Corporate social responsibility (CSR) is increasingly discussed and recognized as essential as to existence of the corporations. In this contemporary world corporations are expected to report not only their accounting profits but also their social and environmental responsibility. Corporate social responsibility reporting is an emerging field at the global level, which is on its way of gaining its position as a mandatory business practice. However many of the organizations are still not reporting their social responsibility and others that are reporting only disclose the positive aspects and never talk about damages caused by their actions to society and environment. The upcoming sections will discuss this hypothesis in details.
The substantiveinfluence of corporations over the country’s economyenables them to influence the political actions and ultimately the regulations for accountability. The political bodies normally dependon large corporations to fund their campaign; hence the unbiased and neutral legislation as well as their implementation on behalf of government agencies is questionable.In such a scenario corporationsdo not feel the need to publish high quality CSR reportssince there are no checks and balances that could penalize them for doing so. An important finding is observed at this point, that is, “measures of stakeholder power, strategic posture, and economic performance are significantly related to levels of corporate social disclosure” (Robin, 1992).
The voluntary nature of CSR reporting and lack of pubic regulations allows large corporationsto select and disclose only the optimistic information while at the same time ignore any negative aspects on society and environment that results from a company’s operations. Therefore, the reliability of the CSR is deemed to be biased in favor of corporation’sprofit motivated objectives including gaining society’s support or consumer acceptability.
The spread out of large corporation across the borders during 1990 established the need for corporate social responsibility reporting to encounter the uncountable power of international business conglomerates and its influence on environment and society (Kaplan and David, 2007). The very objective of CSR is to disclose the social and environmental effects of corporations on the community, society and stakeholders at large and how the corporations are complying with their social responsibilities. However, most of the CSR reports only portray the glowing picture and ignore the negative side effects of the corporation’s operation on society and environment.
The government power and its influence in developing countries are relatively low therefore their legislative policies are more of accommodating nature instead of controlling large corporations (Murtha &Lenway, 1994). The stakeholders, society and environment in developing countries are more exposed to biased and irrelevant CSR reporting. Consequently the CSR reports are aimed to gain positive image by publishing the self-congratulatory news and exclude relevant bad news about company operations.
Corporations publish their sustainability and environmental reports on voluntary basis and this practice gained importance in recent decades and most of the business started reporting on their own. As corporate social responsibility is not mandatory hence no authentic regulations or legislations by the government or international bodies were introduced. Therefore, biased or non-reporting of corporate social responsibility does not place any legal binding on corporations and cannot be blamed or liable.The number of non-disclosing firms can be significant (e.g., 36% of the companies in the Clarkson et al., 2008 sample).
In addition to the above, non-mandatory nature of corporate social responsibility reporting has provided firms with flexibility in making their own decisions regarding what should and what should not be…