A Multi‐level Perspective of CSR Reporting: The Implications of National Institutions and Industry Risk Characteristics

• Author: Suzanne Young,Magalie Marais
• Date: 01 September 2012
• Published date: 01 September 2012
• DOI: http://doi.org/10.1111/j.1467-8683.2012.00926.x

A Multi-level Perspective of CSR Reporting:

The Implications of National Institutions

and Industry Risk Characteristics

Suzanne Young* and Magalie Marais

ABSTRACT

Manuscript Type: Empirical

Research Question/Issue: This study seeks to capture the inf‌luence of national institutions and industry characteristics on

CSR reporting. To explore national institutions, the paper compares CSR reporting in France and Australia characterized

respectively as state-led market economies (SLMEs) and liberal market economies (LMEs). Comparisons are also made

between high-risk and low-risk industries. The interaction between the two main variables is also analyzed.

Research Findings/Insights: Using corporate published data from a sample of 220 Australian and French companies in

2009, the research f‌inds that CSR reporting is stronger and CSR practices more transparent in France compared to Australia.

CSR reporting is also stronger in high-risk industries than in low-risk industries. It also found that industry characteristics

override the inf‌luence of national institutions in high-risk industries. However, these conclusions vary depending on the

sub-categories of CSR reporting and the implicit versus explicit form of this type of communication.

Theoretical/Academic Implications: This study develops a new model of CSR reporting using 99 items. It provides

empirical support for the institutional perspective for understanding differences in reporting whilst demonstrating the

interaction between industry risk characteristics and national institutions.

Practitioner/Policy Implications: The study offers insights to policy makers interested in promoting CSR accountability

and transparency. It especially raises the importance of regulation to develop corporate reporting practices. It also provides

insights to managers to identify relevant CSR practices within their country/industries and the different communication

strategies that they can adopt in responding to institutional pressures.

Keywords: Corporate Governance, Reporting, Corporate Social Responsibility, National Institutions, Industry Risk

INTRODUCTION

Over the past decade companies have been subjected to

greater f‌inancial scrutiny, facing growing expectations

from diverse stakeholder groups and in particular facing

growing pressures to address social and environmental

issues (Arvidsson, 2010; Basu & Palazzo, 2008; Johnson &

Greening, 1999). In this context, calls are increasingly being

made to encourage or even force f‌irms to take into account

their impact on society (Lee, 2011). Corporate social respon-

sibility (CSR) is thus gaining signif‌icant importance for

business and political leaders (Buhr & Grafström, 2004).

Companies are under pressure to be accountable for their

CSR engagement and in particular they are being asked

to improve transparency in reporting on CSR issues

(Dando & Swift, 2003; Maignan, Ferrell, & Hult, 1999). As a

result, companies, and especially multinational corporations

(MNCs) are increasingly adopting CSR reporting practices

(Conley & Williams, 2005; Cooper & Owen, 2007). A recent

KMPG survey has concluded that in 2011, 95 percent of the

250 largest global companies now report on their CSR activi-

ties. This represents a jump of more than 14 percent over

their 2008 survey. Hence, understanding how and why com-

panies report on CSR appears a promising f‌ield of research

(Adams & Harte, 1998).

The corporate governance literature provides interest-

ing insights that assists in understanding the nature of

CSR reporting practices (Kolk, 2008). Drawing on a socio-

political view of corporate governance (Aguilera, Williams,

Conley, & Rupp, 2006), it is argued that CSR motives can

*Address for correspondence: Suzanne Young, La Trobe Business School, La Trobe

University, Melbourne, Vic. 3218,Australia. Tel: +61 394793140; Fax: +61 394793144;

E-mail: s.h.young@latrobe.edu.au

432

Corporate Governance: An International Review, 2012, 20(5): 432–450

© 2012 Blackwell Publishing Ltd

doi:10.1111/j.1467-8683.2012.00926.x

arise at multiple levels: the transnational, national, organiza-

tional, and individual levels (Aguilera, Rupp, Williams, &

Ganapathi, 2007). We propose, in this paper, to focus on the

national and organizational levels by analyzing the respec-

tive and combined effect of national institutions and indus-

try characteristics on CSR reporting. First, to study the

inf‌luence of national institutions, we rely on the varieties of

capitalism (VOC) approach proposed by Hall and Solskice

(2001). In particular, we investigatehow CSR reporting prac-

tices may vary between liberal market economies (LMEs),

characterized by strong market domination, and a specif‌ic

type of coordinated market economies (CMEs) called State-

led market economies (SLMEs), characterized by a strong

State domination. Extant CSR research is yet to focus on the

SLME form of capitalist system, even though these econo-

mies are facing unique institutional pressures regarding the

role of corporations. Moreover, this comparison is particu-

larly interesting as SLMEs have faced, in the last decade,

increasing pressures to shift towards the LME system of

governance (Kang & Moon, 2012). In particular, our research

focuses on two countries representative of the LME and

SLME distinction, namelyAustralia and France. Beyond the

inf‌luence of national institutions, we secondly will take

into consideration the impact of industry characteristics on

CSR reporting by adopting an industry risk perspective

(Bebbington, Larrinaga, & Mariano Moneva, 2008; Unerman,

2008). In this regard similar environmental conditions of

f‌irms operating in the same industry may result in each f‌irm

adopting similar CSR practices and reporting (Jackson &

Apostolakou, 2010). Finally, our research analyses the com-

bined effect of national institutions and industry character-

istics on CSR reporting, extending the debate as to whether

they are indeed complementary or substitutable (Jackson &

Apostolakou, 2010).

The paper is organized as follows. In the next sections,

we describe the nature of CSR reporting practices as well

as the inf‌luence of national institutions and industry char-

acteristics to develop a set of hypotheses. The methodology

is then discussed before we present our f‌indings and

discuss their main implications. The paper concludes with

its key contributions before discussing limitations and

further research.

THEORETICAL FRAMEWORK

CSR Reporting

The study of CSR reports has been argued to be worth-

while. Adams and Harte (1998) concluded that corporate

reports shed light on corporations’ attitudes and should be

examined in the light of both what they report and what

they omit, given the potential inf‌luence of reports in

shaping what is considered to be important in society. It

is suggested that it is worth exploring not only the reasons

for f‌irms’ (non)disclosure, but also worth examining the

methods of reporting in detail (Adams, Hill, & Roberts,

1995). Even though CSR reports differ from CSR actions,

they are linked (Jackson & Apostolakou, 2010). During the

reporting process, managers make a selection of what they

will report on and the amount of information that they

want to provide to their stakeholders. They are able to

choose the nature of the elements to disclose as well as the

way to do so. Hence CSR reporting may reveal top man-

agement’s will to align their practices with a specif‌ic

acceptable “norm” def‌ined by a large range of stakeholders

(Perrini, 2006). Reports are thus more than public relations

“puff” or passive describers of the “objective reality” but

“play a part in forming the world view or social reality”

(Adams, Hill, & Roberts, 1998:17) as well as ideological

weapons in the pursuit of corporate prof‌itability (Tinker &

Neimark, 1987). Importantly, the social forces shaping

institutions are increasingly understood as discursive

formations which are structured from texts and practices

(Phillips, Lawrence, & Hardy, 2004).

A number of reasons have been suggested as to why com-

panies report on CSR. First, companies may report on CSR

as a display of their responsibility towards a range of stake-

holders (Deegan & Samkin, 2006). Through CSR reporting,

companies indeed have a chance to respond to stakeholder

expectations and, by doing so, contribute to societal well-

being (Morsing & Schultz, 2006). Through this tool, com-

panies have a chance to address different stakeholders’

expectations and to manage their own legitimacy (Archel,

Husillos, Larrinaga,& Spence, 2009; Castelló & Lozano, 2009;

Mäkelä & Näsi, 2010; Reverte, 2009; Yongvanich & Guthrie,

2007). In this vein, many researchers (Balmer & Greyser,

2007; Hooghiemstra, 2000; Vanhamme & Grobben, 2009)

have argued that social disclosures are principally used to

guard a company’sreputation and identity by engaging with

stakeholders through what others have described as a form

of moral discourse (Reynolds & Yuthas, 2008).

Secondly, companies report on CSR as they expect

some instrumental payoff in terms of long-term prof‌itability,

which may eventuate from improving their ability to attract

labor, through reassuring shareholders about non-f‌inancial

risks, by reducing information asymmetries (Merkl-Davies

& Brennan, 2007) or by improving stakeholder decision

making (Du, Bhattacharya, & Sen, 2010). Thirdly, companies

may also report on CSR because they are forced to do so by

diverse institutional pressures. Focusing on institutions

indeed helps in understanding CSR not only as a voluntary

discourse but also as a requirement imposed by the corpo-

rate environment. For instance, companies face coercive

pressures to report on specif‌ic CSR issues. These pressures

arise from other organizations on which an organization

depends, and by pressures to conform to cultural expecta-

tions of society at large (Scott, 2008). The inf‌luence of law

and regulation regarding CSR reporting is also fundamental

in this regard. For instance, Gunningham (2008) discussed

the links between environmental law, governance, and

regulation mechanisms to encourage environmentally

friendly corporate behaviors. Companies also face signif‌i-

cant normative pressures to engage in CSR (Kolk & Pinkse,

2010). Such pressures arise traditionally from professional-

ization (DiMaggio & Powell, 1983). For instance, Campbell

(2007) explained how being involved in professional asso-

ciations or in local communities may inf‌luence companies’

CSR practices. Pressure to adopt CSR reporting may also be

due to mimetic pressures as a response to uncertainty.

Hence, in situations where a clear course of actionis unavail-

able, managers may imitate a peer organization perceived to

be successful (DiMaggio & Powell, 1983). CSR reporting is

CSR AND GOVERNANCE 433

Volume 20 Number 5 September 2012© 2012 Blackwell Publishing Ltd