than the more commonly used term of corporate social responsibility (CSR)
reporting. The authors are part of a small but hopefully growing community which believes
that the term CSR reporting is overly narrow, inasmuch as many corporate non-financial
disclosures dedicate equal or greater attention to environmental rather than social impacts.
The terms CSR report, CR report, Citizenship report, Sustainability report and Social,
Environmental, and Governance (SEG) report are typically interchangeable; they all involve
a company measuring, aggregating, and reporting non-financial impacts.
5. TBL reporting is a concept that was introduced in the 1980s by John Elkington. The
predominant standard for disclosures was developed by the Global Reporting Initiative
(GRI). The GRI, a multi-stakeholder network of experts, began as a project of a U.S. non-
profit organization, CERES, in 1997. It expanded under the auspices of the UN and in 2002
became an independent non-profit organization based in Amsterdam. Often, the GRI
guidelines are seen as a framework for not only reporting, but also for engaging with
external stakeholder groups. The GRI guidelines are available at Global Reporting Iniative, (last visited May 14, 2008).

CR reporting, as have 41% of companies in a sample consisting of the

largest 100 companies in each of 16 developed economies.6 However, the
practice of CR reporting is still in its nascent stages in China and India-
two of the world's most dynamic and significant economies. To the best
knowledge of the authors, there has not been a cross-national study of CR
reporting including China and India published to date, nor a comparison of
Western and Eastern attitudes and experiences related to CR reporting.
The authors began to fill this void in existing scholarship by
reviewing available literature and interviewing executives who have
implemented CR reporting in China, India, and Japan. This paper contains
observations about the similarities and differences in the motivations for,
the implementation of, and impacts resulting from CR reporting among
respondents in these three countries and between the East and the West.


The growth of "soft law" standards suggests that companies see some
value in at least appearing to abide by a code of conduct that requires
greater transparency than what is mandated.7 Voluntary codes of conduct
such as the UN Global Compact, in addition to voluntary disclosure
guidelines such as the Global Reporting Initiative (GRI) and Organization
for Economic Co-Operation and Development (OECD) standards, are
examples of these soft law approaches that have established norms
enforced by a desire to avoid shame rather than a desire to avoid sanctions.
The growth of socially responsible investment is also a phenomenon
that contributes to firms voluntarily disclosing non-financial data. 12% of
managed assets are invested in stocks that are currently screened based on
ethical criteria.8 Investors and fund managers therefore are making
investment decisions partially based on the non-financial disclosures of
publicly traded corporations. Further, there is growing evidence of a
demonstrable positive correlation between good financial performance and
successful management of commitments to corporate responsibilities. 9


RESPONSIBILITY REPORTING 2005, at 4 (2005) [hereinafter KPMG INT'L SURVEY], available
7. See Roberta S. Karmel, Reform of Public Company Disclosurein Europe, 26 U. PA.
J.INT'L ECON. L. 379, 391-92 (2005).
8. Jeroen Derwall et al., The Eco-Efficiency Premium Puzzle, 61 FIN. ANALYST J. 51,
51 (2005).
9. See Terra Pfund, Corporate Environmental Accountability: Expanding SEC
Disclosures to Promote Market-Based Environmentalism, 11 Mo. ENVTL. L. & POL'Y REV.
118, 119 (2004).

Finally, the community of legal scholars has advocated informational

regulation as the third generation of regulation of environmental and
societal impacts.' 0 In this view, the first generation of regulation consisted
of "command and control" and the second involved tradable emissions
permits." The disclosure of non-financial data is arguably a means of
control; inasmuch as companies manage what they measure and inasmuch
as markets with better information ought to function such that bad actors
are punished. 12



A. Motivations: Why Engage in CR Reporting?

KPMG's 2005 global study of CR reporting surveyed executives at
the largest 250 corporations in the world plus executives at the top 100
companies in sixteen industrialized economies, including: Australia,
Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, the
Netherlands, Norway, South Africa, Spain, Sweden, the UK, and the
United States.'3 Because this list of countries is, with the exception of
Japan, solely comprised of Western economies, and because the vast
majority of responses were therefore provided by Western executives, the
results can be interpreted to reflect a predominantly Western perspective.
Of the 250 top-grossing global corporations, 64% (or 161) have adopted
CR reporting, as have 41% (or 658) of companies in a sample consisting of
the 100 top-grossing companies in sixteen developed economies.' 4 Of the
respondent companies issuing CR reports, 40% indicated that their report
metrics were based on the GRI guidelines for CR reporting. At the time of
this study, at least 660 companies in fifty countries had adopted the GRI
guidelines for their CR reports, which is some indication of a desire to take
a disciplined, structured, and transparent approach to CR reporting.
In response to the question of why they implemented CR reporting,
respondents could choose multiple responses. Economic considerations
were identified by 74% of respondents while 53% chose ethical
considerations as the primary drivers. 15 Respondents identified specific key
drivers of their CR practices: 53% of respondents selected innovation and

10. See Case, supra note 1.

1I. Id.
12. See id. at 383.
13. KPMG INT'L SuRvEy, supra note 6.
14. 1d. at 9.
15. Id. at 18.

learning, 47% chose employee motivation, 47% chose risk management or

reduction, 39% chose access to capital or improving shareholder value, and
27% chose positive impact on reputation or brand. 16 The desire to increase
market share was identified by 21% while 13% chose strengthened supplier
relationships, 9% chose cost savings, and 9% chose improved relationships
with government. 17
Several observations are worth noting. This data confirms that
economic benefits outweigh ethical duties as the self-identified motivations
for the practice of CR reporting in the West. This statistical data reflects the
typical rationale repeated in Western CR reports. Western corporations
often explain that they see CR efforts and CR reporting as ultimately
serving the interest of shareholders. The top two specifically identified
economic benefits of CR reporting both involve the impact of the practice
on employees (motivating employees and encouraging innovation). Better
control of risk and improved access to capital and shareholder relations
were the next three most commonly identified benefits. A concern for
brand management was only the sixth most commonly identified impact,
with less than one in three respondents identifying this as a reason for CR
reporting. This ranking of motivations indicates that CR reporting is
perceived to be more than merely a public relations exercise.
In a related finding, a 2003-2004 survey conducted by the Center for
Corporate Citizenship at Boston College, the U.S. Chamber of Commerce,
and the Hitachi Foundation found that 82% of executives acknowledged
the importance of social and environmental responsibility to the bottom 18
line, 59% to their companies and reputations, and 53% to their customers.
The study also concluded, however, that there is considerable variation
among businesses in terms of their embedding these values into their
functions and in the effective implementation of meaningful practices to
further the causes of social and environmental responsibility.1 9
In a study of the motivations of Japanese companies, close
relationships with foreign shareowners and foreign customers appeared to
be a stronger influence on a firm adopting CR reporting than its links to
domestic owners. 20 The results of the study were interpreted by its authors

16. Id.
17. Id.
18. Philip Mirvis & Bradley Googins, The Best of the Good, HARV. Bus. REv., Dec.
2004, at 20, 21.
19. Id.
20. Kanji Tanimoto & Kenji Suzuki, Corporate Social Responsibility in Japan:
Analyzing the Participating Companies in Global Reporting Initiative 7-8, 16 (The
European Inst. of Japanese Studies, Working Paper No. 208, 2005),
eijswp/papers/eijswp0208.pdf (last visited May 14, 2008).

as indicating that modem business realities outweigh the influences of

cultural tradition and that foreign pressures are playing an important role in
the spread of the practice of CR reporting.

B. Implementation: Do Culture and Corruption Matter, and What

Else Might Affect Success?
Previous scholarly studies have suggested that current business
realities, such as corruption, can have an effect on the functioning of firms.
For example, a comparison of ethics policies and practices in large
corporations in Spain, Brazil, and Argentina found similarities among
companies across the three countries, but also found a greater emphasis on
avoiding misconduct and taking ethical criteria into account when selecting
personnel in countries where corruption is most prevalent.2' While ethics
policies are not precisely the same as the responsibility of a corporation in
managing its impacts on stakeholders, the study indicates that corruption in
a society has some impact on the decisions of a firm's management.
Similarly, previous studies have investigated whether traditional
cultural values have an impact on the CR efforts of companies. In India, for
example, there is a long-standing tradition of philanthropy among India's
business elite. 22 However, some large-scale surveys of modem Indian CR
practices indicate that Indian businesses continue to prefer to fund trusts
and foundations at arms length from the company rather than integrating
CR practices into their core business processes. Further, because of the lack
of integration of CR practices into core processes, CR initiatives in India
have a reputation as largely being pursued on a case-by-case basis or driven
by individual CEOs.23
The idea that the success of CR initiatives is "strongly dependent" on
their footing in society has been posited before. 24 Other authors have also
identified the need to produce theoretical and empirical knowledge and 25
have taken steps to begin addressing this need with a study in Pakistan.
Most relevant to the present study's focus on CR reporting, it has been

21. Dom~nec Mel6, Patricia Debeijuh & M. Cecilia Arruda, CorporateEthical Policies
in Large Corporationsin Argentina, Brazil and Spain, 63.1 J. Bus. ETHICS 21, 33-34 (2006).
22. Bimal Arora & Ravi Puranik, A Review of CorporateSocial Responsibility in India,
47.3 DEVELOPMENT 93, 96-97 (2004).
23. Id
24. Reinhard Steurer, Markus E. Langer, Astrid Konrad & Andr6 Martinuzzi,
Corporations,Stakeholders and Sustainable Development I: A Theoretical Exploration of
Business-Society Relations, 61.3 J. Bus. ETHICS 263,263 (2005).
25. Peter Lund-Thomsen, Towards a Critical Framework on Corporate Social and
EnvironmentalResponsibility in the South: The Case of Pakistan, 47.3 DEVELOPMENT 106,
106-14 (2004).

argued that local managers in a collectivist society are less likely to openly
raise issues with superiors because such conduct is considered an affront to
another's face.26
One study suggests that country-specific cultural sensitivities are
salient to CR reporting, inasmuch as CR reports address the issues that are
of greatest concern to a particular society.27 For example, Tanimoto and
Suzuki have documented that Western CR reports disclose more data on
gender equity issues as compared to Japanese CR reports, while Japanese
CR reports disclose relatively more data on environmental impacts.
In addition to external contemporary realities, such as corruption and
traditional cultural factors, one would naturally guess that factors within a
company, such as information systems and firm culture, also affect the
implementation and impacts of CR reporting. Studies have lent this
supposition some credibility. Among CEOs in emerged economies who
have implemented CR reporting, there is a consensus that the internal
intellectual capital, technology, and culture of a firm can impact the success
of the adoption of CR reporting.28 Put another way, the knowledge
management that turns CR reports into sustainable performance
improvements involves people, process, and technology.29

C. Impacts: What Do Businesses Gain from CR Reporting?

Large companies have found that CR reporting can boost profitability
by, for example, prompting corporations to make socially- and
environmentally-conscious investments that rapidly pay for themselves and
contribute to the bottom line by reducing energy costs or the costs of
absenteeism and worker errors.30 Integrating concepts such as total quality
management (TQM) and cost of poor quality (CPQ) with CR reporting has
been suggested as a logical next step to maximize the potential of CR
reporting to help businesses realize cost savings. 31 Richard Ellis, Head of

26. Y. Ling, Steven Floyd & David Baldridge, Toward a Model of Issue-Selling by
Subsidiary Managers in MultinationalOrganizations,36 J. OF INT'L Bus. STUD. 637, 644-45
27. See Tanimoto & Suzuki, supra note 20.
28. See Pamela Ruebusch, The Triple Bottom Line: What It Means and Why We Need to
Embrace It, CAN. TRANSP. LOGISTICS (Feb. 2002), available at
29. Carol Gorelick & Brigitte Tantawy-Monsou, For Performance Through Learning,
Knowledge Management Is the CriticalPractice,12 LEARNING ORG. 125, 125-29 (2005).
30. See, e.g., Anita Roper, Proving the Casefor Sustainability at Alcoa, 1 CORP. RESP.
MGMT. 34, 34-37 (2004).
31. See Raine Isaksson, Economic Sustainabilityand the Cost of PoorQuality, 12 CORP.
Soc. REsp. & ENVTL. MGMT. 197, 197-209 (2005).

Corporate Social Responsibility at Boots, a UK-based health and beauty

products company, has found that cooperation between himself and the
Chief Financial Officer and the practice of32tracking environmental impact
data has resulted in significant cost savings.
It is worth noting that large MNCs in developed economies are not
the only enterprises that have observed positive outcomes as a result of the
adoption of CR reporting. Small and medium-sized enterprises (SMEs)
located in developing countries and engaged in textile manufacturing and
the tanning of leather-a highly-polluting activity-were shown to mitigate
their harmful activities upon adoption of CR reporting.3 3 The same study
found that, even in developing countries, these SMEs became more
profitable when they implemented CR reporting.
The practice of making disclosures seems to correlate with better
financial performance; companies that disclose more non-financial
information have been found to be more profitable.34 There is a growing
trend of making a strictly "business case" in favor of CR reporting.3 5
D. Known Unknowns: What About China, India, and Eastern v.
Western Perspectives?
The most noticeable gaps in the existing scholarship are geographic.
The practice of CR reporting has not been thoroughly studied in China or
India. This is partly due to the fact that, at the time of this study, the
practice had not yet been widely adopted in China and India. One
indication of this is that accepted guidelines for systematic CR reporting
had been adopted by only fourteen Indian companies and thirty-four
Chinese enterprises (twenty-three of which are in Hong Kong), including at 36
least one foreign subsidiary in China and three universities in Hong Kong.

32. Telephone Interview with Richard Ellis, Head of Corporate Soc. Responsibility,
Boots (June 29, 2006).
33. Ralph Luken & Rodney Stares, Small Business Responsibility in Developing
Countries:A Threat or an Opportunity?, 14 Bus. STRATEGY AND ENv'T 38, 43-52 (2005).
34. Diana C. Robertson & Nigel Nicholson, Expressions of Corporate Social
Responsibility in U.K. Firms, 15 J. Bus. ETHIcS 1095, 1097-1106 (1996).
35. See Bj6rm Stigson, Foreword to CHARLES 0. HOLLIDAY, JR. ET AL., WALKING THE
Tree Huggers, Soy Lovers, andProfits, 147 FORTUNE 98, 98-105 (2003) Oliver Salzmann et
al., The Business Case for Corporate Sustainability: Literature Review and Research
Options, 23 EUR. MGMT. J. 27, 27-35 (2005).
36. - Global CSR Resources,
(last visited May 14, 2008) (follow "advanced reports search" hyperlink; then, under
country, search for "People's Republic of China," "Hong Kong," and "India"). Figures
include companies reporting under the GRI Guidelines, AccountAbility's AA1000
Assurance Standard (AA1000AS), and the Global Compact Index. See id.

However, there are pioneering companies in India that have been

issuing CR reports since 2004. In mainland China, there are pioneering
companies that have adopted the practice of gathering, aggregating, and
making available data on environmental impacts. Even though such
environmental reports are now strongly encouraged by the Chinese
government and required of companies that violate pollution standards, the
practice was adopted at these leading companies voluntarily before it was
required. These businesses therefore provide a context for studying the
motivations for, implementation of, and impacts arising from voluntary CR
reporting in China that is analogous to voluntary CR reporting in India and
Another gap is thematic. There is a general lack of cross-national
comparisons describing the differences and similarities in motivations,
implementation experiences, and impacts related to CR reporting. Such
comparisons, especially of experiences and impacts in Eastern as compared
to Western companies, could be very useful to corporations seeking to
adopt these practices cross-nationally and to stakeholders seeking to
understand these reports. The authors therefore developed specific
questions and proceeded to interview seventeen executives in China, India,
and Japan to learn about their experiences and perspectives.37
The first major area of questioning concerned motivations for CR

37. The authors identified companies in China, India, and Japan as leaders in the field of
CR reporting. At each company, at least one executive with experience in implementing CR
reporting was interviewed. Some respondents requested anonymity in exchange for sharing
their candid observations. Some also requested that their company not be named. Twelve
total interviews were conducted involving seventeen participants at nine companies. Four
companies were Japanese, two were Chinese, and three were Indian. All executives cited in
this paper were either CEO level or Vice Presidents accountable for their companies'
The companies were selected to serve as rough analogs of each other cross-
nationally. At least one respondent from a heavy industrial manufacturing company was
interviewed in each country; a representative example is Tata Steel. At least one respondent
from a well-known light consumer moveable goods company (referred to in this paper as
light industry companies) was interviewed in each country. These included Huatai Group in
China, ITC in India, and Ajinomoto in Japan. Additionally, an executive and a supporting
manager from an electronics component manufacturer in Japan, NEC, were interviewed.
All interviews were completed in person and based on a common list of questions.
The lead author was present for all interviews to assure uniformity and to observe and
record similarities and differences in both the substance and tone of each response. The
questions covered three main learning areas, namely: ascertaining the motivations for, the
implementation challenges of, and the effects of CR reporting. Within these three areas,
fifteen major questions were asked with several entailing planned follow-up questions. The
interviewers explored unplanned tangents to a reasonable degree and the interviews
typically lasted from one hour to one and a half hours.

reporting. The authors were curious whether Tanimoto and Suzuki's

hypothesis regarding the salience of foreign connections and pressure
would be confirmed. The authors asked from what level of the organization
the idea originated and what functions CR reporting served. The authors
specifically asked about the ultimate motivations for CR reporting as well.
This was an opportunity to learn if the often-repeated narrative that "we are
doing this because it ultimately serves our shareholders by doing X and Y
for our company" would be echoed in the explanations of Eastern
A second set of questions inquired about the implementation process.
For example, the authors asked whether culture or corruption in society
mattered and asked the respondents to rank the importance of people and
training and firm culture versus information technology versus the
commitment of executives.
Finally, the authors asked about the impacts of CR reporting. One
question was whether and how it impacted CR performance. The more
significant goal was to determine if the benefits identified by Western
managers would also be identified by Eastern managers. Based on data
from the 2005 KPMG study described above, the authors expected
executives to readily identify benefits to their businesses after adopting CR
reporting. The authors also asked follow-up questions about the precise
ways in which CR reporting was perceived to have affected the firms'



A. In China, India, and Japan, Improving Company Performance:

The Business Case Mantra Was Rejected as a Primary Ultimate
In all three countries, but especially in China, respondents rejected the
suggestion that the business case was the primary motivation for beginning
to monitor non-financial impacts and use CR reporting. The fact that all
executives rejected increased profitability or an increase in share value as
an ultimate motivation for CR reporting is noteworthy because, as stated
above, KPMG's worldwide study revealed economic motivations to be the
primary reasons for adopting CR reporting in Western economies. Western

38. The assertions presented in this section, and sections V and VI infra, derive from the
in-person interviews described above. See supra note 37. Quoted language has not been
otherwise attributed to protect the survey respondents' confidentiality. All interview records
are on file with the primary author.

companies typically justify investments in CR activities or CR reporting as

ultimately serving the interests of shareholders.
The Chinese heavy industry executive repeatedly and fiercely stressed
that "one should not expect a benefit from doing the right thing. If one
does, one will be disappointed." Similarly, his light industry company
counterpart stated that often his company's philanthropic activities are not
publicized and "not used for public relations benefits." In China, one
respondent practically inverted the priorities that a Western executive
would typically articulate: the light industry executive in China stressed his
perspective that, as a businessperson, "to be honest ... your primary
responsibility is socially [and] environmentally, to the government and to
employees. Lastly, to shareholders and owners."
Similarly, the Indian light industry company chairman answered that
CR activities and CR reporting were "adopted first for moral conviction.
Now, [we are] beginning to see the long-term business sense." The Indian
heavy industry executives also pointed to their company's well-established
reputation as a leader in responsibility and philanthropy to discredit the
notion that GRI adoption was driven by a desire to reap reputational or
business benefits, and that it rather was intended as a means to structure
stakeholder engagement and communications.
In Japan, there was similarly, in several instances, some rejection of
the business case as an ultimate motivation for CR and specifically for CR
reporting. In the heavy industry company, the senior respondent stressed
that external pressures "did not matter .... [We] did it because of the
social trend-and we think it is the right way. We agree with the social
trend. .. [we were] not pressured from outside." He further stressed the
importance of ishiki-which the respondents translated as "societal
awareness"-which is a higher value than making money. The senior
respondent in the Japanese electronics company said that it is impossible to
prioritize the importance of shareholders vis-d-vis that of other
stakeholders, commenting that such an exercise is perhaps "an outsider
tendency." The rejection of the business case mindset was most strongly
emphasized at the conclusion of the meeting with representatives of the
Japanese heavy industry company. The senior respondent in the room, in
response to the final question which asked for his advice to Western
managers operating in Japan, advised that Westerners should take note of
the following:
Two things: [1] [with regard to] the purpose of doing CSR
[Corporate Social Responsibility] in Japan: [The] more important
thing is to do it for society-not to improve one's business. [2]
Ishiki-awareness. There are two important things: awareness
and systems. Systems [between the West and Japan are] not so
different, [but] awareness is different in Japan. When it comes to

CSR, it is [pursued] more for [the benefit of] society [in Japan].

B. Foreign Pressure Not Seen as Significant

Across China, India, and Japan, none of the respondents agreed with
the suggestion that foreign pressure (consumer pressure, investor pressure,
or supply chain pressure from abroad) influenced their decision to adopt
CR disclosures. The responses from the Japanese companies contrast with
the conclusions of Tanimoto and Suzuki that the links with foreign
investors and customers are likely drivers of the practice; at least,
executives either do not openly acknowledge or do not perceive foreign
influences to have any salience to their companies' decisions to begin CR

C. Who Decided to Implement CR Reporting and What Function

Does It Serve?
The Japanese executives' answers were the most similar to the
answers of respondents to the 2005 KPMG study (which included Japanese
respondents) when asked about the function of CR reporting. One response
at NEC provides an example of the similarity between the present study's
findings and those of KPMG: "Accountability and transparency are
important elements of CSR practice and they bring value to the company
such as strengthened compliance and trust from our stakeholders.... [I]t
motivates employees and builds the image of the company. Building trust
[is] very important-it also makes the company attractive to work for."
However, the Japanese respondents' replies can be interpreted as
implying that on some level, the perception of a societal trend may have
influenced their decision to adopt the practice. A Japanese light industry
company executive indicated that they adopted the practice of CR reporting
because they see it
as a means of communication among stakeholders including
employees. Our business activities are developed all over the
world and CSR has to be recognized by all of us. We need to
have the communities where we do business know our activities
and have to contribute to stakeholders through our products and
The Japanese heavy industry company representatives similarly
indicated that the chief function is to communicate with stakeholders, but
also pointed to adopting "a societal trend with which we agree."
While the Japanese respondents cited the benefits articulated above
and explicitly did not or could not ascribe the decision to begin reporting to
any one individual, the Chinese companies readily identified the personal
vision of the chief executive as the principal motivation and locus of the

decision. The Chinese heavy industry company's chairman stated that the
decision to mitigate and monitor environmental impacts was based solely
on his decision to implement his personal vision of "better cars, better
environment." Similarly, the Chinese light industry chairman was the locus
of the decision to engage in CR initiatives and reporting, motivated by his
sense of moral duties. However, the Chinese co-author of this article points
out that there was a long-term self-interested motivation for voluntary
measurement and reporting of environmental impacts. Namely, in the long-
run, it improved relations and established trust between these companies
and the Communist Party. The Communist Party, in its role as resource
allocator and regulator, can be seen as a powerful stakeholder. Therefore,
while the decision to voluntarily report on environmental impacts may truly
have been a single chairman's decision, it was likely prompted by a
combination of personal vision and realization that it would improve
communication and relations with the stakeholder-i.e., Communist Party.
The Indian respondents' answers were more similar to those of the
Chinese respondents than to the Japanese respondents, with a greater
emphasis being placed on the roles of senior executives in driving the
practice. However, consistent with the answers of their Chinese and
Japanese counterparts, the Indian respondents' explanations revealed that
the motivation was to improve communications with stakeholders.
The comments of the light industry company chairman provide the
most vivid example of the extent to which the CR activities and CR
reporting may be driven by the personal convictions of executives:
[I] wouldn't stop [CR activities] if the shareholders were
troubled. It is not a matter of making a rich man richer and
richer .... I am using his money to make society better.... I am
enticing capital to be with me so that I can do something much
better. What gives satisfaction? Not making a rich man richer.
His Vice President for Environment, Health, and Safety then clarified
that the specific motivation for adopting GRI-indexed CR reporting was to
improve stakeholder communications: "We found that our performance
was already very good. We benchmarked, and it looked like we were
complying with 90-95% of GRI guideline requirements.... So we wanted
to communicate what we were already doing but also wanted it audited."
At the Indian heavy industry company, Tata, the answers from several
executives independently and consistently explained that they had a
personal stake in their company's adoption of GRI-indexed reporting
because of their leadership roles in the development and dissemination of
the GRI standards as tools for managing stakeholder relations and
communication. The Indian heavy industry executives went on to articulate
the motivation for adopting GRI-indexed CR reporting: the main benefit of

adopting systematic CR reporting was to move stakeholder

communications "from ad hoc'ism to addressing [stakeholder concerns] in
a structured way."



A. Cultural and Business Climates Are Not Identified as Significant,

but They Should Not Be Ignored.
When asked about the salience of traditional culture and modem
business climate realities such as corruption, none of the respondents
identified these as significant factors in the implementation of CR
However, there were some nuances in the responses that bear
elaboration. The Chinese light industry executive described traditional
Chinese culture as a "double-edged sword" when implementing CR
reporting. He elaborated that while Chinese culture may make some
managers less inclined to adopt administrative reporting structures, the
cultural value of saving face motivates business people to not be seen as
laggards, possibly driving them to keep up with others' best practices and
to avoid being publicly identified by government authorities as law-
breakers. To quote his precise response: "People are afraid of losing face-
if others are doing well and you are shown not to be-that encourages
reporting. But [on the other hand] people don't like to disclose
In terms of obstacles to implementation, not a single respondent in
any country agreed that corruption was an obstacle in their implementation
of CR reporting. Some executives in each country did, however, indicate
difficulties in gathering reliable data. Such difficulties in gathering data
from disparate units of a large organization may be expected. Alternatively,
in some situations, this may hint that, in fact, modern business culture or
corruption on some level is a factor in the early stages of adopting CR
reporting. Based on the statements of respondents, it is only possible to
conclude that some initial difficulties in gathering data are not unusual in
either China, India, or Japan. For example, one respondent at the Indian
heavy industry company answered that in a few instances, yes, there were
initially some inconsistencies or an oversight in data collection in the past,
despite a strictly enforced code of conduct and renowned culture of
integrity. At the Chinese light industry company, some difficulties in
gathering accurate environmental data were noticed at first but corrected; to
quote the precise response: "Yes-on the front line, some tend to maybe
underreport problems-but we are powerful in implementation." At the
Japanese light industry company, the answer was that there were no

difficulties in gathering data, but rather initially surprising difficulties in

"getting employees to intemalize values." At the Japanese heavy industry
company, there were sometimes delays in the reporting of requested data
from their factories.
B. Means of Implementation and Anticipated Challenges Differed
The Chinese respondents both indicated that additional employees
were hired to implement the practice of environmental reporting.
Additional employees were not hired in Indian respondent companies, but
rather existing departments were used. Additional employees were not
hired in Japanese respondent companies, but rather existing employees
were reallocated and departments were reorganized to implement the
Additionally, both Chinese executives-but no others-volunteered
that they expected the costs of implementation to be the only challenge in
establishing the practice of CR reporting. Japanese respondents indicated
that setting up processes for information gathering was the expected
challenge. Indian respondents both indicated that aggregating existing data
and then reformatting the data was the challenge that they expected.

C. Common Factors for Successful Implementation: Leadership and

Company Culture Matter Most
Respondents were asked about the relative importance of possible
drivers of success or failure in the implementation of CR reporting,
including information systems, company culture, employee training, and
the commitment of top executives.
The commitment of executives was identified as most critical by both
Chinese respondents. The commitment of executives was also identified as
the greatest determinant of success by the Japanese respondents. The
commitment of executives is the greatest determinant of success in the
opinion of the chairman of the Indian light industry company. Only
respondents at the Indian heavy industry company, Tata, identified the
culture of the company as the greatest determinant of success. Everywhere,
the training and participation of employees were seen as more important
than information systems.



A. Did CR Reporting Affect CR Performance, and How? Are

Innovation and Change Driven "Top-Down" or "Bottom-Up" or
Is There a Collaborative Process?
All respondents said that the process of CR reporting positively
affected their environmental and social performance. When asked about
how this occurred-namely, did solutions initiate from the local employees
and managers or from the executive level-some differences emerged that
were consistent with the observations mentioned above. First, all of the
Japanese respondents clearly answered that the process by which social and
environmental performance is improved is neither entirely "top-down," nor
"bottom-up." At the Japanese electronics company, the senior respondent
said that improvements are achieved by a "collaborative process of goal
setting and developing solutions." The respondent at the Japanese light
industry company also said that "it is a collaborative process-not
completely top-down, but not completely bottom-up. Business unit
managers set goals. Top-down [management is] necessary sometimes. But
bottom-up is also needed sometimes." Finally, a respondent from the
Japanese heavy industrial company stated:
Other employees, not just CSR people, start to be aware and
change behavior. Bottom-up goals are determined by unit
managers. Environmental section managers of factories twice a
year come to Tokyo to decide on goals. The environment
committee then authorizes those goals. These goals are discussed
in an overall committee meeting.
By contrast, innovation and change in response to non-financial
reporting were identified as "top-down" directed at the Chinese
respondents' firms. For example, the heavy industry respondent stated: "In
1995, I, the Chairman, came back from the U.S. and decided on a mission
of better cars, better environment .... All problems can be foreseen-
nothing can be hidden." He went on to say that "[t]he major factor is top
management setting goals. The front line also has an incentive." At the
light industry company, the chairman stated that "top-down" goal-setting
was the means by which the reporting process resulted in changes.
The responses of executives at the Indian companies were
characterized by three similarities: (1) that the strong culture of the
companies would have resulted in changes, irrespective of publicly
reporting on progress, (2) that changes occur because of a collaborative
process, but (3) upper management is most involved in the process of
making and using CR reports. When asked if change was driven "top-

down" or "bottom-up" at his company, the chairman of the light industry

company said that change was driven "both ways-[it is] interactive."
However, given the content of the rest of the interview, it was clear that
two of his vice presidents suggested public CR reporting to communicate
the efforts which are largely directed by the chairman. At the Indian heavy
industry company, the answer was that a "collaborative process of change"
best characterized how social and environmental practices were improved
in response to data. However, respondents at the Indian heavy industry
company elaborated that "if you were to go to the shop floor and ask 'do
you know about TBL or GRI' the people may not know about corporate
sustainability. It stops at chiefs with key performance indicators."

B. Impacts on Firm Performance: Benefits Not Expected, but

Noticed After a Few Years
When asked directly whether they attribute any financial impacts to
CR reporting, the Chinese respondents both replied "higher costs." The
Indian and Japanese respondents initially replied that they were not sure
about what, if any, financial impacts could be attributed to CR reporting.
However, in the course of discussing specific examples of how CR
reporting might impact different aspects of their businesses' functions that
contribute to profitability, Chinese, Indian, and Japanese respondents all
indicated that specific elements of the business case were noticed after a
few years of CR reporting. Respondents answered the specific questions as
1. Does CR Reporting Help to Attract and Motivate
This was indicated as one of the primary ways that CR reporting
benefited the Japanese heavy industry respondent. Further, all Japanese
respondents indicated that the degree of the positive impact of CR reporting
on employees was surprisingly significant.
The Indian light industry respondent said that CR activities boosted
employee morale, but that given the company's longstanding reputation as
a responsible company, it would be difficult to isolate the role of just CR
reporting as a cause of heightened morale. The Indian heavy industry
respondents indicated that it is a difficult question to answer; for some
employees, CR reporting is likely not important, while for others elements
of corporate responsibility may affect the degree to which they are satisfied
with their jobs.
The Chinese heavy industry respondent answered that his company
"is already a great place to work, and their [the employees'] first concern is
to earn more." The Chinese light industry respondent indicated that "a very
positive reputation for environmental and social conduct helps" in

recruiting good employees, but that it is "one of a comprehensive set of


2. Does CR Reporting Encourage Employees to Improve

Both Chinese respondents and the Japanese heavy and light industry
respondents agreed with this statement. The Indian soft industry
respondents did not think they had a basis to answer this question and the
Indian heavy industry respondents suggested that the effects of CR
reporting probably extend down to a certain level of unit managers who
may have non-financial metrics included in their key performance
indicators, but that otherwise, ordinary employees on the factory floors
may not be familiar with CR reporting.

3. Does CR Reporting Improve Relations with Customers?

The Chinese and Japanese respondents agreed with this statement.
The Indian companies said that they already had strong reputations for
being responsible and the Indian heavy industry company already expended
significant effort on customer relations, so both sets of Indian respondents
stated that the extra benefit resulting from CR reporting was difficult to

4. Does CR Reporting Improve Relations with Company

Owners or Shareholders?
The Chinese respondents agreed that it does. The Indian light industry
respondents indicated that there were some positive reactions from a few
shareholders and the Indian heavy industry respondents said that
institutional investors cared. A Japanese light industry respondent indicated
that improving shareholder relations was the primary way that CR
reporting impacted the business. The Japanese electronics company's
respondents stated that it helped inasmuch as the company's shares became
attractive to socially conscious investors. The Japanese heavy industry
company's respondents did not think that CR reporting impacted
shareholder relations.

C. So Is There a Business Case?

Yes. As described above, while the impacts may not be anticipated or
easily separated and quantified, all respondents in Japan, China, and India
identified some positive impacts on their company's functions attributable
to CR reporting. The specific identifiable impacts observed in Western
companies were also, to some extent, noticed at these Eastern companies.
Systematic CR reporting had been adopted at the respondents' companies

within the three years prior to the present study. Therefore, the adoption of
CR reporting has yielded noticeable positive impacts in these countries
within three years of adoption.
In India, it bears noting that this is a qualified yes. Both companies
said they were less sure that benefits directly accrued from CR reporting as
opposed to CR activities that were already underway. However, they
acknowledged that communications with shareholders and customers have
been to some extent facilitated and that CR reporting allowed them to see
cost savings and creative business opportunities faster. As stated by a
respondent at the Indian heavy industry company:
We would have done all this [CR initiatives] anyway. We were
doing this for 100 years. So what did it [GRI-indexed CR
reporting] accomplish? First, we listed information in a
structured form; second, now that we report in an internationally
recognized format, there has been some refining and addressing
[CR] in business processes.
It bears repeating that relations with the government can be improved
by a company generating CR reports. The Chinese co-author stresses that
this is important to understanding why there is a business case for CR
reporting in China. One's relations with the Chinese government and
Communist Party can be vital in deciding matters of access to resources
and access to business opportunities. Government relations were also noted
to have been facilitated in India by the adoption of CR reporting.
Finally, it is noteworthy that the Japanese responses to the specific
questions in the preceding section most closely matched the pattern of
responses to these same questions in KPMG's 2005 survey of executives in
the sixteen most developed economies. For example, both the respondents
in KPMG's study and in the present study perceive positive impacts of CR
reporting such as boosting employee morale and encouraging employees to
innovate. 39 Another example of a respondent in the present study echoing
the perceptions of KPMG's respondents was the statement of the senior
respondent at the Japanese electronics company: the business case for CR
reporting, in his opinion, includes "risk management, brand, and reputation
and trust and employee motivation."


With regard to the motivations for CR reporting, a major difference

between the Chinese, Indian, and Japanese respondents and their Western
counterparts is the aversion of these Eastern respondents to professing a
self-interested business case for their adoption of CR reporting. They

39. See KPMG INT'L SURVEY, supra note 6.


likewise denied that foreign pressures were salient to their decision to adopt
CR reporting. The Chinese and Indian respondents indicated that executive
leaders made the decision to adopt the practice while the Japanese
respondents did not identify any individuals as accountable for the
decision. Among all respondents, the primary identified function of CR
reporting was to improve communication with stakeholders.
With regard to implementation, none of the respondents in China,
India, or Japan responded that either culture or corruption were significant
factors to take into account. Their responses did suggest, however, that
extra attention to training employees may help overcome initial problems
with data collection. Further, it appears that culture may have played a role
in the resistance of the respondents to accepting the Western utilitarian
mantra that CR reporting was adopted to ultimately serve the self-interest
of the company. Despite some differences in terms of implementation
tactics and anticipated challenges, there was almost a consensus that
executive leadership is the most important determinant of success, with
only the respondents at the Indian heavy industry company asserting that
company culture matters most. Everywhere, the training and participation
of employees was identified as more important than information systems.
As far as impacts, all respondents in China, India, and Japan
perceived CR reporting to improve CR performance and to improve at least
some of the functions of their business. Based on this observation, the
authors suggest that the business case in favor of CR reporting can be
made. Specifically, it appears to be true-in China, India, Japan, and the
West-that within three years, businesses can identify some aspect of their
business that has improved as a result of CR reporting. It bears repeating
that no respondent at any of the companies expected CR reporting to result
in improved financial performance when the practice was adopted; the
Chinese respondents expected higher costs as the only financial impact.
This lends some credibility to their statements with regard to the business
benefits of CR reporting. The specific impacts of CR reporting described in
Western companies, such as a positive influence on employees and
improved shareholder and customer relations, were all to some extent
identified by this group of Eastern executives.
Given the observations above, the authors advise that adopting CR
reporting can yield noticeable benefits for businesses operating in China
and India. The observable benefits appear to be largely consistent with
those noticed at Western companies. Corruption does not appear to be an
insurmountable obstacle. However, some additional emphasis on employee
training may be helpful where corruption is an element in the business
climate. Similarly, cultural differences in China, India, and Japan should
not be seen as a major factor in the details of implementing CR reporting
mechanisms. However, culture may play a role in defining the values of

managers and stakeholders. Strong executive leadership may be needed to

champion the cause in China and India. Most significant, however, is the
authors' recommendation that managers choose their words carefully when
explaining their motivations for CR initiatives and why CR reporting
should be adopted. The authors advise that, when implementing CR
reporting in China, India, and Japan-and possibly other Eastern
countries--explanations of motivations should be couched in terms of
doing the right thing for its own sake, as opposed to explaining that CR and
CR reporting ultimately benefits the firm and its owners.
This insight may be explained by the greater historical influence of
the utilitarian approach to ethics in the West in contrast with the Eastern
notion of dharma, or following a correct path for its inherent virtue.
Regardless of the precise explanation, the most significant lesson of the
authors' conversations with Chinese, Indian, and Japanese executives was
that one mantra does not fit all. That is, the oft-repeated Western
justification that CR reporting ultimately serves shareholders was not
openly embraced, and in some cases was even vigorously rejected as a
guiding principle in the adoption of CR initiatives and CR reporting.
Western executives and their attorneys are well-advised to tailor their
rhetoric when explaining motivations in CR reporting to Eastern audiences
to reflect an appreciation for behaving responsibly for its own inherent