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Ethical, social and

The ethical, social and environmental
environmental reporting- reporting
performance portrayal gap
731
Carol A. Adams
School of Accounting, Economics and Finance, Deakin University, Burwood, Received 13 November 2003
Australia Revised 24 February 2004
25 February 2004
Accepted 26 February 2004
Keywords Management accountability, Financial reporting, Ethical investment,
Social responsibility
Abstract The purpose of this article is twofold. First, it assesses in detail the extent to which
corporate reporting on ethical, social and environmental issues reflects corporate performance in
case study company Alpha. This “reporting-performance” portrayal gap is a key measure of the
extent to which an organisation is accountable to its stakeholders. Alpha’s disclosures concerning
its ethical, social and environmental performance for the years 1993 and 1999 were compared
with information obtained on Alpha’s performance from other sources. Two different pictures of
performance emerged leading to the conclusion that, in the case of Alpha, reports do not
demonstrate a high level of accountability to key stakeholder groups on ethical, social and
environmental issues. Of particular concern is the lack of “completeness” of reporting. Second, the
article assesses the potential of recent standards or guidelines developed by the Global Reporting
Initiative (GRI) and the Institute of Social and Ethical AccountAbility (AccountAbility) as well as
the industry’s own “responsible care” initiative to reduce this “reporting-performance” portrayal
gap and improve corporate accountability. The conclusions point to the need for other measures to
improve accountability including mandatory reporting guidelines, better developed audit
guidelines, a mandatory audit requirement for MNCs and a radical overhaul of corporate
governance systems.

Introduction
Ethical reporting by companies has become increasingly prevalent since the mid-1980s
and there is a comprehensive body of academic literature charting the extent to which
multinational companies (MNCs) in particular report on ethical, social and
environmental issues. The term “ethical reporting” encompasses reporting on all:
. . . those factors which are used by ethical investment funds to form an opinion on the
appropriateness of an organisation’s business practices (see, for example, Harte et al., 1991;
Rockness and Williams, 1998). This may not include much of the information on employees
that is generally considered to fall within the definition of “social reporting”, but may include
other issues which are not generally considered as “social reporting”. “Environmental

The author would like to thank the Chartered Institute of Management Accountants for funding
this research. The author is particularly grateful to Yvonne Laing who acted as a research
assistant on the project and who identified many of the sources of information. The author is also Accounting, Auditing &
Accountability Journal
grateful to Geoff Frost, Dave Owen and the participants at the 2001 APIRA conference at the Vol. 17 No. 5, 2004
University of Adelaide for their comments on an earlier version of the paper, to the anonymous pp. 731-757
q Emerald Group Publishing Limited
reviewers and to James Guthrie and Lee Parker. All views expressed are those of the author 0951-3574
unless otherwise stated. DOI 10.1108/09513570410567791
AAAJ reporting” is clearly a subset of ethical reporting and generally also considered a subset of
social reporting, but as the most common type of social and ethical reporting, warrants a
17,5 separate label (Adams, 2002, p. 247).
Some attention has also been paid to analysing what and how companies report on
particular issues and the quality of that reporting. A great deal of effort has been put
into examining why companies report what they do. Such work must continue given
732 how rapidly the field of ethical, social and environmental reporting continues to
develop internationally and given the changes in the social, political and technological
context in which these developments are taking place. This study, however, examines
in detail what one company does not report and how corporate portrayal of ethical,
social and environmental performance compares with the portrayal of performance in
sources originating from outside the corporation. Such an examination allows
conclusions to be drawn about the extent to which a company has discharged its duty
of accountability to stakeholders.
Accountability can be defined as the “giving of an account” encompassing, for the
purposes of this article, both the “account” itself and the process followed in providing
that account to stakeholders. Nowadays, stakeholders are demanding the “giving of an
ethical, social or environmental account” as well as a financial account. Some
companies instead now produce “sustainability reports”, but they sometimes focus on
sustainability of the business rather than environmental sustainability. For example,
Barry Stickings, President of the Chemical Industries Association and Chairman of
BASF, finished his lecture to the Royal Society of Edinburgh on “sustainable
development through innovation”, with the statement:
I see the continuing debate over sustainable development as an opportunity for responsible
industries such as ours to rehabilitate the word, “profit” and bring the positive role of profits
back to the centre-stage of public debate (Stickings, 2001, p. 27).
Rather than being concerned with profits and financial accountability, accountability
as far as this article is concerned demonstrates corporate acceptance of its ethical,
social and environmental responsibility. As such the “account” given should reflect
corporate ethical, social and environmental performance.
One of the means by which companies can provide such an account is through a
hard copy report. A good “ethical” report should be transparent and represent a
genuine attempt to provide an account which covers negative as well as positive
aspects of all material impacts. To be accountable, reports need to demonstrate
corporate acceptance of its ethical, social and environmental responsibility. Such
acceptance can be demonstrated through a clear statement of values with
corresponding objectives and quantified targets with expected achievement dates.
Companies should then report performance against those targets. Reports should give
a balanced view of key ethical issues facing the company.
Perhaps the most serious problem with current reporting, and the key one
addressed in this paper, is its lack of completeness. If reports are to be complete
covering all material aspects from a stakeholder perspective, then key stakeholders
must be consulted. The process of that consultation and the governance structures in
place to ensure that stakeholders are heard are also an important consideration in
moving towards completeness. The different goals of companies and their
stakeholders means that reports cannot be complete unless stakeholders are
consulted. And yet the much greater power of companies in this process means that the Ethical, social and
corporate perspective will dominate and stakeholder dialogue could become the environmental
ultimate legitimating tool. If an organisation can say it has consulted stakeholders in
deciding what to report it makes it harder to question the content of that report. Yet it is reporting
difficult to imagine how reporting can satisfy stakeholder demands if they are not
consulted. It is perhaps more difficult to see how the corporate duty of accountability
can be discharged without involving stakeholders in the process. As such processes 733
and governance structures should also be covered in the report. Prior work which
highlights specific areas in which a sample of companies have failed to be accountable
include:
.
Adams et al. (1995) with respect to equal opportunities disclosures;
.
Adams and Kuasirikun (2000) with respect to ethical issues in the chemical and
pharmaceutical sectors; and
.
Deagan and Rankin (1996) with respect to successful prosecution under
environmental legislation.
This prior work uses information available from other sources and points to
non-disclosures that are material to key corporate stakeholders. The reasons for
non-disclosure include a reluctance to report on negative impacts (Adams, 1999) and
the social and political context at the time disclosures were made (Adams and Harte,
1998). This paper examines the extent of non-disclosure in detail for one company,
Alpha[1], in two different years.
The moral arguments for greater corporate accountability arise from the increases
in size, power and global spread of multinational companies and increased awareness
of the impacts of companies on the environment and local communities. This increase
in awareness has been brought about by the media, the Internet and the action of
non-government organisations (NGOs) (see, for example, Commission of the European
Communities, 2001).
In the context of little ethical, social and environmental auditing, a call for
stakeholder involvement in the audit process (Commission of the European
Communities, 2001) and of a huge audit expectations gap (see, Kamp-Roelands,
1999; Owen et al., 2000), the assessment of the comprehensiveness or completeness[2] of
reporting provided in this paper is intended to give an indication of the extent to which
stakeholders can rely on corporate reporting as a means of assessing corporate
performance.
The work also briefly assesses the extent to which the current voluntary guidelines
of the Global Reporting Initiative (GRI) and the Institute of Social and Ethical
AccountAbility (AccountAbility)[3] might improve corporate accountability. These
guidelines are recent and assessment of them is essential if they are to avoid the
concerns surrounding the Sullivan principles and the way in which they masked poor
performance, legitimised the corporate perpetrators and yet impressed investors
(Arnold and Hammond, 1994; Patten, 1990). The GRI guidelines were selected for
consideration because of their high international profile and influence and
AccountAbility’s AA1000 standard because of its unique focus on the processes of
accountability.
The article examines the reporting of Alpha for 1993 and 1999 comparing it with the
portrayal of that company’s performance gleaned from an examination of sources
AAAJ external to the company. The identity of company Alpha has not been disclosed and
17,5 names of products, reports, projects, initiatives and other company specific
terminology have been changed. The intention is to allow the reader to focus on the
accountability issues that the paper addresses rather then being influenced by their
own recollections of possibly biased portrayals on the part of the company, the media
or NGOs. The constraint of not revealing the company’s identity has also served to
734 focus the writer’s attention on the purpose of examining the ethical, social and
environmental portrayal gap rather than simply revealing those gaps.
Alpha is a large, multinational company operating in an industry in which
environmental impacts and health and safety issues are significant. Importantly,
Alpha disclosed in its environmental report for 1993 that it participated in the writing
of the voluntary responsible care guidelines of the European Chemical Industry
Association (CEFIC).

Current developments in the field of ethical reporting

The purpose of this section is to review current developments in the field of ethical
(including social and environmental) reporting and its processes in order to allow an
assessment of Alpha’s reporting in relation to those developments. The review allows
an assessment of the extent to which those developments themselves might address
any shortcomings in the quality and extensiveness of reporting.
Whilst legislation is unlikely to lead to increased accountability in the UK, the duty
to account for ethical, social and environmental impacts is being increasingly
considered and captured by legislators around the world. For example, Australia,
Denmark, The Netherlands, Norway, Sweden and the US all have mandatory
requirements that companies report to the public on their environmental performance
(KPMG, 1999). In the UK, only 37 of the FTSE 100 companies produce a separate
environmental report (Skorecki, 2001, p. 18) and the proposals in the final report of the
Company Law Review (The Company Law Review Steering Group, 2001) are unlikely
to lead to improvements in accountability. They leave it to directors to decide whether
or not information is:
.
“necessary to an understanding of the business” (p. 51);
.
“material” (p. 51); and
.
“necessary for an effective report” (p. 51).
In contrast, the UK Pensions Act (1995) now requires pension plans to state the extent
to which ethical, social and environmental considerations are taken into account when
making investment decisions. Change is slow with Friends of the Earth finding that
only ten pension plans out of 100 contacted supplying information showing that they
“had ‘good’ statements on socially responsible investing, monitoring mechanisms and
direct engagement on these issues by money managers” (Payne, 2001, p. 15). However,
in April 2001, Morley Fund Management announced that it would vote against the
resolution to adopt the report and accounts of any FTSE 100 company that did not
produce a separate environmental report (Skorecki, 2001). Similar legislation is being
introduced in Australia and Germany. Another important development in the field
which may lead to further legislation in Europe was the publication of the EC Green
Paper, “Promoting a European framework for corporate social responsibility”
(Commission of the European Communities, 2001, p. 3) which seeks to “bring greater Ethical, social and
transparency and to increase the reliability of evaluation and validation”. environmental
Credibility would be added to corporate accounts of their performance if they were
externally audited and data verified as part of the accountability process. However, reporting
currently, few published reports are verified or audited and the European Commission
recognises that:
Verification by independent third parties of the information published in social responsibility
735
reports is also needed to avoid criticism that the reports are public relations schemes without
substance. Indeed such services are already beginning to be offered by a variety of
companies, which would seek to perform them following agreed standards. The involvement
of stakeholders, including trade-unions and NGOs, could improve the quality of verification
(Commission of the European Communities, 2001, p. 18).
Where assurance statements are provided, credibility would be enhanced by the
availability of generally applicable assurance principles and guidelines, such as those
being developed by AccountAbility (ISEA, 2002).
With regard to voluntary reporting standards, there are two significant
organisations involved in their development at an international level. These are the
Institute of Social and Ethical AccountAbility (AccountAbility), formed in 1996 and the
Global Reporting Initiative (GRI) formed in 1997. Both are international,
multi-stakeholder organisations with greatest influence coming from Western
developed nations[4].
The AA1000 standard was published by AccountAbility in 1999 (ISEA, 1999a, b). It
does not attempt to identify issues to be addressed, but rather focuses on the processes
by which companies report on their impacts. This focus is based on the premise that
unless, for example, corporate values are embedded, and unless governance systems,
data collection systems, reporting mechanisms and audit processes are sound,
reporting is unlikely to be representative of performance or reflect stakeholder
information needs. The AA1000 “principles” have been influenced by the principles of
financial accounting, but a key addition is the principle of “inclusivity” referring to the
reflection of the aspirations and needs of all stakeholder groups at all stages of the
accounting, auditing and reporting process. Stakeholders are defined as “an individual
or group of individuals who affect and/or are affected by an organisation and its
activities” (ISEA, 1999b, p. 93). Customers, suppliers, employees and shareholders are
recognised as stakeholders by most companies. Other stakeholders of companies in the
chemical industry include local communities, politicians, the government, the media,
trade unions, Friends of the Earth, Greenpeace, the Pesticides Action Network, the
Royal Society for the Protection of Birds and Amnesty International. Recognising the
complexity of stakeholder identification, AA1000 recommends that stakeholders assist
in the identification of other stakeholders. Thus, the development of robust stakeholder
engagement mechanisms is an integral part of the AA1000 process and is encapsulated
by the principle of “inclusivity”, which is supported by, and infuses the operational
meaning of, the remaining AA1000 principles. These can be divided into three broad
groups, relating to:
The scope and nature of the organisation’s process; the meaningfulness of information; and
the management of the process on an ongoing basis (ISEA, 1999b, p. 10).
AAAJ The principles, which relate to the scope and nature of the organisation’s process are
17,5 completeness, materiality and regularity and timeliness. Those relating to the
meaningfulness of information are quality assurance, accessibility and information
quality (including comparability, reliability, relevance and understandability). Those
relating to the management of the process on an ongoing basis are embeddedness and
continuous improvement.
736 This emphasis on stakeholder dialogue, and the call for it to be linked with
governance structures, is an important development. AA1000 calls for stakeholder
dialogue mechanisms which give stakeholders power. In practice many (deliberately)
lack this robustness and inclusivity is not achieved (Adams, 1999). Some people
working in this field within companies have highlighted to the writer problems of
attaining inclusivity with which they are grappling. These include lack of stakeholder
awareness of, and even concern for, corporate impacts. This might be industry specific
or region specific and even where there is corporate will, some companies claim to have
difficulty getting stakeholders to engage with them. Others have complained more
explicitly of “stakeholder fatigue” in that the same stakeholder representatives are
being consulted by a number of companies. One way of reducing “stakeholder fatigue”
might be to engage with stakeholders on some levels on an industry basis using
industry association as a vehicle[5].
There is a plethora of voluntary guidelines and standards covering various aspects
of ethical, social and environmental reporting and the AA1000 Framework (ISEA,
1999b) shows how AA1000 and several of these other voluntary guidelines are linked.
The GRI’s Sustainability Reporting Guidelines first published in 2000 (GRI, 2000,
2002) focus primarily on the content of “sustainability” reports, but incorporate some of
the “principles” or “characteristics” of AA1000. GRI (2000) recommends a structure for
GRI reports with six key elements:
(1) CEO statement.
(2) Profile of reporting organisation.
(3) Executive summary and key indicators.
(4) Vision and strategy.
(5) Policies, organisations and management systems.
(6) Performance.
GRI (2002) moves the CEO statement to the “vision and strategy” section and removes
the separate executive summary statement requirement. It adds a “GRI content index”
to show where information is located in the organisation’s report. It gives guidance as
to the content of each section. The GRI (2000) guidelines also call for reporting on the
basis of selection of major stakeholders and approaches to stakeholder consultation,
but give little guidance as to how either might be done. GRI (2002) further requires
companies to report on the output and outcomes of stakeholder consultations.
Limited stakeholder dialogue is also called for in the OECD Principles of Corporate
Governance (OECD, 1999). However, although the principles recognise that social,
ethical and environmental impacts can have an impact on corporate reputation and
long term success, their stated attention is on the governance problems arising from
the separation of ownership and control. They call for “performance-enhancing
mechanisms for stakeholder participation” (p. 20) and disclosure of “material issues
regarding employees and other stakeholders” (p. 39), but there is little guidance on how Ethical, social and
such processes or issues should be determined. The World Bank’s Corporate environmental
Governance – A framework for implementation (World Bank, 1999, pp. 11-12) also
addresses the “principal-agent” problem, but suggests that: reporting
. . . the corporate governance framework should encourage active co-operation between
corporations and stakeholders in creating wealth, jobs and financially sound enterprises . . .
737
However, the document talks about the board’s accountability to shareholders, not
stakeholders. There is no recognition in either the OECD or World Bank documents of
the conflicts that arise between stakeholder and shareholder demands, for example,
when money has to be spent to protect human, animal, bird and fish plant and health
life or provide for adequate and safe labelling of products.
Also at an international level there are the responsible care guidelines developed by
the chemical industry and overseen by the International Council of Chemical
Associations (ICCA). The European Chemical Industry Association (CEFIC) first
published its own guidelines in 1993 that were revised in 1998 (CEFIC, 1998). They
include 16 core indicators. Three of these are concerned with health and safety
outcomes, one with distribution incidents and the remaining 12 with environmental
outcomes concerning emissions and discharges of toxic substances and waste
management. National federations are encouraged to add further indicators reflecting
national concerns and each produces its own responsible care report (CEFIC, 1998).
Each national federation collects data from its member companies for aggregation at
the national level.
Many companies are still not reporting on the 16 core indicators and in this respect
Alpha’s reporting is superior to many others in the industry. At the CEFIC 2000
Responsible Care conference held in Lisbon[6] there was a recognition that CEFIC and
the national industry federations need to find ways of encouraging small- and
medium-sized enterprises (SMEs) to report (Elghamry, 2001). There was also
recognition that more needed to be done to facilitate reporting by Eastern European
companies where there is still a significant proportion of government ownership and
concern for economic survival (Beacham, 2001). Cultural attitudes were cited as a
reason for non-reporting in some countries. Amongst other points discussed were
whether broader ethical and social issues as well as health, safety and environmental
(HSE) issues should be included in the core indicators, the need for global reporting
standards and issues of divergence between global standards and responsible care
guidelines. In particular, there was concern that any other development in responsible
care should be compatible with GRI.
Despite having voluntary guidelines and reporting levels higher than many other
industries, the industry still has a dirty image (see, for example, Tombs, 1993, referring
to MORI poll results). One problem may be that few companies in the industry, despite
their high environmental and social impacts, stand out for innovative reporting. It is
quite probable that the responsible care guidelines themselves have stifled innovation,
with some companies focussing only on what they require. The lack of breadth of
reporting in this sector may be a case in point. King and Lenox (2000) argue that
companies may sign up to industry association guidelines as a form of insurance
against claims of negligence. Indeed, using data from the US Environment Protection
Agency’s (EPA) toxic release inventory (TRI) they found that firms with weaker
AAAJ environmental performance were more likely to sign up to responsible care. Such
17,5 findings lead to expectations of limited accountability confirmed by research carried
out in the US by the Public Interest Research Group (PIRG) (Mullin, 1998). Druckrey
(1998) head of responsible care for der Verband der chemischen Industrie (VCI), the
German chemicals industry association, argues that there is a need for regulation at an
international level that individual national governments cannot provide. She believes
738 there is an “ethical vacuum” to be filled by responsible care and does not like it seen as
the chemical industry’s public relations campaign.
There is currently a low level of reporting on issues known to be of concern to
stakeholders, but which are not amongst the 16 responsible care core indicators. These
include (Adams and Kuasirikun, 2000; UNEP, 2000):
.
equal opportunities;
.
working conditions around the world;
. policies regarding foreign direct investment;
.
export of dangerous products or those banned in the home country;
.
labelling and packaging of chemicals; and
.
other product safety issues.
The same applies to environmental issues. Whilst the responsible care indicators are
concerned with levels of emissions or discharges, stakeholders are at least as concerned
with what is being done to reduce emissions and discharges of toxic substances, what
the corporate targets are and why they have not been met. UNEP (2000) further raises
concerns about the increasing use of fertiliser in less developed countries and its
impact on the nitrogen loading. These findings apply to the industry in general whilst
the next section reports on how issues omitted specifically from Alpha’s reports were
found.

Background information on Alpha and research method

The nature of Alpha’s business has changed significantly since 1993. During 1993, part
of Alpha’s business was demerged into company Beta. At the end of 1993, Alpha was
divided into a number of international businesses differentiated by product type. Since
then, Alpha has bought more businesses and divested others.
Alpha produced its first environmental report in 1992 and has continued to produce
one each year. The first report was 16 pages, only available in hard copy and sent to all
shareholders. The report produced in 2000, covering the calendar year 1999, is packed
with data and available on the Internet. A distinct hard copy format is no longer
available. Prior to production of a separate environmental report, Alpha covered some
health, safety, environment and community involvement information in its annual
report.
The report produced in 1992 incorporated data on wastes to land, air and water for
1990 and 1991 and a commitment to reduce these wastes by 50 per cent using 1990 as a
baseline, by 1995. The report produced in 1996 reported progress on that objective and
launched the Environment Plus Challenge 2000 which expanded the previous focus on
the environment by also setting targets for safety, health and product stewardship. In
1996, Alpha launched its approach to measuring environmental impact. It involves
assigning a factor to each individual emission reflecting its impact in various
environmental categories such as global warming, ozone depletion, etc. The factors are Ethical, social and
taken from scientific literature. The environmental impact of emissions is then environmental
calculated for each environmental category by summing the weight of each substance
emitted multiplied by its potency factor. The intention of this is to allow Alpha to reporting
identify its most harmful emissions and provide stakeholders with a better assessment
of Alpha’s environmental impacts.
The 1990s were therefore a decade of change for Alpha with regard to both the 739
nature of its business and the development of ethical, social and environmental
reporting. The selection of 1993 and 1999[7] offers the opportunity to determine the
extent to which Alpha’s increased experience and expertise (as evidenced, for example,
by the development of an approach to measuring environmental impact) have resulted
in reporting which addresses stakeholder concerns and reflects performance. The year
1999 was selected because it was the most recent reporting year at the time of data
collection and 1993 because it was one of Alpha’s early separate reports thus allowing
the company to learn from its earlier reports, and its publication followed the demerger
of Beta.
Initial searches for data from non-Alpha sources were conducted on all years in the
1990s that Alpha produced a separate report finding critical stories in each year. This
was followed up with more detailed and extensive searching for and collection of, data
for the two years 1993 and 1999 in order to ensure that the data set was complete as far
as possible. The view was taken that where impacts were reported in non-Alpha
sources as occurring in a particular year they should, if the reports were to demonstrate
accountability, be reported in Alpha sources covering that same year. Where they were
not, a check was made of the following year’s Alpha reports where impacts were
significant.
A wide variety of sources including databases, reference books and Internet sites
were consulted in building up a picture of Alpha’s ethical, social and environmental
performance[8].
The search covered information on all ethical, social and environmental issues
identified in Adams and Kuasirikun (2000) as being relevant to the industry. In
reviewing media reports, issues that were either not covered at all in Alpha’s annual
review, annual accounts or environmental report or for which a different portrayal was
given were identified[9]. Coverage was found on some of the ethical, social and
environmental issues identified in Adams and Kuasirikun (2000) and mentioned at the
end of the previous section, without specific reference to Alpha or other particular
companies. Some of the criticisms in connection with these issues were directed at
MNCs in general and others at the chemical industry as a whole. Only articles and
press cuttings that specifically mentioned Alpha were used. Lack of reference to Alpha
in the media in connection with reported chemical industry issues could indicate that
Alpha’s performance on them is considered satisfactory by journalists. It could also
mean that poor performance is widespread and therefore that Alpha in particular has
not been singled out.
It should be noted that Alpha does not claim to be accountable for all of these
impacts, its 1993 separate report, for example, being called an environmental report
(ER). That is, of course, not to say that it should not be accountable. It should also be
noted that the non-Alpha sources of data serve to fill different information needs from
corporate reports. However, if the company reports were intended to represent
AAAJ performance fairly and address the concerns of key stakeholder groups, one might
17,5 expect similar issues to be covered by both sources. There may remain some
differences in portrayal and emphasis due to focussing on concerns of different key
stakeholder groups and some media reporting may be inaccurate. With regard to
Alpha’s own reporting, the annual review and financial statements were reviewed as
well as the environmental report.
740 An earlier draft of the paper was sent to the former company secretary, former
manager responsible for external communications and the manager responsible for
external affairs. Discussions took place with the manager for external affairs and the
vice president responsible for the environment in which Alpha were specifically asked
to point out any inaccuracies in that draft of the paper.

Analysis of results
This section reports on issues reported in the sources identified in the previous section
which were either not mentioned in the Alpha reports or where the portrayal by Alpha
and those external sources differed. The issues are reported by year, 1993 and 1999.

1993
Alpha’s environmental report for 1993 is 15 pages long. It covers health, safety and
environment and is distributed to all shareholders. The 21 page annual review for 1993
contains one half page of information on health, safety and the environment and one
half page on staff and Alpha’s community (Table I).

Pollution, discharges and fines

The Alpha reports give the impression of a company that is trying hard and which
wants to do better. For example, the chief executive, notes that he is particularly proud
of Alpha’s reductions in hazardous waste, the company gone beyond its 1995 target of
a 50 per cent cut. He was however disappointed by the number of times Alpha was
prosecuted and fined for accidentally breaking environmental laws and regulations
(Environmental report, p. 3). Performance with respect to non-hazardous waste, such as
brine and gypsum, which accounts for 95 per cent of all Alpha’s wastes was not so
good. Alpha’s target of a 50 per cent reduction is was described as very demanding and
difficult to achieve (Environmental report, p. 7). On page 4 we are told that hazardous

Content 1993 (pages)

Overview of company 1
Chief executive’s review 1
Policy statement 1
Progress towards objectives set in 1990 to be
achieved by 1995 2
Reducing pollution 1
Table I. Product development and stewardship 2
Breakdown of content of Environmental expenditure 1
Alpha’s environmental Problems, solutions and mistakes 1
report 1993 (in pages Involvement in bodies aiming “for a cleaner world” 1
including text, pictures Data on waste and emissions 2.5
and graphics) Data on fines, complaints and awards 0.5
wastes are 64 per cent and non-hazardous wastes 23 per cent lower than in 1990. The Ethical, social and
target of a 50 per cent cut in waste by 1995 was set in 1990 and is the only one of the environmental
four “objectives” which is quantified. The other three are concerned with the
environmental impact of new plants, an energy and resource conservation programme reporting
and recycling. However, some quantified information is provided on the successes in
connection with both waste reduction and energy and resource conservation. In the
case of wastes, comparative figures are given in the form of bar charts for the 741
preceding three years, but detailed emissions data is given for 1993 only. Targets are
not given.
The section on initiatives to reduce pollution stresses the cost savings resulting
from the company’s efforts. For example, an Alpha plant in Australia reduced the cost
of waste disposal by A$2.4 million and reducing waste saved A$4 million in capital
expenditure. Recycling at an Alpha factory in the UK reduced costs by £300,000 p.a.
This emphasis on cost savings was presumably intended to justify environmental
expenditure to shareholders, a stakeholder group with a keen interest in profitability
and share value. The company also provides an indication that there are limits as to
how far it will go in achieving environmental improvements that incur a financial cost:
In common with all companies, and indeed all countries, spending on environmental
improvements has to be balanced by environmental benefits achieved.
As we continue to improve our environmental performance, to comply with the law and to
make effective products in a clean and efficient way, it is inevitable that an increasing number
of situations will arise where only small improvements can be made, for a proportionately
higher cost. The challenge is to set the right priorities and make the correct decisions, so that
we can continue to improve our performance and remain profitable (Environmental report,
p. 10).
Action taken by Greenpeace against discharges into the sea was not mentioned in
Alpha’s reporting. Greenpeace prosecuted an Alpha business for discharges of
chemicals into the sea under the Water Resources Act 1991. Greenpeace claimed to
have found 100 organochlorine compounds in samples from 34 outflow pipes taken in
September 1992 that the company had no consents to discharge. Chemistry and
Industry (1993) reported that a scientist from the National Rivers Authority thought
that some of the compounds found may have formed as a result of other chemicals
being present rather than being discharged by Alpha[10]. Indeed this legal action did
eventually fail, the levels of pollutants found not to be high enough to cause
environmental damage (European Chemical News, 1994). A point worth noting here is
that rather more media coverage was found of the announcement of the prosecutions
than of the finding in Alpha’s favour. Nevertheless one might have expected that
inclusive, complete reporting on the part of Alpha with the objective of discharging the
company’s duty of accountability would have carried some discussion of it and the
issues which it raised.
Five directors of an Alpha subsidiary and the company itself were charged for
discharges into a river and a total of 36 offences under the Fisheries Act by Canada’s
Federal Ministry for Environment (see Greenpeace Business, 1993a). The Guardian had
earlier reported (The Guardian, 1993a) that Alpha had been accused of abandoning its
Canadian manufacturing base and shifting its production elsewhere in reaction to the
prosecution by environmental authorities. The reporter interviewed spokespersons
AAAJ from the environmental authority and from Alpha. The parties had different views of
17,5 the effort put in by Alpha in preventing pollution indicating perhaps that more open
communication may facilitate the achievement of improvements in performance and
building trust with key stakeholders.
The environmental report mentions the pollution of another river in Canada that
resulted from a decision to use cheaper and less pure sulphuric acid at a fertiliser plant.
742 Alpha informs readers of its environmental report that it was prosecuted 11 times in
1993 for breaking environmental laws. The amount and reasons for these fines are
briefly outlined in the report. The National Rivers Authority also publishes
information on fines giving the amount of the fine and nature of the offence.
Alpha was the first household name to be fined under provisions of Environmental
Protection Act 1990 for two breaches of the duty of care incurred in June 1992
concerning a consignment of waste which caused explosions putting operators at risk.
One of the breaches concerned a failure to take reasonable measures to prevent any
other person from contravening the act in respect of the treatment of controlled waste
in a manner likely to cause harm to human health. The second concerned the
inadequate description of the waste. The fines were £1,500 for each offence plus £5,890
costs (ENDS Report, 1993b). The health and environmental impacts of breaches from
which fines follow are not discussed in Alpha’s reporting. Whilst many shareholders
may be concerned only with the amount of the fines, stakeholders, in this case
employees, their families, consumers and those living in the local communities will be
more concerned about the safety issues and measures put in place to ensure no
repetition.

Environmental impacts of products

Two of Alpha’s products, Yeganam and Zetok, and their marketing of them received
press coverage during 1993. Zetok (see below) is not mentioned in Alpha’s reporting
and Yeganam is described as a well-established alternative to refrigerant.
Greenpeace made five complaints to the Advertising Standards Authority against
Alpha relating to its claims about the environmental impact of its product Yeganam
and in particular the extent to which the product would contribute to global warming
(see, Greenpeace Business, 1993b, for detail of the complaints). The claims were made in
an advertisement in The House magazine, distributed to members of parliament and
parliamentary staff. The Advertising Standards Authority upheld four out of the five
complaints made by Greenpeace (reported in ENDS Report, 1993a; European Chemical
News, 1993; Financial Times, 1993). The Greenpeace action was not discussed in Alpha
reports.
An Alpha business in Malaysia placed an advertisement in the Malay Mail on 15
April 1993 for its product Zetok without mentioning its potentially harmful effects on
human beings, instead promoted it as “environmentally friendly”. The Global Pesticide
Campaigner claimed in November that the advert contravened the UN Food and
Agriculture Organisation’s (1986, amended 1996) “International code of conduct on the
distribution and use of pesticides”. Zetok has been banned in some countries and a
group campaigning against its use protested about expansion of Alpha’s Zetok
production facility the UK. The capacity of the proposed $58 million plant would be
8,000 m/t per year (Chemical Week, 1993). Both the World Health Authority and the US
Environment Protection Agency are reported to be concerned about Zetok’s safety and
contamination potential (Multinational Monitor, 1992; see also, Utusan Konsumer, Ethical, social and
n.d.). environmental
Consumer Currents (1993) quotes the Malaysian chemistry department as reporting
that in the period 1978-1985 Zetok accounted for 66 per cent of 1,442 reported pesticide reporting
poisoning cases in Malaysia. Toxic Trade Update (1993) quotes a 1981 report putting
the number of deaths at 1,200 per annum and reports that the Malaysian women’s
organisation and the Pesticide Action Network found extensive acute Zetok poisoning 743
amongst female pesticide sprayers in a 1991 survey.

Employment issues
There were reports of job losses in the press with The Guardian (1993e) claiming that
the company had already cut 7,000 jobs that year and reporting city estimates that the
workforce would be cut by 25 per cent by 1995, a loss of 24,000 jobs. Alpha’s 1993
annual report states that:
. . . the number of staff worldwide has fallen by 25,700, or about 28 per cent, since December
1990. Divestments have accounted for nearly 30 per cent of this reduction. In 1993 staff
numbers fell by 8,200, of which divestments accounted for 3,500 (p. 3).

Other ethical, social or environmental issues

None of the following issues were mentioned in Alpha’s 1993 reports.
Prices. The Guardian (1993c) reported on the negative reactions of Alpha and other
companies selling pharmaceuticals to the Medicines Information Bill that proposed the
removal of section 118 of the Medicines Act. This section made it an offence to disclose
anything about drug licensing or reactions suffered by patients, even to their doctors.
The drug companies claimed that removal of section 118 would damage them, while
people who claimed to have suffered permanent damage from tranquilliser use
supported it.
The Guardian (1993d) reported on the forthcoming talks between the financial
chiefs of Alpha and other drug manufacturing companies and the Department of
Health to renegotiate the pharmaceutical price regulation scheme that determines the
profits that companies make from selling drugs to the NHS. Profits are related to
“capital employed” so the companies were reported to have invested in
“post-marketing surveillance trials” whereby doctors switch a patient’s drug to one
the company is selling, monitor its performance and record any adverse reactions.
They describe this as safety research rather than promotion allowing them to include
the cost in “capital employed” thereby increasing their profits. A former health
department official was reported as telling The Guardian that their “people just got
walked over” in the negotiations. The outcomes of the negotiations are kept secret and
any appeals are settled by the industry’s own lobbying group, the Association of
British Pharmaceuticals Industry.
Alpha’s and Glaxo’s US subsidiaries were criticised in a US Senate report for
increasing drug prices faster than inflation despite promises to the contrary (The
Independent, 1993a).
Alpha told this researcher that issues regarding pharmaceuticals were excluded
from their reports because of the demerger of the pharmaceuticals business to Beta.
The resolution to give effect to the demerger was passed at the extraordinary general
meeting of the company on 28 May 1993, after the above press reports were published.
AAAJ Animal testing. Outrage (1993) refers to reports that Alpha supplied beagles for
17,5 experiments which induced osteoarthritis in them. The Ethical Investor (1993) reported
that Alpha provides animal testing services or manufactures products commonly
tested on animals.
Arms trade? Alpha was reported to have contracts worth more than £5 million with
the Ministry of Defence in any one of the previous three years (EIRIS, 1993). The nature
744 of these contracts is not disclosed.
Political activities. The Independent (1993b) reports on a challenge made by Alpha to
the EC proposal to hold companies liable for environmental damage. A month later
The Guardian (1993b) carried an interview with Sean Hamil author of Britain’s Best
Employers (Hamil, 1993) who reportedly claimed that the primary reason for Alpha
improving its environmental performance appeared to be the potential threat of
legislation, particularly from the EC.

Summary for 1993

In comparing Alpha’s own portrayal of its ethical, social and environmental
performance for 1993 with the portrayal in other publicly available sources, the reports
give the impression of a company trying hard, making progress, recognising a need to
try harder where progress has not been made and regretting mistakes. This is
tempered by a message in Alpha’s reports that environmental improvements will be
balanced against financial costs and benefits.
Strikingly, the comparison of the two portrayals, by external stakeholders on the
one hand and Alpha on the other, highlights some omissions from Alpha reports of
information which is undoubtedly material to key stakeholder groups and which does
not reflect well on Alpha’s performance. Indeed, the sources consulted indicate that
Alpha’s performance on a number of ethical issues was widely regarded as poor. Low
levels of fines failed to act as a deterrent and John Major’s conservative government
could even be accused of colluding in unethical practices by awarding a director of
Alpha a CBE for his services to environmental protection (The Guardian, 1993f).
When Alpha’s reporting is compared with current guidelines, other deficiencies can
be identified. First, the report does not mention any governance structures to ensure
environmental values are embedded. Second, there is a lack of quantification of targets
and outcomes. Third, there is limited coverage of the background to and broader
impacts of, for example, the significant job losses or the pollution incidents. Finally,
there is no indication of the problematic relationship Alpha has with stakeholders such
as Greenpeace or Friends of the Earth or of the controversy that surrounds some of its
products and processes. It should be noted that these guidelines were not available at
the time when Alpha produced its 1993 report and that report reflects the lack of
development of ethical, social and environmental reporting at that time.

1999
Alpha’s corporate vision in its annual review and accounts and form 20-F 1999 gives
the impression that ethical, social and environmental concerns are not embedded
within the organisation. At the end of a list of other goals, all stated positively, comes
the negative: “We must . . . never compromise our commitment to safety, health and the
environment”. There is no other mention of safety, health and the environment in the
mission statement. Indeed, there is only about a page of information on the
environment and health and safety in that document which discusses progress to date. Ethical, social and
Specific incidents or problems are not mentioned. The two pages in the 1999 annual environmental
review gives a similarly unproblematic impression of progress though it mentions a
£2,000 fine for “two losses on containment in 1998” (p. 24) (Table II). reporting
Alpha’s environmental report for 1999, although much longer than the 1993 version,
is written in the same glossy style, with more reporting on performance, and with the
same recognition that more needs to be done. A new addition is some limited 745
discussion of the reporting process. An organisational diagram shows that the CEOs of
the international businesses are responsible to the Alpha board. It also shows the
environment and health and safety department, but its role is not explained.
Businesses report to the board through a process that was verified by a big four audit
firm. A new management system is mentioned, but the way it fits into the governance
structure is not explained. The report does state, however, that the system is designed
to allow compliance with the US and UK responsible care requirements, ISO 14001 and
the ICC business charter for sustainable development. There is also a brief mention of
the self-assessment management system concerned with product stewardship. There
were more quantified targets than had been previously set and the report quantifies
progress against those targets. There are therefore some noteworthy improvements in
reporting.

Pollution, discharges and fines

In reviewing Alpha’s environmental report for 1999 the ENDS Report (2000b) carries
this caution:
In fact, all these data have to be taken with a pinch of salt for the time being at least. While the
report says that [Alpha]’s policy is to make clear the extent of changes in its releases which
were due to acquisitions and divestments by altering each year’s data back to the baseline,
what it does not reveal is that the company is still in the midst of a process to determine
precisely what the impact of the business changes of the past few years has been (p. 20).
Reports in The Guardian (2000a, b, c) present a different portrayal of the impact of
chemical X on the local communities than that in Alpha’s environmental report for
1999. The Guardian describes the stress on the 1,000 strong population of the town, the

Content 1999 (pages)

Home page/index 1
Chief executive’s review 1
Responsibilities and management systems including
product stewardship 5
Targets and objectives 1
Verifier’s statement 2
Safety and health performance 4
Environmental performance 16
Sustainable development 10 Table II.
Safety, health, environment and product stewardship Breakdown of content of
around the world 4 Alpha’s environmental
Community and wildlife issues around the world 2.5 report for 1999 (in pages
Links to previous environmental reports 1 including text, pictures
Electronic feedback form 1 and graphics)
AAAJ weekly public meetings and the jamming of the special health phone line. Because of
17,5 the poisonous nature of chemical X, which causes liver and kidney cancers, lowers
fertility and shortens lifespans, Alpha offered to buy out the 22 homes found to be
contaminated (see also ENDS Report, 2000a, b). The immediate offer to buy up houses
led to suspicions about what else was in the tip and what Alpha were looking for when
they dug the boreholes in the first place. In the section on “sustainability” the
746 company’s environmental report discloses that 22 homes near the Alpha site were
found to have a presence of chemical X in the air as a result of disposals over a period
of 50 years which stopped around 25 years ago. Alpha reports that it is working to
resolve the situation as chemical X “may cause harm to health”. When discussing an
earlier draft of this article with Alpha, this researcher was directed to a Web site for
more information on Alpha’s work on this and the local press. These sources are not
easily available to non-local stakeholders, the Web site not (at the time) being linked
from Alpha’s site. A link was added following a discussion with Alpha staff on this
issue.
Hydrochloric acid from an Alpha plant in the UK contaminated a wintering ground
for birds on 17 February 1999. It was the sixth such serious incident since 1997 and
Michael Meacher, the environment minister, summoned senior managers from Alpha
in the following week to express his concerns (Financial Times, 1999a). The acid in the
mud flats and seal sands on a river estuary, an internationally designated site for
migrating birds, was reported to be too strong to dip a hand in (The Guardian, 1999c).
Several conservationist and animal protection groups were trying to help damaged
birds and called for tougher penalties against polluters (see also ENDS Report, 1999a).
Alpha was top of the Environment Agency’s list of fines for pollution by companies
in England and Wales published in March 1999 with fines amounting to £382,500 for
pollution during 1998 (Business Insurance, 1999; ENDS Report, 1999b; Environment
Agency, 1999; Financial Times, 1999b; Safety and Health Practitioner, 1999). The
Observer (1999b) and the ENDS Report (1999d) reported that Alpha had four factories
in the top ten releasing cancer causing chemicals to the air including dioxin described
as “the world’s most toxic substance” and linked to reduced fertility. Indeed, The
Guardian (1999b) reported that in 1996 Alpha emitted more than 5,340 tonnes of
cancer-causing chemicals. Although the Environment Agency’s interventions
facilitated the reduction of this figure to 3,761 tonnes, the company is still a top
polluter with an Alpha site being top of the league table for 1999 discharges (ENDS
Report, 2000c).
Three Alpha businesses were named as the first, fifth and 16 on a league table of top
polluters. They discharge alkylphenols used in industrial detergents that are known to
feminise male fish (ENDS Report, 1999e; Friends of the Earth, 1999, 2000). ENDS
reported (ENDS Report, 1999f) that in 1997 Alpha discharged 1,000 tonnes of ammonia
which is also toxic to fish. Friends of the Earth made their feelings known about
Alpha’s pollution record by turning up at its AGM in 2000 wearing protective clothing
and carrying sparkling “time bombs” (The Guardian, 2000c).
With regard to prosecutions under environmental law, Alpha’s environmental
report notes only one infringement compared to four in 1998 and eleven in 1997. This
one infringement related to a spill of 100 gallons of non-hazardous material in the USA,
the resulting fine being only $1,000 plus a $2,141 investigation fee. In addition to this
incident the report mentions that there were five further spills of significant quantities
of material. There is no information about the impacts of these spills on the Ethical, social and
environment. Immediately following these reports of bad news there is a section on environmental
internal Alpha awards. It was not uncommon for companies to be concerned about
negative impacts on their reputation of reporting bad news at this time (Adams, 1999). reporting
The ENDS Report (1999c) notes that an Alpha subsidiary was criticised in the
House of Commons for selling heavily contaminated land to a local authority and
leaving taxpayers with a multi-million pound clean up bill. Again, this was not 747
mentioned in Alpha’s own reports.
The section on sustainability in Alpha’s environmental report 1999, which gives
Alpha’s view on a number of issues “that are particularly important to Alpha’s journey
towards sustainability” contains the statement:
The basic principles of the green house effect are well understood. But the science to support
projections of the effects on climate of increased concentrations of greenhouse gasses in the
atmosphere, and the impact on the environment of any climate change, is still uncertain.
The Global Environmental Outlook 2000 (UNEP, 2000) report comes to a different
conclusion concerning both the impact of greenhouse gasses on the climate and the
impact of climate changes on the environment (UNEP, 2000). The Inter-Governmental
Panel on climate change (whose Web site was linked from the Alpha Web site) has
studied the impact of various levels of CO2 on temperatures and UNEP (2000) outlines
the various ramifications of global warming on land displacement, frequency of
outbreaks of pests, extended range of pathogens, outbreaks of fire, agricultural and
food production and nutrition and health.
In discussing endocrine disrupters, Alpha argues that research about the link with
development and reproduction are inconclusive and that they occur naturally in much
larger quantities than in chemicals. The scientific literature appears much more certain
about the effects of endocrine disrupters on human health including immune systems
and breast carcinoma as well as reproduction (see, for example, Ahmed, 2000; Bhatt,
2000; Johnson-Thompson and Guthrie, 2000; Taylor et al., 1999). ENDS reported (ENDS
Report, 1999a) that potential harm from alkyl phenol ethoxylate (APE) surfacants due
to their endocrine disrupting traits and the likelihood of restrictions being imposed as a
result (see also Friends of the Earth, 2000).

Employment issues
“Executive pay rises are loser friendly” was a claim made by The Guardian (1999b)
referring in particular to pay rises of two of Alpha director’s. The article claims that,
despite, poor performance, senior executives had been given pay rises of more than
twice the going rate on the shop floor. Later The Guardian (1999e) reported that Alpha
was to cut 600 administrative jobs in total mostly in the UK with a few also going from
US offices. The Observer (1999a) reported that Alpha had announced 1,000 job cuts
world wide in on of its divisions, half of which would occur in the UK concurring with
reports in The Guardian (1999a) of 500 UK job losses. The annual report and accounts
and form 20-F set out the salaries, benefits and bonuses of each director for the current
and previous year. It also reports the average number of people employed by the group
by both class of business and geographic area showing figures for discontinued
operations separately. However, the only information given in Alpha reports with
regard to redundancy policies or payoffs is the total “severance costs charged in
AAAJ arriving at profit before tax” of £61 million. The annual report mentions that the sale of
17,5 an Alpha business “involved the transfer of some 2,000 employees” (p. 11). The average
number of employees in the UK was reduced by 1,200 during the year. No information
is given on salary negotiations.
The environmental report mentions three deaths at work during 1999 and
prosecution for a death at work during 1998 under English legislation. The latter
748 incident involved infringements of two sections of the Health and Safety at Work Act
for which Alpha was fined a total of £27,000 and ordered to pay £1,953 in costs.

Other ethical, social or environmental issues

None of the following issues were mentioned in Alpha’s 1999 reports.
Pricing. US Justice Department data suggests that a number of chemical
manufacturers, including Alpha, resorted to price-fixing (Chemical and Engineering
News, 2000).
Other ethical issues. Alpha operates in Indonesia and the Amnesty International
Business Group have questioned them on their human rights policies and whether they
had made representations to the Indonesian government about East Timor, acted on
behalf of employees subject to human rights violations or trained managers of
Indonesian subsidiaries on human rights issues (Ethical Performance, 2000). A search
of the Alpha web site during 2000 produced no information on this. It would appear
that Alpha did not have a policy framework incorporating human rights instruments.
Whilst not uncommon at the time, such frameworks are increasingly being adopted by
major corporations.
The section of Alpha’s environmental report for 1999 on activities around the world
reports on activities or outcomes which are successes. They do not represent a
complete account of performance. One interesting disclosure in the section on Pakistan
read:
Expired stocks of pesticides were also collected from regional warehouses and sprayed on
crops under supervised conditions to ensure no harm was caused.
Given concerns about Zetok mentioned above, it is perhaps unlikely that this would
allay the fears of some stakeholders.

Summary for 1999

Alpha reports for 1999 carry much more information on ethical, social and
environmental issues than in 1993 (see Tables I and II). Particularly impressive is the
extent of the data on emissions and discharges. Whilst the ENDS report (2000b)
questions the reliability of these figures, casting doubt as to whether they relate to
Alpha’s current business, Alpha regard such claims as unfair.
What stands out in comparing the way in which Alpha portrays its 1999
performance with the way it is portrayed in other publicly available sources, is not so
much complete omissions of events and issues, but more the manner in which issues
and events are portrayed. Examples of issues portrayed differently are the finding of
chemical X in the air and the spilling of hydrochloric acid into a river estuary where
external sources put a greater emphasis on the impacts on human health and wild life.
To some extent differing portrayals will reflect specific concerns of NGOs and the
media’s perceptions of reader interest, but these are, nevertheless, important Ethical, social and
stakeholders as are many newspaper readers. environmental
The section on sustainability issues adds weight to the concerns readers would be
justified in having about the commitment of the company on reading the corporate reporting
vision. In comparison with other sources, it appears to downplay the issues facing the
chemical industry and Alpha. The potential impacts of many of these issues and of the
breaches and spill which arise do not receive the attention many stakeholders clearly 749
would like, though the company does provide links to other sites, such as the United
Nations framework convention on climate change.
The performance of Alpha on a number of ethical, social and environmental issues
remained poor. The Labour government played a more proactive role with respect to
pollution incidents, but the independence of the Environment Agency was called into
question. The Sunday Times (1999) reported that five members of the 15-person board
of the Environment Agency had financial ties or other links with Alpha and other
major British polluters. One part-time board member and former director of Alpha was
reported as having 9,350 shares said to be worth more than £50,000.

Conclusions
The most noticeable feature of Alpha’s reports is their lack of full disclosure regarding
its ethical, social and environmental impacts. The Alpha reports portray the company
as one that is doing well, trying hard and seeking to do better. In contrast, the data on
Alpha’s impacts and efforts to curtail them from external sources is different. The more
discerning readers of Alpha reports will be left with many questions even if they never
pick up a newspaper. Analysing Alpha reports against the elements of accountability
which were set out in this paper’s introduction, the level of accountability discharged
by Alpha appears to be low. There is little coverage of negative impacts, insufficient
evidence that Alpha accepts its ethical, social and environmental responsibilities, an
arguably one-sided view of sustainability issues facing the company and a lack of
completeness. The different coverage in external sources also raises question as to the
inclusivity of stakeholders in the reporting process. The report itself provides
insufficient information on the reporting process and governance structures in place
with respect to ethical, social and environmental reporting.
This raises serious concerns as to the value of the responsible care guidelines as
anything but a legitimating tool and insurance policy. Responsible care may have
succeeded in getting companies like Alpha to report on its core indicators, but it has
failed to get Alpha to report in a way which, overall, fairly reflects performance and
impacts. Many of the issues identified as being important to stakeholders of the
industry in Adams and Kuasirikun (2000) are not addressed by responsible care. The
guidelines are voluntary and the industry associations cannot enforce compliance.
There is no requirement to involve stakeholders and information and processes do not
require to be verified or audited. This highlights the deficiencies of guidelines that were
written by and for those who are intended to abide by them.
A particularly concerning feature of Alpha’s reporting is its lack of “completeness”,
an AA1000 reporting principle (ISEA, 1999a). Reports omit details of impacts on
communities and the environment which are material to key stakeholder groups. This
degree of incompleteness would not be tolerated in financial reporting.
AAAJ The reader of Alpha reports finds out about fines, which in the UK at least have
been widely criticised as being too few and too low, but there is limited reporting on the
17,5 impacts of its mistakes on human health and animal and plant life. There are several
issues that have been mentioned in the press such as the large number of deaths
through pesticide use, misleading advertising, accusations of price fixing, operations in
countries with poor human rights issues and animal testing which are not mentioned in
750 the reports. These items would also be regarded as “material” to some stakeholders, for
example, Amnesty International, animal rights groups and some customers. The
section on sustainability issues in the 1999 environmental report gives the impression
of a widely held view of the impacts (or lack of them) of some of Alpha’s products and
processes which was not widely supported by the external sources consulted. In
addition, the coverage of overseas operations is incomplete.
There is little evidence of any consultation with stakeholders. Involving
stakeholders in itself cannot, of course, be taken to mean that corporate reports
accurately reflect performance. Indeed, their involvement could be used as a means of
legitimating corporate reports. Sound governance structures are essential to ensure
that the stakeholder dialogue process is robust, as is transparency concerning the
reporting process itself (see, also ISEA, 1999a, b). Corporate governance structures are
currently designed to protect shareholders, but this must change radically to give equal
prominence to other stakeholder groups if companies are to reflect the aspirations of
their stakeholders and survive in the long term.
Some of the key elements of the AA1000 requirements missing from the Alpha
reports are outlined in Table III. The GRI guidelines are much less concerned with
process than is AA1000. They focus more on the content of the report. Table IV sets
out the main elements of report content in GRI (2000) and some of the key omissions in
the Alpha reports[11]. Compliance with GRI would result in more information being
reported and some stakeholder dialogue. However, Alpha already complies with

AA1000 principles Examples of missing disclosures in Alpha reports

Inclusivity A much clearer statement of governance structures with respect to

ethical issues and reporting and, in particular, a clear statement of how
stakeholders are involved
Identification of key corporate stakeholders
Inclusion of all material adverse impacts relevant to stakeholders
Inclusion of stakeholder-derived indicators and/or stakeholder
commentary
Completeness A clear statement of the scope of the exercise and the reasons for
exclusion of any activities or locations
A summary of the major changes to the company’s business and key
ethical impacts of those changes
Embeddedness A clear and positive statement of Alpha’s commitment to ethical
Table III. issues to be incorporated into the “vision” statement
Some of the AA1000 Clear links between the vision statement and corporate objectives
principles and examples Fuller explanation of the role of the corporate environment and health
of missing disclosures in and safety department and the way in which it fits into the governance
Alpha reports structure
Section of GRI reports (GRI, 2000)
Profile of reporting organisation
Policies, organisations and
management systems
Performance
Key elements missing from Alpha reports
Ethical, social and
environmental
The scope of the report in terms of coverage of
countries/regions, products, etc. reporting
Major stakeholders and basis of defining them
Methods of stakeholder consultation and outcomes of such
consultations 751
Reporting on economic indicators which do not appear in
financial statements such as labour productivity levels,
investment in human capital, performance of organisation in
honouring contracts with suppliers
Reporting on a broader range of social indicators such as
employee retention rates, employee satisfaction levels, ratio of
lowest wage to national legal minimum and local cost of living,
equal opportunities outcomes, etc.
Reporting on integrated indicators including systematic
indicators linking performance at the micro-level with Table IV.
economic, environmental or social conditions at the Sections of GRI reports
macro-level; and cross-cutting indicators bridging information and key elements missing
across the different elements of sustainability from Alpha reports

responsible care and was involved in its development and it is possible that a company
could provide the information outlined in the GRI (2000) guidelines without improving
accountability as defined in the introduction to this paper. Although the GRI guidelines
require stakeholder consultation, there is limited guidance as to the form it should take.
This must be addressed if stakeholder dialogue is to be a robust exercise in enhancing
trust and minimising risk rather than simply a legitimating exercise that companies
can hide behind in the way that they did with the Sullivan principles (Arnold and
Hammond, 1994). The case of Alpha illustrates that simply telling companies what
they should report on is insufficient to ensure accountability.
An external audit is no guarantee that reports will not be used as a legitimating
exercise. For external audits to add value from a stakeholder perspective, they must be
conducted by appropriately qualified people who both understand the audit process
and accept the ethical, social and environmental responsibilities of companies (see
Adams, 2002; Kamp-Roelands, 1999; Owen et al., 2000, regarding concerns with social
and environmental auditing). They must also be carried out using generally accepted
auditing guidelines and, crucially, the criteria for qualification of the audit report must
be clear. At present there are no guidelines that adequately cover the ethical, social and
environmental audit process. There is an urgent need for their development and
enforcement for companies operating globally.
The scope of the work done by KPMG on Alpha’s 1999 report was limited to one
part of the reporting process. The scope of an audit is currently ultimately the
company’s decision and the findings of this research point to the inappropriateness of
this state of affairs with respect to large MNCs. The Ernst & Young audit report of BP
dated 12 March 2001 provides an example of an audit much broader in scope. The
terms of reference included, for example, reviewing “a selection of external media
sources for reports relating to BP’s adherence to its policies, as a check on the
AAAJ appropriateness of the information reported and statements made in the report”
17,5 (www.bp.com). It is not clear from this statement to what extent this particular review
of external media sources in the audit process might improve accountability. Policies
themselves tend to be vague and all encompassing and should be supported by more
detailed objectives. A company may be adhering to its policies, but its reports may be
incomplete as far as its impacts were concerned. A review of external media sources
752 would seem to be an essential element of an audit process if the audit report is to give
assurance as to the completeness of impacts.
The increase in reporting on the Internet, whereby companies can change their
disclosures frequently, further emphasises the need to define the scope of such audits.
There is concern that much of the data on the Internet is not audited. If the Ernst &
Young report of BP specifically includes publication on the Internet, it provides some
comfort:
BP periodically updates the report to provide information on company activities and to reflect
progress in performance. As and when new assertions, statements and performance data are
published by BP, they are reviewed by Ernst & Young. The date appearing on the Ernst &
Young statement shows the last date at which information has been reviewed and attested to
by Ernst & Young in accordance with our terms of reference (www.bp.com).
In conclusion, this study supports the call for comprehensive mandatory requirements
concerning ethical, social and environmental reporting. These must focus on processes
of corporate reporting and governance structures. A radical overhaul of corporate
governance structures is required. The current focus on the concerns of the shareholder
stakeholder at the cost of other stakeholder groups is increasingly inappropriate as
companies become larger and more powerful with ever increasing impacts on other
stakeholder groups. Social and environmental audit practices should come under the
same degree of scrutiny as financial audit practices. Social and environmental audit
guidelines must be developed and audit practices standardised to improve the
completeness of reporting and reduce the audit expectations gap. The scope of audits,
the content of the audit report and the reliability of information posted on the Internet
are particular areas of concern. Room for doubt as to whether reporting reflected
performance on the scale highlighted here would not be tolerated in financial reporting.
Companies complain that few stakeholders read their ethical reports in any detail, if at
all (see, for example, Adams, 1999). Perhaps the reporting-performance portrayal gap is
the reason why. The results produced here suggest that further research work is
needed on: the processes of reporting; auditing guidelines and practices; and,
governance structures which might best serve to improve the accountability of large
global organisations to their stakeholders.

Notes
1. The name of the company, its reports, products, projects, initiatives and other company
specific terminology have been changed.
2. “Completeness” is one of the AA1000 reporting principles (ISEA, 1999a).
3. The author is a former director and council member of AccountAbility.
4. AccountAbility is a membership organisation funded by its membership that is open to all
sectors of the economy. GRI was originally convened by a partnership of the Coalition for
Environmentally Responsible Economies (CERES) and the United Nations Environment
 Programme (UNEP). The current steering committee involves 17 organisations, nine of Ethical, social and
which originate in either the UK or US and one of which is AccountAbility. The GRI received
$3 million to support its activities from the United Nations Foundation and receives environmental
additional funding from organisations such as the Ford Foundation, MacArthur Foundation reporting
and the US Environmental Protection Agency (see, GRI Web site). These two guidelines
have been selected because they are recent, detailed and applicable to a broad range of
reporting issues. In addition, GRI is known to be used by at least 238 companies world wide
as at June 2003 (www.globalreporting.org) whilst AA1000 is unique in its detailed focus on 753
process.
5. Companies which have invested time and resources into developing stakeholder dialogue
processes and reporting these processes on their Web pages include, for example, BT and the
Co-operative Bank.
6. The author was invited to attend and speak as a “stakeholder”.
7. The reports cover a calendar year.
8. These included, for example, the following web sites:
† “biz/ed”, www.bized.ac.uk;
† Business Information Sources on the Internet, University of Strathclyde, www.dis.strath.
ac.uk;
† Dow Jones Business Directory, http://businessdirectory.dowjones.com;
† International Business Resources on the WWW, http://ciber.bus.msu.edu/busres.htm;
† Corporate Watch, www.corpwatch.org;
† Health Action International, www.haiweb.org;
† World Health Organisation, www.who.int;
† Multinational Resource Center, www.essential.org;
† Buko Pharma-Kampagne, www.epo.de/bukopharma;
† MaLAM, www.camtech.net.au/malam;
† Consumers International, www.consumersinternational.org;
† European Agency for the Evaluation of Medicinal Products, www.eudra.org;
† Pesticide Action Network, www.panna.org;
† Amnesty International, www.amnesty.org;
† HealthWrights, www.healthwrights.org;
† Consumers Association of Penang(CAP), www.southbound.com.my/souths/cap/cap.htm;
and
† Greenpeace International, www.greenpeace.org
Searches were also carried out on business journals such as: Harvard Business Review,
European Management Review, Business Ethics, Fortune, Journal of International Business
Studies, Journal of World Business Studies, Economist, Acquisitions Monthly, Business Week,
Chemical Engineering News, Chemical Week and Chemical Market Reporter. Relevant articles
were found by searching BIDS ISI and BIDS IBSS (www.bids.ac.uk) and the Royal Society of
Chemists at BIDS ISI/RSC. Newspaper CD-ROMs were also searched (see, Adams and Laing,
2000, for a detailed account of the method used in this research).
9. For daily and weekly publications, the date of publication is given and for monthly and
quarterly publications, the volume and number of the publication are given.
10. The prosecutions were announced on the eve of the take-over by Her Majesty’s Inspectorate
of pollution (HMIP) of the National Rivers Authority (NRA). Concerns were raised over the
effectiveness of these bodies in bringing prosecutions (Chemistry and Industry, No. 10, 1993;
Chemical Engineer, No. 542, 1993; Chemistry in Britain, Vol. 29 No. 6, 1993; Environmental
Digest, No. 71; European Chemical News, Vol. 59 No. 568, 1993; Financial Times, 30 April
1993; Greenpeace Business, No. 13, June 1993; Health and Safety at Work, Vol. 15 No. 8, 1993;
AAAJ Informations Chimie Hebdo, No. 1131; New Scientist, Vol. 138 No. 1872, 1993; Plastics and
Rubber Weekly, No. 1484, 1993).
17,5 11. This table uses the GRI (2000) guidelines rather than GRI (2002). These were the most
current guidelines at the time this article was developed and also the most relevant in
assessing the reports that Alpha produced in 2000 based on the calendar year 1999. A note
on changes made by the 2002 guidelines is provided in the section on “current developments
in the field of ethical reporting”.
754
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