Voluntary Disclosure on Corporate

Social Responsibility: A Study on the

Annual Reports of Bangladeshi
Companies

Dewan Mahboob Hossain

Amirus Salat
Al-Amin

Faculty Members, Department of Accounting & Information Systems,

University of Dhaka, Dhaka, Bangladesh

Published in:

The Bangladesh Accountant, Vol.47, No.20, April-June, 2005, pp.28-34.

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 Voluntary Disclosure on Corporate Social
Responsibility: A Study on the Annual Reports of
Bangladeshi Companies

Abstract:

This paper focuses on the reporting of Corporate Social Responsibility issues by business concerns to the

stakeholders. The topic has been analyzed in the context of Bangladeshi companies. An attempt has been

made to highlight on the word ‘Corporate Social Responsibility’. Considering the information from 75

sample companies listed in the Dhaka Stock Exchange, the paper concludes that though some of the

companies have been reporting on some Corporate Social Responsibility issues in spite of having no

mandatory requirements, the disclosure is not adequate.

Introduction:

In recent years the impact of business on the society has become a crucial issue. Business

corporations are considered accountable to society for their actions. Now, business

organizations are considered as ‘corporate citizens’ and as a result the business

organizations in the world are striving to play the role of ‘responsible corporate citizens’.

They are now emphasizing on adopting social, ethical and environmentally responsible

approaches to business activity. Now it is said that businesses are accountable not only to

the shareholders but also to a wide range of stakeholders – including business partners,

employees, customers, suppliers and the overall community. This kind of social view

gave birth to the concept of Corporate Social Responsibility (CSR hereafter). There is no

doubt that a business organization is a social unit and as a social unit it has to deal with

the people of the society in order to fulfill its overall objectives and goals. Every business

has some stakeholders. Some of these stakeholders are directly related to the business and

some are indirectly related to its affairs. Stakeholders are part of the society. The society

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and the business organizations have a symbiotic relationship between them. According to

Bhuiyan and Anowar (1997), in past, at the time of industrial revolution, the key business

concern for every business organization was profit maximization. At that time, a business

used to take its actions for the interest of the stakeholder group who were directly

involved with the business, means the shareholders or owners. But over the years, the

natures of businesses were changed. Businesses were becoming larger and complex.

Moreover, they were crossing borders. As a result, they were affecting the society at a

greater extent. Social attitude and expectation towards the business were also changing.

As the business had to work in the society, business people became more alert about the

ethical issues. Moral obligations towards the society started to get importance. Society’s

new vision towards the corporate world begot some new thoughts like ‘corporate social

responsibility’ and ‘social responsibility accounting’ that demand a ‘corporate impact

reporting’. Now a days, so many companies all over the world are reporting on their

corporate social responsibility activities in their annual reports and in most of the cases

this is voluntary disclosure. This tendency can be noticed in case of the Bangladeshi

companies also.

The Concept of CSR and Rationale of Reporting on CSR:

Corporate Social Responsibility (CSR) can be described as the voluntary commitment of

the business organizations to contribute to social and environmental goals. Modern

society presents business with immensely complicated problems it did not have formerly

(Davis, 1975). There is no doubt that business is a social unit and in order to exist and

survive in the society it has to respect the ethical values of the society. It is said that,

today a business lives in a ‘Glass House’ and that is why business has greater ‘Public

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Visibility’ (The extent that an organization’s activities are known to persons outside the

organization) in comparison to other institutions in the society (Davis, 1975). Society is

very much eager to know the activities of the business. The growing popularity of ‘social

welfare’ is also compelling the business to perform some social responsibilities. That is

why the concept of ‘Corporate Social Responsibility (CSR)’ is a burning question in

today’s world. Corporate responsibility covers various aspects of the actions of the

business. Rihan et al (2002) made a survey (conducted by Centre for Policy Dialogue,

one of the most prominent research centers in Bangladesh) on corporate responsibility

practices in Bangladesh. The sample size was 151 and they followed a stratified random

sampling method to construct the sampling framework. They found that Bangladeshi

companies are practicing corporate responsibility in several areas. According to them, the

following corporate responsibility issues are generally followed by the organizations of

many countries in the world:

1. Sustainable Development,

2. Business Ethics,

3. Human Rights,

4. Legal Compliance,

5. Corporate Governance,

6. Stakeholders’ Dialogue,

7. Fair Employment,

8. Health and Safety,

9. Labor Standards,

10. Community Relations,

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11. Environmental Responsibilities.

The main objective of this study is to identify whether Bangladeshi companies report on

these issues in their annual reports or not. The affairs and actions of business

organizations should be such that these actions help and support the CSR issues. The

concept of ‘Corporate Social Responsibility’ got much popularity these days. Corporate

responsibility covers various aspects of the actions of the business. Disclosing on these

issues in the annual reports can be said very important specially in the case of

Bangladeshi companies. Bangladesh is one of the poorest and most corrupted economies

in the world. Human rights violation, child labor, gender discrimination, environmental

pollution- these are considered as very common phenomena in this country. These

irregularities can be noticed in the business sector of the country also. For this reason,

asserting on these ‘CSR’ factors by the companies to its stakeholders can be considered

very significant for sustainable development. Ensuring improved and safer working

environment, alleviating corruption, focusing on human rights and environmental

sustainability are recognized as constitutive factors for social development (Raihan et al,

2002).

Literature Review:

Though the issues like ‘corporate social responsibility’ and ‘social and environmental

reporting’ got huge attention in last few decades, there is no doubt that most of the

studies related to these issues were done in the context of the developed countries of the

world. A very few studies were done related to the developing countries and especially in

Bangladeshi context, the number of studies is much inadequate.

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Disu and Gray (1998) made a study on 22 Multi National Corporations (MNCs) in

Nigeria. They found that all of these companies made some mandatory disclosures like

charitable donations, employment data, pensions, employee consultation, employment of

disables, health and safety and corporate governance. Kisenyi and Gray (1998) made a

short study on only 4 companies of Uganda and concluded that social and environmental

disclosure in Uganda is scarce, low grade and of little importance.

From the context of Bangladesh, Chowdhury and Chowdhury (1996) concluded in their

study that some progressive companies in Bangladesh voluntarily provide some

information with regard to social and environmental matters. Bala and Habib (1998)

made a study on the practice of financial reporting to the employees. They concluded that

the extent of disclosure is at minimum scale and even the mandatory disclosure under the

Security and Exchange Rules was violated. Belal (1999) made a very short study on

Corporate Social Responsibility (CSR) practices in Bangladesh. In which he found that

90% of the companies studied made some environmental disclosures, 97% made

employee disclosures and 77% made some ethical disclosures. The study lacks detailed

findings on the CSR practices in Bangladesh. Imam (2000) has performed a study on 40

companies listed in the Dhaka Stock Exchange (DSE) and concluded that most of the

companies did not make any corporate social performance reporting in 1996-97. Though

some progressive companies made some disclosures, which are not adequate for

discharging social responsibilities. Belal (2001) made a survey of CSR practices in

Bangladesh. On one hand this study made a content analysis in respect of these

disclosures, on the other hand it also tried to emphasize on the socio-political and

economic context in which these disclosures take place. The study was made on the basis

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of annual reports of 30 companies among which 28 were listed companies. He

summarized that all companies included in the survey made at least some social

disclosures. The main weakness of this study is, this study covered only 15% of the total

listed companies. Khan and Hossain (2003) made a very short study on the environmental

reporting practices in the annual reports of manufacturing companies of Bangladesh. The

study was made on the annual reports of 15 companies listed in the Dhaka Stock

Exchange from the year of 1999 to 2002. They found that Bangladeshi manufacturing

companies are mostly doing the environmental reporting in non-financial manner and this

reporting is mainly done in the Directors’/ Chairman’s statement in the annual report. Out

of these 15 companies only one company did financial reporting as they reported

‘environmental expenses’ under the head of ‘Administrating expenses’ in the financial

statements. The focus of this study was only on environmental issues and this study was

done with a very small sample size. Bala and Yusuf (2003) have made an extensive study

on corporate environmental reporting in Bangladesh taking all the listed companies in

DSE under consideration. They found that only 10.4% of the companies included an

environmental report in their annual report. They did an opinion survey in which they

found that one reason for not disclosing the information related to this issue is the

absence of compulsion on environmental reporting. The focus of this study was also only

on environmental disclosures. Hossain, Khan and Yasmin (2004) identified the nature of

voluntary disclosure on human resource in the annual reports of Bangladeshi companies.

The study concluded that Bangladeshi companies are making some disclosures on human

resource even though this kind of disclosure is not mandatory from any regulatory

authority. They did a questionnaire survey to find out users’ perception on this issue and

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most of the respondents in this survey said that this kind of disclosure is important in

decision-making. The main problem of this study was that there were a very small

number of respondents in that questionnaire survey. Khan, Siddiqui and Hossain (2004)

the status of voluntary disclosure on corporate governance through a case study on the

BEXIMCO group annual reports. They found that BEXIMCO makes some disclosures on

corporate governance on a voluntary basis. They also found that (in a questionnaire

survey) BEXIMCO’s user groups are in favour of such disclosures. They concluded that

the disclosures are not adequate in meeting the goals of corporate governance. This is

mainly a case study and the result of this study cannot be generalized.

Objectives and Methodology:

The main objective of this study is to find out the present state of reporting on CSR issues

by the Bangladeshi companies in their annual reports. For this, annual reports of several

companies were analyzed. That means, data collection was done from secondary sources.

As sample, 75 companies listed in the Dhaka Stock Exchange (DSE) were selected

randomly. Means, any 75 companies listed in DSE could be a sample for this study. The

reason for selecting only the listed companies is that these companies have a greater

stakeholder orientation and as a result they try to make quality disclosures. All the annual

reports in the sample were of the year 2003 as this was the most recent year for which

annual reports were available at the time of the study. These companies were from

different sectors (categorized as per Monthly Review of Dhaka Stock Exchange Ltd. and

for reference, see Appendix-1). From these samples, reporters on different dimensions of

the CSR issues (according to the areas identified By Raihan, et al, 2002) were identified.

Companies were considered as reporters if they produced statements under separate

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headings on any of these issues in the annual reports. To limit the scope of the study, the

financial reporting part of the annual report was not considered. Means, this study has

concentrated only on the disclosures that were made outside the financial statements

(Including ‘notes to accounts’). If these issues were discussed even in the Chairman’s/

Directors’ report under separate heading in a company’s annual report, that company was

considered as a reporter of that issue. This study makes a review finding out the

percentage of the companies in the total sample reporting on several issues of CSR.

Findings and Analysis:

Among the 75 sample companies, 26 (34.66%) companies did not disclose any

information on the CSR activity issues. So the percentage of the companies disclosing at

least one CSR issue in the total sample is 65.33%. The findings of the study are

summarized in Table-1.

Table - 1
Issues on CSR disclosed by the Companies
Issues No. of Disclosing Companies in % of the total
the total sample (n = 75) sample
1. Sustainable development 6 8.00
2. Business ethics 9 12.00
3. Human rights 0 0.00
4. Legal compliance 5 6.67
5. Corporate governance 9 12.00
6. Stakeholders’ dialog 7 9.33
7. Fair employment 0 0.00
8. Health & safety 7 9.33
9. Labor standards 0 0.00
10. Community relations 5 6.67
11. Environmental responsibilities 14 18.67

Most of these disclosures by the companies were done in the Directors’ Report section of

the annual reports and the main characteristic of these disclosures is that, these

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disclosures were done mainly in language rather than in quantitative or financial format.

The nature of these disclosures are discussed here through some examples:

1. Sustainable development: 8% of the total sample companies disclosed on this issue.

But in this case, their main focus on this issue was on creating employment opportunities.

For instance, Singer Bangladesh Limited wrote in their annual report:

“We are contributing to the economic development of our country by providing

employment opportunities…..”

Beximco Textiles Limited mentioned:

“…create ample opportunity for employment in our country…”

Mercantile Bank Limited mentioned that they have a rural development scheme which

helps in the sustainable development in the rural areas.

2. Business Ethics: Adams (1998) said that ethical disclosure means covering issues

(directly or indirectly) that gives an impression of the corporate ethical values. 12% of

the total sample companies mentioned this issue. BOC Bangladesh Limited mentioned in

the annual report that they maintain a ‘code of conduct’. Tallu Spinning Mills Limited

mentioned that:

“Tallu Spinning Mills is committed to maintaining the highest ethical standards in

all of its operations.”

3. Human Rights: This issue was not highlighted by any company in the sample.

4. Legal Compliance: 5 companies (6.67%) in the sample highlighted this issue. They

mostly highlighted that they followed the Companies Act 1994 in case of Directors’

responsibilities preparation and presentation of financial statements. BOC Bangladesh

Limited Mentioned that:

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 “BOC’s code of conduct is a group initiative to conduct the global business under a

uniform standard of business ethics and compliance with law.’

5. Corporate Governance: Nine companies (12%) disclosed several issues on corporate

governance in their annual reports. The main issues that were highlighted in this regard

were Internal Financial Control (Including management structure, financial reporting,

asset management, functional reporting), Statement of directors’ responsibilities for

preparation and presentation of financial statements, Board Committees and Rights and

relations with shareholders.

6. Stakeholders’ Dialogue: 7 companies disclosed on this issue. For example: Beximco

Knitting Limited has stated on the control rights of the shareholders as:

“At annual general meeting, shareholders have rights of participation and

supervision. They have the right to ask questions of and request of information from the

board regarding the item on agenda to the extent necessary to make an informed

judgment of the company’s affairs. ”

7. Fair Employment: The issues regarding discrimination between gender, race, religion

and handicaps should come under this topic. Not a single company reported on this issue

in the annual report.

8. Health and Safety: Seven companies reported on this issue in the annual reports. For

instance, BOC Bangladesh Limited has reported that they conduct “Health Programs” in

their company. Beximco Textiles Limited (BTL) reported that:

“Our company believes that all employees are to work in a safe, healthy and

hygienic work atmosphere”

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BTL also reported on several issues related to health and safety like: Fire Fighting, first

aid, male and female physicians, training program on child care and family planning etc.

9. Labor Standards: On this issue, no disclosure was made by any company.

10. Community Relations: 5 companies reported on this issue. An example of Singer

Bangladesh Limited can be given here:

“ We increased the number of sewing schools to 81 during the year. These

schools enable hundreds of young girls to learn sewing and earn the prestigious Singer

Diploma. Some of them take up self-employment while others join in garments

industries.”

11. Environmental Responsibility: As the issue of environmental responsibility is a

burning issue these days, companies ( 14 companies representing 18.67% of the sample)

disclosed on this issue in the annual reports. In these disclosures, the companies mainly

reported about their concern on environmental conservation, their use of environment

friendly products and technology and several actions they take to control environmental

pollution. An example can be given from the annual report of Beximco Textiles Limited

(BTL):

“Under the environmental pollution control several actions have been taken”

Here, BTL has also reported about their several action plans like: Effluent Treatment

Plant (ETP), Noise and Dust Pollution Control and Air emission.

Conclusions:

This findings show that though some of the Bangladeshi companies are disclosing the

issues related to CSR in their annual reports, a clear picture of these issues cannot be

identified from these efforts. From all the discussions and examples in the finding section

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it can be identified that the reporting patterns of the companies are not consistent. About

the same issue, different companies are reporting differently. Moreover, as the companies

are presenting the same kind of issues differently (or inconsistently), stakeholders get

confused and they cannot compare between these companies on these issues, as

consistent information is not there. Another characteristic of these disclosures that can be

identified is that, most of the companies have stated about their awareness on these issues

but they did not present any detailed discussion on their activities related to these issues.

Most of the companies are reporting on these issues very reluctantly and these kinds of

disclosures cannot be something useful to the stakeholders.

Reporting on CSR issues by business organizations all over the world is not a mandatory

requirement by most of the legislations till now. So the reporting that is generally done at

present can be construed as a voluntary activity. May be that is why companies are not

being able to report consistently and satisfactorily in the annual reports. Several

independent organizations and professional bodies and more specifically the supporters

of green revolution are trying to create consciousness on reporting on CSR issues. Here

an organization called Global Reporting Initiatives (GRI) (See Global Reporting

Initiatives, 2002) has played the pioneer role through the introduction of “sustainability

reporting guidelines”- the new dimension of reporting practices. GRI has suggested about

a completely new kind of reporting called ‘sustainability reporting’. Means, they are

suggesting the organizations to produce a separate sustainability report (a separate report

than the annual report) in which issues related to Corporate Social Responsibility will be

disclosed. The companies can report on these topics in their respective web sites also. But

we think a cost-benefit analysis on this respect is necessary. Because, there is no doubt

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that producing a separate sustainability report will involve a lot of costs as producing

information cannot be done free of cost. It needs a huge expertise to report on the matters

to be disclosed in a sustainability report.

From the findings of this study it can be said that Bangladeshi companies do not prepare

any separate ‘Sustainability Report’ but they report on several Corporate Social

Responsibility issues in their annual reports. Though there are no rules and regulations

from any professional bodies or any other governing bodies for this reporting issue, the

companies are doing it out of their own consciousness. That means, these companies are

concerned about the stakeholders’ right to know the information on these topics. The

initiatives on this kind of reporting in the publicly available annual reports from the part

of the companies can be considered as praiseworthy.

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References:

Adams, C.A., Hills, W.Y. and Roberts, C.B. (1998), Corporate Social Reporting Practices

in Western Europe: Legitimizing Corporate Behavior? , British Accounting Review,

Vol.30, No.1, pp.1-21.

Bala, S.K. and Habib, A. (1998) , Financial Reporting to Employees: Bangladesh Case,

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A Study of the Listed Public Limited Companies, Dhaka University Journal of Business

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Accounting, Vol.19, No.1, pp.8-12.

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Chowdhury, A.I. and Chowdhury, A.K. (1996), Corporate Social Accounting: Do We

Need It?, The Bangladesh Accountant, April-June, pp.90-100.

Davis, K. (1975), Business and Society: Environment and Responsibility,3rd Edition,

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No.1, June, pp. 131-145.

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Khan, A.R. and Hossain, D.M. (2003), Environmental Reporting as a Corporate

Responsibility: A Study on the Annual Reports of the Manufacturing Companies of Bangladesh,

The Bangladesh Accountant, January-March.

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Appendix-1

Sector wise Description of the Sample

Serial Sector No. of Companies

No.

1. Bank 02

2. Engineering 08

3. Food & Allied 05

4. Fuel & Power 01

5. Textile 24

6. Pharma & Chemical 06

7. Paper & Printing 02

8. Service 04

9 Insurance 02

10. Miscellaneous 21

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