RR 098 002

social and environmental reporting and the business case
RESEARCh REPoRT no. 98
Social and environmental reporting and the business case

by Dr Crawford Spence University of St Andrews and Professor Rob Gray University of St Andrews
Certified Accountants Educational Trust, London, 2007
The Council of the Association of Chartered Certified Accountants consider this study to be a worthwhile contribution to discussion but do not necessarily share the views expressed, which are those of the authors alone. No responsibility for loss occasioned to any person acting or refraining from acting as a result of any material in this publication can be accepted by the author or publisher. Published by Certified Accountants Educational Trust for the Association of Chartered Certified Accountants, 29 Lincolns Inn Fields, London WC2A 3EE.
The Association of Chartered Certified Accountants, 2007
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Contents
Executive summary 1. Introduction and outline 2. Literature review and explanations of corporate social and environmental reporting 3. Research design, sample and methods 4. Initial explorations: the pilot study 5. Why do corporations report on social and environmental issues? 6. The business case: beliefs and constraints 7. Conclusion, explorations and implications Appendix 1: mind mappings the motivations for SER and CSR Appendix 2: ecological footprinting References
5 11 21 29 39 43 55 63 73 75 77
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Executive summary
The research set out to shed light on the diverse and complex reasons why organisations undertake voluntary social and environmental reporting and recommends a new approach to or at least a new mindset in reporting. The ACCA Awards for Sustainability Reporting recognise and reward the continuing, substantial progress made by an increasingly large number of organisations in the field of social, environmental and (more contentiously perhaps) sustainability reporting. Such reporting has developed alongside the greater adoption, by leading organisations, of mechanisms such as environmental management systems, coherent approaches to social responsibility and attempts to integrate corporate understanding of sustainability into the core business. Guided by institutional structures like the ACCA Awards for Sustainability Reporting, the Global Reporting Initiative (GRI) and standards such as AA1000, the leading edge of voluntary stand-alone reporting continues to rise. This steady incrementalism is an essential element in any response to the growing demands of sustainability. It may be necessary, but is it sufficient? The research suggests that corporate social responsibility (CSR) and social and environmental reporting (SER) motivations are all tightly harnessed to a business case and the authors use this conclusion to ask two further questions. First, can this incremental approach to addressing the interactions between business and social/ environmental issues produce the required level of change sufficiently quickly? Second, are there essential elements in the social and environmental agenda which lie beyond the business case; beyond the capacity of business to deliver?
The authors call for more debate around the need for twin-track approaches to addressing sustainability and conclude that reporting can play a critical role in our understanding of what voluntary and business-led initiatives can and cannot achieve as society faces up to the immense challenges presented by the urgent need to achieve sustainable development. ThE ISSuES The research set out with the objective of bringing clarity to the research literature which has increasingly suggested that the reasons why organisations undertake (voluntary) social and environmental reporting are diverse and complex. SER is the predominantly voluntary, self-reporting of an organisations social and environmental interactions. Such reporting is increasingly undertaken in stand alone reports some in hard copy, many on the organisations website and represents an organisations understanding of what it is to be environmentally and/or socially responsible and (potentially at least) sustainable. Clarity concerning the motivations for such reporting is worthy of pursuit particularly due to the range of apparent conflicts and contradictions that seem to surround reporting and its discussion, especially in commercial, professional and political fora. These tensions and contradictions at least as we see them provide an important backdrop to the research and are central to the way in which the issues are perceived and responded to. Some of these potential tensions and contradictions include: the very upbeat nature of the tone used in reporting, as opposed to the selectivity of the reporting and the relatively few organisations that adopt it (see, for example, ACCA 2006; Kolk 2003; KPMG 2005)
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Executive summary (continued)
the immense progress made by industry in adopting an incremental approach, versus the trends in the global/planetary data, which suggests a need for step changes (see, for example, Meadows et al. 2004)1 the progress and innovation in reporting (see, for example, ACCA 2006) versus the almost complete absence of evidence as far as we can assess of a discharge of strict accountability or that organisations are being held to account the voluntary nature of reporting and the constraints of a business case: in other words, whether corporations are capable of voluntarily discharging an accountability that could honestly expose their socio-environmental impacts (Tinker et al. 1991) the very positive claims that are made about the nature of (for example) sustainable development and the almost complete absence of any evidence to support such claims (see Box 1 and, for more detail, Gray 2006(b) and Erusalimsky et al. 2006) the apparent lack of any notion that there is any conflict between economic pursuits and social and environmental desiderata (see section 1.5, page 15 of the full report). The results suggest, in line with prior research, that a variety of motivations underp in SER. These motivations vary across organisations. Notwithstanding this apparent diversity, the different motivations appear to converge around notions of conventional business success. In other words, the reasons to report social and environmental information are all tightly harnessed to a business case.
Box A: PoTEnTIAL TEnSIonS AnD ConTRADICTIonS: ExAmPLES of quoTATIonS In STAnDALonE SER REPoRTS Our vision is that the principles of sustainable development will become an instinctive part of everyday business. We must deliver fair value to shareholders based on competence, vision, minimising risks and maximising opportunities. Anglo-American, Report to Society 2005: 7. For BHP Billiton, sustainable development is about ensuring our business remains viable and contributes lasting benefits to society through the consideration of social, environmental, ethical and economic aspects in all that we do. BHP Billiton, Summary Report 2005: 3. Sustainable development has increasingly come to represent a new kind of world, where economic growth delivers a more just and inclusive society, at the same time as preserving the natural environment and the worlds non-renewable resources for future generations. BT, Social and Environmental Report: Summary and Highlights 2005: 19. Growth needs to be sustainable if we are to bring long-term value both to our shareholders and others For our business to be sustainable, we must be profitable. National Grid Transco, Operating Responsibly 2004/05: 3. Our approach: As an organisation, we believe that sustainable growth in shareholder value is best achieved through sustainable business practices. United Utilities plc, Our Company 05: Stakeholder Report 2005: 4.
1 In the face of increasingly persuasive and increasingly apocalyptical data suggesting a relatively imminent end of days, incremental change, however intense or well intentioned, looks relatively ineffectual.
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majority of interviewees described this commercial Box B: PRInCIPLE CATEGoRIES of moTIvATIonS business efficiency market drivers reputation and risk management stakeholder management pressures from benefits from mimetic motivations internal champions. predominance as the business case for SER. Also, significantly, the results of the pilot study show that it is often very difficult to separate SER from corporate social responsibility. Secondly, the main study explored the pervasiveness of the business case; the diversity and nature of the rationales offered; and the limits and constraints that such rationales presented for the development of SER. ThE fInDInGS ThE RESEARCh Despite the very significant incremental changes in the interface between business and sustainability, the study questions whether the widely maintained view that business can deliver responsibility and sustainability unaided is, in fact, plausible. The research is based around interviews conducted with managers in 36 UK firms. The interviews were, initially, of a deliberately open nature through which the rationales and motivations underlying SER could be explored. This led to two distinct stages in the research process. Firstly, the pilot study explored various reporting and reporting-related issues in an open-ended manner. The intention here was to allow the conversations between the researchers and the managers to determine the way in which issues unfolded while specifically recognising the diversity shown by previous studies on the subject. It was from this exploration that the apparently unifying theme of the business case emerged. The results from the pilot interviews all indicate a prevalence of commercial motivations for SER. A Both SER and CSR were driven by a variety of different pressures and perceived benefits. Pressures included reputation risk management, stakeholder management, the need to satisfy pressures from the City and from peers. Benefits included reputational effects as well as socio-environmental and business efficiency gains. The role of key individuals in initiating and developing SER and CSR was often critical. Interviewees commonly treated CSR and SER as interchangeable and, despite there being opportunities to talk about each separately, seemed pre-disposed towards bundling the two concepts and/or activities together. Notwithstanding the variety of different motivations and the various ways in which they manifest themselves across firms, the overwhelming majority are driven by business reasons. The motivations form part of some overall business case even if the way in which the business case manifests itself appears to vary across firms.
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Interviewees held views that characterised their organisations relationship with the natural environment as largely harmonious, or at least manageable. The business case, with its emphasis on win-win situations, seems to preclude consideration of situations where there may be conflict. The business case seems to limit what organisations can do in the first instance, and it appears to preclude discussion about the limits of the business case itself. ThE ImPLICATIonS: BEyonD ThE BuSInESS CASE The report concludes with an initial exploration of what this limit to the business case might mean for industry, society, social responsibility and sustainability. Despite the very significant incremental changes that have been wrought in the interface between business and sustainability, the report suggests that there are important and unexplo red areas beyond the business case. That is, in the face of widespread evidence (on matters as diverse as the low incidence of voluntary reporting, the quality of reporting and the increasing urgency of sustainable development), the study questions whether the widely maintained view that business can deliver responsibility and sustainability unaided is, in fact, plausible. This is not to suggest that businesses are necessarily irresponsible or that that they can or should seek to go beyond a business case. It is, rather, to request that more clarity be brought to the debate and that the limits to businesses contribution to society and the environment be explicitly and forcibly recognised. The report calls for further debate on this issue and, recognising explicitly that voluntarism must have its limits, recommends a new approach to (or at least a new
mindset in) reporting and suggests that we might move towards a reporting on organisational unsustainability.
I think that we start this stuff [SER and CSR] from a commercial point of view: if it doesnt make business sense, then you are not going to do it. you have to have a bottom line benefit, otherwise you have no compelling argument for your shareholders, you have no compelling argument within the business. If it doesnt deliver tangible reputational benefits, tangible business benefits, then it is impossible to justify. We are not a registered charity. (Interviewee)
[our action was taken] for environmental reasons but to sell it [we needed to show] financial benefit to the company. (Interviewee)
There has to be added value in doing what we are doing. We couldnt just go and do something for the environment or the community just because we wanted to. (Interviewee)
RECommEnDATIonS In the light of the increasingly convincing data about the state of the planet and its inhabitants and the claims by a growing number of businesses to be sustainable, it is crucial that we develop a clear and reliable understanding of the relationship between organisational activity and sustainability.
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Such understanding, as it currently exists, is scarce and where it does exist it is often contested, lacks clear data to support claims and relies upon poor communication. The report therefore recommends four strands of action. REPoRTInG Organisational reporting should ultimately directly address sustainability through the production of un-sustainability reports comprising: ecologically, a mass balance (see Danish Steel Works 1991 and Ricoh Group 2005); and an estimated ecological footprint (see Best Foot Forward Ltd, 2004) socially, a detailed and honestly addressed stakeholder map (see Traidcraft plc and Exchange and Cooperative Financial Services) and full reporting of the information relating to that map (ie descriptive; legal and quasi legal; company orientated; plus stakeholder requested; reporting for each relationship); and an explicit attempt to address issues of social justice an honest confrontation of the organisations own un-sustainability. Attestation of sustainability and/or sustainability reports must challenge all claims to this state that are not supported by convincing and reliable evidence.
REGuLATIon Voluntary initiatives are valuable but not sufficient. Government must either ensure that the business case aligns with full sustainability reporting and accountability or regulate to ensure this outcome. The accounting profession should actively support the government in this. DEBATE The limits of the business case must be publicly, carefully and regularly, re-examined. There is no high moral ground here but an urgent need for understanding. Claims to win-win outcomes must be supported by data or fiercely challenged. fuRThER RESEARCh Details of the business case, how it is developed and where its limits lie. An examination of the limits of the win-win. Developing further exemplars of how the un-sustainability report might be implemented. Examining the impediments to wider debate, wider accountability and wider acceptance of the necessities of sustainability. More specific examination of how reporting has developed that may provide guidance on what is not being reported: where the major failures are in completeness and why.
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1. Introduction and outline
1.1 InTRoDuCTIon Although voluntary disclosure by organisations has probably existed as long as there have been organisations, it is really since about 1990 that we have witnessed the triumphal progress of voluntary stand-alone reporting. As an increasingly large number of significant companies become regular producers of substantial and informative social and environmental reports, so has the innovation embodied in the leading edge of reporting continued to embrace ever-richer conceptions of the interactions between the corporation, society and the natural environment. Nearly two decades of such voluntary initiatives have spoken lucidly of the possibilities of voluntary disclosure and very properly attracted unqualified admiration for the champions within the organisations who have been the architects of this progress. Institutional innovation has sprung up around the development of reporting and the influence of, for example, ACCAs Reporting Awards Scheme, the Global Reporting Initiatives Sustainability Reporting Guidelines and the Institute for Social and Ethical Accountabilitys production of the AA series of standards has ensured a supportive and innovative environment within which both new and established reporters can make progress. And yet, this potentially triumphal account is not the whole story. Academic research has not offered entirely convincing explanations of why organisations would undertake voluntarily such a potentially onerous duty as social and environmental reporting. More pressing than this, however, is the growing recognition that if we do know a little about why organisations report, we actually know relatively little about why some do report while many do not. Equally of concern
(as we shall argue later) is why so very few organisations report either completely or reliably.2 This brings us to the key theme of this report: a concern about the consonance (or dissonance) between corporate profit seeking and wider notions of social and environmental responsibility and accountability. It is this that we seek to explore and why, as we will come to explain, we have found the notion of the business case so helpful in clarifying the attendant issues. We will introduce the primary concerns in this chapter, which is organised as follows. The next section provides a brief discussion of social and environmental reporting (SER). This is followed by an introduction to the tensions that underlie the present report and which, inevitably, may prove to be a source of some contention. Section 1.4 then provides a description of the academic background to the research that provided the motivation for this study. The tensions and the background are then teased out in section 1.5, where we introduce the tautology that we believe currently lies at the heart of CSR, SER and the business case. Finally, the chapter concludes by outlining the structure of the report itself. 1.2 TERmInoLoGy AnD BACKGRounD What we will call social and environmental reporting (SER, hereafter) refers to the selfreporting of organisational socio-environmental interactions. SER is used here to cover attempts at accounting for environmental and social issues, and sustainable development. Thus SER is what is variously referred to as social accounting/ reporting; environmental accounting/reporting;
2 As a recent report in Accountancy, How Green is My Company (January 2007: 523) explores.
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1. Introduction and outline (continued)
corporate social reporting; sustainability/ sustainable development reporting. There are overlaps between all these different types of reporting but marked distinctions can also be made between them. SER is the term used in this study to cover all these attempts at the selfreporting of organisational socio-environmental interactions. The different elements of SER may be confused. The individuals interviewed did not share (as we shall see) a coherent vision of SER, and they did not seem to be clear as to how reporting and responsibility are linked/de-coupled, if at all. That is, what is the relationship between SER and corporate social responsibility (CSR, hereafter)? The interviewees readily talked about one in the context of the other, or even conflated them entirely. In order to make it apparent that we do not argue that CSR and SER need necessarily be conflated, we offer one simple clarification in Box 1.1.3 The study of SER has grown steadily in the last 30 years. Overall, however, SER remains a peripheral activity in the world of accounting research. The practice of corporate SER, in contrast, has existed to varying degrees for as long as there have been corporations. However trivial or partial, corporations have always produced some sort of information on their socio-environmental interactions. Maltby (2004), for example, studied a set of the chairmans pronouncements at the annual general meeting of one firm in the early 20th century, for social information. She shows that even then there was dissemination of apparently non-economic information. This
Box 1.1: Social responsibility and accountability There is an extensive and diverse literature that has sought to define corporate social responsibility (CSR) over the years. For convenience we would adopt the statement made by Walters (1977: 45) and quoted in Mintzberg (1983: 13): social responsibility is not telling society what is good for society but responding to what society tells the firm that society wants and expects from it. While recognising the optimism, even naivety, of this approach, it manages to embrace the diversity and complexity of social responsibilities and the probable impossibility that any organisation will meet all those responsibilities. By contrast, we see social and environmental (and sustainability) reporting as having merit to society only in so far as it discharges accountability. Accountability arises from responsibility and, at a basic level, becomes a statement of the extent to which societys expectations of responsibility have not been (and possibly could not be) met by any single organisation. raises the question of what counts as socioenvironmental information. SER could conceivably, and quite legitimately, be thought to include areas as diverse as product advertising, product labelling, press releases, public speeches and conference presentations. The majority of academic work on SER has, until recently, focused on disclosures through the annual report, on the assumption that this is where companies provide the most
3 Other forms of corporate reporting have also been undertaken by parties external to the corporation in question. See Gray et al. (1996) for a discussion of these external social audits.
comprehensive information and where they formalise their position on socio-environmental issues. While this is a reasonable assumption to
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make, it has also been recognised that focusing only on company disclosures through formal reports will lead to an incomplete picture of company reporting (Buhr 1998; Unerman 2000; Zeghal and Ahmed 1990). A wide variety of other media, such as employment brochures, advertisements and product labelling, are employed by companies in order to disclose socio-environmental information. Partly for the sake of practicality, however, this study focuses only on the formal socio-environmental disclosures made by companies. In particular, the study concentrates on stand-alone SERs, rather than instances where socio-environmental information is reported in the annual report. Although this does not offer a complete picture of company reporting, stand-alone reporting may be presumed to offer the single most substantive and comprehensive manifestation of a companys SER (KPMG 2005). A number of SER developments since the mid 1990s are worthy of note. Kolk (2003) observes a continued and significant rise in the number of large firms that are now reporting socioenvironmental information. Gray (2005) reports that 52% of the companies in the Global Fortune 250 now produce an SER of some sort. The nature of the information reported is changing in some respects. There is now a much higher incidence of allegedly Triple Bottom Line (rather than simple environmental or social) reporting (for example, Elkington 1997). SustainAbility/UNEP (2004: 8) report that in the ten years since they first launched their annual SER survey, the number of reporting companies has exploded, the overall quality of reporting has improved considerably and the range of issues addressed has broadened spectacularly. Nonetheless, there has been much evidence in the academic literature that casts doubt on the extent to which a transparency revolution is really occurring (UNEP/SustainAbility
2004: 11).4 For example, SER practice has been criticised for resisting the inclusion of overall ecological impact analysis, ignoring key impacts and engaging with a very limited notion of sustainability (see, for example, Gray and Milne 2002, 2004; ACCA/Corporate Register 2004). Whether or not the quality of SER should, or indeed could, be improved to take account of these (and other) factors is a key concern of this study. 1.3 TEnSIonS AnD ConTRADICTIonS The area of SER seems to be more than usually fissured with potential tensions and contradictions. These tensions and contradictions at least as we see them provide an important backdrop to the research and are central to the way in which the issues are perceived and responded to. Some of these potential tensions and contradictions include: the very upbeat nature of the tone used in reporting, as opposed to the selectivity of the reporting and the relatively few organisations that adopt it (see, for example, ACCA 2006; Kolk 2003; KPMG 2005) the immense progress made by industry in adopting an incremental approach, versus the trends in the global/planetary data, which suggests a need for step changes (see, for example, Meadows et al. 2004)5
4 For further support of this claim see, for example, Adams (2004); Erusalimsky et al. (2006); Gray (2006, 2006b); Kolk (2003). 5 In the face of increasingly persuasive and increasingly apocalyptical data suggesting a relatively imminent `end of days, incremental change, however intense or wellintentioned, looks relatively ineffectual.
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the progress and innovation in reporting (see, for example, ACCA 2006) versus the almost complete absence of evidence - as far as we can assess - of a discharge of strict accountability or that organisations are being held to account the voluntary nature of reporting and the constraints of a business case: in other words, whether corporations are capable of voluntarily discharging an accountability that could honestly expose their socio-environmental impacts (Tinker et al. 1991).
of sustainability. On the other hand, we must be conscious of the fact that a concern for only drastic, fundamental change will fail to address what can be done and the art of the possible: such an approach risks becoming a charter for inaction and despair. It is essential, we believe, to work at the incremental while recognising the need for step change; and to work for radical change while exploiting and supporting incremental change.6 1.4 APPRoACh To ThE STuDy At a broad level, the study is set in the context
the very positive claims that are made about the nature of (for example) sustainable development and the almost complete absence of any evidence to support such claims (see box 1.2 and, for more detail, Gray 2006(b) and Erusalimsky et al. 2006). the apparent lack of any notion that there is any conflict between economic pursuits and social and environmental desiderata (see section 1.5). There are many potential quotations such as those listed in Box 1.2 and the purpose here is not to make a case one way or other but rather to illustrate that such a case (for tension and contradiction) could exist. Exploring the substance of that case is a central purpose of the rest of this report. Suffice it to say at this stage that the assertive confidence of these quotations deserves attention when, as far as we can assess, there is absolutely no evidence to support such claims. More constructively, however, we would anticipate a theme which will feature throughout this work: that of the simultaneous maintenance of an apparent contradiction. That is, we need to recognise, on the one hand, that marginal, incremental change is essential and important but unlikely to be sufficient to address the exigencies
of a concern with the social and environmental effects of corporate activity and the discharging of a related corporate accountability. This concern reflects an abiding interest within social accounting in the very important role that SER could potentially fulfil in the increasingly important democratic debate over the role that corporations can or cannot play in a sustainable world. In particular, formal and complete social accountability would, ideally, demonstrate whether or not corporations are genuinely capable of contributing to social responsibility and sustainable development. More particularly, the study is implicitly motivated from the outset by the question of whether corporations are themselves capable of voluntarily discharging an accountability that could honestly expose their socio-environmental impacts (Tinker et al. 1991). One relatively consistent theme in the social accounting literature has been the attempt to
6 A colleague coined the term bipolar for this need to maintain, simultaneously, two completely opposing notions. Although, medically, this is an inaccurate coining, it does capture the sense. The sense, incidentally, is also caught by the poet John Keats notion of negative capability, which might be articulated as believing wholly in X while accepting without reservation that not-X may be the case.
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Box 1.2: Potential tensions and contradictions: examples of quotations STAnD-ALonE REPoRTS Our vision is that the principles of sustainable development will become an instinctive part of everyday business. We must deliver fair value to shareholders based on competence, vision, minimising risks and maximising opportunities. Anglo-American, Report to Society 2005: 7. For BHP Billiton, sustainable development is about ensuring our business remains viable and contributes lasting benefits to society through the consideration of social, environmental, ethical and economic aspects in all that we do. BHP Billiton, Summary Report, 2005: 3. Sustainable development has increasingly come to represent a new kind of world, where economic growth delivers a more just and inclusive society, at the same time as preserving the natural environment and the worlds non-renewable resources for future generations. BT Social and Environmental Report: Summary and Highlights 2005: 19. Growth needs to be sustainable if we are to bring long-term value both to our shareholders and others For our business to be sustainable, we must be profitable. National Grid Transco, Operating Responsibly 2004/05: 3. Our approach: As an organisation, we believe that sustainable growth in shareholder value is best achieved through sustainable business practices. United Utilities plc, Our Company 05: Stakeholder Report 2005: 4. At Centrica, corporate social responsibility means making a positive contribution to future sustainability. Centrica, Responsibility: Corporate Responsibility Report 2004: 1. TExTS AnD ARTICLES Sustainability promises both reduced environmental impacts and real cash savings for any organization [and] once people understand sustainability, they are often surprised to find how many untapped sustainable practices make good bottom-line business sense. Hitchcock, D. and Willard, M. (2006), The Business Guide To Sustainability: Practical Strategies and Tools for Organisations (London: Earthscan), cover and p. xix. Overall, the study confirms that there are compelling commercial reasons for emerging markets to take action on sustainability...[and]the research shows clear links between improved sustainability performanceand a companys financial results. Thorpe, J. and Prakash-Mani, K. (2003), Developing Value: The Business Case for Sustainability in Emerging Markets, Greener Management International (Special Issue on Sustainability Performance and Business Competitiveness), Issue 44, Winter: 17 and 18). Outlining the long-term corporate benefits of sustainability, [the book] examines the changes required in organisations to achieve true sustainability. Dunphy, D., Griffiths, A. and Benn, S. (2003), Organizational Change for Corporate Sustainability, back cover (London: Routledge).
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explain the existence of SER from viewpoints other than accountability (see, for example, Gray et al. 1995a, 1996); such viewpoints have included the use of legitimacy, stakeholder management and political economy as theoretical frameworks within which SER practice might be understood. Rather than being used as a means by which organisations render themselves socially and environmentally transparent, SER has generally been understood as: a means of securing the legitimacy of organisations; a tool by which stakeholder relationships can be managed; or a process through which good impressions can be constructed and/or through which conflicts can potentially be obscured. For example, Patten (1992) describes how oil companies used socioenvironmental disclosures to create an impression of environmental responsibility in the wake of the Exxon Valdez oil spill. Such examples could be seen as serving to deflect attention away from more fundamental challenges to modern, international, financial capitalism.7 Although attempts to interpret SER as an act of legitimacy, stakeholder management or reputation management have helped improve our understanding of SER, the results have nevertheless been somewhat partial, contradictory and frustrating. Partly this has been because of the methods employed. Statistical analyses have been useful in understanding broad trends in SER over time and across companies, but the quantitative methods employed by these studies now appear to be inherently limited in their ability
to offer detailed explanations for why companies undertake SER (for example, Deegan 2002 and Roberts 1992). Researchers have, consequently, turned to a more qualitative, field-based approach and have shown that the simple explanations of SER are underspecified and that the motives for disclosure are complex and variable. (See, for example, Adams 2002; Buhr 2002; Gray and Bebbington 2000; Gray et al. 1995b, 1998; Larrinaga-Gonzlez and Bebbington 2001; Larrinaga-Gonzlez et al. 2001; ODwyer 2002, 2003, 2005.) Speaking to those directly involved in SER practice allows for an alternative analysis of SER motivations to that offered by quantitative studies and shows how people within companies speak and apparently think about SER. This itself can contribute much to an understanding of the SER phenomenon. In particular, the way in which motivations apparently cohere and differ across firms can be explored in depth through this method. Stories of internal struggles may reveal much about the interests that are driving and shaping SER practice. The literature indicates that there may be much still to learn about SER and the process of developing SER within firms (Adams 2002; Buhr 2002). Because of this uncertainty, and because of a personal preference on the part of the researchers for talking to people involved, a primarily inductive, exploratory approach was taken to researching SER within firms (see Chapter 3 for further discussion and justification of this). Individuals within firms were interviewed and encouraged to give their views about SER. Because of the complexity and richness shown by
7 The basic thesis underlying this argument is that the additional legitimating disclosures succeed in giving the impression that (for example) oils spills such as Valdez are only incidental accidents. A counter argument is that such blips are actually systemic and they may be better understood as manifestations of deeper structural problems within our system of business, economic and financial organisation.
the previous qualitative studies (see, for example, Adams 2002; Buhr 2002; Gray et al. 1995b and ODwyer 2003), the issues explored in the interviews of this study were initially left relatively open. The analysis undertaken (Chapter 3) was directed towards establishing themes in interview
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transcripts. These themes may be summarised into the principle categories of motivations: business efficiency market drivers reputation and risk management
goodness may not be in question but which may conflict with the enterprises profit generation. Consequently, almost any activity undertaken by a listed company be it a responsible action or an activity of accountability must be, virtually by definition, in the interests of the organisation and its financial participants.8 Why explanations of SER that embrace notions
stakeholder management pressures from benefits from mimetic motivations internal champions. As the study progressed, it also became more focused on what interviewees routinely referred to as the business case. 1.5 ThE BuSInESS CASE AnD TAuToLoGy There is something both deceptively subtle and yet self-evident about the notion of a business case as an explanation of why companies do (and, indeed, should) report voluntarily on such issues as their interactions with society and with the environment, and their impact on the future sustainability of the planet. The issue is selfevident in that, despite years of appeals to the better nature and decency of the corporate world by advocates of sustainability (see, for example, Elkington 1997; Gray and Bebbington 2001; SustainAbility/UNEP 1997, 1998) the extent to which our current predominant forms of capitalism can permit pure altruism remains fairly limited. More significantly, with listed companies and the increased surveillance and arbitrage in their markets, the opportunities for such altruism become very limited indeed. Any manager is likely to be deterred from undertaking activities whose
of a business case might be thought deceptively subtle, is somewhat more complex. As we have already seen, responsibility and accountability might be thought of as consonant with corporate profit seeking (see, for example, Cowe and Hopkins (2003) for an introduction). This suggests either that acts of responsibility and/or accountability are profoundly constrained acts (only those acts of responsibility that are profitable are truly acts of responsibility) or that all recognisable forms of responsibility and accountability are profitable (responsibility always produces profit). This leads to an important potential inference, namely that the current form of capitalism does and can deliver the best of all possible worlds a subject on which both Marx and Friedman had much to say. No matter how one considers the issue, it seems unlikely that such a statement can be accepted in an unqualified manner.9
8 This is not to suggest that listed companies are always less altruistic than private companies but simply to argue that the room for discretion and therefore the potential for it is much less. 9 A corollary of this might well be that all damage and injustice in the world is caused by poor people and badly run companies an argument often heard in disguised form but a difficult argument to sustain.
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Such argumentation leads to the inference that actions of responsibility and/or accountability that are driven by concern for profitability may, in all probability, be responsible or accountable in appearance alone.
10
The exploration became redirected and predominantly focused on how businesses articulate and understand this most dangerous of tautologies and, eventually, whether or not such businesses have any awareness that they are a part of and supportive of it. If the business case (for responsibility, reporting, accountability, sustainability or whatever) has become ubiquitous and, apparently uncontentious, it deserves, in its own right, to be re-examined with care.12 Any business case is clearly partial but its use in business-related language is rarely explicit about this (Milne et al. 2005, 2006). There is generally little or no recognition by business that there may be a limit to what the business case can deliver. Indeed, it is in the nature of business to consider merely business cases. Consideration of situations for which there is no business case is beyond the scope of business. This may or may not be a healthy situation. This report seeks to explore, clarify and, if necessary, expose the potentially delusional use of this apparently commonsense approach to the future of corporations (and, inevitably, that of the planet and its people).
We do not need to dwell on
the complex ethics involved in this argument (see, for example, Jacobsen 1991) to see that with a little sophistry we can then claim that only actions in conformance with profit seeking are socially and environmentally responsible and, therefore, there is no conflict and cannot be any between profit seeking and responsibility and/or accountability. Hence, if an act is not in conformance with corporate self-interest it cannot be a responsible action and must, by definition, be something else entirely (Thielemann 2000). Thus do we arrive at what we fear may be the greatest and perhaps the most dangerous of all tautologies:11 it is in companies interests to be responsible and/or accountable/sustainable and therefore successful companies are (and by definition must be) responsible, accountable and sustainable. It is in the heart of this tautology that this research is located. The research started out as an attempt to add further depth to our current understanding of the voluntary reporting phenomenon and the (arguably) relative poverty of that reporting.
10 Although to help old ladies across roads is a responsible act, to do so only when one is paid well to do it may not be so responsible. 11 The tautology is dangerous because if responsibility equals profit then too easily profit is seen to equal responsibility and, as a consequence, profitable companies do not need to be regulated because they are, by definition, responsible (see Orlitsky et al. 2003, who arrive at just this conclusion). If there is damage in the world it is therefore done by somebody (it becomes unthinkable that it could be done by profitable business) and that somebody is probably poor people. It is difficult to imagine a more pernicious form of reasoning.
12 To illustrate further: a major company used a variant (for reasons of sensitivity the identity is not revealed here) on the phrase feeding the world through good chemistry as its strap line. The sentence is nonsense because it is, in no sense, an accurate description of what the company actually did, which was to undertake good chemistry through which it was sometimes possible to provide food for people. The rhetoric is seriously misleading.
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1.6 STRuCTuRE of ThE REPoRT The report is organised along traditional lines. The next chapter provides a literature review in which the two approaches to understanding social reporting what we will temporarily call the quantitative and the qualitative approaches will be reviewed and examined. The conclusions of Chapter 2 are picked up in Chapter 3, where the research design and methods are introduced. The interview method employed is explained and justified and the evolving nature of the enquiry (and consequently the changing research question) is presented. Chapters 4 and 5 contain the actual research itself: the pilot study, its results and analysis, and the main study. Chapter 6 examines the business case issues in some detail before Chapter 7 provides a digest of the findings and an exploration of the implications for the way in which reporting, voluntary initiatives and regulation are considered at this most critical time. 13
13 Never, it seems, has the urgency of issues surrounding planetary (eg climate change, water, resource use) and social (eg debt, poverty, exclusion) conditions been more widely recognised (eg Meadows et al. 2004; Porritt 2005; WWF 2004). The whole role of economic and environmental and social interaction and potential conflict is at the heart of such concerns and, as we shall see, at the heart of the voluntary reporting and business case discussions.
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2. Literature review and explanations of corporate social and environmental reporting
2.1 InTRoDuCTIon Solomon and Lewis (2002), in a thorough and wide-ranging review of some of the arguments as to why organisations voluntarily make environmental disclosure, ask why they do so when the incentives are far from clear and the disincentives appear to be overwhelming. This chapter explores what the extant social and environmental accounting literature has to say on this apparent conundrum. First, we will define what we mean by social and environmental reporting, in the sense of identifying the exact phenomena that will be the focus of the analysis. Secondly, we will discuss the current quality of SER with particular reference to whether or not SER permits an understanding of an organisations social, environmental and sustainability performance. We will then discuss in detail both historical and recent work into the motivations that underlie SER. 2.2 STAnD-ALonE SoCIAL AnD EnvIRonmEnTAL REPoRTInG Historically, the bulk of formal social and environmental reporting and the bulk of social and environmental reporting research has been based in and around the organisations annual report.
14
literature. For a range of reasons, therefore, it is with the reporting of social and environmental issues in a more formal and systematic manner that we begin this review and with which sections 2.3 and 2.4 are concerned. The majority of this work has focused solely on the annual report, although the phenomenon of communicating through stand-alone social, environmental or other reports is starting to be given more prominence in the SER literature. Although the emergence of stand-alone reporting is of interest in itself, the literature has not treated this change as one that is fundamentally different in character from annual report disclosures. A clear distinction between findings relating to reporting through the annual report and findings relating to stand-alone reporting is therefore not made in this literature review. Stand-alone reporting may be considered simply an extension of the SER function, albeit one that may bring with it new symbolic significance. It should be noted that the work on stand-alone reporting is very much sparser for a variety of reasons. First, stand-alone reporting is a relatively recent phenomenon.15 Therefore, there has simply been less time to study it. Additionally, annual report disclosures offer the advantage of permitting historical analysis over long periods of time. There are still many firms that do not produce stand-alone reports, and so comparison across firms is difficult. Nevertheless, as stand-
Although reporting of various aspects
of the organisations social and environmental interactions might appear in advertising, letters to employees and so on (see, for example, Buhr 1998; Unerman 2000; Zeghal and Ahmed 1990) the diversity and informality of this reporting has only occasionally attracted attention in the
14 Whereas the vast majority of the literature has taken the annual report as its object of study, there are only a handful of works that have focused on stand-alone reporting in its own right (see, for example, Buhr 2002 and Miles et al. 2002).
15 It is typical to date the stand-alone social, environmental or sustainability report phenomenon from 1990 and the influential activities of Norsk Hydro, British Airways, BSO Origin, Noranda and others (see, for example, Gray and Bebbington 2001; Gray et al. 1996). There have, however, been many examples from the 1960s, 1970s and 1980s of organisations that produced stand-alone reports, whether as employee, employment or even one-off environmental reports.
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alone reporting grows it is increasingly likely that the SER literature in the future will focus on this phenomenon as the pre-eminent form of reporting. Indeed, it is stand-alone reports with which the empirical part of this study is concerned. 2.3 ThE quALITy of SoCIAL AnD EnvIRonmEnTAL REPoRTInG (SER) A number of advances in wider accountability (ACCA 2006: 13) have been made in recent years. The number of companies that have taken up the production of stand-alone social, environmental or sustainability reporting in the last 15 years has increased rapidly. The very fact that such reports are produced at all and by so many organisations represents a degree of success. Looking at these processes in conjunction with the increasing standardisation and professionalisation of the field, as exemplified by the development and proliferation of standards such as AA1000 and the ever-evolving Global Reporting Initiative (GRI), global progress in sustainability reporting is indisputable (ACCA/Corporate Register 2004: 13). Indeed, some commentators have suggested that we are in the midst of a transparency revolution (SustainAbility/UNEP 2004: 9), noting the increase, not just in levels of reporting, but in the quality of the reports that are produced: in the ten years since SustainAbility and UNEP launched our first international benchmark survey of corporate non-financial reporting, the number of reporting companies has exploded, the overall quality of reporting has improved considerably and the range of issues addressed has broadened spectacularly (SustainAbility/UNEP 2004: 6). Nonetheless, this apparently ever-increasing progress in SER may be beginning to temper. ACCA/Corporate Register (2004) notes a levelling
off, globally, in the number of companies taking up reporting. Sustainability/UNEP (2004) also concedes that the vast majority of multinational corporations do not produce an SER of any description. While SER remains a marginal activity in terms of the number of companies reporting worldwide, the quality of the reporting that does take place has been questioned. Gray (2000) argues that the backbone of environmental reporting should be either an eco-balance calculation and/or some attempt at measurement of an ecological footprint (see Chambers and Lewis 2001). Given that humanitys collective ecological footprint is always growing (see Meadows et al. 2004; Millennium Eco Assessment 2005; WWF 2004), such information is necessary in order to understand the extent to which corporations contribute to this and, more importantly, what role they could play in its amelioration. Corporate claims of environmental responsibility fail to stand up if they are not supported by information that demonstrates their overall environmental impacts. Environmental reporting continues to display a concern with eco-efficiency rather than the more pressing issue of overall environmental impact (Milne et al. 2006). Social reporting has also been criticised on the basis of its failure to outline the organisations key impacts and state to whom it is accountable (ACCA 2006). There is also the charge that much SER cherry-picks good news. Adams (2004), for example, suggests that there is a gap between reporting and performance in the UK, with SERs often ignoring the more controversial and negative issues that are picked up by the media. Kuasirkun and Sherer (2004) similarly show that SER presents a somewhat selective and sanitised picture of social performance. Even where companies do pick up on issues that have caused public controversy, they overwhelmingly do so in a self-laudatory manner (see, for
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2. Literature review and explanations of corporate social and environmental reporting (continued)
example, Freedman and Patten 2004; Hogner 1982; Hughes et al. 2000, 2001; Maltby 2004; Patten 2002; Patten and Trompeter 2003). Thus, companies overwhelmingly skew their SERs in a positive direction (see also Deegan and Rankin 1996; Guthrie and Parker 1989). Moreover, although an increasing number of companies are embracing Triple Bottom Line Reporting in some fashion, and/or producing what are purportedly sustainability reports, very few of these confront the key sustainability issues or try to envisage what a sustainable corporation would be like (ACCA/Corporate Register 2004; Gray and Milne 2002, 2004). Gray and Milne (2004) point out that Triple Bottom Line reporting is a concept that applies to the individual organisation, accounting for its immediate and direct social, environmental and economic impacts. There is a fundamental distinction between this and sustainability reporting because sustainability applies to the system within which the organisation operates (eg a society or an economic system although, ultimately, even these can be understood only within the context of the whole of humanity and the biosphere). A sustainability account therefore requires consideration of an organisations impacts within the context of the whole system. Gray and Milne (2002) suggest that for organisations to produce a sustainability account they need to look beyond the organisational boundary and consider also the socio-environmental impacts of the organisations with which they contract. It is here too that we can draw a distinction between CSR and sustainability. Whereas the former refers to an organisation that actively improves its social and environmental impacts at the entity level, the latter refers to that same organisations impact on the whole system. In this sense one could envisage an ostensibly responsible organisation as one that, for example uses entirely renewable energy, recycles/reuses
a huge percentage of its waste, is one of the best places to work and produces a product that is hugely beneficial for society. Nonetheless, if that organisation simultaneously contracts with, or invests in, a large number of companies that are not so responsible then its overall impact on the whole system may still be negative. Sustainability requires systems thinking, a level very few companies ever consider, much less attempt to account for. Thus, just as the quality of SER in general has been questioned, the applicability of the term sustainability to sustainability reporting similarly raises doubts. Even institutional developments such as the GRI have arguably been limited or even complicit in preventing SER from achieving a meaningful degree of quality. For example, Hammond and Miles (2004: 75) argue that the full warts and all approach to reporting that has been adopted by many organisations since the proliferation of standards such as the GRI is really just a distraction and may be used as a legitimation device to detract attention from more serious issues. In many instances the bad news disclosure is selective, or reflects information that is already in the public domain, as opposed to providing honest coverage. There is thus a tension between what appears to be reporting progress, on the one hand, with critiques of reporting quality on the other. With the increased numbers of companies reporting, the broadened range of issues that are being covered, and the development of SER standards such as the GRI and AA1000, SER can begin to be understood in more concrete and standardised terms. Whether these developments result in reports that allow assessment of an organisations socio-environmental performance or impact upon sustainability is debatable.
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2.4 SoCIAL AnD EnvIRonmEnTAL REPoRTInG moTIvATIonS SER in the UK and elsewhere is (largely) nonmandatory. Given this, why organisations would undertake the (often) burdensome task of collecting and disseminating information pertaining to their socio-environmental performance is clearly of interest. Quantitative research studies, which have looked at the relationship between SER disclosure and corporate characteristics, have given us some broad insights into why companies might do so. For example, we now know that SER is more prevalent among larger companies (see, for example, ACCA/Corporate Register 2004; Adams et al. 1998; Al-najjar 2000; Choi 1999; Gray et al. 2001; Hackston and Milne 1996; Patten 1992) and organisations from higher profile industries (see, for example, Choi 1999; Clarke and GibsonSweet 1999; Cowen et al. 1987; Gray et al. 2001; Hackston and Milne 1996; Walden and Schwartz 1997). We also know that it is a phenomenon of the industrially developed countries (see, for example, Belal 2000; Choi 1999; Elad 2001; Kuasirkun and Sherer 2004; Rahaman 1999; and Rahaman et al. 2004). ACCA/Corporate Register (2004) notes that North America and Western Europe are the most active reporting regions. Although there have been some recent developments in Asia (SER became mandatory in Malaysia, for example, in 2007), reporting is still mostly concentrated in Australasia and Japan; the Caribbean and Latin America show no significant signs of reporting and throughout the whole of African and the Middle East it is the more industrialised South Africa that shows the most significant levels of reporting activity (ACCA/ Corporate Register 2004). These quantitative studies have provided the
basis for the dominant theoretical perspectives in the SER literature: Stakeholder (Roberts 1992 and Ullmann 1985), Legitimacy (Deegan 2002 and and Neu et al. 1998) and Political Economy theories (Tinker et al. 1991). Each of these describes in one way or another how SER will arise in response to pressure on firms to be responsible (namely the large, high-profile companies of the industrially developed countries). SER is viewed in these theories as a means of placating powerful and/or antagonistic stakeholders, thereby maintaining the legitimacy of the firm along with the wider legitimacy of the market system within which the reporting organisation operates. Such theoretical interpretations have largely resulted from quantitative studies into SER. These studies have succeeded in establishing broad relationships between SER and other factors such as industry variables, size and country (see above), but the interpretations of SER are somewhat simplistic. Qualitative work has yielded insights into SER that suggest that motivations to disclose are somewhat more complex than simply to achieve organisational legitimacy, or to manage stakeholder relationships (eg Buhr 2002). A key characteristic of these qualitative studies is their emphasis on eliciting directly the views and opinions of those involved in producing SERs for organisations, normally undertaken through interviews, case studies or surveys. In one of the few detailed case studies in the area, Buhr (2002) considers the initiation of environmental reports in two Canadian companies. This study shows that changing environmental disclosure practices is a long and complicated process, which varied across the two firms. In one case, motivations were related to investor pressure. In the other case, the main motivation related to someone inside the company who championed the process. Gray et al. (1995b)
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also show the role of individual champions to be significant in initiating environmental reporting. Gray et al. (1995b) assess the extent to which environmental reporting is implicated in organisational greening, concluding that the change brought about by environmental reporting has been largely synthetic. Gray et als study (1995b) has been replicated for a group of Spanish companies by LarrinagaGonzlez et al. (2001). They concur with the findings of Gray et al. (1995b) that fundamental organisational greening does not take place as a result of environmental reporting. The central values of organisations appear to remain unchanged by environmental reporting. LarrinagaGonzlez et al. (2001) go further, to assert that the environmental report is used as part of a changeresistance strategy, to prevent more radical approaches to organisational greening from taking hold. These themes are built upon in LarrinagaGonzlez and Bebbington (2001), a more detailed case study of a Spanish organisation. As in Larrinaga-Gonzlez et al. (2001) and Gray et al. (1995b), Larrinaga-Gonzlez and Bebbington (2001) question whether organisations change substantially when they respond to the environmental agenda or whether they change the environmental agenda itself in order to perpetuate the status quo. Their results suggest that both are taking place simultaneously, thus implying that motivations underlying SER are both numerous and complex. Miles et al. (2002) report on what appears to be the broadest investigation to date into UK SER motivations. Four broad factors are shown to motivate organisations to undertake SER. These are, in ascending order of importance, peer pressure and benchmarking activities; stakeholder pressure; government pressure; and pressure
from the City. Whereas the initial decision to report is understood by SER managers as a reaction to pressure, Miles et al. (2002) show that, once the organisation has started reporting, a number of perceived benefits arise: enhanced external reputation; external recognition via awards/ ranking exercises; increased staff morale; and business drivers, such as cost or risk reduction (p. 85). Therefore, there was a mixture of both proactive and reactive reasons for continuing to report. Adams (2002: 223) highlights a series of internal contextual factors that play an important part in influencing reporting. The factors relate both to the attitudes of organisational members and to an organisations internal processes and governance structures. For example, in addition to managerial attitudes towards reporting and responsibility, Adams (2002) suggests that the way in which organisations structure their reporting process (ie which departments are involved and the timing and resources committed) has an important impact on how the report will turn out. This points towards a potential variety of reasons, or internal contextual factors (Adams 2002: 223) that may explain the diversity in SER practice and that may be relatively independent of the actual motivations that purportedly underlie SER. The qualitative literature therefore suggests that SER motivations are numerous, complex and require analysis in order to unpick them. They can also be contradictory. For example, ODwyer (2003) reports that Irish managers hold broadly two sets of motivations for corporate social responsibility (CSR): enlightened selfinterest, where CSR is a manageable activity that is congruent with conventional business objectives; and rights/obligations, where there is a sense of responsibility for constituencies external to the firm. Probing deeper revealed
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that, in the case of conflict between financial and social/environmental considerations, the former dominates the latter. A similar dual rationale is noted by Gray and Bebbington (2000), who report that individual managerial perceptions of what sustainability implies for business conflict with the official organisational conception. These two studies suggest that CSR activities are presented as moral obligations/duties when, in fact, the reality is closer to enlightened self-interest. These findings also problematise the notion that pursuing business-as-usual is consistent with fulfilling responsibilities to society. Any such tension is largely absent from the business literature on SER and CSR. For example, AccountAbility has been working hard for the last few years to try to convince business that there are benefits in pursuing CSR and SER. In 2000, for example, their publication Conversations with Disbelievers began to point out the various financial benefits that could be achieved as a result of undertaking social and environmental initiatives. Their 2002 Innovation through Partnership outlines some of the less tangible, yet no less beneficial, effects on corporate performance that result from engaging with and becoming accountable to communities. Organisations such as Business in the Community have pointed out the business benefits that can be yielded through the implementation of such things as environmental management systems and corporate responsibility reporting (Business in the Community 2005) in an attempt to get more companies to pursue CSR. Numerous think tanks and consultancies are involved in CSR, and these are actively promoting the business case for SER and CSR. The London Benchmarking Group (2006), for example, has developed a methodology that allows corporations to target their community investment in a way that maximises the business benefits that arise as a result. Surveys
of SER by SustainAbility use the language of risk management and highlight the increasing discernment of investors over SER, again indicating an increasing emphasis on business imperatives to report rather than on moral duties. In Gearing Up, SustainAbility (2004) also asserts that most CSR initiatives are not closely enough integrated into company core strategy and that companies are not receiving the benefits that they could, as a consequence. The business/professional literature therefore reflects a business case emphasis, whereby attempts increasingly are being made to capture the CSR attention of companies with financial carrots. This can be contrasted with the academic literature. The theories of SER have been developed to reflect a concern that SER serves a socio-political function as a mediator between organisations/management and society/ stakeholders. The qualitative literature that has been outlined here suggests that a much more complex and contradictory set of motivations underlie SER. Comparing and contrasting these different literatures reveals a plethora of explanations as to what motivates SER, some of which are complementary and some of which are mutually exclusive. There certainly appears to be value in exploring corporate motivations further in an attempt to clarify whether the business case rationales that are implied by the business/ professional literature contradict the socio-political theorisations of SER and the more nuanced explanations offered by qualitative academic studies.
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2.5 ConCLuSIon There has been much written on SER and this literature review has not sought to be comprehensive but rather to show some relative fixities and trends. Comparing the data from recent fieldwork into SER motivations with the different information coming from the business literature, we have tried to show how our explanations of SER remain underspecified. Qualitative work suggests that the process by which SERs come about and take shape within organisations is far from straightforward. More specifically, qualitative studies suggest SER motivations to be much more complex and multifarious than is reflected in stakeholder, legitimacy and political economy theories. Yet the evidence from business and professional studies suggests that business is merely pursuing CSR and SER for business reasons. This study will seek both to take account of increasingly prominent business arguments for SER and to build upon the insights offered by the fieldwork described in the reports cited above. In so doing, this study attempts to enhance our understanding of, inter alia, SER motivations. The way in which this exploration has been carried out will be reported upon in the next chapter.
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3. Research design, sample and methods
3.1 InTRoDuCTIon The preceding chapter illustrates the diverse and occasionally complex explanations that appear to underlie the decisions and the processes that lead to the (non) disclosure of social and environmental information by organisations. A key factor here is that the more popular explanations (typically stakeholder theory, legitimacy theory and political economy theory) although undoubtedly partly successful are clearly under-specified and offer only partial and not entirely persuasive explanations of reporting. At our current level of understanding, at least, these theories appear to offer relative simplicity at the cost of fuller realism. A range of new insights, greater subtlety and more diversity of explanation appear to be emerging from the field-based research. Possible explanations for voluntary social and environmental reporting include arguments that it: legitimates the organisation legitimates capitalism signals risk management to financial participants
The present research has a field-based approach. If one seeks improved understanding of the reporting process, such an approach is arguably the most fruitful. The inferences drawn from the business/professional literature stand in sharp contrast to the diverse explanations of reporting practice discussed in the academic literature. Theoretical closure is some distance off. As the literature reviewed in Chapter 2 implies, there remains considerable scope for more exploratory fieldwork in this area. Consequently, we conducted exploratory interviews with a range of organisations. This chapter explains the derivation of the interviews, the acquisition of the sample, and how the approach changed as the interviews progressed. The chapter is organised as follows. Section 3.2 introduces the research focus and the way this developed over the different stages of the study. Section 3.3 explains the population and sample, and section 3.4 discusses how the interviews were approached and conducted. Section 3.5 outlines the data analysis processes. Section 3.6 provides a brief discussion of the material covered in this chapter. 3.2 RESEARCh foCuS
demonstrates what the organisation does The purpose of this research is to explore why demonstrates the organisations social responsibility companies report social, environmental and sustainability information voluntarily but do so only partially. Where, if anywhere, do organisations see the limits of advantage to their reporting and, most especially, where do the conflicts lie between typical measures of corporate success and a wider, more embracing accountability? It may be the case that, for the many organisations that do not report, the disadvantages of reporting outweigh the attractions; the arguments for reporting are not universally applicable. It is considered that, by codifying different stakeholders and the nature of
puts the organisations point of view forestalls regulation.
Voluntary reporting is sometimes a result of key individuals efforts and commitment or simply of external pressure.
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3. Research design, sample and methods (continued)
the different pressures and incentives that lead to different approaches in reporting, the study may reveal the strength of the constraints on greater accountability and, as a consequence, allow assessment of the possibilities of SER. As will be discussed in more detail below (and expanded in Chapter 4), the intellectual focus and research design evolved as the project progressed. More specifically, the initial broadbased enquiry sought to embrace both reporting and non-reporting organisations. Furthermore, for purposes of comparison and in order to reveal unwitting assumptions, the pilot study was also directed at both UK and non-UK companies. This pilot study raised two broad issues. First, the attempt to develop a reporting/non-reporting and UK/non-UK sample was impractical (see the next section). Second, analysis of the broadranging interviews produces a range of insights into a number of aspects of reporting motivations and the processes of reporting. This analysis, in particular, also offers a tantalising glimpse of a potentially unifying theme that of the business case. This process will be explained in more detail but, for now, its importance lies in the fact that the interviews in the main study, which followed the pilot, were focused on the issue of what the business case comprises, how such a case is articulated and understood, and the limitations that such a case exhibits. 3.3 PoPuLATIon AnD SAmPLE The research was initially intended to explore two kinds of organisation: those involved at the leading edge of social, environmental and sustainability reporting; and those who are not or only peripherally involved in such reporting. The methodology was to have comprised interviews with the (non) reporting organisations and, if
appropriate access could be arranged, detailed case studies of the reporting experience. The population of reporting companies chosen comprised those that submitted reports to the ACCA Reporting Awards Scheme in 2003, with especial emphasis on those that were shortlisted by the scheme and that might, therefore, be considered the leading edge of reporting.16 Of these submissions, an explicit focus was placed on the larger companies because, as was discussed in Chapter 1, the motivation for this research lay in the importance of accountability as a means of ensuring a democratic debate over the role in society of the organisations with the most significant socio-environmental impacts. An initial approach was made to a selection of these companies (chosen initially somewhat haphazardly), with, in the first place, an emphasis on their size, their location and industry representativeness. As positive responses were received, approaches were then made to comparable companies that did not produce stand-alone social, environmental or sustainability reports. The initial intention was that the resulting sample of shortlisted organisations was to be matched, as far as possible, with a sample of non-reporting organisations. Only one positive
16 There are, of course, UK organisations that report and do not submit to the ACCA Awards and some of these reports may be considered significant. Nonetheless, the submissions arguably represent a reasonable approximation of all UK reporters and there seem to be very few significant reporters that are not included in the ACCA shortlist. In addition, by restricting the population to those in the ACCA Reporting Awards Scheme, we were able to offer some control over one factor that appears to have a significant influence in the decisions to report (see, for example, Miles et al. 2002 who note that some organisations have been motivated to report, at least in part, by the existence of the ACCA awards).
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response was received from a non-reporting company despite numerous attempts and this therefore had a significant effect on the intended sampling strategy. The initial (pilot) sample finally comprised 13 organisations one of which was a non-reporter (in the financial services industry) and 12 of which had produced a stand-alone SER. Two of these 13 organisations were from Italy (this is summarised in Table 3.1 on page 30). The outcome of all these interviews which were wide-ranging and influential in how the rest of the study was conducted is described in Chapter 4. The experiences of the pilot study led to a more focused and coherent approach to sampling for the main study. It was decided that the sample should be further restricted to listed companies and should not include any organisation included in the pilot study. Furthermore, from the pilot study it emerged that the lack of completeness in the reporting something observed elsewhere in social and environmental reporting literature (see, for example, Gray and Milne 2002) had some impact on the responses recorded. It was therefore decided to focus on the organisations whose reports might be thought to represent the most complete examples of social, environmental, and/or sustainability reporting. For this reason, the Sustainability category of the reporting awards was selected as the most important. Sustainability reports should include some consideration of both social and environmental issues, not just one or the other, and reports labelled sustainability should be the most complete of those within the category of best practice.
17
Following the high response rate among reporters in the pilot study, letters were initially sent to organisational CSR or Environment departments identified in the back of corporate reports, requesting an interview with the individual(s) responsible for producing the organisations SER. As responses to these letters were not forthcoming, telephone calls were made and then e-mails sent as a follow-up to the relevant individuals. This proved to be much more successful. In total, 25 companies agreed to give an interview: 21 interviews were successfully arranged with sustainability reporters; the remaining four organisations were drawn from either the environmental or social categories. These organisations were chosen on the basis of the breadth of issues covered in their reports. The reports from the four companies not in the sustainability category did cover both social and environmental issues in roughly equal proportion and so were deemed suitable for inclusion in the sample. Eventually, 27 individuals were interviewed from 25 organisations. The overview of the organisations interviewed is shown in Table 3.1 it should be noted that two of the interviews in the main study involved two people, rather than only one person. Main sample interviews therefore include the views of 27 people. The individuals interviewed were generally those responsible for the day-to-day collation of the sustainability report. In two cases, the individual worked on the report, but did not have overall responsibility for it. Elsewhere, two interviewees were the directors with ultimate responsibility for the report, but subordinates dealt with the day-today process of producing the report. This scenario was not one that was deliberately sought out by
17 ACCA has since changed the structure of its Awards scheme, combining all reports into one Sustainability category.
the researcher; rather it depended on availability of the relevant individual and the person to whom
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the researcher was directed. Thus, there was some difference in opinion over who the relevant individual was, although generally the SER managers, ie those responsible for the dayto-day process of producing the report, were those who were interviewed. These individuals were generally below board level and part of either the corporate environment department, the environment department, the health and safety department or the corporate responsibility/sustainability department.
Companies that rejected the approach for an interview were often unwilling to provide a reason or suggested that one read the report in order to obtain any information that was required. The main reason given for not granting an interview was that the individuals and their departments were insufficiently resourced and/or had a limited amount of time. A common comment was that they already spent considerable amounts of time filling in academic and investment questionnaires.
Table 3.1: Distribution of interviews undertaken Industry sector Water and waste Power generation and transmission Pharmaceuticals Extractive (including oil and gas) Speciality metals Construction Telecoms Property Logistics Aviation Financial and corporate services Music and publishing Community-based organisation SMEs Tobacco and gaming Total 1 2 2 13 25 4 1 1 Pilot sample main sample 4 3 1 Both pilot companies were Italian and one of those interviews involved three people; one interview in the main study involved two people One of these interviews involved two people The pilot interview involved two people Comments
4 1 2 1 1 1 1 3 3
One in the main study and one in the pilot was a non-reporter One was a non-reporter
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One respondent said: There is quite a severe issue of CSR questionnaire fatigue/overload, in which companies receive large numbers of enquiries from a) many bodies such as ACCA, b) even more organisations doing research work on their behalf (ie this is the third enquiry re. work commissioned by ACCA that I have received in the last month or so), and c) an amazing amount from BSc and MSc students looking to write dissertations based on surveys of the FTSE100/250. One of the interviewees in the study developed this view when he remarked that having to spend lots of time reporting and dealing with external communications prevented him from changing the organisation. There seems little doubt that a number of organisations experience research fatigue and many may find that the apparatus of being seen to be responsible hinders them in achieving true responsibility. This is increasingly the case with the growing formalisation and standardisation of SER through initiatives such as ISEA and the GRI. The limited ability of business generally to respond to civil societys concerns about its socio-environmental activities is itself indicative of the relative dearth of resources committed to both CSR and SER. This suggests the lack of priority given to socio-environmental concerns. 3.4 APPRoACh To ThE InTERvIEWS The interviews were all conducted at the premises of the interviewees, carried out face-to-face and recorded, with the guarantee of anonymity in any subsequent publications. All interviews were semistructured, involving a single researcher and were conducted as guided conversations (Llewellyn 2001; ODwyer 2004) where the individuals were directed into relevant themes and topics and then left relatively free to convey their own views and
beliefs. The interviewees were not supplied with a copy of the interview protocol beforehand, but simply informed that the research was concerned with discussing the motivations behind SER and, in the main study, any conception of a business case for it. The pilot study interviews were structured around broad discussion areas identified by Adams (2002: 223), who describes a series of inner contextual factors that influence reporting within organisations. She classifies these variables as process variables or attitudes. Process variables include the degree of formality with which reports are constructed, the departments that are involved in the preparation of reports, and the way in which, if at all, stakeholders are engaged as a part of the reporting process. Attitudes are largely the explicit reasons given for reporting per se as well as views on such things as reporting bad news. Adamss work (2002) was used as a basis for the pilot study because of the breadth offered by her protocol, which covered a range of issues relating to reporting motivations and the process of reporting. A similar protocol gave the pilot study a frame whereby the researcher could understand something of the way in which company managers view and talk about SER. The key areas in the pilot interviews were: the reporting process reasons for reporting perceived effects of reporting issues not reported on reporting in the future reporting audiences views on reporting regulation the influence of the ACCA Awards. The intention was not, however, to replicate Adamss study (2002). Whereas Adams (2002)
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raises questions relating to both broad and specific reporting issues and succeeds in identifying areas that may be worthy of further research, the pilot study was intended to go into more depth on a narrower range of issues. The pilot study focused on the motivations underlying SER rather than the detail of the costs associated with it or the links between the systems for collecting the environmental and economic data. Therefore, the protocol used by Adams (2002) was adapted slightly for the pilot study. The protocol was edited a little, providing a loose framework within which to explore reporting motivations. Although the interview protocol remains quite wide ranging, all the areas of the revised protocol were related in some way to reporting motivations. Immediately before the interviews, the interviewees were informed that the researcher had a protocol of issues to cover but that it need not be followed rigidly. It was stressed to the interviewees that the main point of the interviews was to hear their story about the reporting process and why their organisations were undertaking SER. The intention was to discuss a range of theoretically interesting issues and, on the basis of subsequent analysis, highlight areas worthy of further investigation. In practice, the conversations drifted away from the interview protocol at times, and areas of apparent interest were pursued by the researcher. The interview protocol still served to structure the conversations loosely. Each topic on the interview protocol was discussed, although the extent to which the interviewees talked about any particular issue varied. The results of the pilot study are presented in the following chapter. The pilot study encompassed a diversity of theoretically relevant areas, while the main study concentrated on issues that emerged from the pilot study analysis, such as win-win, the consonance of profit and responsibility,
and the potential for conflicts in accountability and responsibility. The main focus remained on motivations but this was accompanied by a concern to explore in more depth the ideologies and beliefs of the interviewees. The protocol was adapted from the pilot study in order to enable this. This tighter focus for the main study necessitated some adaptation in the interview technique. That is, in the pilot interviews the interviewer was relatively passive but in the main interviews there was more active probing. Such probing was related, primarily, to: 1 whether respondents considered that there was any sense in which pursuing notions of responsibility consonant with the business case might undermine genuine responsibility 2 how the completeness/incompleteness of the reporting was explained18 3 the extent to which respondents recognised boundaries and conflicts in this area and how they were resolved. Although the researcher was more active in probing in the main study than in the pilot study, the interviews were always of a semi-structured nature. Interviewees were still encouraged to tell their stories. Thus, the change in methodology between the two studies was intended to provide a more relevant theoretical frame of reference. The conversations became more guided (Llewellyn 2001; ODwyer 2004) but they always
18 Assertions of completeness were challenged by reference to ecological footprints as approximations of environmental completeness (see Gray 2000).
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remained conversations and never regressed into straightforward question and answer sessions. The interviews themselves (in both the pilot and main studies) lasted between half an hour and two hours. The average time for the pilot study was around one hour while the majority of interviews in the main study lasted one and a half hours. All but two were recorded and subsequently transcribed. The transcription for the remaining two was based upon written notes taken by the principal researcher (see below). 3.5 DATA AnALySIS Miles and Huberman (1994) note that there are three concurrent themes during qualitative data analysis: data reduction, data display, and conclusion drawing and verification. Throughout the data collection stage, extensive notes were taken during the actual interviews and following each interview personal reflections were written in a memo book in order to collect initial impressions. Thus, some form of data analysis was done during the data collection phase. As ODwyer (2004) notes, data analysis constitutes a pervasive activity throughout a studys life and does not commence (only) after interview evidence has been collected. Similarly, Ahrens and Dent (1998) remark that it would be a strangely disinterested researcher who could withhold from at least tentative pattern making at an early stage during the research process. As the interviews were transcribed these notes were added to and interrogated. An interpretative reading of the transcripts was then undertaken in conjunction with these notes. This reading was largely inductive, although the fundamental thread to be considered was SER motivations. The other issues that were covered during the interviews ensured that these motivations were not viewed
in isolation. Nonetheless, the analysis was not undertaken just to understand specifically what each interviewee said about those particular areas. Rather, the interview transcripts were treated as stories in themselves. These stories were read and re-read in order to get an intuitive sense of what was being told. It was this informal pattern seeking, coupled with the sampling issues, that eventually led to the designation of the initial exploratory interviews as a pilot study. The 13 interview transcripts from the pilot study were read and re-read and broad inferences drawn. Revising, presenting and discussing these led to the decision to focus upon the business case (see Chapter 4). The material from the main study was more detailed and although the approach employed in the pilot study was also adopted in the main study, the data were still very difficult to manage and link together. Hence a more systematic approach to data analysis was undertaken in order to facilitate the writing of the meta-story of the interviews. The approach followed throughout the data analysis phase is summarised in Fig. 3.1 on page 34. During the main study each transcript was coded in sections using NVivo software. The codes were derived initially from the interview protocol but the semi-structured nature of the interview meant that most of the codes were intuitively derived. For example, 89 free nodes were derived, over 30 of which were identified as specific motivations. So codes had to be derived for each motivation as it was interpreted. Also, the loosely guided conversations invariably extended beyond the interview protocol, and codes had to be derived for the various topics discussed. Throughout this process, a memo book, separate from the one that related to each individual interview, was kept
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figure 3.1: Process of data analysis (adapted from ODwyer 2004)
Data reduction 1 preparatory Construction of interview protocol Notes taken during interviews Reflections recorded in Memo Book 1: immediately after interview and subsequently Tape-recorded reflections: immediately after interview
Data reduction 2 Transcribe interviews and record thoughts in Memo Book 1 Prepare big picture summaries On second reading of interview scripts, record emerging themes using NVivo software Develop intuitive coding scheme iteratively and reflexively Review Memo Book 1 New thoughts recorded in Memo Book 2
Data display Collate open codes into general groupings Separately record uncollapsed codes Prepare motivations mind map
Data reduction 3 Review initial coding Record thoughts on each code Construct matrices for motivations and audiences Draw out relationships and contradictions in the data
Data interpretation 1 constructing the meta story Make detailed examination of mind map and matrices Identify key patterns in codes Question if evidence can be organised differently: make changes Review: interview guide; field notes; memo books; summaries
Data interpretation 2 theorising the meta story Neo-Gramscian interpretation Interplay between meta-story and theory
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in order to reflect on potential general themes and the meaning of the data as a whole. Once a number of transcripts had been coded using the intuitively derived codes, the process of coding became less cumbersome and the need to revise codes became less frequent. The coding of the initial transcripts was the most demanding.
elements. Although this helped enormously in understanding the links between motivations and corporate behaviour, the utterances were not looked at in isolation. The context and general thrust of each interview were always taken into account. Once the coding was completed and summaries
The process of coding was primarily inductive. Although background theorising inevitably influenced the formulation of open codes, a conscious attempt was made to keep the codes as atheoretical as possible. Terms such as risk management or customer satisfaction were as abstract as the codes became, and these were based on the language constructs used by the interviewees themselves. The intention was to produce an inductively derived, descriptive metastory. Ahrens and Dent (1998) note that the most untheorised part of the qualitative research process is the way that the researcher sees certain streams in the data. As mentioned above, this process of theorising is pervasive throughout the life of the study, starting with the framing of the interview protocol, continuing with the way in which the researcher interacts with the interviewees in the field, through to the analysis and writing up of the data. It is a highly creative process (Ahrens and Dent 1998). Following the coding of each transcript, big picture summaries were made for each interviewee. The summaries were constructed around the themes on the interview protocol. The summarising of each transcript served two main purposes. First, it allowed a clearer reading of each interview and how each interview corresponded to the various themes. Secondly, the systematic data analysis carried out served to dissect the data and provide greater understanding of various
had been prepared, the motivations themselves were analysed. NVivo records as an extract each section of transcript that has been given a specific code. Each code was therefore itself subject to analysis. This was particularly useful for understanding the intricacies of the various motivations claimed for SER and CSR. To facilitate this understanding, matrices were constructed where each citation of a motivation was recorded next to the interviewees name in a table. This table showed the relative incidence of various themes and further helped to highlight similarities and differences between the motivations. It also served to smooth out the coding, which, as it was developed in iterative fashion, invariably resulted in the initial application of some codes where others were later deemed more appropriate. At this stage, two motivations were reduced in importance while two others were eliminated, their sections being transferred to other, apparently more relevant, codes. As the codes were analysed and matrices constructed, inferences about each motivation were recorded in a memo book. The construction of the matrices also helped in revealing contradictions in the data. Each free node (the NVivo term for open code) included both affirmative and negative information. For example, the node for Motivation-Reputation included transcript sections that were either indicative of reputation as a motivating factor for SER/CSR, or that questioned or denied reputation as a motivating factor. During the construction of the matrices, only the affirmative statements
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were included as the purpose of the matrix was to display the motivating factors in SER and CSR. The contradictory statements were noted in the second memo book and were consulted when writing the meta-story. The two interviews that were not transcribed have not been included in the matrix. The matrices and incidences talked about therefore are in the context of 23 interviews. This is not to say that these other interviewees have not been considered in the analysis. On the contrary, their views and comments have been noted down and woven into the narrative. It was judged, however, that the detailed notes taken during and after these two interviews were not of the same breadth or depth as the rest of the interviews and they might, therefore, skew the numbers because of the many boxes that would remain empty. Finally, a mind map of the various motivations was drawn in order to visualise the different motivations and group them (intuitively) into more general motivational themes. As can be seen from the mind map (see Appendix 1 on page 73), certain general themes such as stakeholder management or market-driven motivations have been used to group free nodes. The groupings into motivational themes are arbitrary and it is recognised that alternative groupings are possible. The focus is not, however, on dissecting the business case to understand it, but rather on understanding how the business case, as represented by various business drivers, appears to dominate CSR and SER. This theme is developed in Chapters 5 and 6.
3.6 DISCuSSIon The research approach taken here used novel methodologies on which there is little previous reporting, rather than the more deductive, hypothesis-testing, scientific methods generally favoured by researchers, but the choices made in the design of this project seem entirely justified by the outcomes. The need to go beyond the testing of theory into a more deductive mode of fieldwork has been well established (Adams 2002; Gray 2002, 2005; ODwyer 2003). What is less well established is how that fieldwork might be most productively conducted. The broad exploratory pilot study, followed up by a more focused main study and a rigorous approach to data analysis, has led in unexpected directions. Those directions (towards the business case debates) in retrospect seem logical, but they have not been especially privileged in the previous literature and were, therefore, not expected. Chapters 4, 5 and 6 explore the substance of this discovery and surprise.
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4. Initial explorations: the pilot study
4.1 InTRoDuCTIon The pilot study comprised 13 wide-ranging exploratory interviews in one non-reporting and 12 reporting organisations, 11 in the UK and two in Italy. Chapter 3 has explained the rationale for the pilot study and how this was used as the basis for developing the main study. This chapter reports the findings from the pilot study. As mentioned in the previous chapter, the pilot study had a strong exploratory emphasis, but the main focus was on ascertaining motivations for SER. A specific point-by-point analysis around the interview protocol was not carried out. Rather, the themes that were identified as more salient are presented below. This has allowed a skeletal theory (Laughlin 1995) to be formed regarding SER motivations, and, in turn, raised a number of issues that were pursued in the main study. 4.2 SER/CSR moTIvATIonS From the outset many of the interviewees stated that they did not make clear distinctions between SER and CSR and that the former could generally be understood only in the context of the latter. The discussions therefore invariably developed around SER and CSR together. The most salient theme identified from the interview analysis was that the interviewees were all articulating business reasons for their approach to SER and CSR. For example, some of the interviewees described the importance of making sure that financial outlays were controlled and tied into business benefits. So its not like we have to have a cost-benefit analysis for each decision that we make and of course a lot of the stuff that we do does not generate any revenue or anything... So you have to determine what is realistic and that is in large part determined by budget, resources and human resources as well (Corporate Social Responsibility Manager 1).
Table 4.1: Dominance of the business case

number of interviewees 13 0 13
Business case v. Socio-environment Business case as the primary motivating factor for SER/CSR Socio-environmental concerns as the primary motivating factor for SER/CSR Socio-environmental concerns articulated at all
If you expect your investment in a social and environmental reporting system to pay back in 12 months, a year whatever it is, I dont necessarily think that happens. I think it can on occasion, but I think its a much more organic process of actually gaining the benefits. You know, you spend 50,000 on a system to record your employee demographics and then two years later that has a direct payback on your bottom line (Corporate Social Responsibility Manager 2). One interviewee in particular was very clear about what was driving both SER and CSR. I think that we start this stuff from a commercial point of view: if it doesnt make business sense, then you are not going to do it. You have to have a bottom line benefit, otherwise you have no compelling argument for your shareholders, you have no compelling argument within the business. If it doesnt deliver tangible reputational benefits, tangible business benefits, then it is impossible to justify. We are not a registered charity (Corporate Communications Director 1). There was a striking preoccupation with business benefits, or with the business case, as some interviewees described the harnessing of SER and CSR strategies to business concerns. In line with earlier literature (ODwyer 2003), the researchers expected motivations related to SER
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4. Initial explorations: the pilot study (continued)
and CSR to be articulated in terms of their socioenvironmental value. The interviewees did not, however, put forward any primarily responsible arguments for SER or CSR strategies. Rather, responsible behaviour was blended with business case arguments. This situation is reflected in Table 4.1 on page 37, where commercial concerns (referred to as the business case) are shown as the primary motivation for every interviewees organisation. This business case was often articulated as if it were self-evidently the primary motivating factor. Socio-environmental concerns (being a concern with social or environmental issues) were articulated only insofar as they were linked to some commercial benefit, not as an end in themselves. figure 4.1: SER/CSR motivations (Pilot Study)
of pluralistic or win-win scenarios, interviewees made it appear that the business case can deliver, or is even a prerequisite for, socio-environmental improvement. The model for sustainable business nowadays is that it is no longer good enough to just look after the interests of your shareholders. Or rather, put another way, if you are looking after the long-term interests of your shareholders then you also need to look after the interests of your other stakeholder groups (Corporate Social Responsibility Manager 5). We have shown that our CSR activities contribute directly to levels of customer satisfaction to the extent that if we stopped doing them, levels of customer satisfaction would fall and there is a high financial correlation between customer satisfaction and sales (Corporate Social Responsibility Manager 6).
Business case
Thus, although the interviewees were very clear that the business case is the primary motivating factor, they did not recognise limits to the extent to which socio-environmental effect could be addressed through the business case (this simultaneous dominance and conflation is presented in Fig. 4.1). Whereas ODwyer (2003)
Socioenvironmental concerns
argues that individuals within firms hold distinct and competing rationales initially, the interviewees in the pilot study blended the business case with the socio-environmental arguments immediately. This gives rise to the dangerous tautology referred to in Chapter 1 (that it is in companies interests
This leads to interesting issues central to the main study. Socio-environmental concerns were important only if there was a business spin-off. Thus, socio-environmental concerns appeared to be addressed only in certain circumstances. By describing business spin-offs in the context
to be responsible and/or accountable/sustainable and, therefore, successful companies are and by definition must be responsible, accountable and sustainable), which it was the purpose of this study to explore.
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4.3 AuDIEnCES The pilot study suggests that the intended audiences for sustainability reports are what a few interviewees termed opinion formers. Well, the key target audiences are investors, the CSR community, government and policy makers, and then to a lesser extent we would hope that some suppliers, customers and employees would read it; and then to an even lesser extent we would hope that... NGOs would read it as well. But our key target audience are the people who work on CSR on a professional basis, whether that be a government person or an investment person or whatever (Corporate Social Responsibility Manager 1). I think the readers to a certain extent are what we have called opinion formers. So these would be some of the commentators; they are the government, MPs, that kind of area as well; our counterparts in other organisations; the standard setters, people who are looking at things like GRI and AA1000; people like yourself, academics. There is no sense that this document is written for consumption by the general public unless people are very interested in a particular area. I think we have always set the standard of this quite high, quite academic, quite detailed (Corporate Social Responsibility Manager 4). It was not clear that the audience for the SERs were mostly the financial stakeholders, as previous research has suggested (Milne and Patten 2002; Neu et al. 1998). It seemed from the pilot study that business was targeting both itself (the CSR community and counterparts in other organisations) and various stakeholder groups. The main study explores the audiences for the reports in more detail. From the pilot study it may be conjectured that SER is a strategy to appease wider stakeholders while simultaneously creating a consensus among the business community.
4.4 voLunTARy REPoRTInG By articulating a socio-environmentally worthy business case, interviewees demonstrated a convergence of interests and they presented business as the only mechanism for socioenvironmental sustainability. The discussion around voluntary versus mandatory reporting conveyed this. Wed be deeply unhappy to be in any regulated environment on any of this stuff and we have said this to the minister responsible for social responsibility umpteen times. Not really because of the impact that it would have on us, I think wed shine because of the work we have done in the area, but more specifically because of the impact it would have in discouraging SMEs from doing anything in this area at all... I think it is something in the order of 2125 of the FTSE 100 companies currently report a single social report... that is a growing number, there are an increasing number of FTSE companies that are reporting in this way, and that is to be encouraged. And it is happening because it is not mandatory. I think if it was made mandatory you would see a fall off in the number of people involved (Corporate Communications Director 1). Others were keen to see more widespread reporting but emphasised that business should be allowed flexibility. We would not be hugely supportive of mandatory [reporting], not so much because it is mandatory but because we dont have the confidence in a one size fits all approach applied by government. We feel quite strongly that government officials are unlikely to come up with something that is going to help. But we do think that more and more companies should be obliged to report, so in that sense we are not opposed to it (Corporate Social Responsibility Manager 1).
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In espousing standard anti-regulatory views, the interviewees appeared keen to remain free to construct their own image of corporate socioenvironmental interactions. The imposition of guidelines requiring the calculation of ecological footprints and rigorous, meaningful stakeholder engagement would probably result in an SER that showed conflicts between commercial objectives and socio-environmental criteria. 4.5 DISCuSSIon In talking overwhelmingly about the business case for SER and CSR, the interviewees exhibited an adherence to win-win thinking whereby SER and CSR are undertaken to the extent that they bolster the commercial health of the company. Moreover, one must also consider the type of SER and CSR that was discussed, eg what relationship does customer satisfaction have with wider notions of CSR or sustainability? The work of Bebbington (2001), Gray and Bebbington (2000) and ODwyer (2003) permits a skeletal theory (Laughlin 1995) to be formed at this point. Their work suggests that the commercial benefits described by the interviewees above may derive from a significantly restricted understanding of what environmental stewardship, social responsibility and sustainability entail in practice. Beyond the exploitation of win-win scenarios, however the social and environmental benefits are defined, the reality of large-scale corporate activity in the current market system may be one that encounters significant social and environmental conflicts. Some commentators argue that win-win scenarios are viable only up to a point (see Walley and Whitehead 1994). Nevertheless, the primary frame of reference for corporate approaches to SER and CSR may be the win-win scenarios. One could reasonably presume that lose-win scenarios, where organisations
undertake socio-environmental initiatives without a perceived business benefit, will not be considered by business. Indeed, the corporate desire to stay within business bounds is noted by Owen et al. (2001), who are somewhat critical of the very notion of a business case for SER. The fundamental flaw in exclusively promoting the business case for [SER] lies in a failure to fully recognize that stakeholder conflict, rather than harmony, permeates much economic activity. Equally, there is a refusal to acknowledge that such conflict is invariably resolved in favour of shareholders as a powerful combination of external financial hegemony and internal bureaucratic control conspire to prevent organizations from being socially responsible in anything but an instrumental sense (Owen et al. 2001: 276).
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5. Why do corporations report on social and environmental issues?
5.1 InTRoDuCTIon Chapter 4 reviewed the pilot study and concluded that SER motivations are apparently grounded in conventional business notions of strategic benefit. That conclusion formed the basis on which the main study was founded, that is, to investigate the motivations for reporting, within a broad framework of articulating, exploring and analysing the notions of the the business case. The main study comprises 27 in-depth interviews from 25 companies. Of these, 23 permitted taping so that detailed analysis of the transcripts could be undertaken, and two did not. The majority of the comments here are from the 23 taped organisations. The main study interviews were structured around a number of key themes. These are shown in the list of key areas in the pilot interviews on page 33. This chapter is broadly organised around the first three of these themes with the main emphasis being placed on section 5.4 (motivations). Sections 5.2 (interviewees) and 5.3 (structural issues) are included principally for completeness. The themes starting from Conflicts onwards will be discussed in the following chapter. There are two issues worth noting at the outset. First, there were many occasions when interviewees intertwined or even confused CSR and SER. This was not challenged in the interviews and the implications of this will be explored later. Second, there was no attempt to establish what the business case is in practice or indeed what a business case might be. This will emerge from the discussions and is perceived in very varied ways.
5.2 RoLE AnD BACKGRounD of ThE InTERvIEWEES As discussed in Chapter 3, the interviewees were generally the SER managers, ie those responsible for the day-to-day process of producing the sustainability report. These individuals were generally below board level. The backgrounds of the interviewees were varied. Some had worked for years in the environment or health and safety departments of their current or previous organisation. Others had come from other business departments entirely and seemed to have arrived in their new CSR role by way of a perceived opportunity to develop their careers. It may be significant that a number of interviewees were non-specialists by background, implying that CSR and SER are simply other business units like any other and that universal business principles may apply during their implementation. It should be noted that a few interviewees were explicit on this point, suggesting that they did not want CSR or Sustainability to become just another business function, or a bureaucracy in its own right. Rather, they were concerned that CSR or Sustainability be fed right throughout their organisation. 5.3 InDIvIDuALS/DEPARTmEnTS InvoLvED In ThE PREPARATIon of ThE REPoRT The people interviewed generally worked in the corporate environment, environment, health and safety, or corporate responsibility/sustainability departments. They worked either individually or as part of a small team that was generally concerned with both reporting on social and environmental performance, and with social and environmental performance itself. While these people led the reporting function, however, it would appear that many other people and departments throughout the organisation were also involved. For example, individuals in other departments
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5. Why do corporations report on social and environmental issues? (continued)
would be responsible for particular health and safety protocols, as well as the collection of health and safety data. Many of the interviewees told of how collecting information for the report involved, in large part, the contacting of relevant individuals in other departments. In many cases, the interviewees were the people responsible for the final SER and (in some cases) responsible for setting socio-environmental targets, whereas people in other departments were charged with supplying the relevant information and with meeting those targets. 5.4 moTIvATIonS foR REPoRTInG
Although costs and income were raised regularly as issues, only rarely was either SER or CSR justified as purely financial. Rather, the vast majority of business case articulations made reference to much less tangible business benefits. Equally, a number of respondents spoke in nonbusiness terms as though they wished to stress that SER and CSR were over and above the business case that true altruism and decency were a sine qua non of any activity. These moral cases were diverse and were invoked, to some degree or another, by 11 of the 25 interviewees. I am not saying this lightly: [company X] I believe
The researchers did not expect that motivation for reporting and certainly the discussion of organisational motivations would be simple. One manifestation of its complexity was that not only were there a range of articulations as to why reporting takes place and a wide range of aspects of a business case, but it was also exceptional for an articulation to specify the case for SER and CSR explicitly in terms of income generated or costs saved. The nearest examples of such a direct claim might be: in terms of a financial bottom line, and the environmental perspective, the savings, the potential savings and the realised savings run into multimillion pounds purely because of the economies of scale of our business. I mean, our sickness absence is costing us 250 million pounds a year. So they are huge figures that we are talking about here. So actually bringing in a coordinated approach is definitely having an impact (CSR Manager, Logistics).
inherently is a good organisation and has a desire to be good (CSR Manager, Energy). ... it is sometimes difficult to disentangle ... what we would regard maybe as moral values and being responsible (Sustainability Manager, Extractive). The second main driver or imperative [after risk management] is probably the moral imperative. Or it is also driven by individuals, visionaries, people who believe it is the right thing to do, or perhaps people who have been kicking around from the risk scenario, they understand that there is a moral obligation for them to do these things above and beyond the SWOT analysis and mitigating potential risk (CSR Manager, Oil and Gas). So there are pressures, but essentially we think that we are doing it because it is the right thing to do (Purchasing and Internal Affairs Director, Publishing). Equally, when interviewees talked directly about
All of this social and environmental performance improvement is actually a means to an end and that end is to make more money (Environment Manager, Extractive).
reporting, they might not talk about social welfare or some analogue of altruism, but transparency, completeness and honesty seemed to loom large in the rhetoric and (perhaps) in the thinking also.
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What we just want to do is represent a real and accurate picture of where we are. That is what we are trying to achieve (Environmental Manager, Extractive).
It is a bit like the AR and accounts, you know, that figure isnt very good, we need to work on that (Environment Manager, Extractive). For others, reporting was more of a manifestation
It may be, of course, that within business it is normal to see the highest moral ground and the business case within ones own organisation as wholly consonant. This is something we will address in Chapter 6 when we examine limits and conflicts. Nevertheless, the simple, hard-nosed business case cannot be said to be ubiquitous or, at least, its articulation cannot be said to be ubiquitous. The analysis undertaken (as explained in Chapter 3) was directed towards establishing themes in the interview transcripts. These themes may be summarised into the principal categories of motivations: business efficiency market drivers reputation and risk management stakeholder management pressures from benefits from mimetic motivations internal champions. The rest of this section will be organised around these themes. Business efficiency This motivation refers to the ability of SER or CSR to help manage physical business operations in a more efficient fashion, ultimately resulting in a direct and tangible impact on the bottom line. For example, six interviewees said that reporting on their social and environmental performance was tied up with improving their performance in that regard. In some cases it helped to identify impacts that needed to be managed.
of the fact that they were managing their impacts, although the fact that they report acts as an impetus to do so. In turn, the managing of social and environmental impacts could be justified in terms of the cost savings that accrue. Eight interviewees cited costs as a driver of their SER/ CSR to some extent. Some of the things, particularly on the environmental side some of this is about cost savingin terms of energy efficiency, energy consumption you can actually demonstrate that you are saving money (Sustainability Manager, Financial Services). Cost savings and narrow financial wins were therefore considered important by a number of interviewees, although the business case, in the main, seems to be found beyond short-term, direct financial returns. market drivers This sub-group of motivations covers those created by pressure from the market, such as when seeking share inclusion in Socially Responsible Investment (SRI) indices or achieving differentiation among investors through other means. About half the interviewees mentioned market-related reasons for their SER and CSR. Ethical investment, in particular, was seen as a driver. One could actually say that if you are managing environmental issues, then it demonstrates as well that your management of the business is good People then are more likely to invest (Environment Manager, Utilities).
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Around half the interviewees stated specifically that their SER was driven by a perceived desire in the marketplace for information or by a belief that, by reporting, their firms market performance improved. We have done some work with some external stakeholders, in particular some investor stakeholders, to see whether they give [company X] a better rating because of it [the report]. It enhances our reputation. I think we can demonstrate that it is a positive in that respect (Sustainable Development Director, Utilities). I think that to some extent that will earn more brownie points than a company that refuses to report, wont tell you what they are doing, keeps their cards close to their chest (Public Affairs Manager, Aviation). The influence of the market was made clearer by a number of interviewees whose companies had become listed only in the previous few years. Now that we are listed, that has had a big impact the scope of the report is now wider. But also in terms of the amount of questionnaires that we get in, interest from investors. So now we are doing the Dow Jones Sustainability Index, FTSE4Good, Insight investment, there is a biodiversity index and we have been asked to do a health and safety one. So there are now more demands on us than there were before we were listed (Sustainability Manager, Utilities). One interviewee recognised the markets demand for information somewhat reluctantly. Obviously we are trying to respond to this additional need for information, but there can be a frustration because the questionnaires are very general, they have to be. But they dont necessarily address our business. You get to the stage where you say well
none of those boxes are relevant for me but if I dont tick one of them there will be a minus somewhere in the system (Communications Manager, Property). The market therefore appears to be driving SER and CSR to some extent, but it is not necessarily the mainstream of the market that is interested in this. The marketing director of a pharmaceutical firm said that CR is not significant to mainstream investors and that the market is more likely to punish firms for negative performance than it is to reward companies for the good that they do. Thus, it is implied that CSR is more about avoiding scenarios that will subtract value from the company than it is about proactively seeking benefits that add value. In this sense, the business case may be seen as a defence mechanism or, as is described below, a risk management tool. Nevertheless, the marketing director outlined how his company was trying to convince mainstream investors of the value of its approach to CSR. He believed that they would recognise it eventually. Another interviewee recognised this too, and mentioned how they were including in their report now, and beginning to manage, activities that will later on become meaningful to investors (Sustainable Development Director, Utilities). Reputation and risk management Reputation and risk management have been grouped together here because of the significant crossover between the two. Although the two were coded separately, the interviewees often talked about one in the context of the other. For example, some interviewees described the wide-ranging field of risk management as being ultimately conducive to maintaining a good reputation. Conversely, others saw reputation as a risk itself that needed to be managed. Nonetheless, it should be noted that, although there appears to be significant crossover between the two on a higher level, they may also be considered distinct at a lower
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level. Risk management refers to a wide range of issues that are important to business in their own right, irrespective of whether they are ultimately conducive to enhanced reputation or not.
A few interviewees talked specifically about the role of reporting in demonstrating good risk management. Strategic risk management, there is good
Ten interviewees talked specifically about risk and the role of CSR in managing risks. Moreover, a number of interviewees were quite clear that risk management was the key driver for them. These risks are issues that may arise, or become more important, in the future although not necessarily affecting the financial results immediately. I think it is fair to say that most of what we do comes under the heading of risk management (Sustainability Manager, Extractive). I have always maintained that there are roughly three drivers for people getting involved in CSR in the first place. The risk imperative is seen as the most obvious: risk to persons, risk to operations, risk to maintaining or not obtaining the license to operate from the community point of view. That is probably the first place and certainly most extractive companies start there. So to understand the risk and begin to address the risk and finally to avoid risky situations that involves talking to people, understanding stakeholders. So they do their risk mapping and assessment and they put their management plans in place before they go into places and do things which may expose them to some of these risksI think most extractive companies, and [company X] is certainly one of them, started with risk when CSR started in 199719 (CSR Manager, Oil and Gas).
governance, good management, and all those proxies that are out there. They work and that is, I guess, one of the reasons that we are reporting: to demonstrate to our shareholder community that we have controls in place (CSR Manager, Speciality Metals). Some bemoaned the pressures on them to demonstrate risk management, because it precluded them from devoting more time to actual performance improvement. What we wanted to do was produce one every two years, with more stories, more time to collect the information. But such are the pressures of risk management that we need to be producing it more and more often (Environment Manager, Extractive). This interviewee then went on to highlight the crossover between reputation and risk management. You are seeing people jostling people for the marketplace that is reputation, to hopefully secure investment from very large funds, owing to being able to demonstrate excellent risk management in the medium and long term (Environment Manager, Extractive). SER was seen by the interviewees variously as a strong reputational tool, a reputation builder or even a marketing document.
19 To say that CSR started in 1997 is an interesting statement for all sorts of reasons. For example, does it suggest that companies were never concerned with social responsibility until this date, or does it merely imply that the phrase CSR was not in wide circulation until then? An in-depth analysis around this might reveal some interesting issues, but this was not a key concern of the study and will not be further pursued here.
So the risks for us are really all about reputational risks. So the perception out there is that we are a clean, green organisation, that was before we did any of this stuff. I think this gap between perception and what is going on is actually quite a risk really. So I
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think that by reporting on it we are closing that gap a bit (Sustainability Manager, Financial Services). Reputation seemed to be an important motivation for producing SERs for at least half the companies interviewed. Reporting aside, some interviewees mentioned that it was their practical CSR activities that had an impact on reputation. The purchasing director of a publishing company mentioned that it would be a nightmare to find out that child labour was used in their supply chain. Another interviewee talked about how involvement in a tree-planting scheme enhanced the companys reputation among the local community. Another mentioned how their actual relationships with society had an influence on brand and reputation. Some of the interviewees pointed out that not managing their risks would result in bad publicity and therefore have a negative effect on reputation. The relationship between reputation and risk management motivations and CSR and SER is therefore complex. One could say that CSR is the management of risks whereas SER is the demonstration of that management. Thus, CSR provides the risk management whereas SER delivers the reputation. This appears to be plausible, but such an analysis is incomplete. CSR itself is perceived by some interviewees to help both in managing risks and in directly enhancing/ maintaining reputation. Similarly, SER may help in identifying risks that need to be managed and so is not merely a reputation deliverer. There is thus much overlap between SER and CSR as regards both reputation and risk management. These overlaps informed the decision to treat reputation and risk management as one motivational grouping. Stakeholder management This is a very broad heading under which much has been gathered. The various sub-groups of stakeholder management were coded separately
(see the mind map in Appendix 1, page 73) under various intuitive schema. First, there are the nodes pertaining to pressures experienced by organisations from various stakeholder groups and society generally. Then there are the actual benefits that are accrued from deploying CSR/SER as a stakeholder management tool. To consider first the pressure experienced, generally, from stakeholders: the majority of the interviewees talked explicitly about current and future stakeholder expectations as a driver for their CSR activities. Reporting, in particular, was cited by a number of interviewees as a reaction to stakeholder demands. Stakeholders expect it, employees expect it, the communities expect it, our peers expect it, the government expects it. There is an awful lot of people out there who are watching, because we are such a big company out there. Because we supply a lot of people with their life assurance, they want to know that we are a good company, and that is why we do a lot of what we do out there (CSR Manager, Financial Services). My view is that CSR is usually issues-based within an organisation. So the biggest issue for [us] in the past has been [our] safety and environmental performance. That has been the biggest concern in terms of societys expectations (CSR Manager, Energy). There was much talk of reporting per se in order to meet societal and stakeholder expectations. A few interviewees went further, to say that the actual form and content of their report were influenced by specific stakeholder expectations. Not everyone, however, was clear that they were reporting in order to meet stakeholder expectations. A few interviewees mentioned that they were not under much pressure from wider stakeholders for
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information. Similarly, the interviewees from the two companies that do not produce stand-alone reports claimed there was no pressure, from either society generally or stakeholder groups specifically, to expand their reporting. According to interviewees, it is not just reporting, but organisational CSR activities generally that are influenced by stakeholder pressure although, again, it is not always easy to separate a reporting response to stakeholders from an actual change in organisational activities prompted by stakeholders. If climate change is the biggest problem we face and if regulation is going to gradually increase, and not just regulation but I firmly believe that there will be other constraints on us, ultimately from consumers and our customers, the people who buy our materials, to use the natural environment more responsibly and to try and reduce emissions, then I think it is as well that we take, where we can, a leadership role on that and present the company as a responsible environmental player, so it is responding to future and existing pressures (Sustainability Manager, Extractive). A number of specific stakeholder groups whose views or expectations were identified as important enough to warrant a reporting response were mentioned by interviewees.
20
on organisations to take action in this area. Regulatory pressure was also cited by a number of interviewees as a key factor for both their SER and CSR. Complying with legislation was, it was emphasised, the lowest bar. A business case was to be found also in going beyond the regulatory minimum. This seemed to be motivated, at least in part, by a desire to pre-empt any attempts at future legislation (see section 6.4 Reporting regulation on page 60 for a discussion of this). Moving beyond general discussion around stakeholder expectation and pressures, the interviewees outlined various ways in which SER and CSR helped in the proactive management of stakeholder relationships. A number of interviewees said that they were using CSR to try to change external perceptions of their business or industry, engender trust or improve stakeholder relationships, because doing so would make things easier in the future. Because when you have good relations with the community when you put in a new mast, then when you want to put in another mast, you wont have problems (CSR Manager, Mobile Phones). I think it would be very difficult for us to go out there and say we want new runways here there and everywhere, if we didnt tell people what we were up to. People would be a lot more sceptical about what we were doing, they wouldnt understand it as much so it is extremely important for us to be open and transparent and if we make mistakes we admit it (Public Affairs Manager, Aviation). It was within this context of the benefits of
Seven interviewees
mentioned NGOs specifically. Ten interviewees mentioned government pressure as a key driver. With the exception of shareholders and institutional investors, the government was most cited as the stakeholder that was putting pressure
20 It should be noted, however, that the notion of stakeholders was not discussed in depth during the interviews. The figures discussed above were identified during the data analysis phase and, although perhaps indicative of broader trends, should be interpreted with circumspection.
stakeholder management generally that employees and customers were mentioned as well. Seven interviewees articulated customer-related business drivers for their CSR or SER.
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There are strong drivers to work with customers on these issues (CSR Manager, Energy). A couple of organisations that were consumeroriented were clearly driven by customer concerns, although these were not considered to be hugely significant. There is a growing band of green consumers out there generally. It is not a huge pressure from our customer base but there is some (Sustainability Manager, Financial Services).
This morale effect was one that helped to generate buy-in for CSR in the company. Given that there was also believed to be a strong business case for CSR and SER, enthusiastic employee acceptance of these meant that there was more chance that the benefits to the organisation arising from CSR activities would be realised. There is always a feel-good factor to these things, which is of benefit to the organisation (CSR Manager, Energy). People really do quite like the feeling that they are
Another couple of interviewees, who were not from consumer-oriented industries, attached more importance to the benefits that could be reaped from increased customer satisfaction. The KPI [Key Performance Indicator] for the client there was for us to produce a facility that enabled him to attract and retain staff. We didnt have any of this stuff when I was a young student or a young engineer. It was all about can we programme it in on time, can we get anywhere near the budget, can we do it without injuring too many people and will it be to the right quality? Well those elements are expected to be to a certain standard already. So this is the added value, the differentiator (Environment and Engineering Director, Construction). Nine interviewees in total made some link between their SER or CSR and business benefits related to employees. Five of these nine said that doing things in this area increased staff morale. It creates a sense of pertinence to a company. It sets the boundaries of what you as an employee can and cant do. It also gives an opportunity for people in the company to fill the social part that all of us have (CSR Manager, Telecoms).
doing something that isnt raping and pillaging the world. And that is right. If you take it too far down the you do this or I will give you a good caning route, it is not the most innovative, it is not going to be as exciting and you will not get the full holistic benefits that you would if you did it from a more strategic perspective (Environment Manager, Extractive). In addition to having a morale effect, CSR was linked by some interviewees to staff skills development or the recruitment and retention of better staff. Two interviewees noted that their employee volunteering schemes were actually ways of developing project management skills for their staff. A further two explained how their community education projects were linked into improving the quality of their future workforce pool. In turn, another interviewee made the link between better-trained people and business benefits while talking about one of their sustainability strategies to improve staff competence. There is the link between having good efficient people who are well trained, so our policy is part of that, into how efficient they are and how productive they are. There is no doubt about it, the more productive management, better management, is going to produce better EPS [earnings per
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share] and profitability and things like that for the business (Environment and Engineering Director, Construction). Having a socially and environmentally responsible reputation was also linked by a number of interviewees to enhanced quality in staff recruitment, particularly among graduates. mimetic motivations This motivational group brings together interviewee articulations of the business case for mimicking the approach to SER or CSR of competitors or best practice organisations. Peer pressure is also included in this section. Although responding to peer pressure does not necessarily entail an exact mimicking of peer reporting practices, it is presumed to entail some sort of organisational response that enhances conformance with the values and norms established among peer or best practice groups. Thus, mimetic and peer pressures may not be identical, but it is presumed that there is significant overlap between them, to justify their being considered in conjunction. Nine interviewees cited some sort of peer pressure, specifically for their reporting. I think that is a part of why we are reporting: industry, peer pressure you might call it (Sustainability Manager, Extractive). Another interviewee talked about best practice and how learning from others was a good way to proceed in this area. A lot of the indices you look at and say who is involved with that, is that worth signing up to, who is heading that up? Currently I think there is an awful lot of peer respect going on and peer learning (CSR Manager, Financial Services).
This peer pressure was not restricted solely to industry competitors, but for many companies it was driven also by reporting leaders whom they were trying to follow, at least to some extent. Some interviewees explained in more detail why it was important to match others endeavours. I think that it is a shame because it costs tens of thousands of pounds to produce it whereas what we could do is take everybody who is interested in our business in this way, take them all into a room and talk to them about the contents of this report, for about 10% of the cost on an annual basis. Still get the same information across but then every time a list of the top 250 companies comes out that produce reports you would be at the wrong end of it. So you have almost got this very basic peer pressure that says: you need to have one of these (Environment Manager, Extractive). This discussion around peer pressure raises the interesting question of whether an organisations SER and CSR are related more to what other companies are doing than to its own underlying activities. Although real pressures to mimic competitors and industry leaders were outlined by the interviewees, this mimicry may have the potential to direct attention away from substantive consideration of organisational socioenvironmental interactions and towards, instead, the mere use of certain types of language and guidelines that display conformity. Alternatively, one might argue that this peer pressure encourages organisations to follow the leaders, thus raising the level of SER and CSR as a whole. Ones position may depend on the view that one takes of the quality of current SER and CSR best practice. Internal champions Some interviewees claimed that SER and CSR were driven by key individuals within organisations the motivational sub-group comprising internal
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champions. Eight interviewees mentioned senior management, the board or the CEO as significant in driving the process. Three specifically indicated the influence of the CEO. One interviewee talked about how there had been various attempts to get environmental issues on the corporate agenda within his organisation, but they had succeeded in doing so only in the last couple of years. He indicated that the change of chief executive was one of the main things that had brought about that transition. His views were echoed by one of the other interviewees. Our current CEOwhen he came on board, he saw the importance of sustainability and he pushed it toward the centre of the organisation and actually it is part of everything we do now whereas, as I understand it, his predecessor thought it was important but it wasnt at the heart of everything we were doing. Now he has made that shift, recognised the importance and it is across everything we do now (Public Affairs Manager, Aviation). Others indicated the importance of their senior management team more generally. When I joined the team in November 2002, the initial remit was to produce a CSR report within three years internally. However, the momentum at board level had increased quite significantly so it changed from a three-year project to can we do one next year in July please (CSR Manager, Energy). We have become more aware of the risks to our operations that come from not managing SD [sustainable development] issues properly. This has led to a significant increase in emphasis in the whole area and because our senior management think that it is important we do things to certain standards. They also believe that it is important that we report on this, to show the world what we are doing (Sustainability Manager, Extractive).
It would be easy to conclude that boards and CEOs are driving CSR in organisations because they see the business case. One interviewee indicated some potential tension between the business case and the fancies of senior management. The board came back to me and said right, we want to report on our Human Rights situation after August. That was the first time the board have actually fed back to me and said look into this issue and feed into us again. That was brilliant because it meant that they had actually read the report and actually picked up on issues and talked about things. But it means that they are aware of the things that we need to be aware of as well. They can do that. If the board say that, it is a business case already; if I come up with it I have to prove that it is a business case. That is a bit of a discrepancy at the moment, but that is the way business is; I just get on with it (CSR Manager, Financial Services). This opens up a potentially interesting area of enquiry that would depict the business case as a rhetorical device. Although the need to construct a business case remains strong, the implication of this is that the way in which business cases are constructed may leave managers a zone of discretion. Thus, while in the first instance the extent to which the business case translates itself into hard financial figures would appear quite limited, in the second instance the wider intangible notion of the business case might not really be a business case at all. There may be so many grey areas when discussing the business implications of socio-environmental activities that constructing even a flimsy business case might, in some instances and depending on who does the constructing, be enough to justify a particular socio-environmental initiative. The extent to which this might occur can only be speculated upon here but the potentially rhetorical nature of the
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business case would certainly be something worth pursuing in future research. 5.5 InfEREnCES AnD ConCLuSIonS It becomes quite apparent that, although matters may be expressed in many ways, the range of discretion outside a business case that most respondents perceive is very limited indeed. The business case must dominate. The notion of the business case is, itself, variable but it seems to contain one central if tautological element: namely anything that yields business benefits. Quite what those benefits might be, how they are identified and articulated, does not seem to be crucial and seems to be dependent upon the specific context in which an individual is working. That is, it seems to be an attitude that seeks out an articulation of a business case and then adapts that articulation for the current organisational context. I think there is a business case but whether it is clear or not I think is a different thing. I think in some areas it is clearer in other areas. Because there is so much under this heading of SD [sustainable development], you cant treat it all equally (Sustainability Manager, Extractive). So as long as it fits in with our overall strategy then that is the business case in itself. We have projects that dont fit in necessarily immediately but when you look at the long-term impacts then that is actually going to be a business benefit (Public Affairs Manager, Aviation). We can begin to see that CSR (and, to a degree, SER) is a strategic issue. It is interwoven with (or should in some way be articulated with) the core values of the business and is, therefore, a means whereby there is a formal linking of social
and environmental activities and positions to the formal business goals of the organisation. This is so much so that the more mature business response to the CSR agenda is to see it as a repackaging of existing business-driven activities. It is about making sure that the business is being run in the best interests of the shareholder and the interests of the shareholder are met by running the business in the most professional way and making sure that issues that now have a label of CSR, but which in most cases we have been doing for some time [sic]. You know, we have just said oh, that is CSR, but it shouldnt really have that, it should be fundamental to the way the business runs. It is just that the world at large has decided to put a label on it (Communications Manager, Property). how long have you had in place CSR practices?, and I said 30 years, at least. It is only the last two or three years we have called them CSR (CSR Manager, Energy). Consequently, we can begin to see that the majority although probably not quite all of the articulations of motivations for CSR and SER can be subsumed within and/or seen as expressions of ideas in the currently legitimate mores of the business. Whether stakeholders, risk, decency, staff morale, reputation, industry credibility or whatever these are simply variants on a complex notion of the business case.
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6. The business case: beliefs and constraints
6.1 InTRoDuCTIon The previous chapter outlined the results from the main study on the principle motivations underlying SER and CSR, as articulated by the interviewees. It was suggested throughout that chapter that the various motivations underlying SER and CSR can be subsumed within a business case rationale where commercial concerns predominate. This chapter presents the results from the remainder of the issues explored in the main study interviews. In doing so, it provides an opportunity to interrogate in more detail the implications of this business case. In particular, the extent to which the business case is perceived as presenting real conflicts with socio-environmental concerns is delineated in the following section, alongside evidence relating to the extent to which the business case really does set the parameters. Following from this is a discussion of the perceived audiences for SER, which, combined with the subsequent exploration of views on reporting regulation in section 6.4, serves to illuminate and shed further light on the motivations underlying SER in particular, and what function SER is intended to serve. Finally, the extent to which the business case presents a constraint on greater accountability is discussed in section 6.5 through interviewee perceptions of the value of the ecological footprint as a basis for environmental reporting. 6.2 ConfLICTS AnD LImITS The motivations outlined by the interviewees were overwhelmingly in terms of a business case, but this strict business case was not the only thing articulated by interviewees. Some interviewees outlined socio-environmental drivers that are apparently unrelated to business case concerns. Furthermore, even where a business case was articulated, it was generally conflated with some
socio-environmental justification. There was thus more to the discourse of the interviewees than simply the financial return. That said, the extent to which companies are free to pursue socio-environmental objectives without consideration of business-case concerns was a key element of the research study. Interviewees were probed explicitly on whether there was a limit to allowed socio-environmental activities and reporting. Some interviewees were very explicit that there were clearly demarcated limits. Any company that says that they do not feel constrained probably isnt telling you the truth. There is a limit to what you can spendyou have to be aware that we are custodians of shareholders values and we have to be very logical in our assessments of how much money we can spend in these respective areas and still deliver returns to those shareholders (Sustainable Development Director, Utilities). Some interviewees talked about the need to achieve a payback for any initiative but, generally, interviewees defined the limits placed on their CSR and SER in terms of a more strategic, less tangible business case: There has to be added value in doing what we are doing. We couldnt just go and do something for the environment or the community just because we wanted to (Sustainability Manager, Water and Waste). A couple of interviewees pointed out that it was difficult to find a business case, but they did try. Where there was not a business case, something would not get done. Another interviewee described how all attempts to be socially responsible were tempered by commercial considerations.
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6. The business case: beliefs and constraints (continued)
Getting bribes out of places like China is extremely difficult, but that is what happens. We have to make it absolutely clear that it is not something as a global company that we could accept. But on the other hand, the pushback was that we recognise that bribes are there to give some companies a competitive advantage So you have to be mindful of the competitive implications of doing that. So there has to be understanding (Marketing Director, Pharmaceuticals). A number of interviewees outlined limited resources and staff as constraints on the extent to which they could pursue socio-environmental objectives. Pressure exerted from the City was also a key factor mentioned by interviewees. Interviewees particularly mentioned the need to generate returns and adequate levels of growth as being more important than any environmental or social initiative. A couple of interviewees, whose companies had recently been listed, described how they now had extra pressure to make sure that all their initiatives could be tied into a business case. One interviewee described in detail how, now that the company was listed, it was scrutinising its philanthropic activities to make sure that adequate intangible benefits were being derived. Indeed, one particular relationship with a cancer charity was to be discontinued and replaced by another whose activities better reflected the focus of the business. Perceptions of conflict So the business case appears to dominate both CSR and SER. The interviewees were very clear that everything that they did needed to be tied in to a business case of some sort. Whether or not the interviewees also perceived this to represent a significant constraint on the ability of their organisation to be responsible was also explored in the interviews. Interviewees were asked whether they perceived any conflicts between
commercial objectives and socio-environmental criteria. In particular, interviewees were presented with a conundrum: that of business growth and environmental impact. They were asked whether they thought that business growth imperatives undermined their organisations environmental responsibility. Many of the interviewees did not deny that there were conflicts, and were again quite clear about which of the three pillars of sustainability (economic, environmental and social) was the preeminent one. For us, to continue to be a successful company, and achieve the sort of returns that we are looking for, if that means burning oil and gas, which inevitably impacts on the environment, then we will do that, so long as we remain within the limits imposed upon us in terms of those emissions (CSR Manager, Energy). Many of the interviewees said quite clearly that their companies primary objective was to make money. Some said more specifically that it was fundamentally important that they made a profit, without which they could not begin to be sustainable in non-financial terms. All the interviewees went on to qualify this with further explanations as to how a dominant financial pillar is not necessarily a bad thing. That is, they justified the pursuit of business goals in terms of the social and environmental benefits that arose from their activities. A number of interviewees questioned the growth/ impact conundrum in terms of eco-efficiency. Two interviewees remarked that growth helped in this regard because of the economies of scale that it brought. If you are making spoons, if you are making ten thousand spoons, you can make them much more
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efficiently than if you are making three spoons. So you will be looking at less resources to do it (CSR Manager, Speciality Metals). This does not take account of the possibility that business growth will undo any efficiency improvements and leaving the organisation with a greater environmental impact overall. Other interviewees who stressed the positives of improved efficiency invoked slightly more sophisticated arguments in their defence. They described how efficiency meant an overall improvement for society or the environment, rather than being undermined by growth, because they were competing on increasing their share of a market that did not grow: ...and it is OK for me to say that we should be sustainable [financially] because if we are doing stuff that is better than other people in the arena, then it is better that we should be here, than we should not be here (Engineering and Environment Director, Construction). A few interviewees questioned the validity of the growth/impact conundrum on the grounds of technological development. They argued that if growth were coupled with the introduction of more environmentally friendly technology, then their business could grow without increasing its overall impact. A number of interviewees shifted emphasis away from the conflict between business growth and environmental impact by bringing into the discussion the positive social impacts arising from their organisations activities. For example, a few interviewees re-framed the conundrum between commercial and socio-environmental considerations by pointing toward the conflicts between social and environmental goals.
We could shut down all the quarries in this country, not take any more stone out of the ground, but then people would have to go back to living in mud huts, things like that (Engineering and Environment Director, Construction). A number of interviewees made arguments along similar lines, namely that they had an environmental impact but that there were social positives at the same time. Environmental costs are obviously really important and we are doing all we can within the industry... but ultimately we cant take away peoples demand to air travel...peoples right to travel regardless of the environmental cost (Public Affairs Manager, Aviation). A number of interviewees pointed out that their organisation had found a balance between the economic, the social and the environmental. As long as they are all being considered, it is trying to get a balance between them. I work on the [Six] Sigma project. I sit on the committee to make that into a standard, that is looking at how do you have evidence that sustainability environment, social and economic is being integrated into decisionmaking processes? I think that provides a framework for the decisions that the management team make. I think it allows for decisions to be made on a more balanced perspective (Sustainability Manager, Utilities). Another interviewee described how financial considerations were pre-eminent, but that his firm still manages to have overall outcomes for social and environmental responsibility. Rather than a win-win, he described a mixture of various wins and losses. We cant invest like Shell or BP in hydrogen cells, renewable energy. We have looked at all of these
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things but it is not something that is commercially viable at the moment. So are we contributing to sustainability? I take that [to mean] are we balancing what we take out? No, it is impossible. I dont think there is any small or medium company who can balance what they take out. We create jobs for people and contribute to various oil provinces, West Africa for example (CSR Manager, Oil and Gas). He then went on to describe how this mix of wins and losses could be turned into an overall win. I think it is impossible to have a commercial activity, certainly in our sector, without an environmental impact. It is impossible. You will impact on the environment, full stop. Whether you manage that, and leave a net positive impact or at least put in place the type of plans that make your impact not just acceptable, but preferably minimum or zero, if that is possible at all, but always strive to have a positive impact. Then I think you have a licence to operate (CSR Manager, Oil and Gas).
Only four organisations did not mention investors as an audience, although each of these had specific relevant circumstances that warrant comment. Two were owned wholly by the UK governments then Department for Trade and Industry; one was a German subsidiary that was no longer listed on the London Stock Exchange; and one was a mutual society. For those who did cite investors as an audience for the report, a significant number were quite clear that investors were the primary audience. The key stakeholder group are the investors and analysts: our shareholders (CSR Manager, Speciality Chemicals). I think we are fairly clear that our primary audience is our investors. Do we consider other readers of the report? Yes, not being totally ignorant of them but they are not our primary audience (Sustainable Development Director, Water and Waste). There was some diversity of opinion about
6.3 REPoRTInG AuDIEnCES The interviews also explored who the audiences were for the report. The most cited audience for each organisations SER was investors, whether that meant company shareholders or the investment community more generally. The principle audiences are: investors employees NGOs government customers peers/competitors local communities local authorities regulators.
which actual investors should be targeted. One interviewee was not sure whether reporting made any difference to the big institutional investors, but he was more encouraged by the interest shown by individual shareholders. The majority of interviewees directed their report at the big institutional investors and analysts, the City, rather than their own shareholder base. I think it is not necessarily shareholders, it is people who work in the big investment banks, people who work in the City of London, people who look at our performance as a company. So investment analysts, brokers (CSR Manager, Oil and Gas). A few interviewees singled out socially responsible investors (SRI) and ethical investors as a more interested audience for the report.
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I liaise with our investor relations manager. His view is that only really the SRI investors are interested (CSR Manager, Utilities). The next most cited stakeholder group (by 18 interviewees) as an audience for SER was employees. Moreover, for at least three organisations (two of which had specific circumstances as defined above), employees were specifically stated to be the most important audience. For around half the interviewees, employees seemed to be the most important audience after investors. The reasons given for citing employees as an audience, or the effect that reporting had on them, were generally described as raising awareness, or something similar. This, it was claimed by some interviewees, could influence behaviour and lead to performance improvement. One interviewee said it was important that employees knew what the company was doing on the sustainability front so that they could talk to the public about these issues if need be. A few interviewees talked about generating a feel-good factor among the workforce or lifting morale. People like to know that they are donating more to charity now. They feel better that we are giving some of our wealth creation back to the community (Environment Manager, Property Developer). It should be noted that, although the view that employees are an important audience for the report was widespread, many interviewees emphasised that they had other communication channels for employees. Stand-alone SER was not necessarily the primary means of communication. The third most cited audience for the report was NGOs, mentioned by 15 out of 23 interviewees. Two interviewees mentioned that NGOs read the
reports, without actually saying that they were specifically targeted or prioritised, although most of the interviewees who mentioned NGOs as an audience did view them as a group specifically targeted with their SER. Very few interviewees talked in depth about NGOs as an audience, as they did for investors and employees. Rather, NGOs were lumped in with the other audiences for the reports, whom interviewees tended to call opinion formers. Thirteen of the interviewees talked about using their SER to reach government. Two of these companies are fully owned by the government, and so the importance of their reporting to the government is perhaps more obvious than for other organisations. The interviewee from one of these organisations stated that the government was their most important audience, while the interviewee from the other DTI-owned organisation placed employees at the top of the list, with the government lumped in with other opinion formers. Ten interviewees cited customers as an audience for their SER, with two seeing them as a main audience. For one of these two, a construction company, a summary of their Web-based SER was produced primarily, they said, in order to communicate their sustainability credentials to both existing and prospective customers. It should be noted that these customers were generally trade customers or other companies. There was a general perception that individual consumers were either not interested or not well enough informed about sustainability to be targeted. Other audiences mentioned by interviewees, but not discussed by them in-depth, included peers, competitors, local communities, local authorities, regulatory agencies and suppliers.
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6.4 REPoRTInG REGuLATIon There was a generally negative view of the desirability of reporting regulation. One interviewee in particular described how, through SER and CSR, the company was hoping to preempt any attempts to introduce legislation. You know, the stick is coming in. Maybe it is because industry generally has been pretty poor on Health and Safety and brought it on itself. But we are kind of hoping that if we take enough proactive moves on this then we can maybe nip regulation in the bud. By showing keenness to take on voluntary, almost self-regulatory type scenarios maybe we can stop the framework becoming too much of a stick and keep entering into this in the spirit in which it was intended. Otherwise you are in danger that it becomes a threat rather than an opportunity (Environment Manager, Extractive). For this interviewee, SER and CSR were actually motivated, at least in part, by a strategic desire to head off regulation. None of the other corporate representatives were as explicit as this, but many of them expressed fairly strong opinions about regulation in the CSR area, both spontaneously and when asked expressly as part of the more formal interview protocol. Two interviewees were quite clear that mandatory reporting would be a bad thing.
feedback in a positive way into how you could change your own operations (CSR Manager, Oil and Gas). There was a general anti-regulation stance to reporting held by the interviewees, but this was qualified by one: I dont think we would be particularly troubled by it [regulation] either. Quite honestly it would be nice to see a more level playing field where others who are not reporting at the moment are required to to not just free-ride on our efforts (Sustainability Manager, Extractive). As far as regulation generally in the CSR arena was concerned, there was some opposition to that as well. Many interviewees expressed the view that the voluntary business case is driving CSR and that, if it were to become regulated in any way, there would actually be a reduction in the high levels currently being achieved. I think they would be foolish if they did. I think legislating CR is a good way to turn people off it. A lot of what goes on in the social and environmental areas of CR is due to the good nature of people managing the company. I think you will lose that if you start legislating, saying you must do this (Business Planning Manager, Services). One interviewee spontaneously stressed the anti-
I think if you start imposing regulation, then there is a risk of it becoming a tick-box mentality. It prevents you from differentiating yourself in the market place (CSR Manager, Energy).
regulation argument at the end of the interview when asked if there was anything she would like to add: Just to re-iterate that for us regulation wouldnt be
I think GRI and AA1000 are good enough. There is no need to change them. We will keep working with them and hopefully people will keep encouraging companies and not criticising because that would
the way forward. Because of our business and the way we operate. If they regulated it, we would feel pushed because it may work for UK companies but from our perspective it would be trickier to comply.
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And we dont need any pressure on reporting because that would just make them [the board] back off (CSR Manager, Financial Services). 6.5 REPoRTInG ComPLETEnESS
not hold much sway with most of the interviewees. Rather, they were quick to point out the practical and methodological problems involved in the calculation. More specifically, interviewees again mentioned
As discussed above, the business case presented a constraint on an organisations socioenvironmental activities. Whether or not that constraint was perceived as problematic is another question, but the business case also seemed to present tensions for fuller accountability. During the interviews the feasibility of calculating an ecological footprint was discussed.21 Two interviewees in particular could see a business case in undertaking an ecological footprint analysis for their organisation. I think the ecological footprint for the nuclear industry is very importantthe whole thing [is] about proving that nuclear energy is part of a sustainable solution and future when you compare it to other forms of electricity generation. So when you get blanket statements like we are assuming that nuclear energy is just as bad as coal, you have got to counter them (CSR Manager, Energy). The other interviewee, who was from the water industry, was interested in the ecological footprint because it could help in assessing the long-term cost implications of projects. These two aside, however, the majority of interviewees displayed some resistance to the idea of calculating an ecological footprint. The idea that it may be the right thing to do in terms of accountability, or that it was presented by the researcher as the ideal form for the environmental side of SER, did
how they simply did not have the resources or staff at their disposal to undertake such an extensive exercise. Of course, businesses often invest significant sums in new projects provided there is a payback. The problem with calculating the ecological footprint was that it was not perceived as delivering an obvious benefit to the business. In particular, interviewees were concerned that it would not be useful in managing their impacts. For that, disaggregated data would be much more useful. Furthermore, there was much concern that publishing an ecological footprint would not show the organisation in the positive fashion that it deserved. Interviewees were concerned that focus on environmental impacts would deflect attention away from all the positive social benefits that the organisation contributes to society. Underlying this argument was not merely instrumental thinking, but an apparent belief in the socio-environmental worthiness of the organisation (see section 6.2 Conflicts and limits, page 55). Thus, reporting the organisations ecological footprint would show the organisation unfairly as one that was riddled with conflicts between commercial, social and environmental criteria whereas, in fact, the organisation had succeeded in finding a balance between the three pillars of sustainability. What is needed is a report that shows that such a balance has been achieved. There is no business case for showing conflicts.
21 Because of time constraints in some interviews, a discussion about the ecological footprint was conducted in only 20 of them.
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6.6 ConCLuSIonS In going beyond an exploration of SER and CSR motivations and considering underlying perceptions and beliefs about the organisations relationship with society and the natural environment, we have tried to reveal why certain motivations have come to dominate or be accepted within organisations. The apparent belief in the organisations socio-environmental worthiness may be a key element in shaping the SER and CSR process within firms. This perhaps constructs an ideological barrier that more substantive reporting frameworks struggle to overcome because they do not show the right image to investors, employees and other stakeholders. Furthermore, the lack of controllability that enhanced reporting frameworks are perceived to bring with them also undermines their chances of acceptance. The need to have a manageable process may well be a key factor in understanding any past or future SER developments.
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7. Conclusion, explorations and implications
7.1 InTRoDuCTIon The previous two chapters have described in detail the outcome of the study as it evolved from an initial exploration of motivations and processes of (predominantly) SER into a more focused interrogation of the business case as the ultimate constraining and enabling factor for SER within organisations. This chapter has two principal aims: to synthesise and reflect upon the foregoing chapters; and to look forward to what we might usefully consider as the next steps. Consequently, this chapter will summarise the principal insights of the study, reflect in more depth upon the empirical results presented in the previous two chapters, provide some conclusions to the study and offer some suggestions for both future research and future practice and policy. Although the business case for SER and CSR varies across firms, from a sustainability perspective what is of more interest is the dominance per se of this business case. The evidence presented here suggests that the business case significantly restricts SER and CSR to what is manageable and can bring business benefits. This restricts CSR activities to matters of corporate self-interest and in so doing also appears to shape the form that SER takes. The extent to which this may be considered problematic or not depends largely on whether one thinks that the pursuit of conventional business criteria is, to some extent, in conflict with socio-environmental welfare and sustainable development. This will be reflected upon in more depth in section 7.4.
7.2 SummARy The primary purpose of the study was to explore the motivations underlying SER in the UK. By default, this also involved an exploration of the motivations underlying CSR, as the individuals interviewed often found it difficult to separate the two. The results show that SER and CSR within the firms interviewed are driven by a variety of different pressures and perceived benefits, including: reputation and risk management, stakeholder management, satisfying pressures from the City, peer pressure, and socioenvironmental and business efficiency reasons. The role of key individuals was also mentioned as important in initiating and developing SER and CSR. Notwithstanding the variety of different motivations, and the way in which they manifest themselves across firms, perhaps the most important insight gained from this exploration is that the overwhelming majority of motivations appear to be driven almost exclusively by business reasons. That is, the motivations are part of or, at least are expressed in the terms of some overall business case, however defined. The dominance of this business case was further explored in the study, finding that it appears to have significant implications for the form that SER takes. In particular, both SER and CSR appear to be shaped primarily by instrumental business criteria. As a caveat to this, the majority of the motivations described by interviewees were non-financial. Indeed, it should be emphasised that, in some instances, business cases may be constructed rhetorically. This suggests the possibility that there is some discretion as to what actually constitutes a business case. The limits to this discretion and how it is exercised by managers were not, however, explored in detail in this study.
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7. Conclusion, explorations and implications (continued)
Further to this exploration of motivations, the study was also concerned to understand something of the way in which individuals within organisations conceive of, and talk about, social responsibility. In particular, notions of conflict between commercial and socio-environmental (especially environmental) criteria were explored with the interviewees. It was found that interviewees generally characterised their organisations relationship with the natural environment as largely harmonious, or at least manageable. We speculate that this belief in the worthiness of the organisation is significant and that it may go some way towards explaining why SER practice generally gives the impression of relative harmony between business, society and the environment (see Chapter 2). 7.3 PRInCIPAL InSIGhTS Size was used as a criterion in selecting the sample of companies. Large companies were focused on from the outset but there was no discrimination of size differences within the sample, so whether or not the differences noted across firms may be explained by size variables is difficult to say. Nevertheless, the previous literature does recognise this as important (see, for example, Adams et al. 1998; Al-najjar 2000; Choi 1999; Gray et al. 2001; Hackston and Milne 1996; Patten 1992). Industry was another criterion used in selecting the sample. Although firms from different industries were included, the size and configuration of the sample is such that a systematic industry analysis could not be carried out. Nonetheless, it is worthy of note that the interviewees from water companies generally displayed a more sophisticated understanding of sustainability. At least in the discussions, they looked beyond their own organisation
and considered societys waste streams, at times invoking more holistic conceptions of the organisation in its environment. Two of the interviewees had sustainability in their job titles.22 The reasons for their apparently more advanced thinking on sustainability may be speculated upon. Clearly such a regulated industry would probably have a fairly consistent approach to environmental matters. The regulator demands a lot of information from them and one of the interviewees cited this as a reason for the generally high quality of SER in the sector. This indicates that sectoral particularities do exist. The remaining companies interviewed were, however, drawn from various sectors. Even those from the same sector had operations that were in some cases quite different from one anothers. It was therefore difficult to form further inferences regarding sectoral approaches to CSR and SER. The only other industry-related observation that seems to emerge from the data was that we may perhaps make a tentative argument that service companies have a somewhat less sophisticated approach to CSR/SER than companies from more operations-intensive industries. This inference should, however, be treated with caution. The principal insights offered by the study related to SER and CSR motivations. Although interviewees cited a number of different motivations for their SER and CSR, it is the similarities between these motivations that
22 Although not necessarily a good indication of understanding, it is worthy of note that two of those with the more holistic thinking reflected this in their job titles. Nonetheless, it should be noted that this correlation does not seem to hold across the whole sample. There were others with an apparently very rudimentary understanding of sustainability who also had sustainability in their job title or remit.
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concern the current study. This report opened by outlining a tautology namely that social responsibility and business practice are consonant notions. The research undertaken for this report suggests that the articulation of a business case is crucial to businesss understanding of both CSR and SER and that only with a sharper focus on the business exigencies that underlie reporting and/ or acts of (so-called) social responsibility may we understand better the current levels and details of reporting and social performance. The business case, such as it is, is often an elusive phenomenon (the rhetorical construction of business cases being a case in point) and the identification or indeed the recognition of such a case is apparently as closely related to the organisations predisposition to social and environmental issues as it is to financial acumen as such. We are therefore returned to the need to develop an understanding of strategy and organisational culture as potential prerequisites for undertaking actions that are labelled as socially responsible, and of the reasons behind a predisposition to undertake social, environmental and sustainability reporting whatever one perceives the quality of that reporting to be. What does emerge, however, is that a crucial part of the process is the way in which organisations learn to articulate socially responsible and/or accountable activities. As Cramer et al. (2004: 221) note, issues, once recognised, have to be turned into context suitable configurations. In other words, they must be transformed into the language of the business concerned (eg risk or reputation), and if this can be the language of potential solutions to actual problems (absenteeism, illness, pressure from stakeholders) then it has a much better chance of embedding in the organisation. Cramer et al. (2004) point out that although the meaning of CSR strategies may vary when they are in their early stages of
development, to generate buy-in internally the meaning and purpose of CSR strategies needs to be expressed in business case terms. Indeed, with few exceptions, this would appear to be the only way that issues can become embedded within the organisation. As one respondent said in one interview: That was done for environmental reasons but to sell it [we needed to show] financial benefit to the company (Environment Manager, Water and Waste). This, inevitably, leads on to a need to investigate how an organisation might recognise/not recognise an issue as requiring attention and as, therefore, a problem. This may be the further prerequisite (along with culture) that we require if we are to begin to understand the reporting phenomenon better. 7.4 RESPonSIBILITy, ACCounTABILITy AnD SuSTAInABILITy While the pre-eminence of the business case (if not all its implications) is generally taken for granted in the business literature, this is less the case in the academic accounting literature. Whereas the business literature starts from the premise that businesses must seek ways in which social and environmental activities and reporting can yield business benefits (see, for example, AccountAbility 2000, 2002; SustainAbility 2004), the academic social accounting literature tends to start from an implicit and theoretical notion of accountability and then explores how organisations act and organise themselves by reference to this benchmark (see, for example, Deegan and Rankin 1996; Patten and Trompeter 2003; Roberts 1992). These different premises lead to the emergence of different insights, as is evident from the different sets of motivations that are described in Chapter 2. Given the dissonance between these two literatures, this study has
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in part tried to understand both academic and business perspectives in order to produce a richer synthesis of corporate motivations. The implications for future research of this exploration will be discussed below, but we will turn now to consider the more pressing issue of what the dominance of the business case implies for the extent to which organisations are and can be considered responsible, accountable or sustainable. Ones perspective on this depends largely on whether one takes the view that conflict or harmony prevails in the way in which organisations interact with society and the natural environment. We do not intend to offer any definitive solutions to this, but to present two different perspectives in the hope that those on either side of the metaphorical fence are in a better position to understand each other. These positions are presented simplistically here for comparative purposes. If one believes that companies operate largely harmoniously with society and the natural environment, and that there are no fundamental conflicts between the pursuit of conventional business objectives such as maximisation of shareholder wealth on the one hand and environmental sustainability, social welfare, etc on the other, then the centrality of the business case will not present any significant problems for SER or CSR. On the contrary, the business case becomes the means by which society and the environment can improve, and vice versa. This (potential) tautology (see below) was wellembedded in the companies visited in this study and is evident in the business literature also. The only responsibility that is recognised, the only accountability that can be countenanced, is that which has been articulated into the language of the business and is therefore part of the business. If it is not so articulated it is not responsibility or accountability it is something
else and that something else is (here we lurch into the pejorative) anti-business, unrealistic, non-competitive, unnecessary, irrational, nonpragmatic, etc (hence the tautology). These may be some of the many parameters that a business case cannot overstep. Manageability would appear to be another one. Although part of the resistance to the idea of publishing an ecological footprint would appear to be ideological, the practical need to be able to manage and control appears to be another prerequisite for any SER framework. Indeed, the point being made here is that what is perceived as manageable is in fact influenced by organisational culture, beliefs and ideologies. Therefore, calculating an ecological footprint would not be manageable, not primarily because it is cumbersome to undertake such a task, but because it is only if there is an underlying belief in conflict between the organisation and the environment that an analysis of such phenomena as an ecological footprint or eco-balance calculation would be attempted. Because the business case and environmental responsibility are seen as consonant notions, there is no recognised need to go to that level of environmental reporting: current levels and quality of SER are perceived as adequate. This more harmonious view also presupposes that the scope of responsible actions ends at the business case. Because the organisation needs to exist in the first place before it can be responsible, anything that is unrealistic, noncompetitive, etc can also be construed as socially and environmentally irresponsible. So the logic works in both directions, from the business case to society and the environment, and from society and the environment to the business case. This is the point at which a more conflict-ridden perspective on organisations can be introduced. Presume for a moment that there is no problem
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with the actual business case activities that are undertaken, ie that when organisations undertake some sort of environmental remediation project because there is a financial payback, this is a good thing. Although there are complex ethical issues involved in this, put them aside for now and call this a win-win situation in which everyone benefits. Nonetheless, what can still be questioned in this situation is not what is done, but what is not done. That is, what exists outside the business case that organisations have not recognised or addressed? For example, Walley and Whitehead (1994) question the substance behind win-win rhetoric. Although there are situations where environmental and economic concerns are congruent, Walley and Whitehead (1994) contend that most environmental initiatives cost money and have little or no payback. Win-win rhetoric is dangerous and misleading, obscuring the (presumed) fundamental conflicts that exist between environmental stewardship and many aspects of commercial and industrial activity. We should recognise this if we want to make both sustainable environmental improvement and sustainable competitive advantage: By focusing on the laudable but illusory goal of win-win solutions, corporations and policy makers are setting themselves for a fall with shareholders and the public at large. Both constituencies will become cynical, disappointed and uncooperative when the true costs of being green come to light (Walley and Whitehead 1994: 47). Echoing Walley and Whiteheads notion (1994) that win-win solutions go only so far, Cowe and Hopkins (2003) recognise that there are many instances where the business case is weak or non-existent. When that is the case, companies cannot engage in CSR activity which might seriously hit shareholder returns, even in the short term (Cowe and Hopkins 2003: 23). Thus the
virtuous relationship between financial and social/ environmental performance is arguably true only up to a point, or in certain cases. The limits of the business case were not, however, explicitly recognised by the interviewees. Rather, the very possibility of there being a win-lose reality (where companies benefit at the expense of society/the environment) was actively challenged by interviewees. It would seem that anything that does not constitute a business case is not acknowledged. Focusing only on what business can do is an implicit denial that there is something that business cannot do. There is nothing volunteered about what is uncompetitive or nonpragmatic. If one takes the view that there are indeed fundamental conflicts between commercial activity as we know it and the highest standards of environmental stewardship, then this has serious implications for accountability. SER, as an extension of accountability, is not simply a means whereby organisations can tell us of their achievements. Understanding the positive contributions that companies make in a socioenvironmental sense should, of course, be one part of SER. More importantly, however, SER should also tell us about the limits to what companies can do in a socio-environmental sense. Civil society needs to know what companies cannot contribute in a socio-environmental sense and where they have a negative impact. In other words, what are the limits of the business case and what really is (say) the ecological footprint of a particular company? These are things that business fails to disclose. They are also, on the basis of the evidence presented here, things that business cannot (or will not) even countenance. By focusing on and projecting an image of the win-win situation, business is unable to address any duty of accountability to society.
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If we were to consider that there must be, at some point or other, the potential for inevitable conflict between business pursuits and social responsibility and/or sustainability, then SER must be seen as one of the most important, yet at the same time among the potentially most trivialised, activities on the planet. SER is important because consideration of, for example, where we over-use resources and produce more waste than can be absorbed by the biosphere is absolutely fundamental for any consideration of sustainability. Looking at how companies interact with social justice issues and affect wealth distribution would enable assessment of their role in social exclusion and poverty. To render transparent the socio-environmental effects of companies is to consider democratically the way in which we structure ourselves as a society, and how we can improve that structure in a way that keeps us within ecological limits and improves the plight of the disadvantaged. SER is potentially trivialised because, from these points of view, current SER practice often provides only marginal or selective evidence that business has done either. Rather than being a substantive exploration of the above issues, SER becomes an exercise in showing only the positive dimensions of business activity. The role that SER plays (or could potentially play) in informing stakeholders and society in general is very easy to underplay precisely because social and environmental reporting can be superficial. SER should not be viewed in isolation: its interaction with CSR more generally being a case in point. SER is one manifestation of the way in which organisations perceive, rationalise and approach society and the environment. If SER across the board projected the impression that there were serious conflicts between commercial objectives and socio-environmental welfare then
this might be one of the many avenues by which the very nature of companies could be opened up and examined. SER methods, such as ecological footprinting, have the potential to expose fundamental conflicts and thereby go some way towards changing consciousness among stakeholders and society in general. Such SER would also potentially influence the organisations themselves: exposing and questioning the very processes by which those conflicts come about. For a voluntary activity, this of course presupposes that organisations would be predisposed to expose conflicts (but see below). As this research suggests, organisations do not appear to believe that such conflicts exist and so are disinclined to undertake exercises of this nature (even though doing so would be one means by which to prove their underlying faith in themselves. See, for example, Gray 2006(a) and Gray 2006(b)). Another possible interpretation, of course, is that individuals within firms do hold deeper beliefs about conflicts between business and society and/ or the environment and are aware that exercises in accountability might well reveal uncomfortable truths about themselves. Either way, the implications for SER are clear. If one believes that SER should expose conflicts between commercial objectives and socioenvironmental criteria, or at least to explore whether any such conflicts are trivial or serious, then the arguments presented here clearly imply that voluntarism alone is unlikely to be sufficient to achieve the quality of reporting and accountability that is needed. Without greatly increased social pressures on companies or some form of regulation, the type of SER that would permit sustainability assessments to be made is, regrettably, unlikely to be forthcoming.
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7.5 ImPLICATIonS foR CSR/SER RESEARCh We need to develop a better understanding of companies especially listed companies their drives and their nature in capitalism (see, for example, Bakan 2004). The SER literature needs to develop a more realistic appraisal of company zones of discretion and how companies must undertake activities for reasons that can be articulated as in conformance with current understandings of business goals and rationality. In particular, the literature might benefit from considering the ways in which the business case forms the main motivation behind both CSR and SER. Indeed, it is perhaps surprising that this has not yet been reflected extensively in the academic literature, given its existence in business literature for a number of years.23 Future research might look more closely at what the business case implies for the forms that SER and CSR take within organisations. Through partial reporting, business creates the impression of accountability, responsibility and sustainability (see, for example, Gray and Milne 2002, 2004). More work on the capture and appropriation of social responsibility, accountability and sustainable development might reveal the extent to which SER, although increasingly reflective of business concerns, is potentially counter-productive as regards wider understanding of these (increasingly important) societal issues. This would build upon previous literature in the area (see, for example, Bebbington and Thomson 1996; Gray and Bebbington 2000; Gray et al. 1995b; Milne et al. 2006; ODwyer 2003; Tregidga and Milne 2006). There would certainly be value in more work that looked at the rhetorical nature of the business
case. For the future, it may be well to explore the (apparently very small) extent to which CSR and SER are not undertaken for business case reasons. How large is this zone of discretion for managers and to what extent can organisations undertake any social responsibility and/or accountability for reasons of human morality rather than primarily for reasons of good financial sense? Such an exploration would also check for the extent to which the business case needs to be grounded in economics and, conversely, the extent to which economics limits the potential of business cases to address socio-environmental issues. As a final possibility as regards exploring the business case further, one could look at other forms of organisation, such as cooperatives, charities and non-plcs, to consider the extent to which business case logic is employed in their social and environmental decisions. This study started from the premise that existing theoretical explanations of SER were underspecified. Through showing the multifarious and complex nature of the business case, it has provided further evidence that this is the case. Nonetheless, the business case explanation for CSR and SER is not entirely separate from existing theorisations. Future work could examine whether we can re-codify existing theoretical explanations as variations on the business case explanation for CSR and SER activities. In doing so, we may thereby understand better how current theories interact and overlap. Beyond this, it may be fruitful to consider the different motivations within the business case in more detail. Thereby, we might seek out whether generalised statements about the adoption and/ or development of SER are possible. A really clear notion, comprising as it might insights from several different theoretical perspectives, of why organisations engage with SER would go a very
23 See Gray and Bebbington (2001) for an introduction to some of this literature.
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long way to helping us to advance practice and more clearly recognise the limitations thereof. There is clearly something which distinguishes an organisations predilection to engage with CSR we, as yet, know too little about this.
How can the leading edge of SER be made more significant and, especially, be advanced to the point where we may begin to address the issues of conflict on which we have speculated? We touch on each of these in this final section of
CSR may be thought of as concerned with undertaking socio-environmental initiatives in order to manage them and bring benefit to the business. SER is the representation of these activities, although not in a simple way. SER directs managerial and stakeholder attention toward specific issues and therefore actively shapes CSR. Thus, SER itself also manages socioenvironmental issues by mediating management and stakeholder perceptions of them. The need to develop much more substantive SER and thereby clarify the limits of CSR is the subject of the last section. 7. 6 ImPLICATIonS foR PoLICy AnD PRACTICE It is with some caution that we reach out into the more explicitly normative domain and seek to tease out some pointers for practice and policy. Our departure points for these recommendations are a number of the key themes we have already identified. Social and environmental (and sustainability) reporting is important and deserves to be taken seriously. Voluntary progress within the business case is impressive but there appear to be substantial limits on that progress the business case is necessary, but is it sufficient? How might we more explicitly recognise the limitations of the business case? How can more organisations be persuaded to engage at the leading edge of SER?
this report. The writing of this entire report has been characterised by a need to maintain two, potentially conflicting, notions simultaneously. On the one hand there is the steady and very significant progress made through the combination of corporate voluntary initiatives and the new institutional structures (such as the ACCA awards schemes, AA1000 and GRI). On the other hand, the increasingly pressing and persuasive (even apocalyptic) data emerging from studies of global trends (see Gray 2006(a) for an introduction) suggest that this progress towards a more sustainable economic and business organisation is very much slower than planetary sustainability requires. Within this perspective, linear, marginal change is unlikely to be sufficient in the time available to mankind and more radical steps will be essential. In a very crude sense, the business case initiatives are achieving a trajectory in business and societal change and the key question is will (or will not) this trajectory be sufficient to avert planetary disaster given the timescales involved and the reliability of the data about this potential end of days?. As the prevalence of the business case has emerged in the research, so has our conclusion that the business case initiatives are necessary but not sufficient. Axiomatic to these last suggestions, then, is the belief that it is essential to do more of what is already being done, while working to do some things quite differently in the very near future. The first step in this project, we believe, is to take SER more seriously than is currently the case.
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Social, environmental and sustainability reporting have the potential, as we have already argued, to provide us with the basis to discuss the extent to which advanced 21st-century international financial capitalism is, indeed, the best of all possible worlds or whether, as a substantial body of evidence might suggest, it is currently inherently unsustainable. This implies no moral high ground but a clear-eyed attempt to understand what accountability and sustainability might actually mean for the advanced Western economies.
introduction). It seems that we cannot know whether or not an organisation is sustainable in the Brundtland sense of the word. Nonetheless, we believe that this does not mean that there can be no meaningful assessment of organisational activity with reference to the issues of sustainability: reporting on unsustainability seems eminently feasible and offers the prospect of providing a first major step towards a better recognition of the limitations of the business case.24 It seems likely that it is possible to derive the
To do this, the current trends in encouraging and supporting organisations to adopt new reporting initiatives must be continued. The current work of bodies such as (among others) GRI, AccountAbility, UNEP, ACCA and FEE needs to expand and to be more widely supported. It is probably essential that SER ceases to be the province of a minority of (mostly) large companies. It is absurd and unacceptable that so many organisations can freeride on the initiatives and imagination of the few. Wider engagement with the issues will support capacity to hold wider and more informed debates about the role of the business case and, of course, its limits. For these debates to have substance, however, they need substantial data which few organisations outside the leading edge of reporters supply. And if the debate is to address as it must the exigencies of sustainability, reporting must begin to address sustainability. In essence, as we have already argued, formal SER must make it possible to assess formally how responsible and/ or sustainable an organisation has been. This is something that current reporting driven by the business case simply does not do. Now it is increasingly clear that the application of the notion of sustainability at the level of the organisation is simply not possible (see, for example, Gray and Milne 2004 for an
minimum components that any unsustainability report must contain. There must be an ecological element and a social justice element; that much is clear.25 Thus the basic minimum for a first pass at the likely responsibility and/or (un)sustainability of an organisation would require a report to comprise the following. Ecologically: a mass balance (as produced, for example by the Danish Steel Works in 1991 or as the Ricoh Group produced in 2005) an estimated ecological footprint (as Best Foot Forward Ltd produced in 2004).
24 There are a range of approaches and these are developing all the time. For more detail see Bebbington and Gray (2001); Bebbington et al. (2001); Gray (1992), (2000), (2002); Gray and Bebbington (2007); Gray et al. (1997). 25 There is a widespread view that there must also be an economic element and although the Triple Bottom Line (TBL) has considerable merit it is not at all clear how this relates to sustainability. It is probable that the financial statements can satisfy us at this interim stage on the economic issue and if organisations wish to show the importance of their economic multipliers they are at perfect liberty to do so (as long as they balance this with an equal emphasis on the economic harm that they have caused).
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Socially: a detailed and honestly addressed stakeholder map (as Traidcraft plc and Exchange and Cooperative Financial Services continue to produce) and full reporting of the information relating to that map (full reporting requires descriptive, legal and quasi legal, company-orientated plus stakeholder-requested reporting for each relationship) an explicit attempt to address issues of social justice (the accounts of this are still embryonic). An honest confrontation with the organisations own unsustainability. No organisation, to our knowledge, does this and therefore no organisation permits the opportunity to assess whether or not it is contributing (more or less) towards (un)sustainability and/or social responsibility. Such an account might appear contentious but it has a series of significant advantages. In addition to advancing the principles of accountability, the account says nothing about what an organisation should do. It simply requires that the organisation reports on what the organisation does and, most importantly, does not do. Whatever an organisation does must, by definition, be part of the business case; anything not done must be outside the business case. It takes nothing from the business but puts information into the public domain and allows the state and civil society to make the judgements as they should. Of course, and finally, our research has suggested that organisations will act only within the business case and we can therefore infer that organisations cannot currently find a business case which embraces accountability as we have
suggested it here. Organisations are going to need encouragement and not the woolly and partial encouragement that the UK and EU are currently embracing but substantive regulation so that the free-riders are avoided and leading organisations are appropriately rewarded. When we have a report on unsustainability, we will know the limits to the business case and appropriately it may then be possible to encourage states to change the rules of the game so that organisations can begin to move their private business cases more in line with those of society and the planet. It may be an ambitious aspiration but, given the planetary crisis, it seems an entirely worthwhile one.
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Appendix 1: mind mappings the motivations for SER and CSR
Pressure from local communities
Pressure from general public Pressure from Government
Benchmark
Cost saving Business-case safety Pressure from NGOs Manage impacts
Peer pressure
Social environmental concern
To be transparent
Pressure to...
Pressure from stakeholders
Best practice
Mimetic motivations
Social environmental
Trust
Business efficiency
Benefits of...
Planning applications Improved relations Changed perceptions
Board driven
Internal champions
CEO driven
Motivations for SER and CSR
Stakeholder management
Employee related
Recruitment retention Staff morale
Market drivers
Pressure from employees
Reputation and risk management

Regulation
Staff development
Pressure from market Investment rating Risk management Enhance reputation
Customer related
Customer retentionattraction Differentiation Regulation compliance
Pressure from regulator Influence regulation
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Appendix 2: ecological footprinting
The text of this report makes reference to ecological footprinting in two particular contexts. First, footprinting is used in the interviews to provide one example of how some elements of sustainability of the organisation might be assessed and the potential conflicts exposed. We also refer to it in Chapter 7 as an essential component of an Unsustainability Report. This appendix provides a brief introduction to ecological footprinting. The ecological footprint is a methodology that attempts to measure the human demand on nature. More specifically, the ecological footprint compares human consumption of natural resources with the earths ecological capacity to regenerate them. It produces final calculations in terms of physical space. That is, an ecological footprint shows how much land area is needed in order to sustain a particular activity, lifestyle or human population.
First developed by Mathis Wackernagel and William Rees in their 1996 book Our Ecological Footprint: Reducing Human Impact on the Earth, footprint methodology has since been developed and refined along various lines. The methodology has been mostly used to calculate the ecological impact of regions and countries. Perhaps its most high-profile application is found in the WWFs bi-annual Living Planet Reports (WWF 2004, 2006), which collate different country information together in order to calculate humanitys impact on the planet as a whole. The figure shows that humanitys ecological footprint (the diagonal line) has increased consistently since the 1960s. Now we are using roughly the resources equivalent to about 1.2 planets. That sounds implausible, yet what it actually means is that we are using (to borrow terms from accounting) natures capital as opposed to living off natures interest. This is only
figure 1: humanitys ecological footprint, 19612003
Source: WWF (2006).
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Appendix 2: ecological footprinting (continued)
possible for a limited period of time and the longer it goes on the less capacity the earth has. If we keep reducing the capital stocks, then the amount of interest that is produced from that capital will also be less, further exacerbating the problems faced. The cause of humanitys overshoot is widely believed to be a function of levels of technological development, consumption and population levels. The greatest impacts are thus to be found in the developed nations. Most countries in the developed world have ecological footprints many times greater than the actual size of their own countries, owing to the amount of waste that they produce and their reliance on other countries for providing natural resources. The nation with the highest ecological footprint is the US, whose footprint per capita is tantamount to 9.6 global hectares. Compare this with the 1.8 global hectares that are, on average, available to each human being on the planet and we can quickly see that if every citizen in the world lived like the average US citizen we would require over five planets to provide the requisite natural resources. The ecological footprint provides one means of calculating total environmental impact. Moreover, it does so in a way that provides information that is digestible and gives a clear indication of how human populations affect global environmental sustainability. The methodology has also been developed so that it can be applied at the organisational or corporate level. Chambers and Lewis (2001) describe how Anglian Water calculated an ecological footprint for its activities. Interface, in the US, is another example of an organisation that has embraced ecological footprinting, boldly claiming that it will have a footprint of zero by the year 2020. Although there remain methodological debates over applying footprinting to the entity level (see, for example, Wiedmann et al. 2006), it is still possible. Recent developments by the Centre for Integrated
Sustainability Analysis at the University of Sydney and Global Footprint Network have further refined the footprinting techniques, making them more accessible than ever to business. Gray (2000) suggests that any serious attempt at doing an environmental report would require an organisation to undertake some form of total impact analysis, whether in the form of an ecobalance or an ecological footprint (see Chapter 7 for more details). Our focus in this report has been on the ecological footprint, as this is the most developed of these methodologies and most widely disseminated. Should every large corporation in the world produce an ecological footprint we would then be able to build up a picture of the environmental impacts of corporate activity and put discussions of corporate sustainability in an appropriate context. As it stands, current reporting practice tends to focus on partial, disaggregated data and resists any form of total impact analysis. Until companies begin to address total impact accounting, discussions of corporate sustainability will have no real reference point. There is no evidence either way. Corporations increasingly make claims about embracing sustainability or moving towards sustainability but there is no real evidence to back this up. All we have to go on is that global and national footprints are increasing, which suggest that individual corporate footprints are also likely to be increasing. The way to move forward with this debate is to have evidence one way or the other. The ecological footprint offers one opportunity to do that. This was the thinking that motivated the presentation of the ecological footprint, as a potential reporting development, to the interviewees.
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social and environmental reporting and the business case

RESEARCh REPoRT no. 98

Social and environmental reporting and the business case

Certified Accountants Educational Trust, London, 2007

The Association of Chartered Certified Accountants, 2007

Executive summary (continued)

Executive summary (continued)

Executive summary (continued)

Executive summary (continued)

Executive summary (continued)

1. Introduction and outline

1. Introduction and outline (continued)

1. Introduction and outline (continued)

1. Introduction and outline (continued)

1. Introduction and outline (continued)

1. Introduction and outline (continued)

1. Introduction and outline (continued)

1. Introduction and outline (continued)

We do not need to dwell on

1. Introduction and outline (continued)

1. Introduction and outline (continued)

2. Literature review and explanations of corporate social and environmental reporting

Although reporting of various aspects

3. Research design, sample and methods

puts the organisations point of view forestalls regulation.

3. Research design, sample and methods (continued)

3. Research design, sample and methods (continued)

3. Research design, sample and methods (continued)

3. Research design, sample and methods (continued)

3. Research design, sample and methods (continued)

3. Research design, sample and methods (continued)

3. Research design, sample and methods (continued)

figure 3.1: Process of data analysis (adapted from ODwyer 2004)

3. Research design, sample and methods (continued)

3. Research design, sample and methods (continued)

4. Initial explorations: the pilot study

Table 4.1: Dominance of the business case

4. Initial explorations: the pilot study (continued)

4. Initial explorations: the pilot study (continued)

4. Initial explorations: the pilot study (continued)

5. Why do corporations report on social and environmental issues?

5. Why do corporations report on social and environmental issues? (continued)

5. Why do corporations report on social and environmental issues? (continued)

5. Why do corporations report on social and environmental issues? (continued)

5. Why do corporations report on social and environmental issues? (continued)

5. Why do corporations report on social and environmental issues? (continued)

5. Why do corporations report on social and environmental issues? (continued)

5. Why do corporations report on social and environmental issues? (continued)

5. Why do corporations report on social and environmental issues? (continued)

5. Why do corporations report on social and environmental issues? (continued)

5. Why do corporations report on social and environmental issues? (continued)

5. Why do corporations report on social and environmental issues? (continued)

6. The business case: beliefs and constraints

6. The business case: beliefs and constraints (continued)

6. The business case: beliefs and constraints (continued)

6. The business case: beliefs and constraints (continued)

6. The business case: beliefs and constraints (continued)

6. The business case: beliefs and constraints (continued)

6. The business case: beliefs and constraints (continued)

6. The business case: beliefs and constraints (continued)

7. Conclusion, explorations and implications

7. Conclusion, explorations and implications (continued)