Harmonization in CSR reporting MNEs and global CSR standards.

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RESEARCH ARTICLE

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Harmonization in CSR reporting MNEs and global CSR standards.

Abstract:

* This paper focuses on MNEs' corporate social responsibility (CSR) reporting, which previous studies have found to exhibit strong country-of-origin effects. It examines whether MNEs' adherence to global standards (as adopted by e.g. ILO, OECD, UN, ISO) is associated with smaller cross-country differences and less country-of-origin effects in CSR reporting, and whether stringency of standards' enforcement mechanisms affects reporting harmonization.

* To test our hypotheses, we collected data on 25 CSR items for a sample of firms consisting of the top 250 firms listed in the Fortune Global list, using ordered logistic regression analysis.

* We find evidence for upward harmonization in reporting for those MNEs that adhere to global CSR standards. Stricter enforcement mechanisms did not result in stronger harmonization.

* Our findings imply that global standards and guidelines do not only increase the overall level of CSR reporting, but are also associated with a harmonization of CSR activities of firms from different countries, thus reducing the role that domestic institutions (including legislation and societal concerns) play in shaping CSR practices. Implications for research and practice are discussed.

Keywords: Corporate social responsibility * Country-of-origin effects * Global standards * Harmonization * Institutional context * CSR reporting

Introduction

Both theorists and practitioners have long been interested in firms' responses to increased stakeholder pressures to aim for more than just profit maximization. Such responses are generally considered as Corporate Social Responsibility (CSR), which can hence be seen to encompass firms' economic, legal, ethical and social responsibilities (Carroll 1999; Whetten et al. 2002), or, in line with the terms 'sustainability', 'triple bottom line', or triple P (People, Planet and Profit) (Elkington 1997), as the environmental, social and economic dimensions of firms' activities. Regardless of the precise definition, with growing attention to firms' CSR strategies, interest in how firms account for, and report on, their CSR activities has increased likewise. In the 1990s, more and more firms started to voluntarily report on their environmental and social activities and impact, providing information on their policies, progress and results. This has resulted in a wide variety of reports, with substantial differences in length, approach, scope and depth of accountability (Kolk 2010; KPMG 2002, 2005, 2008). Non-financial reports may range from health and safety reports to CSR reports and from global citizenship to sustainability reports. Firms disclose different kinds of information, presented in a variety of ways, using a range of definitions and indicators. In spite of these efforts, questions are often raised about the extent to which reported practices reflect actual performance and what the reliability of reporting is, particularly in view of the multitude of dimensions of CSR and related measurement difficulties. The accounting scandals of the past decade have only added to already existing skepticism about managerial and professional 'capture' of for example the environmental agenda, and the doubtful nature of auditing (Ball et al. 2000; Owen et al. 2000; Power 1991).

Partly in response to these doubts, partly in an attempt to ward of more stringent government regulation, and partly also to assist individual firms to implement and shape their CSR strategies, a search for voluntary standardization of reporting contents is taking place. Different organizations have drawn up guidelines and designed formats that firms can voluntarily adopt. Most notable is the international, multistakeholder Global Reporting Initiative with its extensive guidelines to improve the "quality, rigor, and utility of sustainability reporting" (GRI 2002, p. 1). By joining or supporting such initiatives firms hope to acquire expertise, gain credibility for their efforts and have some influence on the shape of such guidelines (Selsky and Parker 2005). Nevertheless, here too firms are often accused of referring or ascribing to global initiatives and standards as a means to 'green-wash', or--in the case of UN-sponsored initiatives--'blue-wash' their activities. Therefore, a key issue in the CSR literature, and the main focus of this paper, relates to the effectiveness of such global standards in stimulating firms to step up their CSR reporting activities, and in harmonizing these activities across firms, thus making them more comparable.

This question finds strong resonance in related literature on the role of the institutional context. Many studies on CSR and environmental and sustainability reporting find remarkably strong 'country-of-origin effects', which reflects how the debate o...

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