Are CSR reports telling the truth?

Are CSR reports telling the truth?

Introduction

Corporate social responsibility (CSR) reporting is one of the most effective techniques for conveying CSR; it includes rules of conduct as well as online reporting (predominantly CSR reports). These reports are characterised as distinct, independent corporate editorial works that contain CSR information (Biedermann, 2008). Thus, CSR reports are a structured method of communication (Schaltegger et al., 2006) that can take the shape of standalone reports or integrated publications that include economic, social, and environmental data in a single yearly report (Daub, 2007).

Credibility is essential in all forms of communication, whether it be personal contact, a political statement, or a company explaining its position and duties in society. Companies have disclosed increasingly more information about their CSR, but this has resulted in increased distrust among stakeholders rather than increased goodwill (Waddock and Goggins, 2011). Stakeholders frequently perceive CSR communication to be strategic in nature and hence untrustworthy (Elving, 2013). This criticism is directed mainly towards the CSR reports, one of the most significant vehicles for corporations to talk about their CSR efforts, sustainability, and corporate citizenship successes. Just as trustworthiness is important in daily communication (Jackob, 2008), it is also important in this communication tool. As a result, the purpose of this essay is to examine if CSR reports are reliable.

Legitimacy and Stakeholders Theory

There are two systems-oriented theories that are widely used in the literature to explain the motivation behind publishing CSR reports by companies around the world. These two theories are legitimacy theory and stakeholder theory. Other systems-oriented theories include political economy theory and resource dependency theory. These theories imply that organisations are a component of the wider social structure in which they function (Gray et al. 1995).

According to legitimacy theory, organisations are always striving to operate within societal norms in order to guarantee that outsiders see their actions as legitimate. Legitimacy from an organization’s perspective is defined as follows: “a condition or status which exists when an entity’s value system is congruent with the value system of the larger social system of which the entity is a part. When a disparity, actual or potential, exists between the two value systems, there is a threat to the entity’s legitimacy.” Lindblom (1994, p.2). Deegan (2006) observes that when an organization’s legitimacy is endangered, research suggests that strategic disclosure of the information is frequently employed by organisations to restore organisational legitimacy. Cho et al. (2015) apply legitimacy theory to explain why companies feel compelled to voluntarily release sustainability reports. According to the study, companies have utilised CSR reports to portray themselves as socially responsible in order to prevent dramatic changes in their activities.

The legitimacy theory is the most commonly utilised in CSR literature; nevertheless, it is frequently coupled with stakeholder theory. A stakeholder is a person or group who has an interest or concern in the business’s operations. Stakeholder theory was presented by Freeman (1984), who stated that a corporation’s stakeholders include anybody who is affected by the firm and its operations. According to stakeholder theory, firms should pay attention to all of their audiences, such as suppliers, consumers, environmental organisations, media, and so on, who might have an impact on them, rather than simply shareholders. Chen and Roberts (2010) investigate the compatibility of the two theories and find that various stakeholders have varied perspectives on the corporation’s activities; hence, it is up to them to assess the organization’s legitimacy. It is the duty of the company to address the requirements of stakeholders, which may be contradictory, via strategic dialogue.

These theories, however, mostly focus on one aspect of the motivations behind the publishing of CSR reports, which is to gain, maintain, or restore legitimacy in the eyes of the stakeholders regarding the corporation’s actions in society. This suggests that the CSR reports are not reliable as they aim to gain something in return, i.e. legitimacy, rather than provide information regarding the impact of their actions on the society and environment.

Lack of standards and audit

Another notable point in the literature regarding the unreliability of the CSR reports is the lack of standard reporting rules, like those in financial reporting. Al-Shaer and Zaman (2018) argue that companies are increasingly reporting on sustainability issues and having the reports voluntar