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Stéphanie Mittelbach-Hörmanseder

CSR re­ports: What do they really tell us?

Taken to­gether, the an­nual re­ports pub­lished by 100 large en­ter­prises fill a total of 25,000 pages every year. In ad­di­tion to wide a range of quant­it­at­ive in­form­a­tion, these re­ports also dis­close the com­pan­ies’ cor­por­ate so­cial re­spons­ib­il­ity activ­it­ies. WU re­searcher Stéphanie Mit­tel­bach-Hörmanseder in­vestig­ates the reas­ons why there is so much vari­ance in how dif­fer­ent firms re­port their CSR activ­it­ies. Her re­search also shows that the con­tent of CSR re­ports can have ef­fects on com­pany value.

The EU’s Cor­por­ate So­cial Re­spons­ib­il­ity Dir­ect­ive has been in­cor­por­ated into Aus­trian na­tional law by means of the Sus­tain­ab­il­ity and Di­versity Im­prove­ment Act (Nach­haltigkeits- und Di­versitäts­verbesser­ungs­ge­setz, Na­DiVeG). Ef­fect­ive as of 2017, this act re­quires large pub­licly lis­ted com­pan­ies to dis­close not only busi­ness-re­lated facts and fig­ures but also non-fin­an­cial in­form­a­tion, for in­stance on en­vir­on­mental and so­cial is­sues, em­ployee re­la­tions, anti-­cor­rup­tion and com­pli­ance meas­ures, and top­ics re­lated to hu­man rights. Stéphanie Mit­tel­bach-Hörmanseder from WU’s Fin­an­cial Ac­count­ing and Audit­ing Group has teamed up with Kat­rin Hum­mel, Uni­versity of Zurich, and Char­les Cho and Dirk Mat­ten, Schu­lich School of Busi­ness, to in­vestig­ate in­ter­na­tional dif­fer­ences in how com­pan­ies word their re­ports and the reas­ons why their re­ports dif­fer. Her re­search is based on the hy­po­thesis that the in­sti­tu­tional en­vir­on­ments found in dif­fer­ent coun­tries have an im­pact both on the con­tent and on the tone of com­pan­ies’ CSR re­ports.

Lib­eral versus co­ordin­ated mar­ket econom­ies

The res­ults of the study con­firm this as­sump­tion. They provide clear evid­ence that the re­ports is­sued by com­pan­ies based in a lib­eral mar­ket economy like the US, where legal reg­u­la­tions are less ex­tens­ive, dif­fer from those pub­lished by com­pan­ies based in co­ordin­ated mar­ket econom­ies such as Aus­tria, which are char­ac­ter­ized by stricter and more far-reach­ing reg­u­la­tion. “In par­tic­u­lar, we’ve found sig­ni­fic­ant dif­fer­ences in tone when com­par­ing the dif­fer­ent CSR re­ports. Our res­ults show that com­pan­ies based in lib­eral mar­ket econom­ies tend to use more pos­it­ive lan­guage. Clearly, one of the reas­ons is that in lib­eral mar­ket econom­ies, com­pan­ies are un­der greater so­cial pres­sure to re­port on CSR-re­lated top­ics, which may not even be sub­ject to any legal reg­u­la­tions in those coun­tries,” ex­plains Mit­tel­bach-Hörmanseder.

A fo­cus on edu­ca­tion, so­cial com­mit­ment, and par­ental leave

In their re­ports, com­pan­ies based in lib­eral mar­ket econom­ies place sig­ni­fic­antly more em­phasis on top­ics like edu­ca­tion, phil­an­thropy, and par­ental leave policies. In typ­ical co­ordin­ated mar­ket econom­ies, edu­ca­tion is seen as a pub­lic ser­vice, while private edu­ca­tional in­sti­tu­tions and private dona­tions to such in­sti­tu­tions play a more im­port­ant role in lib­eral mar­ket econom­ies. As a con­sequence, com­pan­ies in lib­eral mar­ket econom­ies are more strongly in­volved in com­munity activ­it­ies and make more dona­tions – and go into more de­tail about these activ­it­ies in their CSR re­ports, as com­pared to their European coun­ter­parts. The two types of mar­ket econom­ies also dif­fer in how they ap­proach the is­sue of par­ental leave and ma­ter­nity pro­tec­tion. “European coun­tries of­fer longer peri­ods of par­ental leave and higher com­pens­a­tion com­pared to the US, where there is al­most no le­gis­la­tion in place to pro­tect work­ing moth­ers after giv­ing birth. For this reason, many com­pan­ies em­phas­ize their so­cial com­mit­ment in their re­ports to strengthen their pro­file as at­tract­ive em­ploy­ers. You can clearly ob­serve this tend­ency in cor­por­a­tions like Amazon, Ap­ple, Google, and Face­book,” Stéphanie Mit­tel­bach-Hörmanseder points out. “CSR re­port­ing also gives com­pan­ies the op­por­tun­ity to dif­fer­en­ti­ate them­selves from their com­pet­it­ors,” she ex­plains.

CSR dis­clos­ure can af­fect a com­pany’s value

Pre­lim­in­ary res­ults from the European con­text also sug­gest that CSR re­port­ing on the top­ics re­quired by EU le­gis­la­tion has cer­tain ef­fects on com­pany value. Even though such ef­fects ex­ist, however, the dis­clos­ure prac­tices of dif­fer­ent firms are not uni­form and vary from coun­try to coun­try. The pre­lim­in­ary find­ings show cer­tain tend­en­cies which in­dic­ate that the dis­clos­ure of some CSR top­ics may even have neg­at­ive ef­fects on firm value. The re­search is still on­go­ing, however, and fi­nal res­ults on these aspects are ex­pec­ted to be­come avail­able in the course of the year 2018.

About the study

The study uses spe­cific tex­tual ana­lysis tech­niques to in­vestig­ate Eng­lish-lan­guage CSR re­ports is­sued by the largest pub­licly lis­ted com­pan­ies from nine coun­tries in the period from 2008 to 2015. The sample com­prises a total of 1,153 items.