Critics of SRI have said little about the integrity of corporate representations resulting in screening inclusion or exclusion. This is surprising given social and environmental accounting research that finds corporate posturing and deception in the absence of external verification, and a parallel body of literature describing corporate "greenwashing" and other forms of corporate disinformation. In this paper I argue that the problems and challenges of ensuring fair and accurate corporate social reporting mirror those accompanying corporate compliance with law. Similarities and (...) points of convergence between social reporting and corporate compliance are discussed, along with proposals for reform. (shrink)

This study examines social desirability bias in the context of ethical decision-making by accountants. It hypothesizes a negative relation between social desirability bias and ethical evaluation. It also predicts an interaction effect between religiousness and gender on social desirability bias. An experiment using five general business vignettes was carried out on 121 accountants (63 males and 58 females). The results show that social desirability bias is higher (lower) when the situation encountered is more (less) unethical. The bias has religiousness and (...) gender main effects as well as an interaction effect between these two independent variables. Women who were more religious recorded the highest bias scores relative to less religious women and men regardless of their religiousness. (shrink)

This article explains problems and opportunities created by standardized ethics initiatives (e.g., the UN Global Compact, the Global Reporting Initiative, and SA 8000) from the perspective of stakeholder theory. First, we outline differences and commonalities among currently existing initiatives and thus generate a common ground for our discussion. Second, based on these remarks, we critically evaluate standardized ethics initiatives by drawing on descriptive, instrumental, and normative stakeholder theory. In doing so, we explain why these standards are helpful tools when it (...) comes to ‘managing’ stakeholder relations but also face considerable limitations that can eventually hamper their successful expansion. We suspect that this discussion is necessary to conduct meaningful empirical research in the future and also to provide managers with a more clear-cut picture about a successful application of such initiatives. Third, we outline possible ways to cope with the identified problems and thus demonstrate how standard-setting institutions can improve the initiatives they offer. (shrink)

Corporate sustainability reports are supposed to provide a complete and balanced picture of corporate sustainability performance. They are, however, usually voluntary and thus prone to interpretation and even greenwashing tendencies. To overcome this problem, the Global Reporting Initiative (GRI) provides standardized reporting guidelines challenging companies to report positive and negative aspects of an organization’s sustainability performance. However, the reporting of “negative aspects” in particular can endanger corporate legitimacy if perceived by the stakeholders as not being in line with societal norms (...) and values. Starting from the theoretical lenses of economics-based disclosure theories and socio-political theories of disclosure, the focus of this study therefore was to analyze the communicative legitimation strategies companies use to report “negative aspects,” i.e., negative ecological and social impact caused by corporate activity. Using qualitative content analysis of GRI-oriented sustainability reports from companies listed on the US Dow Jones Industrial Average Index and on the German DAX Index, we identified six legitimation strategies. We discuss these strategies regarding to symbolic and substantial management of legitimacy. We show that symbolic legitimation strategies aiming at modifying the perception of legitimizing stakeholders dominate in the reports at hand. Such persuasion, however, does not meet the requirement of impartiality as postulated by the GRI guidelines. Building upon this conclusion we propose a concise characterization of “negative aspects” and develop a GRI-compliant schema of reporting about them. In doing so, we offer a way to improve the overall “balance” of sustainability reporting contributing to a true and fair view in sustainability disclosure. (shrink)

There is a growing realisation that the current upward trend in levels of disclosure of social, ethical and environmental performance by corporations and other organisations is not being accompanied by simultaneous greater levels of public trust. Low levels of confidence in the information communicated in public reporting is probably undermining the impetus for this disclosure. This article suggests that this credibility gap can be narrowed through the use of third party independent assurance. However, this is not an unqualified panacea. Much (...) verification and assurance practice itself has to date been of questionable robustness, reliability and consistency, and has been framed by financial assurance models that are inadequate for the broader, qualitative dimensions of social, ethical and environmental performance. The paper argues that there is need for a universal standard for the provision of assurance of social, ethical and environmental reporting, and indeed for the credibility of the assurance providers themselves. The new AA1000S Assurance Standard, developed by the Institute of Social and Ethical AccountAbility, offers an approach and a tool for addressing these gaps. (shrink)

Sustainability reporting and assurance of sustainability reports have been used by organizations in an attempt to provide accountability to their stakeholders. A better understanding of current practices is important to provide a base for comparative and trend analyses. This paper aims to consolidate and provide information on sustainability reporting, assurance of sustainability reports and types of assurance providers. Another aim of this paper is to provide a descriptive analysis of these practices for a global sample, comparing results with previous studies, (...) and suggesting opportunities for future research. To accomplish these objectives, a literature review was performed, an analysis of the organizations included in the Fortune Global 500 2010 was completed, and results were presented and consolidated by country. These results demonstrate that all organizations analysed provided some type of information in relation to their social or environmental performance in their official website. The percentage of organizations issuing a sustainability report has been increasing in the last few years. However, the percentage of organizations assuring their sustainability report has stagnated. Types of assurance engagements include those performed by accountants and non-accountants, and new practices have emerged, namely the “mixed approach” and the “stakeholder or specialist review”. The analysis also shows that the practices of issuing sustainability reports and having them assured have become a world-wide phenomenon, occurring in developed, and emerging economies around the world. (shrink)

The need for conceptual work in marketing ethics is addressed by examining the five techniques of neutralization as a means for partially explaining unethical behaviors by marketing practitioners. These techniques are often used by individuals to lessen the possible impact of norm-violating behaviors upon their self-concept and their social relationships. Borrowed from the social disorganization and deviance literature, the five techniques of neutralization are: (1) denial of responsibility, (2) denial of injury, (3) denial of victim, (4) condemning the condemners and (...) (5) appeal to higher loyalties. Examples of marketing professionals using each of the five techniques are given, and a conceptual model linking the techniques of neutralization with unethical behavior is presented. Finally, relevant research questions are offered for consideration. (shrink)

Research on sustainability assurance is still in its beginnings. One of the key questions in this field that also is of the highest practical relevance is concerned with the quality of the assurance process. However, a common understanding of assurance quality and how it should be measured is still missing. We try to close this gap by building on the financial audit literature. We introduce a definition of assurance quality that comprises two key aspects: the depth of the assurance process (...) and the breadth of the assurance statement. Based on prior research, we hypothesize that a firm’s sustainability performance is related to the depth of the assurance process, while the type of the assurance provider, more precisely the affiliation to the accounting profession, is related to the breadth of the assurance statement. Results for a sample of 122 European firms reveal a negative relationship between sustainability performance and assurance process depth as well as between the affiliation to the accounting profession and assurance statement breadth. Thus, we find evidence that poor sustainability performers ask for in-depth assurance services, most likely as a means to enhance their internal sustainability-related processes and systems. Assurance providers that do not belong to the accounting profession in turn are associated with broader assurance statements. (shrink)

The main purpose of this exploratory analysis is to understand whether, based on evidence gathered from international best practices selected among corporations which adopt the Global Reporting Initiative guidelines in sustainability reporting (SR), stakeholders are significantly consulted and involved—as international literature would indicate—by assurance providers, during assurance processes of SR. We aim at verifying if this practice—known as stakeholder assurance—is in fact widespread in SR assurance by carrying out empirical research, through content analysis, into a sample of 161 assurance statements (...) of international corporations, in order to test characteristics of any stakeholder assurance implemented. (shrink)

This paper explores the justifications and impression management strategies that industrial companies use to rationalize their impacts on climate change. These strategies influence the perceptions of stakeholders through the use of techniques of neutralization intended to legitimize the impacts of corporate operations in the area of climate change. Based on a qualitative and inductive approach, 10 case studies were conducted of large Canadian industrial emitters. Interviews were conducted with managers and environmental specialists. Public documentation was also collected when available. This (...) study identifies six main neutralization techniques that industrial emitters use to rationalize their impacts: self-proclaimed excellence, promotion of a systemic view, denial and minimization, denouncing unfair treatment and deceptive appearances, economic and technological blackmail, and blaming others. The paper develops a better understanding of corporate arguments and strategies aimed at influencing the perceptions of stakeholders, including policymakers. The study also contributes to the literature on impression management by shedding light on new strategies and techniques of neutralization used by managers to shape the perceptions of stakeholders on socially sensitive issues. (shrink)

This paper explores the strategies organizations use to demonstrate their accountability for biodiversity and legitimize their impact in this area through the use of techniques of neutralization. Neutralization aims to manage stakeholder impressions on very socially sensitive issues. Based on the content analysis of 148 sustainability reports from mining organizations, the study sheds light on the successful use of rhetoric in reports on non-measurable and potentially unaccountable issues. Specifically, the study shows that mining organizations use four main techniques of neutralization (...) when they explain their impact on biodiversity. When they address stakeholders, they defend their social legitimacy and environmental responsiveness using one of the four techniques: they claim of a net positive or neutral impact on biodiversity, they deny that they have a significant impact, they distance themselves from the impact of their actions, and they play down their responsibilities. The study contributes to the literature on corporate sustainability and accounting for stakeholders. It focuses on under-researched issues such as the management of biodiversity and the tactics used to rationalize negative impacts. The study also bridges the gap between theories about organizational legitimacy, impression management, and techniques of neutralization. (shrink)

This article presents, an analysis of the opinions of assurance providers regarding the quality and the limitations of sustainability reports and their recommendations to improve them using the Global Reporting Initiative as a framework. The qualitative content analysis of 301 assurance statements for sustainability reports from mining and energy companies provides a comprehensive view of the main outcomes of the assurance process, including its limitations, the application of the GRI principles and suggestions for improving sustainability reports. Taking into account the (...) perceptions of practitioners a priori well informed on the quality of sustainability reports—namely assurance providers—this paper complements the current literature on sustainability reporting and its assurance, including critical approaches that question the reliability of sustainability reports, stakeholder engagement and the accountability of reporting practices. This study contributes to the debates surrounding the quality of sustainability reports, the added value of assurance statements and the ethical issues underlying the assurance process. It also contains important practical implications for auditors, standardization organizations and stakeholders. (shrink)

The assurance of corporate sustainability reporting has long been a controversial field. Corporate management and assurance providers are routinely accused of 'capturing' what should be an exercise in public accountability. This article responds to recent calls for an analysis of the process by which Capture' takes place. Integrating elements of neo-institutional theory and the arena concept, the article sets out a fresh conceptual framework for investigating the dynamics of the interactions between the various bodies active in the assurance field in (...) the UK. (shrink)

The increasing pressures to conserve biodiversity—particularly for industries based on the exploitation of natural resources—have reinforced the need to implement specific measures in this area. Corporate commitment to preserving biodiversity is increasingly scrutinized by stakeholders and now represents an important aspect of business ethics. Although stakeholder involvement is often essential to the management of biodiversity, very few studies in the literature have focused on the details of this involvement. The objective of this paper is to analyze how mining and forestry (...) companies can manage biodiversity issues through stakeholder involvement based on a content analysis of 430 sustainability reports using the Global Reporting Initiative framework. The paper elucidates the reasons for such involvement, the nature of stakeholders involved, and the types of measures employed to manage biodiversity. Stakeholders’ motives for becoming involved revolve around four main issues: complexity and knowledge management; self-regulation and relationships with public authorities; legitimacy and social responsiveness; and commercial and strategic objectives. The stakeholders involved in biodiversity initiatives are essentially non-governmental organizations, experts and universities, public authorities, and coalitions of companies. In the end, the initiatives identified can be grouped into three categories: management practices, socio-political actions, and research and conservation measures. The paper provides various examples of these initiatives and shows how they can be implemented in collaboration with different stakeholders depending on the company’s objectives. The contributions the study makes to the literature on biodiversity management and the managerial implications of the study are analyzed in the discussion section. (shrink)

We study companies that do not produce a sustainability report in contexts where institutionalisation is assumed. Based on a careful analysis of interaction patterns between non-reporting companies, sustainability interest groups, and peer organisations, we find patterns of discursive and material isomorphism that suggest sustainability reporting is confined to an issues-based field, rather than spreading as an institutionalised practice across the business community. We argue that the issues-based field exerts only weak pressure for sustainability reporting, and that encouraging more firms to (...) report rests on understanding what influences companies to interact more widely to become part of this field. (shrink)

This research focuses on examining the relationship between some attributes of assurance providers and the level of sustainability assurance. By using the propensity to issue negative conclusions in the assurance statement as an indicator of the level of assurance, we examine whether the brand name and industry specialisation of the practitioners have an impact on the assurance opinion issued. Using an international sample of 1233 firm-year observations over the period 2007–2014, the findings document the impact of the brand reputation and (...) industry specialisation of assurance providers on the level of assurance. The probability of detecting material errors and omissions in a sustainability report is higher if it is verified by a Big 4 auditing firm and by an industry expert as an assurance practitioner. The greater experience in providing audit services and the relevant skills and training provided by Big 4 firms, as well as the greater knowledge and experience of industry experts, increase the propensity to report more accurate opinions about a sustainability report. The findings are robust for alternative measures for the level of assurance and the industry specialisation. (shrink)

We highlight how Corporate Social Responsibility can be strategically used against the negative perception from earnings management. Using international data, we analyse the effect of CSR and EM on the cost of capital and corporate reputation. Results confirm that CSR strategy is positively valued by investors and other stakeholders. Contrary to EM, CSR has a positive effect on corporate reputation and lowers the cost of capital. In addition, we also find that the favourable effect of CSR on cost of capital (...) is consistently more intense in firms that show signs of EM indicating that the market does not identify when CSR practices are used as a strategy to mask EM. We also demonstrate how institutional factors influence the above relationship. (shrink)

This paper aims to examine the credibility value of sustainability assurance and the type of assurance provider on cost of capital. A large sample of international companies from the period 2007–2014 was used to develop our models of analysis. We find a greater decrease in cost of capital for companies that publish and assure their social and environmental reports. Thus, voluntary sustainability disclosures decrease the cost of capital. However, companies also have the opportunity to reinforce this decrease by providing an (...) assurance statement, so increasing the credibility of corporate social responsibility information. In addition, the decrease in the cost of capital is significantly higher when such assurance is provided by a top-tier accountancy firm instead of by engineering or consultancy firms; this result supports also the reputational capital of accountancy firms. (shrink)

The paper begins with an example of the accounting treatment afforded an Indefeasible Rights Use Swap by Global Crossing. The case presents a typical example of ways in which accounting firms contributed to the ethical scandals of the early 21st century. While the behavior of Arthur Andersen, the accounting company in the case, might have met the letter of the law, we argue that it violated "the spirit of the law," which can be discovered by looking at the legitimate goals (...) of a company which give it its ethical direction and the responsibilities of the accounting professionals who serve the company and the general public. Those professional responsibilities are determined by looking at the legitimate function those professionals fulfill in the economy. A further claim is that Andersen and other accounting firms are motivated to abandon the responsibilities derived from pursuing their proper goals by falling into the trap of accumulating wealth for its own sake. We argue that the ultimate responsibility of internal auditors is to develop statements that give as reasonably true and fair a picture of the financial situation to any user having a claim to that knowledge. Further we argue that the major responsibilities of the external auditor are: first, to be responsible to the using public for evaluating financial statements and declaring that they represent a fair picture of the financial situation of a company, and second, to be a watchdog of financial markets and call into question irregular practices that would distort those pictures. Such due professional care requires the auditor to exercise "professional skepticism": an attitude that includes a questioning mind and a critical assessment of audit evidence. The paper concludes by giving particular examples of how Arthur Andersen LLP failed to meet those responsibilities. (shrink)

Independence is a fundamental concept to the audit. There is a clear relationship between independence and conflict of interest in all professions. This paper examines this relationship in the auditing profession and in the context of three specific practices. The paper analyses these practices by using the Davis model of conflict of interest. The results of this analysis give rise to some interesting questions for the ethical practices of the auditing profession.

In this article we explore how multinational corporations (MNCs) adopt assurance practices to develop and sustain organizational accountability for sustainability. Using a panel of Fortune Global 250 firms over a period of 10 years, we document the diffusion patterns of third-party assurance of sustainability reports. We specifically investigate how evolving auditing practices, namely diversity of assurance standards and type of assurance providers, shape the quality of sustainability assurance statements. The results illustrate great variability in the adoption of assurance practices in (...) the formative stages of this novel market. Our descriptive analysis indicates the relevance of external institutional pressure as well as internal resources and capabilities as underlying factors driving the adoption of assurance. Our evidence also suggests that several MNCs project a decoupled or symbolic image of accountability through assurance, thereby undermining the credibility of these verification practices. The paper contributes to the emerging literature on international accountability standards and emphasizes the need to enhance theory-based, cross-disciplinary knowledge related to auditing and accountability processes for sustainability. (shrink)

This article contributes to the growing scholarship on the topic of assurance services for sustainability reports. We first synthetically illustrate the main international standards for the implementation of assurance services regarding the subject documents. The second part of our article is an empirical analysis of reports drawn up on the basis of the current Global Reporting Initiative 2006 guidelines, and looks at how effectively these standards have been implemented, analyzing the different typologies of assurance statement.

Audit standards require auditors to conduct audits being independent in mental attitude from their clients. Regulators and financial statement users are concerned that auditors compromise their independence by allowing clients that contract for consulting services, i.e., non-audit services, more financial statement discretion relative to clients that demand relatively little non-audit services from their auditor. This paper begins by discussing the role of auditing in the capital markets and the various stakeholders that rely on audited financial information in making their capital (...) allocation decisions. The paper continues by explaining the ethical dilemma inherent in audit contracts in general, and more specifically, how the provision of non-audit services threatens auditor independence. The paper concludes by summarizing research studies that report conflicting evidence that there is a violation of auditor independence due to the provision of non-audit services to audit clients. (shrink)