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Issues in Social and Environmental AccountingVol. 1, No. 1 June 2007Pp 26-39 Current Debates in Corporate Social Responsibility: An Agenda for Research David Crowther, Department of Accounting and Finance De Montfort University, UK Esther Ortiz Martinez Departamento de Economia Financiera University of Murcia, SpainAbstractCorporate Social Responsibility (CSR) has a particular prominence at this point in time, featur-ing heavily in the discourses of both academe and business. The understanding of what ismeant by CSR continues to evolve as a consensus is reached. Nevertheless some importantdebates continue – or are commencing – which need to be resolved. It is the purpose of thispaper to highlight these as some of the current debates within the CSR community – and henceform a significant part of an agenda for research in the area. Specifically we focus upon threekey areas for the management of business, namely setting standards for reporting, identifyingand implementing sustainable practice, and the management of risk.Keywords: corporate social responsibility, corporate reporting, sustainability, regulation,risk, accountabilityIntroduction the world. Central to CSR is a concern for sustainability, particularly for envi-Corporate Social Responsibility (CSR) ronmental sustainability, as this is cru-is an important issue in contemporary cial for long term success and even sur-international debates. In the past two vival – even in the financial terms bydecades, CSR appears to have become which firms normally judge their suc-more difficult to escape from, being cess. CSR however is more problematicmore relevant to corporations all over as it is often perceived that there is aDavid Crowther is Professor of Corporate Social Responsibility at De Montfort University, UK and Visiting Professorof Corporate Social Responsibility at Yildiz Technical University, Istanbul, Turkey. Esther Ortiz Martinez is Professorof Accounting at the University of Murcia, Spain. Currently she is on secondment as Director General of EconomicPlanning for the Regional Government of Murcia. They have been researching and writing about Corporate SocialResponsibility for some years. Please contact via David Crowther at firstname.lastname@example.org
D. Crowther, E. Ortiz Martinez / Issues in Social and Environmental Accounting 1 (2007) 26-39 27dichotomy between CSR activity and further research. The purpose of this pa-financial performance with one being per is to both review the field of CSRdeleterious to the other and corporations and its current developments and tohaving an imperative to pursue share- highlight areas where further researchholder value. Moreover there is no would be beneficial. This is addressedagreed upon definition of exactly what through the investigation of three areasconstitutes CSR (Ortiz Martinez & which are key to the management ofCrowther, 2005) and therefore no agreed business as far as CSR activity and re-upon basis for measuring that activity porting are concerned, namely settingand relating it to the various dimensions standards for reporting, identifying andof corporate performance. Consequently implementing sustainable practice, andmuch of the previous research regarding the management of risk.CSR deals with this issue and the prob-lems in development of standards fordefinition and reporting for such indeter- Setting Standards for Reportingminate activity (see Crowther, 2006). When researching into corporate activityAlthough this problem is widely ac- and the reporting of that activity in thecepted it is equally widely accepted that 1990’s it was necessary to acknowledgethe impact of corporate activity upon (Crowther, 20021) that no measures ofsociety and its citizens – as well as all social or environmental performancestakeholders including the environment existed which had gained universal ac-– is considerable and has an impact not ceptability. Good social or environ-just upon the present but also upon the mental performance was subjectivelyfuture. Moreover these stakeholders are based upon the perspective of theincreasingly exercising their power not evaluator and the mores of the temporaljust in their own interests but also in the horizon of reporting. Consequently anyinterests of long term sustainability. So reporting concerning such performanceit is necessary to develop some methods could not easily be made which wouldof analysing and measuring sustainable allow a comparative evaluation betweenCSR activity (see Aras & Crowther, corporations to be undertaken. This was2007a) in such a way that it is univer- regarded as helpful to the image creationsally understood, and can be evaluated activity of the corporate reporting as theby interested parties. It will therefore authors of the script were therefore ablebecome of assistance to societal decision to create an image which could not bemaking. refuted through quantificatory compara- tive evaluation. Instead such imagesDeveloping measures for CSR is an is- could be created through the use of lin-sue which is considered of great impor- guistic and non-linguistic means. Thustance in many parts of the world. But each company was able to select meas-such research as does exist is based upon ures which created the semiotic of socialthe principles of the Anglo-Saxon tradi- concern and environmental responsibil-tion of corporate operational behaviour, ity and of continual progress, throughaccounting and reporting. Little suchwork is based in the traditions of other 1 This research was based the investigation of corporateparts of the world – an obvious area for activity included in their reporting between 1991 and 1997
28 D. Crowther, E. Ortiz Martinez / Issues in Social and Environmental Accounting 1 (2007) 26-39the selective use of measures which sup- integrate their stakeholder engagementport these myths. As a consequence of processes into daily activities. It hasthe individual selection of measures to been used worldwide by leading busi-be reported upon, a spatial evaluation of nesses, non-profit organisations andperformance, through a comparison of public bodies. The Framework is de-the performance with other companies, signed to help users to establish a sys-was not possible and a temporal evalua- tematic stakeholder engagement processtion was all that remained. This temporal that generates the indicators, targets, andevaluation was of course determined by reporting systems needed to ensure itsthe authors of the script, through their effectiveness in overall organisationalchoice of measures for reporting upon, performance. The principle underpin-in order to support the myth of continual ning AA1000 is inclusiveness. Theimprovement. Because any measure of building blocks of the process frame-such performance does not have univer- work are planning, accounting and audit-sal acceptance as a measurement tool, ing and reporting. It does not prescribeeach company must determine its own what should be reported on but ratherpriorities for social and environmental the how.performance and develop appropriatemeasures for reporting upon impact. It is According to Accountability theconvenient however that companies, all AA1000 Assurance Standard is the firstundertaking very similar operations, initiative offering a non-proprietary,chose different measures of performance open-source Assurance standard cover-which all show their performance as be- ing the full range of an organisation’sing not just good but, by implication, the disclosure and associated performancebest that can be achieved. (i.e. sustainability reporting and per- formance). It draws from and builds onWhile this research was being under- mainstream financial, environmental andtaken steps were being taken to change quality-related assurance, and integratesthis and to develop some kind of stan- key learning with the emerging practicedards for reporting. Thus in 1999 the of sustainability management and ac-Institute of Social and Ethical Account- countability, as well as associated re-ability2 published the AA1000 Assur- porting and assurance practices.ance Standard the aim of fosteringgreater transparency in corporate report- At the similar time the Global Reportinging. AccountAbility, an international, Initiative (GRI) produced its Sustainabil-not-for-profit, professional institute has ity Reporting Guidelines have been de-launched the worlds first-ever assurance veloped through multi-stakeholder dia-standard for social and sustainability logue. The guidelines are claimed to bereporting. The AA1000 framework closely aligned to AA1000, but focus on(http://www.accountability.org.uk) is a specific part of the social and environ-designed to improve accountability and mental accounting and reporting proc-performance by learning through stake- ess, namely reporting. The GRI aims toholder engagement. It was developed to cover a full range of economic issues,address the need for organisations to although these are currently at different2 stages of development. The GRI is an The Institute of Social and Ethical Accountability isprobably better known as AccountAbility. initiative that develops and disseminates
D. Crowther, E. Ortiz Martinez / Issues in Social and Environmental Accounting 1 (2007) 26-39 29voluntary Sustainability Reporting voluntary basis, for several hundred or-Guidelines. These Guidelines are for ganizations, mostly for-profit corpora-voluntary use by organisations for re- tions. It claims to be the result of a per-porting on the economic, environmental, manent interaction with many peopleand social dimensions of their activities, that supposedly represents a wide vari-products, and services. Although origi- ety of stakeholders relative to the impactnally started by an NGO, GRI has be- of the activity of business around thecome accepted as a leading model for world.how social environmental and economicreporting should take place. It aims to GRI and AA1000 provide a set of toolsprovide a framework that allows compa- to help organisations manage, measurerability between different companies’ and communicate their overall sustain-reports whilst being sufficiently flexible ability performance: social, environ-to reflect the different impacts of differ- mental and economic. Together, theyent business sectors. draw on a wide range of stakeholders and interests to increase the legitimacyThe GRI aims to develop and dissemi- of decision-making and improve per-nate globally applicable Sustainability formance. Individually, each initiativeReporting Guidelines. These Guidelines supports the application of the other – atare for voluntary use by organisations least this is the claim of both organisa-for reporting on the economic, environ- tions concerned; AA1000 provides amental, and social dimensions of their rigorous process of stakeholder engage-activities, products, and services. The ment in support of sustainable develop-GRI incorporates the active participation ment, while GRI provides globally ap-of representatives from business, ac- plicable guidelines for reporting on sus-countancy, investment, environmental, tainable development that stresses stake-human rights, research and labour or- holder engagement in both its develop-ganisations from around the world. ment and content. Part of the purpose ofStarted in 1997, GRI became independ- this paper however is to question theent in 2002, and is an official collaborat- need for these standards as all the evi-ing centre of the United Nations Envi- dence concerning standard setting sug-ronment Programme (UNEP) and works gests that standards are derived by con-in cooperation with UN Secretary- sensual agreement rather than by theGeneral Kofi Annan’s Global Compact. actions of a third party.The guidelines are under continual de-velopment and in January 2006 the draftversion of its new Sustainability Report- The regulation of standardsing Guidelines, named the G3, was pro-duced and made open for feedback. The Much of the broader debate about corpo-GRI pursues its mission through the de- rate social responsibility can be inter-velopment and continuous improvement preted however as an argument betweenof a reporting framework that can be two positions: greater corporate auton-used by any organisation to report on its omy and the free market economiceconomic, environmental and social per- model versus greater societal interven-formance. The GRI has become the tion and government control of corpo-popular framework for reporting, on a rate action. There is clear evidence that
30 D. Crowther, E. Ortiz Martinez / Issues in Social and Environmental Accounting 1 (2007) 26-39the free market proponents are winning which shows a link between corporatethe argument. They point to the global socially responsible behaviour and eco-spread of capitalism, arguing that this nomic profitability which is reinforcedreflects recognition that social wellbeing by much of the research into sociallyis dependent on economic growth. Op- responsible investment funds. This evi-ponents concede this hegemony but see dence however suggests that there is athe balance shifting in their favour, positive relationship between the two ifthrough for example greater accountabil- a longer term view of corporate perform-ity and reporting. Some opponents sus- ance is recognised.pect the corporate team of cheating ontheir environments, both ecological and Similarly there have been many claimssocial, while others object fundamen- (see Crowther, 2000a) that the quantifi-tally to the idea that a free market econ- cation of environmental costs and theomy is beneficial to society. inclusion of such costs into business strategies can significantly reduce oper-Resolving these arguments seem intrac- ating costs by firms; indeed this was onetable if not impossible because they as- of the main themes of the 1996 Globalsume divergent philosophical positions Environmental Management Initiativein the ethics vs regulation debate as well Conference. Little evidence exists thatas in more fundamental understandings this is the case but Pava & Krauszof human nature. I don’t propose to offer (1996) demonstrate empirically thatany definitive answers since any attempt companies which they define asto do so would itself involve make value ‘socially responsible’ perform in finan-judgements. It is possible though to cial terms at least as well as companieshighlight the terrain upon which these which are not socially responsible. It isarguments roam. Moreover we can look accepted however that different defini-for evidence of the relationship between tions of socially responsible organisa-economic growth, as manifest through tions exist and that different definitionscorporate profitability, and socially re- lead to different evaluations of perform-sponsible behaviour in an effort to re- ance between those deemed responsiblesolve this seemingly dichotomous posi- and others. Similarly in other countriestion. I have argued elsewhere (eg Crow- efforts are being made to provide ather & Jatana, 2005) that the creation framework for certification of account-shareholder value is often not through ants who wish to be considered as envi-the operational activities of the firm but ronmental practitioners and auditors. Forrather through the externalisation of example the Canadian Institute of Char-costs, which are passed on to customers, tered Accountants is heavily involved inemployees and other stakeholders in- the creation of such a national frame-cluding society at large. Examples of work. Azzone et al. (1996) however sug-this practice are evidenced elsewhere gest that despite the lack of any regula-and it seems that companies adopt a phi- tory framework in this area a degree oflosophy that any stakeholder does not standardisation, at least as far as report-matter in isolation. ing is concerned, is beginning to emerge at an international level, one of the cen-There is however a growing body of evi- tral arguments of this paper.dence (eg Crowther & Caliyurt, 2004)
D. Crowther, E. Ortiz Martinez / Issues in Social and Environmental Accounting 1 (2007) 26-39 31Growth in the techniques offered for is also apparent in many parts of themeasuring social impact, and reporting world however is the tendency of com-thereon, has continued throughout the panies to produce separate social andlast twenty-five years, during which the environmental reports3. In this contextconcept of this form of accounting has such reports are generally termed CSRexisted. However the ability to discuss reports or Sustainability reports, depend-the fact that firms, through their actions, ing upon the development of the corpo-affect their external environment and ration concerned. This trend is gatheringthat this should be accounted for has momentum as more organisations realiseoften exceeded within the discourse any that stakeholders are both demandingpractical suggestions for measuring such more information and are also demand-impact. At the same time as the technical ing accountability for actions under-implementation of social accounting and taken. Equally the more enlightened ofreporting has been developing the phi- these corporations are realising that so-losophical basis for such accounting – cially responsible activity makes busi-predicated in the transparency and ac- ness sense and actually assists improvedcountability principles – has also been economic performance.developed. Thus some people considerthe extent to which accountants should This realisation obviates any need forbe involved in this accounting and argue regulation and calls into question thethat such accounting can be justified by standards suggested by such bodies asmeans of the social contract as benefit- accountability. The more progressiveing society at large. Others have argued corporations have made considerablethat sustainability is the cornerstone of progress in what they often describe associal and environmental accounting and their journey towards being fully so-that auditing should be given promi- cially responsible. In doing so they havenence. developed an understanding of the pri- orities for their own business – recognis-An examination of the external reporting ing that CSR has many facets and needsof organisations gives an indication of to be interpreted differently for each or-the extent of socially responsible activ- ganisation – and made significant stepsity. Such an examination does indeed towards both appropriate activity anddemonstrate an increasing recognition of appropriate reporting of such activity.the need to include information about The steps towards CSR can be likened tothis and an increasing number of annual increasing maturity as all organisationsreports of companies include some in- progress towards that maturity by pass-formation in this respect. This trend is ing through the same stages (see below),gathering momentum as more organisa- although at different paces. The mosttions perceive the importance of provid- mature are indeed recognising that na-ing such information to external stake- ture of globalisation by recognising thatholders. It has been suggested however the organisational boundary is perme-that the inclusion of such information able (see Crowther & Duty, 2002) anddoes not demonstrate an increasing con- that they are accountable also for thecern with the environment but rather 3some benefits – for example tax breaks – Originally these were called environmental reports. Now they are normally known either as CSR reports orto the company itself. One trend which as sustainability reports.
32 D. Crowther, E. Ortiz Martinez / Issues in Social and Environmental Accounting 1 (2007) 26-39behaviour of other organisations in their resources are utilised. An examplevalue chain. would be an energy efficiency pro- gramme.Identifying sustainability Sustainability is a controversial topicDespite much of the rhetoric that is used, because it means different things to dif-sustainability implies that society must ferent people. Nevertheless there is ause no more of a resource than can be growing awareness (or diminishing na-regenerated. This can be defined in ivety) that one is, indeed, involved in aterms of the carrying capacity of the battle about what sustainability meansecosystem (Hawken, 1993) and de- and, crucially, the extent (if at all) it canscribed with input – output models of be delivered by MNCs in the easy man-resource consumption. Thus the paper ner they promise (United Nations Com-industry for example has a policy of re- mission on Environment and Develop-planting trees to replace those harvested ment (Schmidheiny, 1992). The startingand this has the effect of retaining costs point must be taken as the Brundtlandin the present rather than temporally ex- Report (WCED, 1987) because there isternalising them. Similarly motor vehi- explicit agreement with that Report andcle manufacturers such as Volkswagen because the definition of sustainabilityhave a policy of making their cars al- in there is pertinent and widely accepted.most totally recyclable. Viewing an or- Equally, the Brundtland Report is part ofganisation as part of a wider social and a policy landscape being explicitlyeconomic system implies that these ef- fought over by the United Nations, Na-fects must be taken into account, not just tion States and big business through thefor the measurement of costs and value vehicles of the WBCSD and ICC, (seecreated in the present but also for the for example, Beder, 1997; Mayhew,future of the business itself. 1997; Gray & Bebbington, 2001).Such concerns are pertinent at a macro There is a further confusion surroundinglevel of society as a whole, or at the the concept of sustainability: for the pur-level of the nation state but are equally ist sustainability implies nothing morerelevant at the micro level of the corpo- than stasis – the ability to continue in anration, the aspect of sustainability with unchanged manner – but often it is takenwhich we are concerned in this work. At to imply development in a sustainablethis level, measures of sustainability manner (Marsden, 2000; Hart & Mil-would consider the rate at which re- stein, 2003) and the terms sustainabilitysources are consumed by the organisa- and sustainable development are fortion in relation to the rate at which re- many viewed as synonymous. Ever sincesources can be regenerated. Unsustain- the Bruntland Report was produced byable operations can be accommodated the World Commission on Environmentfor either by developing sustainable op- and Development in 1987 there has beenerations or by planning for a future lack- a continual debate concerning develop-ing in resources currently required. In ment (Chambers, 1994; Pretty, 1995)practice organisations mostly tend to and this has added to the confusion be-aim towards less unsustainability by in- tween sustainability and sustainable de-creasing efficiency in the way in which velopment. For us we take the definition
D. Crowther, E. Ortiz Martinez / Issues in Social and Environmental Accounting 1 (2007) 26-39 33as being concerned with stasis; at the ety makes upon the corporation incorporate level if development is possi- terms of the social contract andble without jeopardising that stasis then stakeholder influence;this is a bonus rather than a constituent • Environmental Impact, which wepart of that sustainability. define as the effect of the actions of the corporation upon its geophysicalMost analysis of sustainability (eg Dyl- environment;lick & Hockerts, 2002) only recognises a • Organisational culture, which wetwo-dimensional approach of the envi- define as the relationship betweenronmental and the social. A few (eg the corporation and its internalSpangenberg, 2004) recognize a third stakeholders, particularly employ-dimension which is related to organisa- ees, and all aspects of that relation-tion behaviour. We argue that restricting ship; andanalysis to such dimensions is deficient. • Finance, which we define in termsOne problem is the fact that the domi- of an adequate return for the level ofnant assumption by researchers is based risk undertaken.upon the incompatibility of optimising,for a corporation, both financial per- These four must be considered as theformance and social / environmental key dimensions of sustainability, all ofperformance. In other words financial which are equally important. Our analy-performance and social / environmental sis is therefore considerably broader –performance are seen as being in conflict and more complete – than that of others.with each other through this dichotomi- Furthermore we consider that these foursation (see Crowther, 2002). Conse- aspects can be resolved into a two-quently most work in the area of corpo- dimensional matrix along the polaritiesrate sustainability does not recognise the of internal vs external focus and shortneed for acknowledging the importance term vs long term focus, which togetherof financial performance as an essential represent a complete representation ofaspect of sustainability and therefore organisational performance this can befails to undertake financial analysis represented as the model as follows (seealongside – and integrated with – other the next page). This model provides bothforms of analysis for this research4. Aras a representation of organisation perform-& Crowther (2007b) however argue that ance and a basis for any evaluation ofthis is an essential aspect of corporate corporate sustainability.sustainability and therefore adds a fur-ther dimension to the analysis of sustain-ability. Furthermore they argue that the The Conflation of Financial, Socialthird dimension sometimes recognised and Environmental Performanceas organisational behaviour need to actu-ally comprise a much broader concept of One view of good corporate perform-corporate culture. There are therefore 4 ance is that of stewardship and thus justaspects of sustainability which need to as the management of an organisation isbe recognised and analysed, namely: 4 Of course the fact that many researchers do not have• Societal influence, which we define the skills to undertake such detailed financial analysis even if they consider it to be important might be a as a measure of the impact that soci- significant reason for this.
34 D. Crowther, E. Ortiz Martinez / Issues in Social and Environmental Accounting 1 (2007) 26-39 Internal focus FINANCE ORGANISATIONAL CULTURE Short term focus Long term focus SOCIETAL ENVIRONMENTAL INFLUENCE IMPACT External focus MODEL FOR EVALUATING SUSTAINABILITY From Aras & Crowther (2007b)concerned with the stewardship of the present as an investment for the future.financial resources of the organisation sotoo would management of the organisa- Not only does such sustainable activitytion be concerned with the stewardship however impact upon society in the fu-of environmental resources. The differ- ture; it also impacts upon the organisa-ence however is that environmental re- tion itself in the future. Thus good envi-sources are mostly located externally to ronmental performance by an organisa-the organisation. Stewardship in this tion in the present is in reality an invest-context therefore is concerned with the ment in the future of the organisationresources of society as well as the re- itself. This is achieved through the en-sources of the organisation. As far as suring of supplies and production tech-stewardship of external environmental niques which will enable the organisa-resources is concerned then the central tion to operate in the future in a similartenet of such stewardship is that of en- way to its operations in the present andsuring sustainability. Sustainability is so to undertake value creation activity infocused on the future and is concerned the future much as it does in the present.with ensuring that the choices of re- Financial management also however issource utilisation in the future are not concerned with the management of theconstrained by decisions taken in the organisation’s resources in the presentpresent. This necessarily implies such so that management will be possible in aconcepts as generating and utilising re- value creation way in the future. Thusnewable resources, minimising pollution the internal management of the firm,and using new techniques of manufac- from a financial perspective, and its ex-ture and distribution. It also implies the ternal environmental management coin-acceptance of any costs involved in the cide in this common concern for man-
D. Crowther, E. Ortiz Martinez / Issues in Social and Environmental Accounting 1 (2007) 26-39 35agement for the future. Good perform- cost of capital. This is all establishedance in the financial dimension leads to fact as far as finance theory is concernedgood future performance in the environ- and is recognised in the operating of themental dimension and vice versa. Thus financial markets around the world.there is no dichotomy (Crowther, 2002) Naturally a company which is sustain-between environmental performance and able will be less risky than one which isfinancial performance and the two con- not. Consequently most large companiescepts conflate into one concern. This in their reporting mention sustainabilityconcern is of course the management of and frequently it features prominently.the future as far as the firm is con- Indeed it is noticeable that extractivecerned.5 The role of social and environ- industries – which by their very naturemental accounting and reporting and the cannot be sustainable in the long term –role of financial accounting and report- make sustainability a very prominenting therefore can be seen to be coinci- issue. The prime example of this can bedental. Thus the work required needs be seen with oil companies – BP being aconcerned not with arguments about re- very good example – which make muchsource distribution but rather with the of sustainability and are busy redesignat-development of measures which truly ing themselves from oil companies toreflect the activities of the organisation energy companies with a feature beingupon its environment. These techniques made of renewable energy, even thoughof measurement, and consequently of this is a very small part6 of their actualreporting, are a necessary precursor to operations.the concern with the management for thefuture – and hence with sustainability. Just as a company which is sustainable is less risky then one which can claim sustainable development is even lessThe management of risk risky and many companies mention this concept and imply that it relates to theirIt is recognised in the financial world operations. Such a company has a rosythat the cost of capital which any com- future of continued growth, with an ex-pany incurs is related to the perceived pectation of continued growth in profit-risk associated with investing in that ability. An investigation of the FTSE100company – in other words there is a di- for example (see Aras & Crowther,rect correlation between the risk in- 2007c) shows that 70% make a featurevolved in an investment and the rewards of sustainability while 15% make a fea-which are expected to accrue from a suc- ture of sustainable development. So thecessful investment. Therefore it is gener- cost of capital becomes lower as the cer-ally recognised that the larger, more es- tainty of returns becomes higher. Wetablished companies are a more certain have shown in this article that the con-investment and therefore have a lower cept of sustainability is complex and problematic and that the idea of sustain-5 Financial reporting is of course premised upon the able development is even more problem-continuing of the company – the going concern princi-ple. atic. It is our argument that companies6 It needs a very careful reading of the annual report to are not really addressing these issues butdiscover this. are merely creating an image of sustain-7 See Crowther 2002 for a full discussion of imagecreating in corporate reporting. ability7. The language of the statements
36 D. Crowther, E. Ortiz Martinez / Issues in Social and Environmental Accounting 1 (2007) 26-39made by corporations tends therefore to tangible benefits which are not easilybe used as a device for corrupting subject to quantification. The comple-thought (Orwell, 1970) by being used as tion of an environmental audit will en-an instrument to prevent thought about hance the understanding of the processesthe various alternative realities of organ- involved and will make this easier. Inisational reality. Significantly it creates considering environmental benefits, asan image of safety for investors and distinct from financial benefits, it is im-thereby reduces the cost of capital for portant that an appropriate time horizonsuch corporations. Such language must is selected which will enable those bene-be considered semiotically (Barthes, fits to be recognised and accrued. This1973) as a way of creating the impres- may imply a very different time horizonsion of actual sustainability. Using such from one which is determined purely byanalysis then the signification is about the needs of financial analysis.inclusion within the selected audiencefor the corporate reports on the assump- Once all the data has been recognised,tion that those included understand the collected and quantified it then becomessignification in a common way with the possible to incorporate this data, in fi-authors. This is based upon an assumed nancial terms, into an evaluation whichunderstanding of the code of significa- incorporates risk in a more consistenttion used in describing corporate activity manner. It is important to recognisein this way. As Sapir (1949: 554) states: benefits as well as costs, and it is per- haps worth reiterating that many of these … we respond to gestures benefits are less subject to quantification with an extreme alertness and are of the less tangible and image and, one might almost say, related kind. Examples include: in accordance with an elaborate and secret code • Enhanced company or product im- that is written nowhere, age – this in itself can lead to in- known by none and under- creased sales stood by all. • Health and safety benefits • Ease of attracting investment andIt is our argument that the methodolo- lowered cost of such investmentgies for the evaluation of risk are de-ceived by this rhetoric and are deficient • Better community relationships –in their evaluation of risk – particularly this can lead to easier and quickerenvironmental risk. In order to fully rec- approval of plans through the plan-ognise and incorporate environmental ning processcosts and benefits into the investment • Improved relationship with regula-analysis process the starting point needs tors, where relevantto be the identification of the types of • Improved morale among workers,costs and revenues which need to be in- leading to higher productivity, lowercorporated into the evaluation process. staff turnover and consequentlyOnce these types of costs have been lower recruitment and training costsidentified then it becomes possible to • General improved image and rela-quantify such costs and to incorporate tionship with stakeholdersqualitative data concerning those less
D. Crowther, E. Ortiz Martinez / Issues in Social and Environmental Accounting 1 (2007) 26-39 37Many of these benefits are not just intan- rate reports. We do not assume suchgible but will take some time to realise. cynicism, although we note that the ef-Hence the need to select an appropriate fects are beneficial for corporations and,time horizon for the evaluation of the in the short term at least, for investors.risk and associated effects. This time Instead part of our argument is that thehorizon will very likely be a longer one concept of sustainability is insufficientlythan under a traditional financially based understood and therefore any evaluationevaluation. Obviously cash flows need is flawed and simplistic. Thus there is anto be considered over that period and an opportunity for further research in thisappropriate method of evaluation (eg a area.discounted cash flow technique) needsto be used in the evaluation. None of this One further tentative conclusion fromwill change with the incorporation of our research is concerned with the extentenvironmental accounting information, of disclosure manifest through the re-except for assessment of risk and its as- porting of such things as sustainability,sociated impact upon the cost of capital, and is more in the nature of a prognosis.which can be expected to rise as the true Crowther (2000b) traces an archaeologyextent of the environmental impact is fed of corporate reporting which shows that,into the calculation. over time, the amount of information provided – first to shareholders, then toThe steps involved in the incorporation potential investors (Gilmore & Willmott,of environmental accounting into the 1992), then to other stakeholders – hasrisk evaluation system can therefore be gradually increased throughout the lastsummarised as follow: century, as firms recognised the benefit in providing increased disclosure. Simi-• Identify environmental implications larly the amount of disclosure regarding in term of costs and benefits CSR activity has been increasing rapidly• Quantify those costs and incorporate over the last decade, as firms have rec- qualitative data regarding less tangi- ognised the commercial benefits of in- ble benefits creased transparency. Therefore it is rea- sonable to argue that the amount of in-• Use appropriate financial indicators formation regarding sustainability will• Set an appropriate time horizon also increase, not just as firms gain a which allows environmental effects clearer understanding of its implications to be fully realised but also as they understand the benefits of greater disclosure in this respect.Conclusions ReferencesIn this paper we have highlighted a num-ber of areas of interest for CSR research, Aras, G. & Crowther, D., (2007a)and our views contrasts with a lot of “Sustainable corporate socialpublished work. Much of the literature – responsibility and the valueparticularly of the “greenwash” variety – chain” In D Crowther & M Mimputes a cynical intention to deceive Zain (eds), New Perspectives onthrough the images portrayed in corpo- Corporate Social Responsibility
38 D. Crowther, E. Ortiz Martinez / Issues in Social and Environmental Accounting 1 (2007) 26-39 pp 109-128 “Corporate social responsibility_________ & _________ (2007b) “Is improves profitability” in D the global economy sustain- Crowther & K T Caliyurt (eds), able?” in S Barber (ed), The Stakeholders and Social Respon- Geopolitics of the City sibility, Penang: Ansted Univer- (forthcoming) sity Press, pp 243-266_________ & __________ (2007c) “The ______ & Duty, D. J. (2002) governance of sustainability: An “Operational performance in investigation into the relation- post modern organisations - to- ship between corporate govern- wards a framework for including ance and corporate sustainabil- time in the evaluation of per- ity” Corporate Governance formance”, Journal of Applied (forthcoming) Finance, May, 23-46Azzone, G., Manzini, R. & Noel, G. ______ & Jatana, R. (2005) “Modern (1996) “Evolutionary trends in epics and corporate well being” environmental reporting” Busi- in D Crowther & R Jatana (eds), ness Strategy and Environment, Representations of Social Re- Vol. 5 No. 4, pp. 219-230 sponsibility, Hyderabad: ICFAIBarthes, R. (1973) Mythologies trans A University Press, pp 125-165 Lavers. London: HarperCollins. Dyllick, T. & Hockerts, K. (2002)Beder, S. (1997) Global Spin: The cor- “Beyond the business case for porate assault on environmental- corporate sustainability”, Busi- ism. London: Green Books ness Strategy & the Environ-Chambers, R. (1994) “The Origins and ment, 11, 130-141 Practice of Participatory Rural Gilmore, C. G. & Willmott, H. (1992) Appraisal” World Development, “Company law and financial re- Vol.22, No.7, pp. 953-969 porting: a sociological history ofCrowther, D. (2000a) Social and Envi- the UK experience” in M Brom- ronmental Accounting. London: wich & A Hopwood (eds), Ac- Financial Times Prentice Hall counting and the Law pp 159-______ (2000b) “Corporate reporting, 191, Hemel Hempstead: Prentice stakeholders and the Internet: Hall mapping the new corporate land- Gray, R. H. & Bebbington, K. J. (2001) scape”, Urban Studies, Vol. 37, Accounting for the Environment. No. 10, pp. 1837-1848 London: Sage______ (2002) A Social Critique of Cor- Hart, S. L. & Milstein, M. B. (2003) porate Reporting. Aldershot: “Creating sustainable value” Ashgate. Academy of Management Execu-______ (2006) “Standards of Corporate tive, Vol. 17, No. 2, pp. 56-67 Social Responsibility: Conver- Hawken, P. (1993) The Ecology of Com- gence within the European Un- merce. London: Weidenfeld & ion”, in D Njavro & K Krkac Nicholson. (eds), Business Ethics and Cor- Marsden, C. (2000) “The new corporate porate Social Responsibility; citizenship of big business: part Zagreb; MATE pp. 17-34 of the solution to sustainability”,______ & Caliyurt, K T. (2004) Business & Society Review,
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