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J Bus Ethics

DOI 10.1007/s10551-015-2878-8

An Evaluation of the Quality of Corporate Social Responsibility

Reports by Some of the Worlds Largest Financial Institutions
S. Prakash Sethi1 Terrence F. Martell1 Mert Demir1

Received: 8 September 2014 / Accepted: 23 September 2015

 Springer Science+Business Media Dordrecht 2015

Abstract This study investigates the variations in the regulations in place. We also observe higher quality
quality and comprehensiveness of 104 corporate social integrity assurance in common law countries. CSR-minded
responsibility (CSR) reports published by the worlds lar- countries and countries with low-quality legal environment
gest financial institutions in 2012. Using a novel measure also report on philanthropy at a higher quality. Finally, we
of CSR report quality, we examine the impact of certain offer guidelines for companies toward improving the
national, legal, and firm-level factors that might explain quality of their reports, and suggestions for scholars and
differences in the overall quality and extent of coverage of researchers for further avenues of research.
various issues in these reports. Our findings show that legal
factors and CSR environment in a firms country of Keywords Corporate social responsibility (CSR)
headquarters play an important role in firms CSR report- reports  Environment social and governance (ESG)  CSR
ing quality. Common law countries exhibit systematically monitor  Global financial institutions  Country-of-origin
higher overall CSR reporting quality than code law coun- effect (EOC)  GRI  ISO 26000  Bribery and corruption 
tries. Countries with higher CSR standards, policies, and Philanthropy
regulations in place also produce significantly higher
quality CSR reports. Firm size, on the other hand, has no
major impact on the overall quality of CSR reports. In Introduction
further analysis of the individual aspects of CSR disclo-
sures, namely environment, philanthropy, bribery and From all accounts, publishing CSR reports is a high-growth
corruption, and integrity assurance, we document that lar- industry. 72 % of the S&P 500 companies published some
ger firms report at a higher quality on philanthropy and form of CSR report in 2013, an increase from 52 % in
bribery and corruption. Bribery and corruption is reported 2010.1 The importance of publishing CSR reports has
at a higher quality in countries with common law tradition, become all too apparent especially in the light of large-
high-quality legal regimes, and high CSR standards and scale financial crisis and resulting public opprobrium
inflicted upon the worlds largest financial institutions. It
An earlier version of this paper was presented at the 18th International would seem that business as usual and being prof-
Symposium on Ethics, Business and Society: Ethics in Accounting, itable are no longer sufficient to garner public trust and
Finance and Banking: Toward a more comprehensive integration. sustain an enduring social license to operate. Instead,
IESE Business School, Barcelona, Spain, June 30July 1, 2014. companies must convincingly demonstrate that their busi-
Research Assistants: Alex Schwarz, Danhua Zhang, Shivani Trehan
ness operations create lowest level of negative externalities
or harm to the commons. It behooves, therefore, that
& S. Prakash Sethi these institutions must take all possible actions to improve their operations and respond to publics concerns in a
1 manner that would engender greater public trust and
Weissman Center for International Business, Baruch College,
The City University of New York, One Bernard Baruch Way,
Box J-1034, 10010 New York, NY, USA Governance, and Accountability Institute (2014).

S. P. Sethi et al.

rebuild corporate reputation. For all the above-stated rea- Business 2014), to examine the variations in the quality of
sons, CSR reports present a viable and highly perfect CSR reports among our sample of financial institutions
opportunity for financial institutions. While CSR disclosure worldwide.3 The CSR-S Monitor offers a unique frame-
has received considerable attention by researchers over the work to assess the content of a CSR report along with the
past several years, our understanding of its implications for accompanying third-party integrity assurance in consider-
financial services companies is very limited due to lack of able detail and depth with regard to the comprehensiveness,
adequate (i) research focusing on this particular industry quality, and accuracy of the information disclosed.
group, (ii) coverage of existing studies by focusing only on Our sample of financial institutions comprises 104 of the
a particular country or region (e.g., Branco and Rodrigues worlds largest companies that have published CSR reports
2008; Bravo et al. 2012; Carnevale et al. 2012; De la in 2012. We focus on financial institutions for a number of
Cuesta-Gonzalez et al. 2006; Jizi et al. 2014), and (iii) reasons. First, they are invariably global in character and
framework for the evaluation of the content and compre- cover most aspects of financial transactions involving the
hensiveness of CSR reports that are highly non-standard- worlds largest corporations, state-owned enterprises,
ized and mostly voluntary in nature (Scholtens 2009). national governments, multi-lateral agencies. Second, as
This study aims to fill this gap in the literature by global financial institutions, their activities can expose
investigating the role of firm characteristics, and legal and countries and companies to significant risks, which coun-
CSR tradition of the country of origin on the CSR reporting tries must take steps to protect. Consequently, these insti-
quality of the largest financial institutions worldwide. We tutions are subjected to a high level of regulatory oversight
hypothesize a considerable influence of corporate, institu- by various national, regional, and international authorities.
tional, and legal processes on the overall quality as well as Finally, notwithstanding the multiplicity of regulatory
the quality of particular aspects of CSR reports such as regimes, their global operations are highly intertwined and
environment, philanthropy, bribery and corruption, and integrated. Therefore, their regulatory oversight must also
integrity assurance due to variations in the scope of regu- be coordinated.
lations by governing bodies across countries and regions.2 We conduct our analysis at two levels. First, we carry
In particular, larger firms are more visible in the public out our analysis in terms of firm size, state of CSR envi-
domain, attract higher media attention, and, hence, are ronment in a country, legal tradition of a firms home
subject to higher public and regulatory pressure (Bowen country, and other exogenous factors. Second, we conduct
2000; Brammer and Pavelin 2004). Accordingly, we pre- our analysis in terms of overall quality and the quality of
dict that these firms are more likely to publish higher information on four contextual elements, i.e., environment,
quality CSR reports to establish and maintain credibility philanthropy, bribery and corruption, and the provisions of
with their various stakeholders and their license to oper- integrity assurance as to the accuracy and substantive
ate. We further examine the national patterns of CSR nature of the reports content. The selection of these con-
disclosures by finance companies, hypothesizing a positive textual elements as ESG issues reflects their importance to
impact on the overall quality of CSR reports of the national the industry, its major stakeholders, and society-at-large,
state of corporate responsibility in the headquartered and thus (a) called for a need for greater explanation for an
country. Legal tradition of a country also has considerable issue that is likely to be of public concern because of its
influence on corporate governance systems and managerial potentially negative connotation, (b) provides an opportu-
decisions (La Portaet al. 1997, 1998; Lopez de Silanes nity to expand on companies activities that would be seen
et al. 1999) including disclosure choices, which extends as positive contributions to community welfare, and
well beyond financial disclosure. While a common law (c) enhances reports overall credibility from the perspec-
regime grants higher protection to shareholders, a code law tive of the companys important stakeholders.
country enables interactions with management and a In terms of exogenous variables, our initial analysis of
broader group of stakeholders than merely shareholders exogenous variables did not show any impact of firm size
(Ball et al. 2000; Smith et al. 2005), leading to expectations on the overall quality of the CSR reports. However, this
of higher quality, more comprehensive disclosures from result changes when we consider disaggregated scores of
firms originating from such countries. contextual elements. In particular, firm size is a major
We use a novel measure of CSR report quality, provided determinant of philanthropy- and bribery and corruption-
by the Corporate Social ResponsibilitySustainability related information in CSR reports, while it does not
(CSR-S) Monitor (Weissman Center for International explain variations in the quality of environment disclosures
and integrity assurance. These results highlight the signif-
2 icance of firm size and related features (i.e., media
KPMG, Center for Corporate Governance in Africa, Global
Reporting Initiative and United Nations Environment Programme

An Evaluation of the Quality of Corporate Social Responsibility Reports

attention, public visibility) based on which firms switch impact of their normal business practices on larger public
among various contextual elements and fine-tune their concerns dealing with issues of economic, socio-political,
disclosure practices to accommodate the diversity in and and governance, i.e., public accountability or environment,
the magnitude of demands made by their stakeholders and social, and governance (ESG) issues. The voluntary nature
that of large society which provides these institutions their of these reports, and the fact that their content and
raison detre. reporting environment, i.e., medium of communication, are
Regarding legal origin, common law countries demon- entirely controlled by the sponsors, affords the companies
strate higher quality disclosures for financial firms when two important advantages. First, it allows them to present
compared with their code law counterparts. On the other the positive ESG elements pertaining to the companys
hand, our analyses of the association with the four con- operations in a manner most favorable to the company.
textual elements provide evidence of variations across Second, when a companys ESG issues have a negative
elements. In particular, common law countries systemati- public impact, the companys CSR report can play a crit-
cally put more emphasis on philanthropy, while the quality ical role in presenting the companys response in a more
of environment, bribery and corruption, and integrity favorable and balanced context.
assurance follow similar patterns in countries from these The voluntary character of the CSR reports, however,
two legal traditions. This supports the argument of a more places a heavy burden on the company to ensure that its
unilateral approach pursued by firms in common law report is accurate and objective, and the information pro-
countries where shareholder influence is paramount vided is relevant to the issues discussed and is verifiable for
drowning out the voices of other stakeholders (Ball et al. its accuracy. Otherwise, it runs the risk of losing credibility
2000; Jaggi and Low 2000). In such regimes, firminvestor and being dismissed by the very stakeholders that a com-
relations typically determine the content of firm disclo- pany is trying to reach and convince of the veracity of its
sures, which is led by the demand for comprehensive and position.
high-quality information. Another major challenge to overcome is the non-stan-
Finally, we observe higher quality CSR reporting in dard character of these reports as to content and manner of
countries where CSR is widespread and there is higher reporting. Unlike financial reports, where the content and
social provision in and largely held traditions and societal reporting format are strictly regulated and thus make these
expectations for such contexts. This finding is also sup- reports easily comparable, CSR reports have not yet
ported by higher quality philanthropy and bribery and evolved some measure of consistency in their reporting
corruption disclosures as well as third-party assurance in practices. Notwithstanding, a number of private and public
such countries. This is consistent with the legitimacy the- agencies have created various formats for reporting CSR
ory suggesting an implicit contract between firms and information and also criteria for measuring and ranking
society, the terms of which firms are required to fulfill to systems. These systems, which in large part are paid by the
attain their license to operate (Brown and Fraser, 2006; reporting corporations, do not make public their criteria for
Cormier et al. 2004; Deegan 2002; Patten 1992). evaluating and ranking these reports, or confine themselves
The rest of the paper is structured as follows. First, the to providing systems that should help companies prepare
conceptual framework is portrayed by outlining a back- such reports.
ground of the current situation in CSR reporting. Second, The growth in the quantityand to some extentthe
research hypotheses are developed linking systematically quality of these reports, has had two positive impacts. First,
our variables of interest and CSR report quality of financial reports are increasingly being scrutinized by long-term
institutions. Third, data and methodology are explained institutional investors and other important stakeholders in
with special mention to the CSR-S Monitor. Fourth, a order to gauge future risks, which the company may have
discussion of the empirical results is provided, and the down-played or ignored in their public communications.
article concludes with the main conclusions and recom- Second, companies risk adverse public reaction when CSR
mendations for future research. reports by other industry members are viewed in a more
favorable light.

Conceptual Framework Current Research on the Quality of CSR Reports

Corporate Challenges in Creating Effective There have been a number of published research papers
and Meaningful CSR Reports examining CSR reports issued by financial institutions. For
the most part, these papers have focused on the financial
CSR reports serve an important business purpose. They industry behavior in specific countries and regions. These
allow corporations to disseminate information for the include Spain (Callado-Munoz and Gonzalez 2011),

S. P. Sethi et al.

Portugal (Branco and Rodrigues 2008), Latin America the accompanying third-party integrity assurance in con-
(Aldama and Zicari 2012), and Europe (Carnevale and siderable detail and depth with regard to the appropriate
Mazzuca 2014; Carnevale et al. 2012). Other authors have implementation of any reporting and assurance standard
addressed overall aspects of financial industrys CSR regardless of the approach followed by the reporterand
reporting (Chih et al. 2010; Attig et al. 2014; Scholtens particularly to the comprehensiveness, quality, and accu-
2009; Wu and Shen 2013; Jizi et al. 2014). We intend to racy of the information disclosed.
build on this research by taking a global perspective that
includes a larger sample and a more systematic analytical Types of CSR Reports
There are a number of organizations that focus on Stand-Alone versus Integrated Reports
identifying, measuring, and certifying the quality of
reports. Among these, two organizations, i.e., Global Current trends in developing CSR reports indicate two
Reporting Initiative (GRI)4 and ISO 260005 have focused directions, i.e., either a stand-alone report or as part of
on developing systems and procedures to assist and guide the companys annual financial report (integrated report).
corporations in preparing CSR reports. GRI provides Both approaches offer some advantages and also certain
specific guidelines for reporting on economic, environ- drawbacks in terms of their ability to engender trust among
mental, and social impacts and risks of organizations. Its the companys stakeholders and also the flexibility they
G4 sustainability reporting framework outlines key provide in creating and disseminating relevant information
performance indicators that organizations can monitor, (Jensen and Berg 2012; Willis 2010). At present, a large
measure, and report in accordance with the sustainability majority of reports follow the stand-alone model. While
reporting principles set out by GRI. Unlike GRI, ISO these reports may follow the style and certain contextual
26000 does not specifically set out guidelines for CSR categories of the regulatory-mandated financial reports,
reporting but rather provides guidance to organizations on they provide a large measure of discretion for the company
organizing their environmental, social, and economic to add qualitative information that may not be strictly
activities, which can then be monitored, measured, and germane to the required elements of financial reporting.
reported to present a clear picture of the reporting organi- Stand-alone reports, however, sufferat least initially
zations performance on CSR to its various stakeholders. some public skepticism because companies may be temp-
It should be noted, however, that GRI and ISO 26000 do ted to engage in window dressing or managerial cap-
not provide any mechanism to assure uniform quality of ture in the sense that they may emphasize issues and
information included in CSR reports using their guidelines; performance measures that would put corporate manage-
nor do they assure any independent external verification of ment in a good light rather than detailed information that is
the information contained in the CSR report. The endeavor relevant to societal expectations (Delmas and Burbano
is collaborative and depends entirely on the commitment of 2011; Palazzo and Richter 2005).
the companies to prepare their CSR report using the ISO The second approach calls for the companies to create
26000 and GRI guidelines. integrated reports where financial and ESG elements are
GRI and ISO 26000 also emphasize strengthening the containedgenerally in separate sectionsin the same
credibility of the CSR reporting and encourage attaining report (Eccles and Armbrester 2011; Eccles and Krzus
some measure of quality assurance in the CSR reports. 2010; Schaltegger and Wagner 2011). This approach sim-
While both GRI and ISO 26000 underscore the need for plifies the task of report creation by standardizing the
comparability of reporting over time as well as among peer treatment of various contextual elements (IIRC 2011).
organizations and aim to achieve this through standard- Unfortunately, it also regresses the treatment of ESG issues
ization, they do not provide any mechanism to monitor and to narrower financial terms and thus limits the scope of
assess the extent to which organizations follow procedures discussion in terms of broader issues of public policy where
outlined in these frameworks in the reporting process. The the companys external stakeholders would be interested in
CSR-S Monitor used in our analysis in the current paper learning about both the positive and negative externalities
aims to fill this gap. We provide a framework which emanating from a companys core business operations.
enables us to assess the content of a CSR report along with In our sample, we include both types of reports. How-
ever, integrated reports constitute only 7 % of the total
sample and do not allow for meaningful separate analysis.
For Global Reporting Initiative (GRI), please see Global Reporting
In the case of integrated reports, we have used only the
Initiative (2014).
5 information that the company identified as CSR report
For ISO 26000, please see Moratis, L. and Cochius, T. (2011);
Craig N. Murphy and JoAnne Yates (2009); International Standards or ESG elements of the integrated approach compatible
organization (2010). with our data set.

An Evaluation of the Quality of Corporate Social Responsibility Reports

Development of Hypotheses about corporate statements, and (c) corporations have

positive information to communicate, but which has not
Influence of Internal Factors on the Quality received enough attention in the news media. Of the four
of Reporting on CSR contextual elements selected for our analysis, environment
and bribery and corruption are intended to test for coun-
Extant literature documents firm size as a major determi- tering of negative information, while philanthropy is
nant of CSR disclosures (e.g., Branco and Rodrigues 2008; viewed as lending positive support for the companys
Chih et al. 2010; Cowen et al. 1987; Patten 1992). On the image, and integrity assurance points to the companys
other hand, firm size measured by various accounting- or strength with regard to the accuracy and substantive nature
market-based measures often extend beyond merely size of the information contained in the CSR reports.
(Bowen 2000). In this respect, larger firms are more likely We expect larger firms to disclose higher quality
to publish high-quality CSR reports to command better information on environment, philanthropy, bribery and
credibility with important stakeholders, improve their corruption, and integrity assurance to improve and sustain
reputation, and thus maintain and enhance their social their public impression and mitigate any potential negative
license to operate (Brammer and Pavelin 2004; Bravo perceptions:
et al. 2012; Campbell 2007; Trotman and Bradley 1981;
H1b Larger firms are more likely to provide higher
Watts and Zimmerman 1978). Larger firms are also argu-
quality information on environment, philanthropy, bribery
ably more diversified geographically, by product/activity
and corruption practices, and integrity assurance in their
type (Bowen 2000; Brammer and Pavelin 2004), and thus
CSR reports.
offer a higher level of detail than smaller ones. In line with
these arguments, we contend that larger firms will be more
likely to publish higher quality CSR reports than their Influence of External Factors on the Quality of CSR
smaller counterparts. Reports
H1a Firms that are larger are more likely to publish
An important aspect of CSR disclosure is the country in
higher quality CSR reports.
which a firm is headquartered. Previous research has
Following our analysis of overall trends in CSR reports, focused on the determinants of variations in voluntary
we focus our attention on the quality of information con- reporting across countries/regions (e.g., Azzone et al.
tained in some of the contextual elements in CSR reports. 1996; Gamble et al. 1996; Meek et al. 1995; Fekrat et al.
The CSR-S Monitor scores eleven contextual elements on a 1996). The legal environment of a country determines the
scale of 0100, higher scores indicating higher quality behaviorincluding disclosure decisions of firms domi-
disclosure. As previously stated, we have selected four ciled in that country (Ball et al. 2000; La Porta et al.
particular elements for detailed analysis in this paper. 1997). Similarly, firms originating from stakeholder-ori-
These are environment, philanthropy, bribery and corrup- ented, code law countries are documented to provide
tion, and integrity assurance. We postulated that in their higher quality disclosures than those from common law
CSR reports, companies would provide greater detail and countries with a narrower focus on shareholders (e.g.,
relevance on those issues where industry and individual Smith et al. 2005). Considering the variety of issues that
companies may have been the subject of negative infor- arise when dealing with a range of stakeholders with
mation through the mass media, e.g., bribery and corrup- varying interests, we expect that firms headquartered in
tion, environment, and sustainability. Conversely, we also code law countries will undertake higher quality of CSR
argued that companies would provide greater detail and disclosures due to pressures for increased accountability
higher quality of issues where they have a positive record from institutional and societal mechanisms in place.
of accomplishments but which may not have received Campbell (2007) points to the influence of institutional
sufficient news media attention, e.g., philanthropy and factors on firms CSR behavior and suggests that firms are
assurance. more likely to adopt socially responsible practices in well-
A similar line of reasoning applies to the analysis of four established institutional environments. Chih et al. (2010)
selected contextual elements and their association with firm test Campbell (2007)s argument using a sample of
size, and the overall quality score of the firms CSR report. financial firms in 34 countries during 20032005 and find
Furthermore, given the voluntary nature of CSR reports, it supporting evidence in countries with better legal
would be logical for the companies to emphasize those enforcement, while they also document an opposite rela-
factors where (a) there is high likelihood of negative news tionship between the extent of shareholder rights and
media reports, (b) there is considerable public skepticism responsible corporate behavior.

S. P. Sethi et al.

However, the literature on the influence of legal/insti- (b) improve the quality of information available in the
tutional factors on the quality of CSR reporting particularly public domain and therefore help important stakeholders
by financial firms is scarce. We aim to fill this gap in the make informed judgments on a companys ESG
literature hypothesizingin line with the above argu- performance.6
mentsthat in countries with strong institutional/legal The CSR-S Monitor has been developed by academic
settings, firms will be more likely to publish high-quality researchers and scholars at the Weissman Center for
information in their CSR reports: International Business at Baruch College, the City
University of New York. To the best of our knowledge, this
H2a Firms will be more likely to issue CSR reports at a
analytical framework and scoring system for contextual
higher overall quality in countries where there are adequate
elements is the first of its kind in the world. The CSR-S
regulatory/institutional standards to promote and ensure
greater disclosure.
Offers a range of objective measures for comparing
We hypothesizein line with the arguments discussed
reports in terms of their comprehensiveness, specificity
previously in this reportthat in countries with strong
of detail, quality, and accuracy of reporting;
institutional/legal settings, firms will be more likely to
Provides internal corporate accountability officers with
publish high-quality information on environment, philan-
an external and independent evaluation tool, and
thropy, bribery and corruption, and external assurance in
provides guidance for companies initiating their own
their CSR reports:
CSR reporting;
H2b Firms will be more likely to issue higher quality Enables companies to compare their reports across their
information on environment, philanthropy, and bribery and industry, region, and market capitalization;
corruption in and to obtain higher quality assurance on Minimizes the free rider problem; the facilitated
their CSR reports in countries where there are adequate comparison of report quality will induce all compa-
regulatory/institutional standards to promote and ensure niesboth those currently publishing corporate social
greater disclosure. responsibility reports and those planning to do so in the
futureto create high-quality reports; and
Creates a market-driven incentive for companies to
Data and Methodology improve their CSR reporting to gain competitive
advantage, as an alternative to greater regulation in
Our universe of financial institutions comprises 104 of the this area.
worlds largest companies that have published CSR reports
in 2012. Three regions account for almost 92 % of com-
Statistical Analysis
panies in our data set. These are Western Europe (46),
North America (35), and East Asia (15). There are signif-
We perform multivariate analysis using ordinary least
icant differences among the companies with regard to
squares (OLS) model to test our hypotheses. The multi-
diversity and quality of information. Our intent is to look
variate analysis is undertaken both at an aggregate as well
for possible explanations for the differences using a variety
as disaggregate level, where we distinguish between the
of independent variables. We also attempt to find intra-data
overall CSR report quality and the quality of the infor-
differences, i.e., contextual variables, with a view to
mation in the CSR reports pertaining to each of the four
examine their relationships in the context of the overall
contextual elements analyzed in this study. The multi-
quality of the CSR reports.
variate regression model used to test the hypotheses is
presented below:
The CSR-S Monitor
One of the primary goals of our research is to address and b4 NCSR b5 ADRI b6 DIVERSE
minimize the problems of data incompatibility and there- b7 EQUATOR b8 WOLFSBERG
fore facilitate comparison between different types of CSR 1
reports. The scoring framework used in this paper, the
CSR-S Monitor, is designed to offer an analytical approach
that would (a) allow a companys report to be objectively 6
Appendices 1, 2 and 3 provide description of the CSR-S Monitors
analyzed and compared with any report published by
analytical framework, research methodology, and its applications to
another company, or with the average scores of all com- CSR reports. They also include case examples; three companies with
panies sorted by country, region, or industry, and low, medium, and high quality scores.

An Evaluation of the Quality of Corporate Social Responsibility Reports

The dependent variable, CSRS SCORE, represents the legal environment and the degree of shareholder protection
CSR-S Monitors assessment of the quality of the infor- in a country. It ranges between 0 and 6, where a higher
mation in a CSR report in its entirety.7 In further analysis, value indicates higher quality legal regime and greater
we replace overall CSR report quality with the quality of shareholder rights. Both legal environment variables, LAW
disclosure on environment, philanthropy, bribery and cor- and ADRI, are collected from La Porta et al. (1998).
ruption, and integrity assurance in these reports. ENVIR, National CSR index, NCSR, is the National Corporate
PHIL, CORR, and ASSUR represent corresponding con- Responsibility Index (NCRI) measured by and collected
textual element scores from the CSR-S Monitor. This from AccountAbility.8 It represents the overall CSR envi-
variable takes values between 0 and 100 for the overall ronment in a country in the year 2005. This variable helps
score, 0 and 10 for environment and philanthropy, 0 and 5 us account for the variation across countries with respect to
for bribery and corruption, and 0 and 15 for integrity the nature of CSR including relevant reporting on envi-
assurance, where higher values indicate higher quality of ronmental and social matters and thus also provides a
disclosure. measure of the public awareness and consequent pressure
Firm size (SIZE) is measured by the natural log of a on firms to disclose on environment, social, and gover-
firms total assets and helps test the first set of hypotheses nance issues. A number of studies have provided evidence
(i.e., H1a and H1b). We estimate profitability by return on of increased environmental and social disclosure in
equity (ROE) measured by the ratio of earnings before response to public perception of relevant risks (e.g.,
interest and taxes scaled by total equity. Extant research Berthelot et al. 2003; Deegan et al. 2002; Lee and Hutch-
suggests that firms with better financial performance will ison 2005). According to the legitimacy theory, changes in
act more socially responsibly as they have more resources public and institutional pressures induce companies to
to spare for socially responsible activities (e.g., Campbell adjust the extent of their environmental and social disclo-
2007; Waddock and Graves 1997). Thus, profitability will sures so as to fulfill their implicit contracts with society and
reflect a firms socio-political profile and induce such firms achieve/maintain their license to operate (Brown and Fra-
to disclose their achievements at a higher quality in the ser 2006; Deegan 2002; Patten 1992). In line with these
public domain (Hibbitt 2004). Profitability will also pro- studies, we expect higher CSR reporting quality for firms
vide more public visibility and lead to closer public scru- operating in countries with higher institutional and public
tiny, which will eventually incentivize firms to convey a pressure towards sustainable business practices.
positive social image through publishing higher quality DIVERSE is the number of different industry sectors in
CSR reports. On the other hand, neo-classical view sug- which a firm operates (i.e., number of different six-digit
gests that when financial performance is poor, managers North American Industry Classification System (NAICS)
will resort to environmental and social activities and rela- codes assigned to a particular firm by the CSR-S Monitor)
ted disclosures to promote a positive public image and thus and ranges between 0 and 5, 5 representing the most
divert attention from poor financial performanceman- diversified and 0 representing the non-diversified. The data
agerial opportunism (Preston and OBannon 1997). In for different industry sectors are collected from the CSR-S
contrast, they will be more likely to spend less on socially Monitor. Firms with diverse set of operations spread over
responsible activities and rather act to increase short-term multiple industries will be subject to a more diverse set of
profitability and personal gains when financial performance stakeholders and hence will be more likely to issue higher
is high, suggesting a negative relation between firm prof- quality CSR reports.
itability and CSR. Due to these conflicting arguments in the Most industries organize themselves into one or more
literature, we do not have any prior expectation on the industry-based organizations where membership is volun-
direction of the relationship between the quality of CSR tary and open to all companies in the industry. The primary
reporting and firm profitability. Accounting data come focus of a vast majority of these groups is to promote and/
from the Compustat database. or defend the industrys position to various legislative and
LAW represents the legal tradition of a firms head- regulatory bodies, public at large, with the explicit purpose
quarter location in the country or region. It indicates of protecting the industrys business model. More recently,
whether a firms headquarter country possesses a common a new form of industry grouping has become en vogue.
law or a code law tradition and takes values of 1 and 0, These groups aim to persuade individual members to vol-
respectively. We also control for the legal environment of a untarily participate in policies and programs that are being
country. Following La Porta et al. (1998), we use Anti advocated by important stakeholders and are yet not
Director Rights Index, ADRI, to represent the quality of the required by law. Managing such voluntary groups is often
quite challenging because of political and philosophical
See Appendices 13 and for a more detailed
description of the methodology and sample list of companies. AccountAbility (2005).

S. P. Sethi et al.

differences, disparate cost effect on participating members, Table 1 Descriptive statistics

and problems with free rider and adverse selection. N Mean Median SD Min Max
Accordingly, in the case of financial institutions, we
have used participation in the Equator and Wolfsberg Panel A dependent variables
principles as two of the elements of industry participation. CSRS 104 42.26 40.00 14.37 15.25 71.00
Equator principles were jointly created by the International ENVIRONMENT 104 6.11 6.00 1.89 1.00 10.00
Monetary Commission and industry members whereby PHILANTHROPY 104 7.20 7.50 1.79 0.00 10.00
participants agreed to ensure that in granting infrastructure CORRUPTION 104 2.34 2.50 1.69 0.00 5.00
loans, member bank would ensure that the borrowers ASSURANCE 104 4.12 2.50 4.03 0.00 12.00
adhere to certain standards of environmental sustainability, Panel B explanatory variables
land use, and protection of the rights of indigenous people FSIZE 104 13.09 13.13 1.98 8.37 20.27
(Schepers 2011; Macve and Chen 2010).9 Similarly, ROE 104 0.10 0.09 0.14 -0.49 1.17
Wolfsberg principles have been developed by eleven glo- LAW 104 0.56 1.00 0.50 0.00 1.00
bal financial institutions to address a diverse range of NCSR 104 42.31 39.65 4.80 34.85 57.93
issues, particularly financial crimes, in global banking such ADRI 104 3.49 3.00 0.95 1.00 5.00
as of anti-money laundering, corruption, terrorist financing, DIVERSE 104 2.96 3.00 1.64 0.00 5.00
and sanctions.10,11 EQUATOR and WOLFSBERG are EQUATOR 104 0.38 0.00 0.49 0.00 1.00
dummy variables representing a firms commitment WOLFSBERG 104 0.11 0.00 0.31 0.00 1.00
towards such industry-level CSR initiatives. These dummy
variables take values of 1 if a firm follows the Equator or
Wolfsberg principles, and 0 otherwise. In line with
Campbell (2007) and Chih et al. (2010), we expect higher and WOLFSBERG, indicate certain degree of participation
quality CSR disclosures from financial institutions that are from our sample of firms in industry-level CSR initiatives.
signatories of either initiative in an effort to show adher- Table 2 shows the correlations across model variables.
ence to environmental and social responsibility. In all We document high positive correlations between overall
regressions, we use robust standard errors clustered by CSR report quality and contextual elements, albeit the
region to account for the lack of independence among units correlation is the weakest between CSRS and PHILAN-
within the same region. THROPY (q = 0.34). We also document significant cor-
relations between CSRS and other model variables such as
firm size (FSIZE; q = 0.19), profitability (ROE;
Results q = -0.31), legal origin (LAW; q = -0.20), national CSR
index (NCSR; q = 0.41), and industry self-regulations
The descriptive statistics are shown in Table 1. CSR report (EQUATOR; q = 0.30 and WOLFSBERG; q = 0.17). Our
quality (CSRS) ranges from 15.25 to 71, with a median decision to use multivariate analysis was based on the fact
score of 40/100. This wide range in scores along with high that there was significant correlations among the model
variation of 14.37 indicates a lack of consensus in CSR variables. This allowed us to isolate the unique association
reporting and resulting dispersion in CSR reporting prac- between each of the model variables and the quality of
tices across financial institutions worldwide. An interesting CSR reporting. On the other hand, none of the correlation
finding of our data was the quality/consistency of CSR coefficients exceed the 80 % threshold, indicating that the
reports and the extent to which sponsoring companies were validity of the inferences drawn from the multivariate
active in industry-wide initiatives pertaining to environ- regression model is not threatened by multi-collinearity
mental, societal, and governance (ESG) issues. As pre- (Gujarati 2003).
sented by DIVERSE, a typical firm in our sample is
involved in an average of 3 different industry sectors. Overall CSR Report Quality
Finally, two industry-level regulation proxies, EQUATOR
In Table 3, CSR reports by financial institutions have an
average score of 42.26 out of a maximum of 100. We group
reporting firms into six regions. The analysis of the dif- ferences in reporting quality across these regions indicates
significant dispersion across firms in their CSR reporting
Current members of the Group are Banco Santander, Bank of
practices (F statistic = 2.17; p value \ 0.10). Among the
Tokyo, Mitsubishi UFJ, Barclays, Citigroup, Credit Suisse, Deutsche
Bank, Goldman Sachs, HSBC, J.P. Morgan Chase, SocieteGenerale, top three regions, West Europe-based companies have the
and UBS. highest overall average CSR report quality (CSRS) with a

An Evaluation of the Quality of Corporate Social Responsibility Reports

median of 46.13/100, followed by companies in East Asia

37.5/100 and North America as the laggard with a median
score of 34/100. Surprisingly, the average reporting quality

for the other three regions is remarkable, i.e., 46.56/100,

the highest overall. This indicates that only those firms that

are committed to CSR disclosure choose to report in these


regions, pushing the overall quality above those for other

The comparisons of environmental disclosure quality

across the three regions provide no evidence of a major



difference. These results are reflected as very close regio-
nal averages. When taken together with relatively high

overall average and low dispersion in environmental dis-

closure quality (6.11/10 average and 1.89/10 standard


deviation), we can argue that a certain level of standard-

ization in disclosure of this particular aspect of CSR has


been achieved across all regions and countries. We observe


similar results for philanthropy. On the other hand, regio-


nal factors play an important role in determining the

quality of reporting on bribery and corruption and integrity

assurance. Regarding the former, Western Europe has the




highest average quality of 2.98/5. East Asia comes next


with 2.28/5 average, while North America ranks the lowest

with 1.59/5 average reporting quality, all together leading


to a statistically significant cross-regional difference in



reporting quality (F statistic = 5.18; p value \ 0.01). The


quality of integrity assurance also varies significantly

across regions. Specifically, regional differences in average


quality of assurance are so large that the gap in reporting




quality between the top (Western Europe with an average


of 5.32/15) and bottom (North America with an average of

only 2.2/15) is more than twofold (F statistic = 6.22;



p value \ 0.01).


Multivariate Analysis


Overall CSR Report Quality



In our first model, we regress aggregate CSR reporting quality

scores (CSRS) on a set of explanatory variables to isolate any



potential impact of the variables of interest on CSR disclosure



quality. Table 4 shows estimates for the OLS regression


* p \ 0.10, ** p \ 0.05, *** p \ 0.01

models using aggregate CSR score as the dependent variable.

These results show that firm size does not have any major



impact on CSR reporting quality, whereas less prof-


Table 2 Correlation matrix

itable firms publish higher quality CSR reports.


Regarding institutional factors, the effect of legal origin

(LAW) is significant, suggesting a tendency towards higher

quality CSR reporting for firms headquartered in common



law countries, contrary to our expectations outlined above.


The coefficient on the national CSR index, NCSR, is sig-




nificantly positive, suggesting that the extent of institu-


tional factors that favor and encourage corporate

S. P. Sethi et al.

Table 3 Aggregate statistics per region


East Asia
N 15 15 15 15 15
Mean 39.00 5.82 7.23 2.28 3.43
Median 37.50 5.50 7.50 1.75 4.00
SD 11.18 2.38 1.32 1.55 3.03
Min 22.00 2.00 5.00 0.00 0.00
Max 54.75 9.50 9.50 5.00 10.50
Latin America & the Caribbean
N 1 1 1 1 1
Mean 66.75 9.00 6.00 4.50 11.00
Median 66.75 9.00 6.00 4.50 11.00
SD . . . . .
Min 66.75 9.00 6.00 4.50 11.00
Max 66.75 9.00 6.00 4.50 11.00
North America
N 35 35 35 35 35
Mean 38.43 5.99 7.60 1.59 2.20
Median 34.00 5.50 7.50 1.50 1.50
SD 14.64 1.93 1.14 1.47 2.84
Min 16.00 2.00 5.00 0.00 0.00
Max 63.25 10.00 9.50 4.50 11.50
N 5 5 5 5 5
Mean 35.60 5.15 6.90 0.30 4.80
Median 36.00 4.75 7.00 0.00 2.50
SD 8.99 2.50 1.98 0.54 4.62
Min 26.50 2.00 4.50 0.00 0.00
Max 49.00 9.00 9.50 1.25 10.00
Sub-Saharan Africa
N 2 2 2 2 2
Mean 63.88 8.63 6.75 5.00 10.00
Median 63.88 8.63 6.75 5.00 10.00
SD 0.53 0.53 1.77 0.00 0.71
Min 63.50 8.25 5.50 5.00 9.50
Max 64.25 9.00 8.00 5.00 10.50
Western Europe
N 46 46 46 46 46
Mean 45.49 6.22 6.96 2.98 5.32
Median 46.13 6.25 7.50 3.25 3.00
SD 14.15 1.56 2.28 1.55 4.37
Min 15.25 1.00 0.00 0.00 0.00
Max 71.00 9.00 10.00 5.00 12.00
N 104 104 104 104 104
Mean 42.26 6.11 7.20 2.34 4.12
Median 40.00 6.00 7.50 2.50 2.50
SD 14.37 1.89 1.79 1.69 4.03
Min 15.25 1.00 0.00 0.00 0.00
Max 71.00 10.00 10.00 5.00 12.00
Test of differences (region) 2.17 0.33 1.03 5.18 6.22
(p-value) (0.09) (0.80) (0.38) (0.00) (0.00)

An Evaluation of the Quality of Corporate Social Responsibility Reports

Table 4 Multivariate
(1) (2) (3)
regression analysis of aggregate
CSR reporting quality
FSIZE 0.817 (1.07) 1.173 (1.22) 0.723 (1.02)
ROE -21.78*** -19.54*** -20.62***
(-6.23) (-5.25) (-6.22)
LAW 2.613 (1.65) 4.022** 2.957 (1.86)
NCSR 1.003** 1.217*** 1.045**
(3.91) (4.27) (3.93)
ADRI -0.723 (-0.94) -0.246 (-0.26) -0.737 (-0.98)
DIVERSE -0.730* -0.905* -0.894**
(-2.13) (-2.45) (-3.15)
EQUATOR 5.503* 4.785*
(2.48) (2.07)
WOLFSBERG 6.420 (1.88) 5.017 (1.63)
Constant -7.638 (-0.63) -22.11 (-1.30) -8.221 (-0.66)
Observations 104 104 104
Adjusted R2 0.213 0.204 0.216
t statistics in parentheses
* p \ 0.1, ** p \ 0.05, *** p \ 0.01

responsibility also affects corporate disclosures. Financial multivariate analyses of the four contextual elements
firms originating from such countries are significantly more selected for detailed analysis. These are environment,
likely to report CSR-related information at a higher quality, philanthropy, bribery and corruption, and integrity assur-
consistent with our hypothesis. Legal environment (ADRI), ance. Overall, these results document wide variations in the
however, has no significant association with the quality of determinants of the scores of these elements. In particular,
CSR reports. larger firms tend to report at a significantly higher quality
The relation between CSR report quality and the extent on philanthropy and bribery and corruption (shown in
to which firms diversify their operations in multiple columns 49). Profitability (ROE) significantly affects the
industry sectors, DIVERSE, is negative, suggesting that quality of reporting in environment, philanthropy, and
financial firms such as bank holding companies operating integrity assurance. Specifically, whereas profitable firms
in multiple industry sectors produce lower quality CSR report at a lower quality on environment and integrity
reports than their less diversified counterparts. assurance, they tend to disclose high-quality information
Membership in industry-level voluntary CSR organiza- on their philanthropic activities.
tions has positive association with CSR reporting quality, Contrary to our expectations, legal origin of a country
consistent with Campbell (2007) and Chih et al. (2010). (LAW) has significant positive relation (at the 1 % level) with
The coefficients on both proxies for a firms involvement in reporting quality only for philanthropy-related disclosures,
industry-level CSR-related initiatives, EQUATOR and suggesting higher quality reporting on philanthropic activi-
WOLFSBERG, are positive, while only those on the former ties by firms from common law countries, presented in col-
are significant. These results underscore the role of private umns 46. National CSR rating (NCSR) has all positive
regulations and voluntary industry-level initiatives in pro- association with disclosure quality. It has the strongest
moting environmentally and socially conscious business relation with the quality of reporting on philanthropy.
models including effective disclosure of related risks and Additionally, the quality of legal environment in a country
opportunities. (ADRI) has significant relations with philanthropy- and
bribery and corruption-related disclosures. Surprisingly, its
Quality of Reporting on Contextual Elements association with the former is negative, while that with the
latter is positive, both being highly significant. Diversity of
In the second regression, we substitute aggregate CSR operations is not a major factor that determines the quality of
reporting quality with the scores for each of the contextual reporting on any of the four contextual elements analyzed.
elements and run similar regressions using the same set of Finally, the relation between industry-led voluntary CSR
explanatory variables. Table 5 shows the results of our initiatives and reporting quality provides some evidence of

Table 5 Multivariate regression analysis of contextual elements
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)

FSIZE 0.0298 (0.60) 0.00538 0.346** 0.352** 0.327** 0.131** 0.180** 0.127** -0.0291 0.00400 -0.0658
(0.40) (0.09) (3.28) (3.16) (3.75) (3.08) (2.74) (3.22) (-0.11) (0.02) (-0.30)
ROE -3.356*** -2.921*** -3.058*** 0.884 1.179** 1.120* -1.264 -1.086 -1.214 -3.636** -3.018** -3.186***
(-7.50) (-5.76) (-5.96) (1.33) (2.77) (2.50) (-1.35) (-1.10) (-1.21) (-3.70) (-3.93) (-4.13)
LAW 0.473 0.697 0.562 1.533*** 1.662*** 1.603*** -0.456 -0.315 -0.442 -1.098 -0.799 -0.964
(1.35) (1.96) (1.62) (5.07) (5.32) (5.44) (-1.34) (-0.90) (-1.22) (-1.24) (-0.81) (-0.98)
NCSR 0.0513 0.0841 0.0623 0.117*** 0.135*** 0.126*** 0.105** 0.127** 0.107* 0.121 (1.87) 0.165* 0.138*
(1.21) (1.85) (1.44) (4.11) (4.54) (4.57) (2.62) (3.48) (2.46) (2.36) (2.04)
ADRI -0.263 -0.205 -0.267 -0.435*** -0.411** -0.438*** 0.283*** 0.341** 0.283*** 0.626 (1.17) 0.696 0.620 (1.17)
(-1.30) (-0.92) (-1.33) (-5.06) (-4.00) (-5.26) (5.37) (3.63) (5.37) (1.27)
DIVERSE -0.0662 -0.110 -0.109* 0.133 0.0984 0.0990 -0.0844 -0.0928 -0.0914 -0.329 -0.395 -0.393
(-1.17) (-1.86) (-2.24) (1.92) (1.70) (1.89) (-1.38) (-1.69) (-1.46) (-1.57) (-1.66) (-1.60)
EQUATOR 0.792 (1.99) 0.607 0.411 0.265 0.600 (1.77) 0.569 (1.44) 1.022** 0.743***
(1.40) (1.84) (1.33) (3.42) (4.56)
WOLFSBERG 1.473*** 1.295*** 1.102* 1.025* 0.383 (0.81) 0.216 (0.43) 2.170 1.952 (1.48)
(3.56) (2.78) (2.23) (2.16) (1.64)
Constant 4.421 (1.73) 2.508 4.270 -2.255 -3.142 -2.374 -4.401 -6.077** -4.426 -1.279 -3.661 -1.506
(0.76) (1.65) (-0.95) (-1.17) (-1.05) (-1.85) (-2.87) (-1.80) (-0.22) (-0.62) (-0.25)
Observations 104 104 104 104 104 104 104 104 104 104 104 104
Adjusted R 0.075 0.098 0.108 0.194 0.219 0.215 0.284 0.265 0.278 0.094 0.109 0.106
t statistics in parentheses
* p \ 0.1, ** p \ 0.05, *** p \ 0.01
S. P. Sethi et al.
An Evaluation of the Quality of Corporate Social Responsibility Reports

the impact of industry-led CSR initiatives on the quality of also add to the pool of good information in the public
disclosure for contextual elements. In particular, observed domain.
associations are significantly positive for environment and In terms of financial institutions, an interesting avenue
integrity assurance, while the effect is only weakly sig- of future research could be to analyze the component
nificant for philanthropy and insignificant for bribery and business units of globally integrated large financial cor-
corruption. These results are consistent with our findings of porations with a view to examine the impact of various
an overall weak association between membership in such business unitsand their relative weighton the quality
CSR initiatives and aggregate CSR reporting quality doc- of their CSR reports, the level of specificity provided for
umented above. various contextual elements, and the quality, scope of
integrity assurance, as well as the qualifications and inde-
pendence of assurance providers, among others.

Our overall findings provide some encouraging signs but Funding The funding for this project was provided by the Weiss-
also indicate areas of potential concern: man Center for International Business and is gratefully
1. Most large financial companies are publishing CSR
reports on a regular basis. They also show a consis-
tencyalbeit at a lower level in terms of overall
Appendix 1: Scope of Coveragea Brief
qualityin the CSR reports.
Description of Analytical Framework
2. Companies originating in Common Law tradition
countries have not positively used their flexibility to
The CSR-S Monitor scores CSR reports published in the
create higher quality reports with greater detail. They
year 2012 by the worlds largest corporations. The com-
have further undermined the credibility of their CSR
panies are selected from the Fortune 250 US, Fortune 250
reports by either completely ignoring any measure of
Global indices along with those included in the previous
integrity assurance, or have scored quite poorly in this
edition of the CSR-S Monitor. The 2014 sample of com-
panies comprises the worlds 614 largest companies,
3. Corporations that demonstrate a proactive approach
spanning 20 industry sectors and 43 countries. In our
with other members of the industry demonstrate
analysis, we include 104 financial institutions from around
greater inclination toward providing more detailed
the world that have published CSR reports.
Using a content analysis-based framework, the CSR-S
4. From the perspective of financial industry, bribery and
Monitor assesses the breadth and depth of information in
corruption is one of the most important contextual
these CSR reports. The scoring framework reflects the
elements. However, financial institutions do not seem
quality and credibility of information in CSR reports based
to have taken advantage of CSR reports on a forum for
on a set of the 11 most common areas of sustainability
discussing this issue. Once again, companies from the
covered in these reports including environmental manage-
Common law tradition countries score poorly on
ment, stakeholder engagement, supply-chain management,
these elements when compared with companies from
human right, and bribery and corruption. The number and
code rule countries where greater disclosure is gener-
definition of various contextual elements, and their relative
ally required.
weight, were determined based on the information contained
In conclusion, we believe that financial institutions are in large cross section of CSR reports. The significance of this
missing an important opportunity by using CSR reports as approach rests on the primary object of the CSR monitor, i.e.,
a pro-company communication document rather than a to compare and analyze the information that is currently
powerful and potentially influential communication vehicle contained from the CSR reports, and not what should be
where corporate views are presented and explained in an contained in these reports and prescribed by someone other
objective manner and are protected from potentially hostile than the corporations preparing these reports.
and biased content which surrounds corporate news in the The CSR-S Monitor provides a total score for the CSR
general news media. report as well as scores for each of the 11 contextual ele-
From the perspective of researchers and scholars, CSR ments. The scores on each contextual element are added up
reports offer a fertile ground for identifying and testing to achieve an overall quality score for each report, ranging
new sets of hypotheses and therefore create a proactive from 0 to 100 with a higher score indicating higher quality
environment where companies are encouragedunder reporting. Table 6 shows the list of individual elements and
competitive pressureto produce good reports and thus their respective weights.

S. P. Sethi et al.

Table 6 Individual component of the CSR-S Monitor and the irrespective weights
15 points each 10 points each 5 points each

Individual components and the irrespective weights

Integrity assurance Environment Corporate governance
Codes of conduct Corporate citizenship, philanthropy, and community relations Bribery and corruption
Company codes (5) Stakeholder engagement Human rights
Industrial codes (5) Supply-chain management Executive message
Universal codes (5) Labor outsourcing

The overall score as well as the scores on each contextual write more complete reports. Similarly, some countries
element reflects the comprehensiveness (scale) and level of require more specificity as to what a company must include
specificity (scope) of information disclosed in a companys in its CSR report. Therefore, we present the CSR-S Mon-
CSR report. The scoring methodology takes into account itor scores by country and region. Each report is analyzed
variations in CSR practices and related disclosures across a by multiple analysts, and their findings are randomly
variety of countries and regions, industry sectors, and legal examined by experienced supervisors to ensure that the
and regulatory systems. This allows for objective compar- scoring framework is objectively and consistently applied.
isons among reports and emerging trends in reporting.
The CSR-S Monitor provides the user with the ability to
compare any of the companies analyzed in the report. Appendix 2: Definitions of Contextual Elements
Some industries have more regulation or public scrutiny, and List of Illustrative Topics
creating an environment that encourages companies to

Contextual Definition Illustrative sub-elements


Chair/executive The chair/executive message contextual element measures the Message signatory
message quality of information provided by the company in the CSR key topics
introductory statement of their CSR report about their
management commitment and effectiveness across all CSR Current achievements
subjects, in terms of current achievements and future targets Future targets
Environment The environment contextual element measures the quality of Waste management
information provided by the company about their management Climate change
commitment and effectiveness regarding environmental issues
such as waste management, climate change, and biodiversity, Water management
as well as disclosure about product or process innovation Biodiversity
opportunities, reducing the firms environmental impact Sourcing
through their supply chain, and any environmental accidents
Environmental opportunities/innovation
Packaging materials
Philanthropy and The philanthropy and community involvement contextual Cash donations
community element measures the quality of information provided by the In-kind donations
involvement company about their management commitment and
effectiveness regarding their charitable activities, including the Employee engagement
type (cash, in-kind, employee engagement), purpose, and Donation matching
geographic scope of contributions, and how their philanthropy Purpose of activities (healthcare, education, environment,
is tied to their business disaster relief, small business development/entrepreneurship/
microfinance, poverty reduction/rural development)
Geographic scope of activities
Integration with business
External The external stakeholder engagement contextual element Engagement for business operations
stakeholder measures the quality of information provided by the company Engagement for CSR-related projects
engagement about their management commitment and effectiveness toward
integrating the advice of external stakeholders in their business Engagement for governance/oversight
operations, including CSR-related projects. Engagement at both Engagement for field-level and corporate-level projects and
the field level (single-site) and corporate level (company-wide) policies
is examined

An Evaluation of the Quality of Corporate Social Responsibility Reports

Contextual element Definition Illustrative sub-elements

Supply chain The supply chain contextual element measures the quality of Union relations
information provided by the company about their Employee health and safety
management commitment and effectiveness regarding the
CSR aspects of their relationship with suppliers, including the Supply-chain labor standards
procurement process, contract terms, and monitoring/auditing Child labor
of suppliers (including contractors, sub-suppliers, joint- Women and minority contracting
venture partners, or other major business associates)
Supply-chain certifications
Local/global sourcing
Labor relations The labor relations contextual element measures the quality of Union relations
information provided by the company about their Cash profit sharing
management commitment and effectiveness regarding its
treatment of employees, both direct (employed by the Employee involvement (in ownership, stocks)
company) and indirect (employed by a partner, such as a Employee health and safety
supplier). Areas covered include compensation and benefits, Supply-chain labor standards
health and safety, professional development opportunities,
Compensation and benefits
commitment to diversity and equal opportunity, and union
relations Professional development
Child labor
Employment of underrepresented groups
Workforce diversity/equal opportunity
Governance The governance contextual element measures the quality of Board composition
information provided by the company about their Top management compensation
management commitment and effectiveness toward following
the best practice governance principles in areas including the Governance codes/policies
composition and level of independence of their board of Shareholder engagement
directors, compensation of top management, commitment to
relevant governance codes, and shareholder engagement
Anti-corruption The anti-corruption contextual element measures the quality of Policies for preventing corruption
information provided by the company about their Discussion of publicized cases of corruption
management commitment and effectiveness regarding the
prevention of bribery and corruption, through policies and Political instability
procedures for monitoring activities which are vulnerable, as
well as describing any investigation currently underway by
regulatory authorities and the steps the company is taking to
address the situation
Human rights The human rights contextual element measures the quality of Community impact
information provided by the company about their Indigenous peoples relations
management commitment and effectiveness regarding their
impacts on local communities and the rights of indigenous Support for controversial regimes
peoples, support for any controversial regimes, and their Freedom of expression/censorship
commitment to protecting freedom of expression and Discussion of publicized cases of human rights
preventing censorship. Note that human rights topics tied to violations
labor issues are covered under the labor relations and/or
supply-chain contextual elements
Codes of conduct The codes of conduct contextual element measures the quality Individual company codes of conduct
of information provided by the company about their Industry codes of conduct
management commitment and implementation of internal and
external codes of conduct in the CSR area, including an Universal codes of conduct
individual company code of conduct, industry codes of Involvement in code governance structure
conduct (such as the International Council on Mining and
Metals), and universal codes of conduct (such as the UN
Global Compact)
Integrity assurance The integrity assurance contextual element measures the Independent third-party verification statement
quality of information provided by the company about their Internal assessment
management commitment and effectiveness regarding
independent verification of the CSR report, either in its External assessment
entirety or for specific contextual elements. Specific contextual element assurance

S. P. Sethi et al.

Appendix 3: Sample Scoring Criteria


Level Criteria Illustrative examples

0 Report does not discuss activities toward reducing/mitigating the The Group has three specific sustainability management goals
environmental impacts of the companys business in a which are: being wise, being smart and being sustainable We
meaningful way endeavor to minimize social and environmental risks through
green management KB Financial Group has been dedicated to
resolving global environmental issues which are becoming
increasingly more serious (KB Financial Group Inc., 2014)
I Report provides minimal depth of information on the scope of Johnson Controls generally remained on track to achieve our
coverage of the companys activities toward reducing/mitigating 10 year greenhouse gas, energy, water and waste intensity goals
the environmental impacts of the companys business. in 2013. We are committed to an annual 1 percent absolute
Discussion categorized as vague and incomplete reduction of greenhouse gas emissions across all our businesses.
The improvements we make also enhance our financial results.
Over the past 10 years, revenue has increased 78 percent while
our carbon footprint has increased only 10 percent (Johnson
Controls, Inc., 2014)
II Report provides fair depth of information on the scope of coverage Freescale established a goal in 2010 to reduce our water
of the companys activities toward reducing/mitigating the consumption by our manufacturing operations by 50 % over our
environmental impacts of the companys business, including 2008 baseline. In 2013, we had a significant production increase
measurable results. Discussion categorized as reasonably detailed over 2012, increasing our absolute water consumption amount;
and comprehensive however, we still hope to achieve this 2015 goal We
implemented conservation projects that saved more than 42
million gallons of water and 14.9 million kWh per year
(Freescale Semiconductor, Ltd., 2014)
III Report provides good depth of information on the scope of In 2013, the total extrapolated amount of carbon emissions from
coverage of the companys activities toward reducing/mitigating our business operations decreased from 209 to 169 kilotons
the environmental impacts of the companys business, including compared to 2012 and per FTE from 2.4 to 2.2 tons In the
measurable results and comparisons of outcomes at a company or spring of 2012, we partnered with an electric taxi service to
industry level. Discussion categorized as detailed and support the transportation needs of employees in the Netherlands.
comprehensive Through this initiative, we have greened 18,000 km of journeys
up to year-end 2013 Our Sustainable Procurement program,
which began in the Netherlands in 2012, takes this a step further
by embedding INGs procurement policy towards suppliers into
our processes (ING Groep N.V. 2014)
IV Report provides excellent depth of information on the scope of Since fiscal 2009, we have decreased our total water use by
coverage of the companys activities toward reducing/mitigating 44.8 % and achieved a one-year reduction of nearly 9.8 % in
the environmental impacts of the companys business, including fiscal 2012. Over the past 4 years, we have lowered water use by
measurable results and comparisons of outcomes at the company more than 2,750 million liters Hazardous waste makes up only
or industry level. Discussion categorized as detailed and 0.04 % of our total waste output. In fiscal 2013, our volume of
comprehensive, and is noted for reaching an exceptional level of waste produced rose by 44 % from the previous year. This
disclosure increase was due to activities relating to cleaning out an old fuel
oil tank at one of our distilleries, which caused 30 tons of
redundant fuel to be sent to a facility to be filtered and then
blended as fuel for a power plant Three major air pollutants are
sulfur dioxide (SO2), nitrogen oxides (NOX) and particulate
matter (PM). These emissions increased by nearly 12 % in fiscal
2013, from 1010 metric tons to 1134 metric tons, primarily due to
our burning a greater amount of heavy fuel oil to compensate for
our decreased biogas generation (Bacardi Limited 2014)
Source The CSR-S Monitor (2014)
Depth (of information) defined as the level of specificity and type of detail included in the report about the different relevant topics and locations
of operations. Strong depth of information means the company discussed the Element both narratively (citing specific cases or events) and
quantitatively, with a focus on the managerial aspects of the communication, including information on how the relevance of different topics is
determined; Scope of Coverage defined as the range of topics and locations discussed in the report. A wide scope of coverage means the company
includes information about many of the relevant topics of the Element, both domestic and international

An Evaluation of the Quality of Corporate Social Responsibility Reports

Appendix 4: List of Companies

1 3i Group plca 27 BNP Paribas SA 53 Intesa Sanpaolo S.p.A. 79 Regions Financial

2 ACE limited 28 British Land Company PLC 54 ITOCHU Corporation 80 Royal Bank of Canada
3 AEGON N.V. 29 Caja de Ahorros y Pensiones 55 JPMorgan Chase and Co. 81 Royal Bank of Scotland
de Barcelona Group plc
4 Aetna Inc. 30 Canadian Imperial Bank of 56 KB Financial Group Inc. 82 RSA Insurance Group
Commerce plc
5 Aflac Incorporated 31 China Construction Bank 57 KBC Groep NV 83 Segroplc
6 Agricultural Bank of China 32 CIGNA Corporation 58 Landesbank Baden- 84 SocieteGenerale S.A.
Ltd Wurttemberg
7 Aker ASAa 33 Citigroup Inc. 59 Legal and General Group Plc 85 Standard Bank Group
8 Allianz SE 34 CNP Assurances SA 60 Lloyds Banking Group plc 86 Standard Chartered PLC
9 Allstate Corporation 35 Commonwealth Bank of 61 Manulife Financial 87 Standard Life plc
Australia Corporation
10 American Express Company 36 Credit Agricole S.A. 62 Marsh and McLennan 88 State Street Corporation
Companies, Inc.
11 Aon PLC 37 Credit Suisse Group AG 63 MetLife, Inc. 89 Sumitomo Mitsui
Financial Group, Inc.
12 Assicurazioni Generali S.p.A. 38 Dai-ichi Life Insurance 64 Mitsubishi UFJ Financial 90 Sun Life Financial Inc.
Company Limited Group, Inc.
13 Australia and New Zealand 39 Danske Bank A/S 65 Mizuho Financial Group, Inc. 91 Swiss Reinsurance
Banking Group Ltd Company
14 Aviva plc 40 Deutsche Bank 66 Morgan Stanley 92 T&D Holdings, Inc.
15 AXA S.A. 41 Deutsche Borse AG 67 MS&AD Insurance Group 93 Tokio Marine Holdings,
Holdings, Inc. Inc.
16 Baloise Holding AGa 42 DZ BANK Deutsche Z-G 68 MunchenerRuckversicherungs 94 Toronto-Dominion Bank
AG AG [The]
17 Banca Monte deiPaschi di 43 Fifth Third Bancorp 69 National Australia Bank 95 U.S. Bancorp
Siena S.p.A. Limiteda
18 Banco Bilbao 44 First Data Corporation 70 Nedbank Group Limiteda 96 UBS AG
VizcayaArgentaria, S.A.a
19 BancoBradesco S.A. 45 Glencore International plc 71 Nomura Holdings, Inc. 97 UniCreditS.p.A.
20 BANCO SANTANDER, S.A. 46 Goldman Sachs Group, Inc. 72 Nordea Bank AB 98 UnitedHealth Group
21 Bangkok Bank Public 47 GPT Group 73 Northern Trust Corporation 99 Unum Group
Company Ltda
22 Bank of America Corporation 48 Hartford Financial Services 74 Old Mutual plc 100 WellPoint, Inc.
Group, Inc.
23 Bank of Montreal 49 HSBC Holdings plc 75 PNC Financial Services 101 Wells Fargo and
Group, Inc. Company
24 Bank of New York Mellon 50 Humana, Inc. 76 Prudential Financial, Inc. 102 Westpac Banking
Corp Corporation
25 Bank of Nova Scotia 51 Industrial and Commercial 77 Prudential PLC 103 Wyndham Worldwide
Bank of China Ltd Corporation
26 Barclays PLC 52 ING Groep N.V. 78 PT Bank Mandiri (Persero) 104 Zurich Insurance Group
Tbk.a Limited
Part of annual report (Integrated report)

S. P. Sethi et al.

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