CSR disclosure and environmental topics: what’s happen in American corporates?

Responsible management and finance

CSR disclosure and environmental topics: what’s happen in American corporates?

Assuntina Coviello, Alessandra De Chiara

This work in progress focuses on corporate social responsibility (CSR) disclosure practices of American multinational corporations (MNC). In light of the new politics of Trump, the paper focuses on the behaviour of the corporations to communicate their commitment to the environment analysing 40 CSR reports of the main American multinational corporations.

Is CSR disclosure positively associated with social context, especially government policy on sustainable development? And what is the role of government policy on companies engaged in green strategies commitment. These questions are investigated by the research in this paper.

The literature on corporate social responsibility (CSR) and on disclosure states that implementing CSR depends also on the social context within which CSR occurs (Athanasopoulou et al. 2015). Companies’ responsible behavior is affected by several institutional factors (public and private regulations, the presence of institutionalized norms on corporate accounting, cultural systems, and the degree of openness to firm’s stakeholders) (Coluccia et al. 2018).

The environmental policy in the United States (US) and the corporate social responsibility disclosure (CSRD) practices of American multinational corporations (MNC) is the relation investigated in this work in progress.

The environmental policy in the United States aims to conserve natural resources and maintain the quality of air, water and land to protect public health and the natural environment. Policymakers harmonize environmental protection with economic growth, property rights, public health and energy production and use. Environmental policy has also expanded in recent years to include global warming and man-made climate change theory. The issue of environmental protection is addressed by the American Agency for the Protection of the Environment (EPA), founded on December 2nd, 1970, born as a result of a high concern for environmental pollution and to consolidate a series of federal activities research, monitoring, standard setting and supervisory activities. Since its inception, the EPA has been working towards a cleaner and healthier environment for the American people. For the first time on January 2nd, 2011, the EPA began regulating greenhouse gases (GHG) from mobile and stationary sources of air pollution under the Clean Air Act (CAA).

In the aftermath of his election, Donald Trump presented what he calls the America First Energy Plan. His administration says that: «America has been held back by heavy energy sector regulations».

America currently has 264 billion barrels of oil reserves, the largest oil reserve in any nation. The United States also has a large amount of coal reserves, accounting for 26% of the world total, more than any other nation.

The White House estimates that by removing the Obama climate action plan, wages will rise by more than $ 30 billion by 2024. Trump wants America to achieve energy independence from OPEC and from all nations that are hostile to the interests of the United States, to ensure national security and ensure it from possible supply disruptions and price fluctuations from the global oil market.

However, fossil fuels have run out, and entities such as the Pentagon claims that climate change also poses a threat to national security. During the first 100 days of the presidency, Donald Trump signed executive orders that direct the EPA to consider the formal revocation of the Clean Power Plan, a federal rule aimed, in 2015, to reduce carbon dioxide and similar emissions from power plants. electric.

On June 1st, 2017, President Donald Trump announced that the United States would withdraw from the Paris climate deal. According to which, the signatory countries are committed to reducing carbon dioxide emissions and the like in an attempt to limit man-made climate change. Trump argued that the deal was unfair to the United States, as it would cut jobs and have little effect on global temperatures.

Trump’s new environmental policy has therefore caused major concerns by over 360 companies especially American, including Starbucks, General Mills, Kellogg, Levi Strauss, L’Oréal USA, alongside European giants such as Schneider Electric and Unilever, the which have launched an appeal to President Donald Trump asking to join the Paris Climate Agreement: «We ask to support investments in favour of a low-carbon economy in the United States and abroad, to ensure greater clarity for financial decision-makers and strengthen investor confidence all over the world – the letter reads – we want the American economy to be energy efficient and based on low-emission energy. Innovative and convenient solutions that can allow us to create jobs and strengthen American competitiveness. We are committed to doing our part to achieve the Paris goal of a world economy that limits heating well below 2 degrees Celsius».

The environmental policy of the administration of Donald Trump represents a shift from the political priorities and objectives of the mandate of his predecessor Barack Obama. Trump, during his campaign, has often described environmental regulations as an obstacle to business. Stating, in March 2016, that he wanted to eliminate the US Environmental Protection Agency (EPA) and to revoke many regulations and a moratorium on the leasing of federal coal reserves.

In light of the new politics of Trump, this work focuses on corporate social responsibility disclosure practices of American multinational corporations (MNC). The paper focuses on the behaviour of the corporations to communicate their commitment to the environment analysing 40 CSR reports of the main American multinational corporations, during two consecutive years, respectively 2016 and 2017.

The research questions of the paper are aimed at identifying the presence of a positive relationship between companies engaged in green strategies commitment and CSR reports, analysing the degree of diffusion of the environmental issue in the CSR reports by US companies and analysing whether the environmental communication is changed in the run-up to the years preceding Trump’s candidacy and subsequent to his election, connecting it to the green strategies of the multinationals themselves.

CSR disclosure (CSRD) can be defined as «the process of communicating the social and environmental effects of organizations’ economic actions to particular interest groups within society and to society at large» (Gray et al. 1987, p. 9). In recent years, the concept of CSRD has developed enormously (Adhikariparajul et al. 2019; Alshbili and Elamer 2019; Tilt 2018; Coluccia et al. 2018).

Communication is considered an important aspect in sustainability strategies, both in the literature and in the sustainability guidelines, proposed by the various institutional bodies. The first considered CSR an important element of the competition (Cerana 2004) as it is not only aimed at improving the image, the corporate reputation (Hoeffler and Keller 2002) and at achieving social legitimacy (Morsing 2006), but may be aimed at influencing the consumer purchasing process. Even in the guidelines drawn up by various international bodies, CSR communication is considered important. Europe stressed that those who communicate their social responsibility strategy transmit a positive example to other companies. In the latest communication on the European CSR strategy, with reference to the dissemination of social and environmental information, it was stressed that communication «can facilitate engagement with stakeholders and identify concrete sustainability risks. It also constitutes an important element for accountability and can contribute to increasing public confidence in companies» (EU, 2011 p.13).

Many are the studies regarding the upgrading of general guidelines, principles and standards in refence to CSR to support firms, trying to establish them, that are very important to inform about the social and environmental disclosure (OECD 2011). The firms should report CSR information about the objective, aims, intentions and progress. It is important in order to incentive the firms and improve their actions and performances.

One of the most common problem regarding the divulgation of the CSRD regards the destination of the reports, because some authors concentrate their interest on various aspects of social and environmental disclosure causing conflicting findings (Aerts et al., 2006; Du et al., 2010; Morhardt, 2010; Schaltegger and Burritt 2010).

Some researchers believe that the reporting practices are like a public relation in order to defense or mitigate the risks of the firms (Deegan 2002; Beck et al. 2010; Bondy et al. 2012; Chauvey et al. 2015); but there being changing this perspective in fact CSR disclosure is becoming part of the firms’ strategies in order to create added value (Pérez-Lopez et al. 2013; Russo Spena et al. 2018).

If the firms implementing a proactive approach to CSR disclosure have results not only in terms of ethical and reputation, but also in term of business (McElhaney 2009; Porter and Kramer 2006; Xueming and Bhattachary 2006), reducing operating risks and input costs, implementing long term orientation of management and potentially innovation, increasing market opportunities (Dhaliwal et al. 2011; Eccles et al. 2011; Guenster et al. 2011; Barnett and Salomon 2012; O¨ berseder et al. 2013). Nevertheless, some authors recently started to doubt on the real value of reporting (Arena et al. 2014). Others focused on the quality of information disclosed in CSR reports, considering communication with stakeholders as a part of assumed social responsibility (Szczepankiewicz and Mućko, 2016), and finding that CSR reporting practices did not improve the quality of disclosure (Michelon et al. 2015). Some authors observed that often companies tend to disclose CSR information by diluting the relevant CSR information with unnecessary information to build their desired images (Anugerah et al. 2018).

Several studies have attempted to investigate the effect of general contextual factors on CRS disclosure, but findings are not univocal. Factors that may influence CSR disclosure practices fall broadly into internal and external and are commonly classified in (Tilt 2016): 1. corporate characteristics (such as size, industry group, financial/economic performance and share trading volume, price and risk), 2. general contextual factors (such as country of origin, time, specific events, media pressure, stakeholders and social, political, cultural and economic context, 3. internal contextual factors, including different aspects of corporate governance.

Some studies focus on the meaning of social context, underling that three theoretical approach can be used: institutional theory that has become the predominant perspective in organization studies and has used to explain the external context of CSR; the cognitive/sensemaking perspective is been selected because of the important role of individual decision makers in CSR; cultural approach that describes culture as a key component of a multidimensional approach and it is the most widely integrated social context approach in CSR studies (Athanasopoulou et al. 2015).

A review of the literature, in the paper of Alshbili et al. 2019, shows that the level of CSRD practices is different between developed and developing countries, because developed countries have employed practical actions and procedures to push firms to reveal their CSR information. The differences between developed and developing countries suggest that CSRD practice is largely affected by the institutional context in which firms operate (Alshbili et al. 2019). Other studies, explaining the meaning of institutional factors – such as public and private regulations, the presence of institutionalized norms on corporate accounting, cultural systems, and the degree of openness to firm’s stakeholders-underline that the theoretical debate announces that CSRD are higher in countries with weaker institutions’ mechanisms. Companies, by adopting CSR initiatives, fill institutional voids and CSR seems to act as a substitute for institutional forces and that it is stronger in liberal market economies (Coluccia et al. 2018). In this line, several studies underline that the practices of CSRD are more popular in western part of Europe then in Central and Eastern European (CEE) countries and empirical studies are filling this gap (Hąbek 2017, Fijałkowska et al. 2018; Ehsan et al. 2018).

The meaning of social and institutional context is particularly relevant: different political, social, cultural and economic environments impact on reporting of CSR activities (Tilt 2016). On these topics some studies underline the important impact of the institutional environment (at the institutional, group, and firm level) on CSR reporting practices, analysing different levels of corporate governance mechanisms as determinant factors of the CSR reporting practices (Miras-Rodríguez et al. 2019).

Several studies have examined the role of government in CSR activities, analysing the political function, the political dependence and political monitoring (Marquis and Qian 2013), or examining both political function and economic function together (Wang et al. 2016). This study shows that: «political regulation through issuing regulatory disclosure does improve CSR reporting quality as people anticipated, but governmental economic control on listed firms cancels out the positive link between regulation and CSR reporting quality, in particular for government controlled larger firms, which gives insights into the reasons why recent studies of social disclosure regulation suggest that government interventions do not seem to resolve the problems that are generally attributed to voluntary disclosures» (Ibidem, p. 69).

#CSR #disclosure #environment #government policy #USA