degree project1471703/fulltext01.pdf · in reutlingen, germany, 24.08.2020 _____ iii...

Degree Project

Master’s degree

Differences in CSR Disclosure

Does the Content of CSR Disclosure vary between Code Law and Common Law Countries?

Author: Mona Zimmerer-Benz

Supervisor: Asif M Huq

Examiner: Peter Hultén

Subject/main field of study: Business Studies

Course code: FÖ3027

Higher education credits: 15

Date of examination: August 24, 2020

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ii

Declaration of own Work

I hereby declare that I am the sole author of this master thesis and that I have not used any

sources other than those listed in the bibliography and identified as references. I further

declare that I have not submitted this thesis at any other institution in order to obtain a degree.

(Signature)

In Reutlingen, Germany, 24.08.2020 _____________________

iii

Acknowledgements

First and foremost, I would like to express my sincere gratitude to my thesis supervisor, Asif

M Huq, for his continuous support, guidance and advice in my research process and his valuable

feedback.

I would like to show my appreciation to Wensong Bai for reading through my many

unstructured drafts and giving me a valuable second opinion throughout the process.

I would also like to thank my parents, Uta Zimmerer and Rainer Benz, for encouraging me in

my decision to study in Sweden and for supporting me.

Lastly, I would like to thank my friend Polona Cigoj for her support and work as research

assistant.

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Abstract

Only a handful of studies focuses on the relationship between the legal origin

and the content of CSR reports, based on the institutional differences. The

previous studies have contradicting results. The paper aims to add to the body

of research by analyzing the relationship between the legal origin and its

effect on the content of CSR disclosure. To analyse the content a scoring

index is developed following Clarkson, Li, Richardson, & Vasvari, 2008 and

Ong 2016. 45 CSR reports from 8 different countries are analysed and the

research period is 2018 or FY 2019.

The findings suggest that companies from code law countries do publish more

in-depth CSR reports. The key findings are that code law countries disclose

more employment related information and that institutional regulations lead

to better disclosure. Overall, this study extends the discussion on the effects

of the legal origin.

Key words:

CSR reports, sustainability reports, legal origin, code law, common law, content of CSR

reports, institutional theory, isomorphism, scoring index

v

Table of Contents

Declaration of own work ……………………………………………………………………… ii

Acknowledgements ………………………………………………………………………….. iii

Abstract ………………………………………………………………………………………. iv

List of Tables …………………………………………...…………………………………… vii

List of Figures ………………………………………………………………...……………... vii

List of Abbreviations ……………………………………………………………………….. viii

1 Introduction ............................................................................................................................. 1

2 Key Concepts & Theoretical Framework ................................................................................ 5

2.1 Corporate Social Responsibility (CSR) ............................................................................ 5

2.1.1 Global Reporting Initiative ........................................................................................ 6

2.1.2 Paris Agreement ........................................................................................................ 7

2.2 New Institutional Theory ................................................................................................. 7

2.3 Institutions and Stakeholders in Code Law and Common Law Countries .................... 11

3 Research Design .................................................................................................................... 15

3.1 Sampling & Data Collection Method ............................................................................. 15

3.1.1 Different Institutional Settings ................................................................................ 17

3.2 Disclosure Assessment Method ..................................................................................... 19

3.2.1 Scoring Index .......................................................................................................... 19

3.2.2 Content Analysis Method ........................................................................................ 21

3.2.3 Statistical Method .................................................................................................... 25

3.3 Limitations ..................................................................................................................... 26

4 Results ................................................................................................................................... 27

5 Discussion ............................................................................................................................. 35

5.1 Country Level ................................................................................................................. 35

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5.2 Legal Origin ................................................................................................................... 36

5.3 Sectors ............................................................................................................................ 38

6 Conclusion ............................................................................................................................. 39

7 References ............................................................................................................................. 41

8 Appendix ............................................................................................................................... 48

Appendix A: Overview of Articles from Chapter 2.2 .......................................................... 48

Appendix B: Overview Companies ..................................................................................... 49

Appendix C: Detailed Scoring Criteria ................................................................................ 53

Appendix D: Detailed Scoring Index and Differences to Clarkson et al’s (2008) and Ong’s

(2016) Scoring Indices ......................................................................................................... 54

Appendix E: Reports used to develop Search Words & Search Words ............................... 58

Appendix F: Statistical Analysis .......................................................................................... 60

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List of Tables

Table 1 Overviews of Laws & GRI Standards Accordance ..................................................... 17

Table 2 All Score Results ......................................................................................................... 25

Table 3 Results for the Total Score based on Countries .......................................................... 27

Table 4 ANOVA Results Countries ......................................................................................... 28

Table 5 ANOVA Results Legal Origin .................................................................................... 29

Table 6 ANOVA Results Sectors ............................................................................................. 30

Table 7 Overwiev of the accepted and rejected null hypothesis .............................................. 31

Table 8 ANOVA Results GRI-Standards ................................................................................. 32

Table 9 ANOVA Results Legal Origin excl. Canada .............................................................. 33

Table 10 ANOVA Results Legal Origin of European Countries ............................................. 34

List of Figures

Figure 1 Shortened Scoring Index ............................................................................................ 20

Figure 2 Extraxt 1 CSR Report Groupe PSA (PSA Groupe, 2018, p. 208) ............................. 23

Figure 3 Extract 2 CSR Report Groupe PSA (PSA Groupe, 2018, p. 193) ............................. 23

Figure 4 Extract 3 CSR Report Groupe PSA (PSA Groupe, 2018, p. 209) ............................. 24

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List of Abbreviations

CSR – Corporate Social Responsibility

GHG – Greenhouse Gas

GDP - Gross Domestic Product

GRI – Global Reporting Initiative

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1 Introduction

The reactions of investors and the public to the Volkswagen Emission Gate Scandal

2015 show the importance of corporate socially responsible behaviour. After Volkswagen

admitted to manipulating the emissions of diesel cars, by using a software, that lowered the

emission when the car was being tested, their stocks fell drastically. Previous to the scandal,

the stocks were at their peak with approximately €250 and they fell to approximately €100

within months (Börse Frankfurt, 2020). Corporate social responsibility (CSR) reports help

corporations to communicate information about the effects of their business practices on issues

of public concern, such as public accountability, environment and governance (Sethi, Martell,

& Demir, 2017). The demand of the stakeholders for transparency has increased, as well as the

research dedicated to environmental and social accounting topics (Bini & Bellucci, 2020).

The institutional determinants of the environment, in which the company operates,

affect the reporting behaviour of companies. Companies are set in a vast area of political, legal,

social and economic institutions, that influence their behaviour (Campbell, 2007). Institutional

and regulatory initiatives lead companies to disclose non-financial information. Furthermore,

in the last years different governments, market regulators and operators started to adopt policies

and regulations which require the disclosure of the environmental and social impact of

companies (Bini, Bellucci, & Giunta, 2018). The author of this paper will narrow down their

focus solely to the influence of the legal environment on CSR reporting behaviour. Attention

will be given to the code law and common law legal systems and their institutions and

accounting standard settings. The author chose the legal environment, because the state is the

biggest and most influential institution. Also, the findings in this area are limited and past

research is contradictory. The importance of stakeholders and shareholders varies between the

two legal systems. Code law countries are stakeholder-oriented, while common law countries

are shareholder-oriented. Van der Laan Smith, J., Adhikari, and Tondkar (2005) argue, that

stakeholders in countries with a stakeholder orientation hold more power and legitimacy,

compared to countries with a shareholder orientation, which results in management being more

likely to engage and disclose CSR activities. Ball, Kothari, and Robin (2000) argue that

shareholder orientation leads to a demand from the investors for high quality reports and that

the external equity and debt markets monitor the management better. According to Matten and

Moon (2008) worker rights are an important topic in CSR reports from common law countries

(in the article’s case the USA), while CSR reports from code law countries (in the article’s case

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Europe) address these issues less, because they are mandated by the law. When it comes to

environmental issues, the USA have less regulations compared to Europe, which leads to

voluntary actions of companies, while Europeans try to fulfill the mandatory standards. Another

difference that can be expected is the focus on philanthropic activities in common law countries.

The voluntary nature and sole control of the content presents the companies with certain

advantages and the public with concerns surrounding CSR reports. It enables companies to

portray themselves and their behaviour in the most favourable way. Moreover, it allows the

companies to engage in window dressing, highlighting the issues and actions, that shed a good

light, rather than disclosing relevant and detailed information. In case of Volkswagen, they

stated in their report 2014 that they will invest “€85,6 billion in new models, environmentally

compatible drive technologies and optimized production processes” between 2014 and 2019

(Volkswagen AG, 2014, p. 37), which portrays them as an environmentally responsible and

innovative company. However, they never addressed, that the engineers cheated on the

emission tests in 2005. Furthermore, the Chairman Hans-Dieter Pötsch confessed on December

10, 2015 that even after engineers found a solution, they “they chose to keep on cheating, rather

than employ it” (Goodman, 2015). Another issue presented by CSR reports is their non-

standardized character, both concerning the content and the style of reporting. The lack of a

strictly regulated format makes the quality of these reports hard to compare (Sethi et al., 2017).

Many researchers identified the absence of a standardised sustainability reporting framework

as an issue (Gray, Javad, Power, & Sinclair, 2001; Dingwerth & Eichinger, 2010; Lenssen,

Bevan, Fontrodona, Perrault Crawford, & Clark Williams, 2010). Furthermore, Gray (2010,

p. 50) claims that CSR reports do not portray genuine accounts of sustainability but are

“powerful fictions” and that companies use them to proclaim CSR and to distract from the

actual CSR performance. The findings of Patten and Zhao (2014) support this argument. They

found companies from the retail industry in the United States were disclosing more information

about the strategy and initiative programmes than relevant performance data. The companies

which were assessed to be environmentally responsible did not have a high environmental

performance. While Volkswagen did address the actual performance, they committed fraud by

using the manipulated data.

However, CSR reports can be a valuable source of information and the rise of the

information-based economy has increased the importance of non-financial indicators among

the management and the stakeholders. Some academic studies state that including non-financial

indicators in a company’s performance measuring system supports its strategic alignment and

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has a positive impact on the organisational effectiveness (Bini, Dainelli, Giunta, & Simoni,

2019). Moreover, non-financial indicators are necessary “to understand past performance,

future potential and make well-informed investment decisions” (PwC, 2015 as citied by Bini et

al., 2019, p. 6), because they also include information about critical aspects of the business,

which cannot be characterized by financial measures, e.g. human capital, relational capital or

organisational capital (Bini et al., 2019). Therefore, it is crucial for companies, report users,

like investors or the general public, and policy makers, to understand how the content of CSR

reports varies between different countries. Understanding the differences between countries

will help the report users in forming their expectations for the reports and judging their

credibility. Furthermore, it enables policy makers and regulators to target areas of deficiencies

country or aspects wise (Van der Laan Smith, J. et al., 2005). Additionally, the information

about sustainability impacts and performance support the management in their decision-

making, planning, implementing, and controlling activities (Yusoff, Yusoff, Abd Rahman, &

Darus, 2019).

Previous research ( Chih, Chih, & Chen, 2010; Fernandez-Feijoo, Romero, & Ruiz,

2014; Sethi et al., 2017) on the influence of the legal system and institutions on reporting

behaviour have found contradicting results. Chapter 2.3 includes a detailed review on the

previous research based on the new institutional theory. The contradicting findings show that

further research regarding the differences in CSR reports is necessary. The aim of the paper is

to identify if the CSR disclosure varies between code law and common law countries.

Therefore, the research question is: Does the content of CSR disclosure vary between code law

and common law countries?

This research differs from previous research through its mixed methods approach. Most

researchers relied on quantitative data like the amount of published reports in a certain

timeframe or the length of the reports. A limitation of these studies is their focus on the surface

manifestation of data and not the content (Khan, Lockhart, & Bathurst, 2018). The author’s

mixed methods approach includes a qualitative content analysis, based on a self-developed

scoring index, followed by a statistical analysis. The scoring index is divided into different

categories, the environmental and the social category. As far as the author knows, only Sethi

et al. (2017) use a similar mixed methods approach by applying a self-constructed quality index.

Therefore, this research adds to an underrepresented area of study and to the literature of CSR

disclosure.

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The key findings of the study show significant differences between code law and

common law countries regarding the total score and the social score. The environmental score

was not significantly different, though. The findings implicate that the institutional regulations

in code law countries do lead to more in-depth CSR disclosure.

The paper is structured into five chapters. First, the key concepts and theoretical

framework are explained, in order to understand the terms CSR, legal origin and to understand

the new institutional framework. Then the research methods and the development of the scoring

index are explained. In the third chapter, the results are presented which are followed by the

discussion of the results. In the conclusion the research question is answered, and future

research options are discussed.

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2 Key Concepts & Theoretical Framework

In this chapter CSR and the new institutional theory are explained furthermore CSR

reporting behaviour will be analysed based on the institutional theory and the influences of

isomorphism.

2.1 Corporate Social Responsibility (CSR)

There is not one universal definition of CSR. There are various aspects that seem to be

important for CSR, but their inclusion in the definitions varies considerably. In order to

approach a definition of CSR, some theoretical approaches are presented here (Tanner,

Bamberg, & Gude, 2018).

Corporate responsibility is often associated with the term sustainability or sustainable

action by organizational members. According to the concept of Elkington (1994), sustainability

of organizations comprises three areas (triple bottom line), which are characterized by

economic, environmental and social goals. Only the equal implementation of these three areas

leads to long-term success of the organization. This equal implementation is, however, partly

seen as inadequate. It is argued, that in the practical application of the triple bottom line only

the economic goals are actually considered and that there is a vague commitment to social and

environmental goals, so that the latter goals cannot be effectively pursued (Norman &

MacDonald 2004). Others see a strength in the flexible application of the approach, since

organizations can adapt the concept to their needs (Slaper 2011).

One model that deals more specifically with the social responsibility of organizations is

the pyramid model by Carroll (1991). This distinguishes four levels of responsibility. The basis

is economic responsibility, which means that organizations should at least cover their costs.

Building on this, there is a legal responsibility according to which organizations are expected

to comply with the statutory provisions. The third level is ethical responsibility. This describes

the expectation that organizations will act fairly, ethically and without damage beyond the legal

framework. The top level, philanthropic responsibility, describes a charitable commitment to

improve the general quality of life. Carroll (1991) emphasizes that the social responsibility of

organizations goes beyond the economic and legal level. This means that ethical and

philanthropic responsibility are of particular importance in this model. At the same time,

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economic and legal responsibility are a kind of the basis for the upper levels, which must be

given in order to be able to carry out the other levels.

Another central approach is the stakeholder theory (Freeman, R. E., 1994). The theory

assumes that the long-term economic success of an organization depends on the extent to which

it considers the interests of its stakeholders or is able to build relationships with the different

interest groups. The term stakeholder includes, according to Freeman (1984), all individuals

and groups that can influence or can be influenced by the corporate goal. Thus, the capital

providers, supervisory board, board of directors, employees, customers, suppliers, as well as

the general public and the public sector, the media, trade unions, competitors or economic

chambers and special interest groups such as Greenpeace. This theory represents an expansion

of the shareholder theory (Friedmann, 1970),which sees responsibility only towards the

shareholders1.

These three briefly described approaches form the essential foundations for

understanding CSR. In summary, the following implications can be derived:

• CSR goes beyond an economic responsibility of organizations and

• CSR includes the interests of the relevant stakeholders.

Two factors that can possibly influence the CSR reporting behaviour are the GRI standards

and the Paris Agreement. The use of the GRI standards is widely spread and the Paris

Agreement was signed by all countries of the sample. Both will be shortly explained in the

following sub-chapters.

2.1.1 Global Reporting Initiative

KPMG (2017) reported that the GRI guidelines are the most adopted guidelines for

voluntary CSR reports. The GRI guidelines were developed at the end of the 1990s and

introduced in 2002. Since then, the guidelines have been continuously developed and since

2016, they are GRI-Standards and not guidelines.

1 “[…] there is one and only one social responsibility of business – to use it resources and engage in activities

designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open

and free competition without deception or fraud.” (Friedman September 13, 1970; p. 6)

7

Companies have three options according to which they can meet the GRI standards. The “in

accordance – core” option is chosen by most companies. It requires at least one associated

disclosure to be reported for each topic that has been defined essential. The “in accordance –

comprehensive” option makes answering all disclosures that are assigned to an essential topic

mandatory. Also, a third option is available with the GRI standards: GRI-Referenced. It can be

selected by all organizations whose reports are based on the GRI but are not in accordance with

the options “core” or “comprehensive”. A common misunderstanding is to compare the

reporting options with quality standards. A report that fulfills the comprehensive option does

not need to be better than a core or referenced report. The options merely represent opportunities

for companies to tailor their reporting to their individual possibilities and needs. The use of a

framework also has little to say in this context. The quality of a report cannot be assessed on

the basis of its structure, but only on the basis of its content (Bini & Bellucci, 2020).

2.1.2 Paris Agreement

The Paris Agreement was signed by 189 countries and is a combined effort to battle

climate change and to adapt to its effects. It entered into force in 2016. The central aim is to

keep the global temperature rise under 2°C above pre-industrial levels and to further limit the

increase to 1,5°C. Another aim is to strengthen the abilities of countries to handle the impacts

of climate change. The agreement stated that “appropriate financial flows, a new technology

framework and an enhanced capacity building framework will be put in place, thus supporting

action by developing countries and the most vulnerable countries, in line with their own national

objectives. The Agreement also provides for enhanced transparency of action and support

through a more robust transparency framework” (UNFCCC, 2020). All parties had to come up

with nationally determined contribution. Therefore, they had to translate the agreements into

national law. All of the sample countries signed the Paris Agreement. Even though the United

States have resigned, this enters into force in 2020. Therefore, all the countries were part of the

agreement during the research period 2018.

2.2 New Institutional Theory

The theoretical foundation of this research is the new institutional theory. As previously

mentioned, company behaviour varies based on the institutional determinants of its

environment. Hence, this research aims to analyse if the legal systems, as an institutional

8

determinant, cause differences in reporting behaviour between code law and common law

countries. Therefore, it is crucial to understand the new institutional theory, which will be

explained in this following chapter.

The neoclassical organizational theories assume perfect and complete markets and

rational actors. These approaches are questioned in the new institutional economics (Hochhold

& Rudolph, 2009). Coase (1984, p. 230) stated, that the “objection essentially is that the theory

floats in the air. It is as if one studied the circulation of blood without having a body. Firms

have no substance. Markets exist without laws and therefore without any clear specification of

what is bought and sold.” The core idea of the new institutional economics is that institutions

are important for economic processes. The aim is to analyse institutions, their structure,

efficiency and change. New institutional economics are based on methodological

individualism. They explain collective phenomena by establishing a connection to individual

behaviour. Thus, collective phenomena, such as organisations or companies, have no identity

of their own and no options for action of their own; every action can be traced back to

individuals. The individuals are utility maximisers, which only act rational to a limited extend

(Alparslan, 2006). According to North (1990) institutions form the basic rules for exchanges

between people in a political, economic or social context. Institutions primarily serve to avoid

uncertainties by giving the individual certain rules of behaviour that limit their options in

everyday life. This can e.g. the way of greeting another person or guidelines for their behaviour

in traffic. During this reduction of uncertainties, a stable public order is established. Institutions

form the framework for human interaction and can both be formally written down and also be

present in unwritten norms of behaviour. There is a clear differentiation between institutions

and organizations: Institutions are to be understood as rules that determine how the "game" is

played. Organizations are individuals who come together to achieve a common goal. From this

point of view, they are the “players” who move within the framework of the rules. However,

institutions are creations of individuals and are evolved and altered by individuals. Variations

in relative prices and in players’ tastes are the main source for institutional change. Changes in

relative prices include changes in the ratio of factor prices or cost of information and changes

in technology. But, not all changes can be explained based solely on economic factors, North

(1990) explains that the change of societal norms (changes in taste), can also bring institutional

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change. Especially, if the structure of institutions enables the individuals to express their

ideologies at a low cost for themselves2.

Matten and Moon (2008) state that the new institutionalism predicts the amplified

homogenization of CSR in different countries. This occurs through a regulative, normative, and

cognitive processes that leads to standardized and rationalized standards in CRS practices. This

process is called isomorphism.

Erckrath (2020) explains isomorphism based on Meyer and Rowan (1977). According

to Meyer and Rowan (1977) isomorphism in the institutional environment is closely connected

with the acquisition of legitimacy and has various consequences for the organization. The

organization demonstrates the appropriateness of its actions through institutional isomorphism.

It adopts elements that are legitimized externally rather than in terms of their efficiency. By

aligning the formal structures, organizations also adopt external or ceremonial evaluation

standards for the assessment of structural elements, and they promote stability. Overall, the

isomorphism with the institutional environment supports the success and survivability of the

organization. DiMaggio and Powell (1983) identify three mechanisms that lead to structural

adjustments: isomorphism through coercion, through mimesis and through normative pressure.

The distinction between these three mechanisms has more of an analytical character; in reality,

overlaps are to be expected. Coercive isomorphism is triggered by formal and informal

pressures on the organization. The legal environment that organizations share with one another

can be seen as an essential impetus for structural adjustments and similar behavior. At the same

time, however, the dependence on other organizations (e.g. of a technical nature in suppliers in

the automotive industry) or cultural expectations in society can lead to an implementation of

certain practices or structures that is viewed as without alternative. Even if these structures

primarily have a ceremonial character, DiMaggio and Powell assume that they have an impact

on the organization. The second mechanism, isomorphism through mimesis, arises from the

uncertainty that can arise, for example, from ambiguous goals or unclear technologies. In such

situations, organizations tend to copy other organizations that are perceived as successful or

their structures and practices. This imitation, which can take place even without the knowledge

of the model organization, is what DiMaggio and Powell (1983) call modeling. It is quite

conceivable that an inadequate attempt at modeling leads to unexpected but successful side

2 North (1990) uses the abolition of slavery in the USA as an example. It was still profitable, however the societal

perception changed, and the electoral process enabled people to express their beliefs. However, the institutional

structure did not allow slave owners to influence the voters, for example by bribing them.

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effects that lead to new innovations, which in turn stimulate imitation. Structural adjustments

that are stimulated due to mimetic processes can also serve the organization to legitimize its

practice and perform ritual functions. The authors identify normative pressure as the third

source of structural changes in organizations. Professions play an important role in this

isomorphism mechanism (DiMaggio & Powell, 1983). They generate normative pressure and

offer their members an orientation framework that develops normative ties and leads to the

preference for specific problem-solving patterns across all cases and organizations (Hasse &

Krücken, 2009). Professions are characterized by a common cognitive basis and legitimation

that grows from their professional (mostly university) qualification. In addition, members of a

profession are organized in networks that extend beyond the individual organization and are

thus conducive to the rapid spread of organizational models. DiMaggio and Powell emphasize

the importance of educational institutions as well as professional and business associations in

the formation of professional standards. The selection of personnel increases the normative

pressure on organizations, as new employees are often selected from the same industry, from

certain training institutions and with the help of certain recruitment strategies, so that career

paths are similar and almost interchangeable (DiMaggio & Powell, 1983; Erckrath, 2020).

Based on the isomorphism process, the author assumes that there will be no significant

differences between the countries, legal origin or sectors, because the best performing

companies of the countries with the highest GDP are chosen. They operate under similar

circumstances. Thus, the first hypothesises is:

Hypothesis 1a: There will not be significant differences between countries regarding

the content of CSR disclosure.

Hypothesis 1b: There will not be significant differences between legal origin regarding

the content of CSR disclosure.

Hypothesis 1c: There will not be significant differences between sectors regarding the

content of CSR disclosure.

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2.3 Institutions and Stakeholders in Code Law and Common Law Countries

Countries without a written set of rules, that follow a body of unwritten laws, which are

legal precedents established by the courts, follow the common law (Segal, 2019). Common law

focuses on “dispute resolving” (Damaška, as cited in La Porta, Lopez-de-Silanes, & Shleifer,

2008). Countries categorized as common law countries are Australia, Canada, Hong Kong,

India, New Zealand, the UK and the USA (Segal, 2019). Usually, these countries are also

shareholder oriented (Van der Laan Smith, J. et al., 2005).

If countries have a codified set of rules and the government has more regulatory power,

they are code law countries (La Porta et al., 2008). Code law can be considered as “policy

implementing” (Damaška, as cited in La Porta et al., 2008). Usually, these laws have been

developed and updated over long periods of time, some origination in Roman law (La Porta et

al., 2008). Countries considered as code law countries are European countries like France,

Germany, Italy and the Scandinavian countries, as well as Japan (Segal, 2019). These countries

normally have a stakeholder oriented approach to corporate governance (Van der Laan Smith,

J. et al., 2005).

Matten and Moon (2008) claim that CSR behavior of companies in different countries

differs, due to historically embedded national institutional frameworks. According to Carroll

(1991), CSR behavior is defined as a set of legal, economic, ethical and voluntary actions, that

affect the future financial performance of the firm, either directly or indirectly. Sethi et al.

(2017) add that an institutional framework that encourages CSR behavior of companies also

influences the disclosure of CSR reports. Companies originating from countries, with CSR

encouraging institutional frameworks, are more prone to report high quality CSR information.

Campbell (2007) presents the opinion that companies CSR behavior varies, based on the

regulatory sanctions of these institutions. Matten and Moon (2008) have found significant

differences regarding the language of CSR reporting between European and American

companies. More US companies claim CSR involvement compared to their European

counterparts.

Whitley (1999) first identified the political system, as a part of the institutional

framework. Matten and Moon (2008) identify the power of the state as a key difference between

the US and Europe. In Europe, the governments are usually more active in the economic and

social activities of the state. It is also easier for external stakeholders to influence the public

policy making processes. Regarding the financial system, the stock market is central source of

12

capital for US companies, therefore US companies need to prove accountability to their

investors. Chih et al. (2010) add that legal systems, which protect the external investors,

discourage companies to act socially irresponsible. In Europe, a small number of large

investors, mostly banks, play a key financing role. And finally, regarding the labour system,

labour unions have strong position in Europe, which made the labour issues part of the

negotiations at the national/government level, opposed to the corporate/firm level in the US.

Consequently, it could be argued that European CSR is rooted in labour law, industrial relations

and corporate governance. Following this it can be concluded, that the lack of employment

reporting in European CSR disclosers, can be linked to these countries’ institutional

frameworks, with its established laws and codified rules (Matten & Moon, 2008).

Institutional frameworks, such as the ownership structure and corporate governance

systems, influence the role stakeholders have in a society. According to Van der Laan Smith, J.

et al. (2005), the definition of the stakeholder’s role in a society affects the quality of CSR

reports. The authors claim that companies from countries with a stakeholder oriented corporate

governance system, in the article's case Norway and Denmark, provide higher quality CSR

reports, than companies located in countries with a shareholder orientation, in the article's case

the USA. Stakeholders in countries with a stakeholder orientation generally hold more power

and legitimacy, compared to countries with a shareholder orientation. This results in

management being more likely to engage and disclose CSR activities (Van der Laan Smith, J.

et al., 2005).

Sethi et al. (2017) claim that corporate governance systems and managerial decisions

on disclosure are also influenced by the legal system of a country. A common law legal regime

offers higher protection to shareholders and according to Ball et al. (2000) its accounting

practices are set in the private sector. A code law legal regime enforces the role of stakeholders

in the interaction with management and according to Ball et al. (2000) is highly influenced by

the political system. Here Ball et al. (2000) argue, that the political influence on accounting

standards weakens the quality of disclosers. The author classifies the USA, the UK, Canada and

Australia as common law countries and Germany, France and Japan as code law countries.

On the other hand, Van der Laan Smith, J. et al. (2005) claim that the ownership

structure, as found in code law countries, where ownership is more concentrated and

government ownership is present, influences the stakeholder-company relationship, increasing

the quality of CSR reports. Equally, Campbell (2007) argues that the effectiveness of state

regulations may be enhanced by stakeholder monitoring. The likelihood that corporations will

13

act in a socially responsible way is increased by the importance of stakeholders. In code law

countries, the government establishes and monitors the enforcement of national accounting

standards, usually with the help of political stakeholder groups such as labour unions. This

political influence encountered by companies, leads to a stakeholder orientated corporate

governance system. According to Ball et al. (2000) this stakeholder orientation leads to an

accounting income disclosure, influenced by the stakeholder’s immediate payouts of “dividends

to shareholders, taxes to governments, and bonuses to managers and employees” (Ball et al.,

2000, p. 3). Instead of reflecting the information needed by investors. Thus, giving managers

more space to misstate financial statements and to window dress on CSR reports, as there is

also less external independent auditing. While in common law countries the law originates from

individual actions in the private sector and following legal procedures, also regarding

accounting standards, that evolve by practice. All accounting standards arise in an accounting

market, not by the government. Typical for common law countries is the shareholder oriented

corporate governance system, where shareholders alone elect the members of the board of

directors. Compared to code law countries, members of the board will unlikely hold

concentrated blocks of stocks, so there will be more monitoring of the management by external

equity and debt markets. Thus, the immediate payouts influence the accounting income

disclosure less, increasing the overall quality of the firm’s annual disclosure (Ball et al., 2000).

Campbell (2007) presents a counter argument to Ball et al. (2000), that the concentrated

blocks, of stocks which are held by banks and other financial institutions, result in a higher

accountability of the management to shareholders. In common law countries stock ownership

is a lot more diffused, there is much less holding of concentrated blocks of stocks by financial

institutions, resulting in less consultations with the management. This gives the management

more decision-making autonomy and less accountability to investors. Additionally, the

maximization of profit and shareholder value present in common law countries, prevents

companies from acting in socially responsible ways. Matten and Moon (2008) present some

reasons why the quality of CSR disclosures might seem better in common law countries. The

authors claim that companies in code law countries act in accordance with set laws and ethics,

but do not claim ownership and authorship of these CSR actions thus not disclosing them. Their

actions are considered as reflections of the institutional environments they are embedded in.

Fernandez-Feijoo et al. (2014) observed similar behaviour in the countries of northern Europe,

they categorized their behaviour as cautious. Companies with cautious behaviour do not

disclose in depth however they do include credibility tools. Companies in common law

14

countries perceive their CSR actions as voluntary, deliberate and strategic decisions, thus

disclosing them in their CSR reports (Matten and Moon, 2008). Contrariwise, Gallego-Álvarez

and Quina-Custodio (2017) found companies headquartered in code law countries to disclose

more information. These companies were also more likely to report on stakeholder issues.

The findings from Chih et al. (2010) support the arguments presented by Campbell

(2007), Matten and Moon (2008) and Van der Laan Smith, J. et al. (2005) and disclaim the

arguments presented by Ball et al. (2000). By analysing 2.500 companies from the Dow Jones

World Index, they showed that companies in countries with a strong legal framework

enforcement, participate in more CSR activities and that companies in countries with a

shareholder orientation conduct and report less CSR activities. The reason for this is, that

countries with greater shareholder protection will be led towards maximizing the shareholders

welfare on the expanse of all the other stakeholders.

Chih et al. (2010) findings also argue against the claims of La Porta, Lopez-de-Silanes,

Shleifer, and Vishny (1997), which focused on the positive impact of shareholder protection

rights. La Porta et al. (1997) argue that common law countries protect shareholders and creditors

the most from the expropriation of the management, while the code law, especially French code

law countries the least. The authors linked that with the fact, that code law countries have

smaller equity markets and lower access to equity finance, making them have highly

concentrated ownerships of stocks. As already mentioned, Ball et al. (2000) link this high

concentration of stock with lower quality annual disclosure information.

On the other hand, the findings presented by Sethi et al. (2017) support Ball et al.’s

(2000) argument that a shareholder orientation leads to a demand from the investors for high

quality information, contrary to the authors’ expectations. The statistical analysis of 104 firms’

CSR reports showed that common law countries presented higher quality CSR disclosures,

compared to companies situated in code law countries.

Based on the literature presented above, the following hypothesis was formed:

Hypothesis 2: Companies headquartered in code law countries will publish more in-

depth CSR disclosure.

A table containing the main themes of the articles can be found in the Appendix A.

15

3 Research Design

This thesis is based on the deductive approach, as the hypothesises were derived from

existing theory and will be empirically tested with the collected data. The mixed methods

approach was chosen. The content analysis of the CSR reports is qualitative, while the following

empirical testing is quantitative. The legal origin of a company is determined by its headquarter.

The legal origin is the independent variable and the dependent variable is the content of the

CSR disclosure. The research design was based on Sanders et al. (2016) who explain that data

collection and analysis based on numerical data are linked to the quantitative research design.

The study itself is explanatory, because the aim is to explain the relationship between two

variables.

First, the following chapter will explain the methods used for sampling and data

collection. And give some more background information about the institutional setting of the

chosen countries. Afterwards the methods used for disclosure assessment are explained, the

development of the scoring index, the method for the content analysis and the statistical

methods.

3.1 Sampling & Data Collection Method

The data was collected from listed companies of different countries in the chemical and

automotive sectors. The author chose these sectors, because previous research (Chih et al.,

2010; Sethi et al., 2017) focused on the financial sector and the author wanted to take a different

approach and add further to the research body. Both sectors have a high impact on the

environment, because they are responsible for a large part of the usage of resources and generate

a lot of waste (OECD, 2009; Brammer & Millington, 2005). The chemical sector is perceived

as one of the sectors with a high environmental impact (Brammer & Millington, 2005).

Furthermore, both sectors are similar and part of the producing industry.

Listed firms were chosen, because they have a greater impact on the stakeholders.

Furthermore, findings from Sethi et al. (2017) show the significance of firm size and to it related

features, such as media attention and public visibility, on their CSR disclosure practices.

Unsurprisingly, larger firms have more public visibility and attract more media attention. This

makes them subject to both higher public and regulatory pressures. Also, listed companies are

16

usually subject to higher regulatory standards hence, they have to disclose more information.

To homogenize the sample, the author decided to select companies with a similar setting. Also,

a lot of small enterprises do not publish CSR reports.

The sampling technique is non-probability sampling and using the purposive sampling

technique. The countries are selected based on their gross domestic product (GDP) and weather

they are classified as code law or common law countries. For each legal system the top four

countries were chosen. The data was retrieved from “worldometers.com,” The countries with

the highest GDP are chosen, as it is a measure for the economic performance of a country,

therefore ensuring comparability. The chosen common law countries are, the United States,

India, the United Kingdom and Canada. The code law countries are China, Japan, Germany and

France3.

For each country and sector, the author planned to choose the three listed companies

with the highest revenue. Thus, the author planned to analyse at least 48 companies. If one

company did not publish a CSR report or an integrated report or it was not available anymore,

the author excluded it from the study and replaced it with the company with the next highest

revenue. The author gathered the data about the revenue from various articles and websites:

Gerginov, 2018; Tullo, 2019; “Fortune 500,” 2018a; “Fortune India,”; “Global 500,” 2018b.

The author was only able to gather and analyse 45 reports, because several companies

did not publish CSR reports in English and the author could not find replacement companies.

11 of these reports are integrated reports and 34 reports are stand-alone reports. The number of

45 reports is appropriate for a master thesis, because Sethi et al. (2017), using a similar

approach, analysed 104 reports and Clarkson, Li, Richardson, and Vasvari (2008), who only

analysed environmental factors, analysed 191 reports.

The overview of the companies, including the excluded companies, the report name and the

GRI standard can be found in Appendix B.

The thesis relies on secondary data in form of stand-alone CSR reports or integrated

CSR reports from selected companies. The reports were acquired from the company websites.

The research period is 2018, as not all companies have published the reports for 2019, yet. For

3 The author chose to exclude Brazil, because the legal system cannot be categorized as purely code law or common

law, as a change in 2015 included common law elements into the system (Serec and Barbuto Neto (2018).

17

companies, that report based on the fiscal year, the reporting period is the fiscal year 2019. This

way the reporting period overlaps by nine months instead of three, moreover the reports were

usually published around the same time. The data collection strategy is based on digitalized

secondary data (Sanders et al., 2016). The use of secondary data is not a limitation in this study,

as the source of the secondary data, the CSR report, is the subject of the study.

3.1.1 Different Institutional Settings

This chapter shows which countries have regulations or laws in place related to the scoring

criteria. Table 1 is an overview whether a country has laws regulating the emissions, a women-

in-management-positions-quota or a disability-quota. The “X” indicates that the country does

have a law related to the issue, while a “–“ shows it does not. Some, not all, states in the USA

have a quota for women in management positions, hence it says partly in the table. All countries

are part of the Paris Agreement and have regulations for emissions in place. The last column

shows how many companies of the sample reported in accordance with the GRI-Standards and

on which level. These regulations will be used to evaluate, if institutional regulations do have

an impact on reporting behaviour.

Table 1 Overviews of Laws & GRI Standards Accordance (source: retrieved from European Commission, 1999; Onishi, 2016;

Takahashi & Cislo, 2017; Tödtmann, 2018; Landeszentrale für politische Bildung Baden-Würrtemberg, 2020; UNFCCC,

2020)

18

* the UK and Japan do not have a quota, but it is necessary to report on the issue

It is notable, that Canada differs from the other countries of the sample, because there are no

Canadian car brands. Their biggest company from the automotive sector (Magna International)

supplies automotive parts to bigger companies from other countries (e.g. Volkswagen, BMW,

General Motor, Ford). However, they have the fifth highest revenue of Canadian companies.

Country

Legal

Origin Emissions

Women in

Management

Positions

Quota

Disability-

Quota GRI-Standard

USA Common

Law X partly -

2x GRI

referenced

2x core

2x comprehensive

India Common

Law X X X

2x GRI

referenced

3x core

1x comprehensive

UK Common

Law X -* -

1x Non GRI

2x GRI

referenced

2x core

1x comprehensive

Canada Common

Law X - -

4x Non GRI

1x GRI

referenced

China Code Law X - X

2x Non GRI

3x GRI

referenced

Germany Code Law X X X

1x GRI

referenced

5x comprehensive

Japan Code Law X -* X

2x Non GRI

2x GRI

referenced

1x core

1x comprehensive

France Code Law X X X

3x GRI

referenced

3x core

19

3.2 Disclosure Assessment Method

The following sub-chapters explain, how the scoring index is structured and how the

content analysis and the statistical analysis were conducted.

3.2.1 Scoring Index

The scoring index used in this research, is based on the scoring indexes of Clarkson et

al. (2008) and Ong (2016) and the GRI G4 guidelines. Clarkson et al. (2008) developed a

scoring index for the environmental performance indicators, based on the GRI G2 guidelines.

They categorised the disclosed information into hard and soft items. Hard disclosure items

represent the actual commitments of the company and are difficult to be mimicked by poor

performers, thus they are rewarded with higher scores. Soft disclosure items can be easily

mimicked by low performing companies and are ascribed lower scores. Soft disclosure items

were for example the company’s vision or environmental strategy. Ong (2016) developed

Clarkson et al.’s (2008) scoring index further, to also include the social dimension and the

disclosure on the management approach.

Based on these indexes, soft disclosure items will be awarded either a score of 1

(present) or 0 (absent), while the scores for hard disclosure items will range between 0 and 5.

For hard disclosure items, a point is awarded for each of the scoring criteria (detailed

explanation of scoring criteria in Appendix C):

• Performance data is presented;

• Performance is presented relative to previous periods (trend analysis);

• Performance data is presented relative to targets;

• Performance data is presented both in absolute and normalised form; and

• Performance data is presented at a disaggregated level.

Substantive CSR actions can be measured with the hard disclosure items, while symbolic

CSR actions can be measured with soft disclosure items. Therefore, a high score will indicate

in-depth disclosure.

Figure 1 shows a shortened version of the scoring index, with one emission disclosure

criteria. In each category, environmental and social, the company can score 50 points. These

20

scores are based on the scores of the sub-categories, emissions and water; and employment and

occupational health and safety, which have the possible scores of either 30 or 20 points.

The complete scoring index with the individual criteria for each category can be found in

Appendix D. Appendix D also includes further explanation about the scoring criteria for the

hard disclosure items and a detailed explanation about the differences between the scoring index

used in this research and Clarkson et al.’s (2008) and Ong’s (2016) scoring indexes.

Figure 1 Shortened Scoring Index

Economic factors were not examined, as only the best performing companies were

chosen. Thus, the author assumes the economic foundation for CSR activities is given.

As environmental factors, emissions and water management are chosen. Emissions are

chosen, because they are an important factor for global warming. Water management is chosen,

because water is becoming a scare resource and water overuse is a concern. Moreover, the

automotive and the chemical sector are both producing industries. The industrial sector was

Detailed Scoring Index

Hard Disclosure Items

Environmental

GRI

Standard

(if

applicable)

Data

Present

Relative

to

Previous

Period

Relative

to

Targets

Absolute

and

Normalis

ed Form

At

Disaggre

gate

Level

Min-Max

Score (0-

6)

Emissions (max. Score 30) 0

Total direct greenhouse gas (GHG) emissions by weight

(Scope 1) / total GHG emissions305-1 0

Water (max. Score 20) 0

Employement (max. Score 30) 0

Occupational Health and Safety (max. score 20) 0

Soft Disclosure Items

Min-Max

Score (0-

1)

Vision and Strategy (max. Score 2) 0

Management Approach (max. Score 4) 0

Social

21

responsible for 21% of the global greenhouse gas emissions in 2010, not including the

emissions generated by their electricity use (Edenhofer et al., 2014). According to the

International Energy Agency (2020), if you relocate the electricity and heat, the industry

produces approximately 39% of the global CO2 emissions.

The chosen social factors are employment and occupational health and safety.

Employment was chosen, because different countries have laws in place regarding some of the

chosen criteria (e.g. minimum disability quota). Occupational health and safety is chosen as the

manufacturing sector is more prone to accidents. Furthermore, the data that is collected is

numerical.

The measure is reliable, as the criteria for the hard measures relies on numerical data

and does not leave room for interpretation. A possible problem is human error, the author may

overlook information. To further increase the validity of the research, a qualified research

assistant (MSc. in Business Studies) analysed a sample of eight the reports. The results varied

by maximum 2 points.

3.2.2 Content Analysis Method

To analyse the CSR reports a content analysis is conducted. Content analysis is a

common technique used in analysing company reports and the extent of their sustainability

disclosures (Gray, Kouhy, & Lavers, 1995; Guthrie & Abeysekera, 2006; Steenkamp &

Northcott, 2007; Ong, 2016).

Because content analysis is a research technique, it is expected to be reliable and to bring

valid results. Therefore, the results should be replicable. The research is replicable, if another

researcher, who uses the same technique and data, comes to the same results (Krippendorff,

2019; Ong, 2016).

The content analysis was done by awarding scores for sustainability information

disclosed in the integrated reports or the sustainability reports. The scores are based on the

developed scoring index explained in the previous chapter. To ensure consistency during the

scoring process there are comprehensive guidelines.

The content analysis was done by reading the reports. To identify relevant parts the

search word feature was used. Based on the GRI G4 standards and by analysing one example

report, a template of phrases and key words to identify relevant sections in the CSR reports was

22

developed. The report used to develop the template is the CSR report of Groupe PSA, because

its 2019 version is ranked first by the CSR-Sustainability Monitor. The CSR-Sustainability

Monitor is a tool created by Baruch College's Weissman Center for International Business to

analyse and rank CSR reports. The CSR-Sustainability-Monitor measures the scope and quality

of the information published in the CSR reports (Baruch College's Weissman Center for

International Business, 2020).

To avoid the bias of a single researcher, the research assistant also developed a list

search words. Both lists were tested on a sample of 6 reports. The reports were chosen by

random sampling. However, the researcher ensured that the reports, used for testing the search

words, were from different countries, that there were three reports for each sector and legal

origin. The differences were reviewed by the researcher and the research assistant and the

search words adapted accordingly. When using the search word feature the researcher used the

word stem of the words, in order to receive all possible variations of the word. E.g. “disab-“ to

get results like disability or disabled; or to get the singular and the plural. The complete list of

search words can be found in Appendix E, as well as the table of the sample reports.

Examples for the search words for the first emission criterion are: “emission”, “indirect

emissions”, “scope 1”.

For a better understanding of the content analysis and the scoring method, it will be

explained with the example of the of the CSR report of the Groupe PSA on the first emission

criterion, which can be seen in figure 2. The data was gathered by reading the report and using

the search word feature to identify relevant passages.

PSA published the total amount of the direct GHG emissions, and therefor got one point for the

first scoring criterion, data presented (see figure 2, number 1).

They also published the data of the previous year(s), therefore they also get one point for the

second scoring criterion, relative to pervious period (see figure 2, number 2).

23

Figure 2 Extraxt 1 CSR Report Groupe PSA (PSA Groupe, 2018, p. 208)

PSA compares the results of 2018 with the targets set for 2018, so they also score one point for

compared to targets (see figure 3).

Figure 3 Extract 2 CSR Report Groupe PSA (PSA Groupe, 2018, p. 193)

24

They also calculated and published the emissions emitted in relation to one car produced, so

they published the raw data and also presented it in ratio (see figure 4, number 4).

Figure 4 Extract 3 CSR Report Groupe PSA (PSA Groupe, 2018, p. 209)

The also presented the data at a disaggregate level, e.g. by showing the emissions based on the

business segment, automotive division and automotive trade (see figure 2, number 5). Another

example here would be the separation by geographical data:

“The geographical breakdown of direct greenhouse gas emissions in 2018 was as

follows: 97.1% for the European Union and 2.9% for the rest of the world.”

(PSA Groupe, 2018, p. 209)

So, the score for the first emission criteria is 5/5 points. There are six emission criteria in total,

thus the maximum score of the emission category is 30 points.

25

Table 2 shows the descriptive statistics for all the scores, including the minimum and maximum

score, the mean and the standard deviation.

Table 2 All Score Results

N Minimum Maximum Mean Std. Deviation

Total_Score 45 6 72 39,18 15,323

Environmental_Score 45 0 34 17,40 8,231

Social_Score 45 1 32 15,24 8,389

Emission_Score 45 0 21 11,84 5,681

Water_Score 45 0 13 6,11 3,157

Employment_Score 45 0 22 9,51 5,907

Safety_Score 45 0 12 6,04 3,323

3.2.3 Statistical Method

The data collected from the sample was imported into the statistical analysis software

IBM SPSS statistics 24. The chosen significance level is α = 0,05.

The correlation between the score variables and the law variable was calculated. The

Spearman’s rho and the Kendalls tau-b correlation were calculated. They are both recognized

methods for calculation rank correlation. Spearman’ rho considers the exact rank position and

looks at the absolute deviations of the two rank positions. Kendalls tau-b counts how often the

rankings contradict each other, by dividing them into concordant and discordant pairs (Capéraà

& Genest, 1993). Feidel (2019) says there should be hardly any discrepancies between

Spearman’s rho and Kendall’s tau-b. However, Allen and Bennet (2012 p. 279) state that the

Kendall’s tau-b coefficient is considered to be more rigorous than the Spearman’s rho

coefficient, because “it tends to provide a better estimate of the true population correlation, and

is not artificially inflated by multiple tied ranks” (Ong, 2016). However, correlation results can

be misleading if there is another confounding variable that is numerically related. Hence, the

partial correlation was also calculated for the legal origin and the total score with the industry

type as control variable. Common law countries were coded as “0”, while code law countries

were coded as “1”.

ANOVA tests were used to determine if there are significant differences in the reporting

behaviour on the country level, based on the legal origin and the industry. An ANOVA

measures the influence of qualitative factors on a quantitative factor, based on the sample. The

ANOVA tests the influence of a nominal-scaled variable on an interval-scaled variable, by

26

comparing the means of the dependant and independent variables (Wewel, 2014). In this case,

the qualitative, nominal-scaled variable, are the countries, legal origin or the industry while the

scores are the quantitative interval-scaled variables. Because the ANOVA only shows if there

is a difference between groups, it is necessary for the country test (because there are more than

two groups) to apply a post hoc test, to determine the exact differences. The tukey-test was

chosen, because it is one of the most widely used tests and the variance of the sample was

homogeneous. The test compares each group to all other groups to determine where the

statistically significant difference is.

The two-sample t-test was used a robustness test, for the results of the legal origin. The

t-test is a hypothesis test which uses the arithmetic mean of two independent samples. It

compares whether the differences of means between the two samples are statistically significant

or not.

3.3 Limitations

Based on the institutional theory, the author speculates that the results can be applied to

companies of similar size in similar settings, e.g. the textile sector.

But, the findings of the study cannot be positively statistically generalized as the study

only focuses on listed companies from countries with a high GDP and only includes two

manufacturing sectors. Previous studies (Van der Laan Smith, J. et al., 2005; Fernandez-Feijoo

et al., 2014; Sethi et al., 2017) suggest that the company size influences the quality and therefore

the content of CSR reports. Therefore, the results cannot be generalized for smaller companies.

Also, through the usage of the content analysis method, the study itself is not objective. The

author tried to resolve this issue by including a research assistant, however it is still an important

limitation.

27

4 Results

Some of the descriptive results are presented first, to get a better understanding of the

data and the results. Table 3 shows the mean and standard deviation of the different countries

for the total score. Japan has the highest score, but it is interesting that the three European

Countries are next. The country with the lowest score is Canada.

Table 3 Results for the Total Score based on Countries

N Mean Std. Deviation Minimum Maximum

Total_Score USA 6 32,67 9,893 17 42

India 6 36,67 10,113 26 52

UK 5 47,40 11,929 31 59

Canada 5 20,60 12,219 6 37

China 5 36,60 14,826 16 56

Germany 6 43,00 14,283 20 57

Japan 6 48,67 13,307 28 64

France 6 45,67 20,539 10 72

Total 45 39,18 15,323 6 72

In SPSS the skewness was analysed first, in order to see the distribution of the values.

The skewness is a measure of asymmetry in a frequency distribution. To see whether the

skewness varied from the normal distribution the measure of the skewness was divided by its

standard error. If the z-value is 1,96 or more, it is statistically significant at the 95% or 0,05

two-tailed level (Cramer & Howitt, 2004). The results of the z-value for all the scores were <

1,96 and therefore the skewness is not statistically significant, all statistical results can be found

in Appendix F.

To ensure that the distribution of the data is not statistically different compared to the

normal distribution the Kolmogorov-Smirnov and the Shapiro-Wilk test were performed. The

test compares the variables of the sample to a normally distributed set of scores with the same

standard deviation and mean. If the test result is significant with a p-value > 0,05, the

distribution of the sample is not significantly different from a normal distribution. Therefore, if

the p-value is < 0,05, the distribution of the sample does not follow a normal distribution. If the

sample size is small, the Shapiro-Wilk test is considered to be more appropriate (Ong, 2016).

28

Besides the occupational health and safety category, all categories have a p-value > 0,05. Thus,

they follow a normal distribution.

All three correlation tests showed a positive relationship between the legal origin and

the total score. The Kendall's tau-b was 0,265, the Spearman's rho was 0,319 and the partial

correlation with the industry as control variable was 0,310. The partial correlation showed that

there was no co-variation between the variables, thus the results of the Kendall's tau-b and

Spearman's rho are valid and there is a positive relationship between the legal origin and the

total score.

The ANOVA was first run, to see if there are significant differences in reporting

behaviour among the countries. If the significance value is smaller than 0,05 the null hypothesis

will be rejected.

H0: µ1 = µ2 There is no difference between the scores of the countries.

H1: µ1 ≠ µ2 There is a difference between the scores of the countries.

Table 4 ANOVA Results Countries

Mean Std. Deviation F Sig.

Total Score 39,18 15,323 2,448 ,036

Environmental Score 17,40 8,231 2,284 ,049

Social Score 15,24 8,389 3,499 ,006

Emission Score 11,84 5,681 2,511 ,032

Water Score 6,11 3,157 1,991 ,083

Employment Score 9,51 5,907 4,277 ,002

Safety Score 6,04 3,323 2,336 ,044

Note: bold face is significant at the 5% level

The null hypothesis was rejected for the total score, environmental score, social score, emission

score, employment score and the health and safety score. There is at least one difference among

the countries. The null hypothesis was accepted for the water score, thus there is no difference

between the countries for this score.

29

The post hoc test showed that the differences for the environmental score, emission score and

health and safety score were not significant at the chosen significance level α = 0,05. And

therefore, the null hypothesis is accepted.

However, Japan scored significantly higher than Canada for the total score (p<0,035). For the

social score Japan (p<0,038) and France (p<0,013) scored significantly higher compared to

Canada. And for the employment score Japan scored significantly higher than the USA

(p<0,013) and also compared to Canada (p<0,005). Also, France scored significantly higher

than Canada (p<0,014). There was no statistically significant difference between all the

remaining countries for all scores. Therefore, the null hypothesis is rejected for these scores.

Since all the higher scoring countries are code law countries, the next ANOVA run was

to identify if there are statistically significant differences between the legal origin.

H0: µ1 = µ2 There is no difference between the scores of code law and common law

countries.

H1: µ1 ≠ µ2 There is a difference between the scores of code law and common law

countries.

Table 5 ANOVA Results Legal Origin


Total Score

Common Law (n=22) 34,36

13,824 4,596 ,038

Code Law (n=23) 43,78

15,550

Environmental Score

Common Law (n=22) 16,09 8,223 1,091 ,302

Code Law (n=23) 18,65 8,222

Social Score

Common Law (n=22) 10,86 5,858 15,646 ,000

Code Law (n=23) 19,43 8,393

Emission Score

Common Law (n=22) 11,14 5,258 ,664 ,420

Code Law (n=23) 12,52 6,097

Water Score

Common Law (n=22) 5,95 3,062 ,104 ,749

Code Law (n=23) 6,26 3,306

30

Employment Score

Common Law (n=22) 6,18 3,996 19,388 ,000

Code Law (n=23) 12,70 5,732

Safety Score

Common Law (n=22) 5,41 2,789 1,595 ,213

Code Law (n=23) 5,65 3,725


The results of the ANOVA show that there are statistical significant differences between code

law and common law countries for three of the scores: the total score (p<0,038), the social score

(p<0,0001) and the employment score (p<0,0001). Therefore, the null hypothesis is rejected for

these three scores and accepted for the remaining scores (environmental score, the emission

score, the water score, health and safety score). It is noticeable that the code law countries score

higher in all categories, while the standard deviation is rather similar.

Lastly, the ANOVA was run for the sectors and the hypothesis were:

H0: µ1 = µ2 There is no difference between the scores of the chemical and the

automotive sector.

H1: µ1 ≠ µ2 There is a difference between the scores of the chemical and the automotive

sector.

Table 6 ANOVA Results Sectors


Total Score

Chemical Sector (n=24) 37,92 14,179 ,343 ,561

Automotive Sector (n=21) 40,62 16,770

Environmental Score



Social Score



Emission Score



31

Water Score



Employment Score

Chemical Sector (n=24) 8,38 5,182 1,943 ,170


Safety Score



The null hypothesis was accepted for all scores, as the p-value is > 0,05.

To test the robustness of the results related to the differences in scores from code law

and common law countries, a t-test was conducted. The results of the t-test (which can be found

in Appendix F) show, that the scores are significantly different for the total score, the social

score and the employment score. The null hypothesis is rejected for these three scores and the

results confirm all the results of the ANOVA.

Table 7 provides an overview which hypothesises were accepted and rejected.

Table 7 Overwiev of the accepted and rejected null hypothesis

Score /

Hypothesis Total Score

Environm

ental

Score

Social Score Emissions

Score

Water

Score

Employment

Score

Health

and

Safety

Score

There is no

difference

between the

scores of the

countries.

Rejected:

Japan >

Canada

Accepted

Rejected:

Japan >

Canada

France >

Canada

Accepted Accepted

Rejected:

Japan > USA

Japan > Canada

France > Canada

Accepted

There is no

difference

between the

scores of code

law and

common law

countries.

Rejected:

Code law >

common law

Accepted

Rejected:

Code law >

common law

Accepted Accepted

Rejected:

Code law >

common law

Accepted

There is no

difference

between the

scores of the

chemical and

the automotive

sector.

Accepted Accepted Accepted Accepted Accepted Accepted Accepted

32

To further analyse the data, another ANOVA was run to see if the application of the

GRI-Standards influences the content of CSR reporting.

Table 8 ANOVA Results GRI-Standards


Total Score 39,18 15,323 3,043 ,039

Environmental Score 17,40 8,231 4,471 ,008

Social Score 15,24 8,389 1,716 0,179

Emission Score 11,84 5,681 3,538 0,023

Water Score 6,11 3,157 3,152 0,035

Employment Score 9,51 5,907 1,153 0,339

Safety Score 6,04 3,323 1,564 ,213


The ANOVA showed significant differences for the total score, environmental score, emission

score and water score. For the social score, the employment score and the health and safety

score there are no difference among these scores regarding the application of the GRI-

Standards.

The post hoc test showed that the differences for the total score were not significant at the

chosen significance level α = 0,05. And therefore, there are no significant differences.

However, for the environmental score in “in accordance – core” (p<0,026) and “in accordance

– comprehensive” (p<0,028) scored significantly higher compared to “non GRI”. “In

accordance – core” scored significantly higher than “non GRI” for the emission score

(p<0,035). And for the water score “in accordance – core” also scored significantly higher than

“non GRI” (p<0,040). Thus, there are significant differences for the environmental score, the

emission score and the water score.

Because Canada scored significantly lower than other countries, another ANOVA was

run excluding Canada from the common law countries. As previously mentioned, Canada

stands out from the sample, because it does not have a large automotive industry or their own

car brand. The author wants to ensure that these factors do not influence the results.

33

Table 9 ANOVA Results Legal Origin excl. Canada


Total Score

Common Law (n=17) 38,41 11,700 1,427 ,240

Code Law (n=23) 43,78 15,550

Environmental Score

Common Law (n=17) 18,00 7,738 ,065 ,801

Code Law (n=23) 18,65 8,222

Social Score

Common Law (n=17) 12,18 5,626 9,517 ,004

Code Law (n=23) 19,43 8,393

Emission Score

Common Law (n=17) 12,47 4,611 ,001 ,977

Code Law (n=23) 12,52 6,097

Water Score

Common Law (n=17) 6,82 2,721 ,328 ,570

Code Law (n=23) 6,26 3,306

Employment Score

Common Law (n=17) 7,00 3,984 12,335 ,001

Code Law (n=23) 12,70 5,732

Safety Score

Common Law (n=17) 6,12 2,571 ,258 ,614

Code Law (n=23) 6,65 3,725


The results show that only the social score and the employment score are statistically different.

This is a variation of the first ANOVA run regarding the legal origin. While there are still

differences, they do not affect the total score anymore.

34

It is interesting that the three European countries were under the four best scoring

countries. The UK was the country with the second highest score, although it is common law

country. Hence, an ANOVA was conducted for only the European countries, the UK, Germany

and France. The results showed that there were no significant differences between the scores of

the European countries.

Table 10 ANOVA Results Legal Origin of European Countries


Total Score

Common Law (n=1) 47,40 11,929 ,134 ,720

Code Law (n=2) 44,33 16,924

Environmental Score

Common Law (n=1) 24,60 7,635 1,516 ,237

Code Law (n=2) 19,25 8,346

Social Score

Common Law (n=1) 16,80 5,495 ,402 ,535

Code Law (n=2) 19,67 9,345

Emission Score

Common Law (n=1) 16,40 3,507 ,612 ,446

Code Law (n=2) 14,08 6,142

Water Score

Common Law (n=1) 8,20 4,207 1,974 ,180

Code Law (n=2) 5,42 3,528

Employment Score

Common Law (n=1) 8,60 3,507 2,231 ,156

Code Law (n=2) 12,92 5,977

Safety Score

Common Law (n=1) 8,20 3,421 ,693 ,418

Code Law (n=2) 6,58 3,728

35

5 Discussion

After presenting the study results in the previous chapter, this chapter discusses the

findings, in comparison to the studies theoretical framework. The results will be discussed first

on the country level, then based on the legal origin and lastly regarding the sectors.

The descriptive statistics regarding the scores of the countries shown in table 3, report

that the total scores ranges from 6 to 72, with an average score of 39,18. The wide range of

scores and the high standard variation of 15,323 indicate a lack of consensus in CSR reporting.

This further highlights the absence of a standardised sustainability reporting framework as an

issue, especially since Sethi et al. (2017) reported similar results for the financial sector.

The results of the GRI-ANOVA support the institutional theory, because reporting with

the application of the GRI-Standards lead to significantly higher results for the environmental

score and its sub-scores. Hence, the institutional pressure leads to better disclosure. However,

code law countries do not necessarily apply higher GRI-standards than common law countries.

5.1 Country Level

Comparing the results of the country ANOVA with the descriptive statistics, it is not

surprising that Japan scored higher than Canada and the USA. Japan had the highest mean total

score of all the countries, while Canada and the USA scored the lowest. France had the third

highest mean, with the UK scoring the second highest, therefore it is interesting that there were

statistically significant differences between France and Canada, but not Canada and the UK.

Based on the results H1a was overall rejected. However, there were no significant

differences between every score and every country. H1a was rejected for the total score for

Japan and Canada, for the social score for Japan, France and Canada and for the employment

score for Japan, France, Canada and the USA.

The results of the environmental score and its sub-scores support the isomorphism

theory, because there are not statistically significant differences among countries. As previously

mentioned, all countries are part of the Paris Agreement and have regulations to reduce

emissions in place. This can be seen as coercive isomorphism (DiMaggio & Powell, 1983)

which is triggered by formal (and informal) pressure on the companies. In this case, all the

companies operate in a legal environment, which is affected by the Paris Agreement. This

shared environment leads to structural adjustments and similar behaviour. Thus, the companies

36

disclose more information related to the environmental issues. Based on North (1990) the author

argues that the changes in the environmental politics have occurred through a change of taste.

The awareness regarding climate change and its issues has increased globally and influenced

the institutions. It is fair to assume that the voters elected politicians or put pressure on

politicians to regulate the emissions, especially since this does not affect the voters as

individuals directly, therefore there is no cost for them.

5.2 Legal Origin

As previously mentioned in the chapter 4, code law countries scored higher than

common law countries for every score. H2 is accepted, because the differences in mean for the

total score were statistically significant. The mean of the code law countries was 9,42 points

higher, compared to the common law countries. The ANOVA also showed significant

differences between code law and common law countries for the social score and its sub-scores.

Because H2 is accepted, logically H1b is rejected.

The findings support the statement of Van der Laan Smith, J. et al. (2005) that the quality

of CSR reporting is better in stakeholder-oriented countries. The results of Chih et al. (2010)

and Gallego-Álvarez and Quina-Custodio (2017) corroborate the findings of this study. Both

found companies headquartered in countries with a strong legal framework enforcement, to

disclose more information. Examples for the strong legal framework are the disability-quota

and the women-in-management-positions-quota. All code law countries have a disability-quota,

while only one common law country (India) has a disability-quota. Only two of the code law

countries have women-in-management-positions-quota and the country with the highest

employment score (which both disclosure scores are part of) is Japan, which does not have a

women-in-management-positions-quota. It is mandatory in Japan to report on women in

management positions, henceforth there is still a strong legal framework. The findings of the

employment score also contradict Matten and Moon’s (2008) statement that there is a lack of

employment reporting in code law countries. The mean of the social score of code law countries

was 8,57 points higher compared to the mean of common law countries and statistically

significant for all conducted ANOVAs. Overall, these results support Cambell’s (2007)

argument, that state regulations, the importance of stakeholders and monitoring improve CSR

behaviour of companies. In this case, the women and people with disabilities became important

stakeholders and their interests are therefore included in the reports.

37

When conducting an ANOVA for only the European countries, there is no significant

difference in means between the code law and common law countries. This could mean that the

institutional framework is similar, even though there are different legal systems. Which seems

very plausible, because the European economy is tight-knit. This could also explain, why the

UK generally scores high. The similarities in the reporting behaviour could be explained by

isomorphism through mimesis, where companies copy organisations that are perceived as

successful. For instance, automotive companies could try to copy the behaviour of the PSA

Group, because their report is mentioned to be one of the best, in order to compete for the

stakeholders’ favour. However, the more logical explanation is, that the same level of disclosure

is actually related to the European Union Directive 2014/95/EU, also called the non-financial

reporting directive, which requires large firms to disclose of non-financial and diversity

information since 2018 (European Parliament, 2014). Thus, it is coercive isomorphism, caused

by formal pressure. The author argues that the European Union Directive 2014/95/EU

represents law making practices that are conform with the code law system rather than the

common law system. Hence, the UK is subjected to higher regulatory standards compared to

other common law countries. This could also explain, why the mean of the total score from the

UK is the second highest after Japan.

It is notable, that Canada has the lowest mean for every score. It is fair to assume that

Canada drags down the average of the common law countries. When excluding Canada from

the ANOVA, only the social score and the employment score were statistically different. On

one hand, one can theorise that Canada has the weakest legal framework enforcement, which

leads to these bad scores. A supporting argument is that there are no quotas for women or

disabled people, which leads to a low importance of these stakeholders and thus to low

disclosure. Moreover, Canadian companies used the GRI-Framework the least, which could be

another explanation for the low scores. On the other hand, Canada has no car brand and the

two sample companies are significantly smaller compared to the big car brands, like Toyota,

Volkswagen or Ford. So, size could be an issue as well. Sethi et al.’s (2017) findings showed

that there was a significant relationship between the firm size and its related features, like media

attention and public visibility, on the disclosure behaviour. It is difficult to judge if that is a reason

here, because Magna International, the company with by far the lowest score, is the company

with the fifth highest revenue in Canada, thus it should get media attention and public visibility

in the country. Furthermore, other companies with a similar revenue scored a lot higher, e.g.

the Zhejiang Geely Holding Group and Jardine Matheson from China. The companies are also

38

not the top performing companies of China’s automotive industry, but the sixth and seventh,

thus they should be less important to the public and receive less media attention in China

compared to Magna International in Canada. Globally, it is fair to state that Canada receives

less media attention compared to China, the reason could be the differences in the GDP, China’s

GDP is about 7,5 times higher than Canadas’ GDP. Hence, media attention could play a role

after all. It is not possible to identify which factor, the weak legal framework or the company

type, is responsible for Canada’s low score.

5.3 Sectors

The results of the ANOVA regarding the sector show no statistically significant

differences among the automotive and the chemical sector. Thus, H1c is accepted. Both sectors

are seen as highly polluting, generating a lot of waste and having a huge impact on the

environment. They are also both producing industries. That their scores do not vary establishes

further, that companies operating in a similar environment behave similar.

39

6 Conclusion

The aim of this research was to determine if the content of CSR disclosure varies

between code law and common law countries. The focus of this study were the top performing

countries (based on the GDP) for each legal system, and their top performing companies from

the chemical and automotive sector. The scores of the reports were based on a self-developed

scoring index and the analysis done with the content analysis method. The results were than

statistically analysed with ANOVAs with a t-test for robustness. In order to get a wider picture

of the variances between the scores, they were analysed based on countries, legal origin and the

sector.

The empirical findings, based on the sample of 45 companies, from the chemical and

automotive sector, show the following: Code law countries do publish in more in-depth CSR

disclosure compared to common law countries. Especially the higher social scores show that

institutional regulations do influence the reporting behaviour in a positive way. The laws

concerning women in management position and people with disabilities lead to more disclosure

and transparency in these areas. The influence of the GRI-Standards on the (environmental)

reporting also shows, that institutions influence the CSR disclosure. The similar environmental

scores between code law and common law countries can also be used to argue for a better more

in-depth disclosure in code law countries. The implementation of rules and regulations lead to

stricter legal frameworks not only in the code law but also in the common law countries.

Therefore, they are adapting practices from code law countries. Also, the similarities in

European reporting can be traced back to institutional regulations. The author concludes that

institutional pressure and regulations have a positive impact on CSR reporting. At the moment

the legal origin influences the scope of reporting. However, the author questions whether

implementation of cross-country regulations has started an isomorphism process, which

subjects companies from common law countries to stronger institutional regulations. Thus, the

environment in which the companies operate now is not isomorph, but it might be in the future.

The research and results contribute to the shortfall in literature, analysing the effect of

the legal origin on reporting behaviour. It contributes to a better understanding of the CSR

disclosure content through the development of the scoring index which actually focuses on the

published data and not only on the surface data. Furthermore, it raised the question if cross-

country regulations started an isomorphism process regarding the CSR reporting behaviour.

Future research should investigate further if the reporting behaviour is actually starting to align

40

by conducting a long-term study. Since the results of this study are opposing from the result of

Sethi et al.’s (2017) study (common law countries engage in higher quality CSR reporting,

therefore they disclose more information), future research should also look into the differences

in reporting behaviour between different sectors, especially between the manufacturing and the

financial sector. Another suggestion for future research is, to analyse a bigger sample that

includes countries with a lower GDP and smaller firms, in order to generalise the findings. It

would also be appropriate to extend the scoring index, to include more criteria, for example

philanthropic activities and donations.

41

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48

8 Appendix

Appendix A: Overview of Articles from Chapter 2.2

(source: own table)

Institutional Setting Ownership Structure Reporting Behaviour Institutional Setting Ownership Structure Reporting Behaviour

Ball et al. (2000) -accounting practices are set in the private

sector

- accounting standards arise in an

accounting market

- more monitoring of the management by

external equity and debt markets

- code law legal regime enforces the role

of stakeholders in the interaction with

management

- political influence on accounting

standards weakens the quality of

disclosers

- immeadiate payouts influence income

disclousure

- less external auditing

high concentration of stock is linked with

lower quality annual disclosure

information

Campbell (2007) maximization of profit and shareholder

value present in common law countries,

prevent companies from acting in socially

responsible ways

- no concentrated ownership of stocks -

less shareholder consultation of

management

- more decision making autonomy and

less accountability to investors

effectiveness of state regulations may be

enhanced by stakeholder monitoring

stakeholder orientation increases

likelihood for socially responsible

behaviour

managers highly accountable to

shareholders, due to concentrated

ownership of stocks

Chin et al.

(2009)

greater shareholder protection will led

towards maximizing the shareholders

welfare on the expanse of all the other

stakeholders

companies in countries with a shareholder

orientation conduct and report less CSR

activities

companies in countries with a strong

legal framework enforcement, participate

in more CSR activities

Fernandez-

Feijoo, Romero

and Ruiz (2013)

companies provided minimum amount of

information without assurance

- northern Europe: categorized behaviour

as cautious. Companies with cautious

behaviour do not disclose in depth

however they do include credibility tools

- Portugal, Spain: leading behaviour, high

level of disclosure and credibility

Gallego-Álvarez

Quina-Custodio

(2017

companies headquartered in code law

countries to disclose more information.

These companies were also more likely to

report on stakeholder issues.

La Porta et al.

(1997)

common law countries protect

shareholders and creditors the most from

the expropriation of the management

less shareholder protection code law countries have smaller equity

markets and lower access to equity

finance, making them have highly

concentrated ownerships of stocks

Matten and

Moon (2008)

CSR actions as voluntary, deliberate and

strategic decisions, thus disclosing them

in their CSR reports

act in accordance with set laws and ethics,

but do not claim ownership and

authorship of these CSR actions thus not

disclosing them

Sethi et al.

(2015)

shareholder orientation leads to a demand

from the investors for high quality

information

common law countries presented higher

quality CSR disclosures

Smith et al.

(2005)

ownership is more concentrated and

government ownership is present,

influences the stakeholder-company

relationship, increasing the quality of

CSR reports

Common Law Countries Code Law

49

Appendix B: Overview Companies

Chemical Sector Automotive Sector

Common Law Countries

United States of America Reporttype GRI-Standard Score United States of America Reporttype GRI-Standard Score

DuPont not found -

exclued - - General Motors

Sustainabiliy

Report

in accordance -

comprehensive 41

Sherwin-Williams

CSR Report +

Investor

Download

GRI referenced 31 Ford Motor Sustainabiliy

Report

in accordance -

comprehensive 39

PPG Industries website - excluded - - Lear not found -

exclued - -

Monsanto not found -

exclued - - Goodyear Tire & Rubber

Corporate

Responsibility

Report

GRI referenced 26

Ecolbab Sustainibility

Report

in accordance -

core 17

Huntsman not found -

exclued - -

Eastman Chemical not found -

exclued - -

Airproducts Sustainibility

Report

in accordance -

core 42

50

India India

Reliance Industries Integrated Report GRI referenced 30 Tata Motors CSR Report +

annual report

in accordance -

comprehensive 29

Grasim Industries Sustainibility

Report

in accordance -

core 26 Mahindra & Mahindra

Sustainibility

Report

in accordance -

core 44

Sun Pharmaceutical

Industries Ltd. Integrated Report GRI referenced 14 Maruti Suzuki India Integrated Report

in accordance -

core 39

United Kingdom United Kingdom

GlaxoSmithKline not found -

exclued - - Fiat Chrysler Automobiles

Sustainibility

Report

in accordance -

comprehensive 59

Linde

Sustainable

Developement

Report

in accordance -

core 56 Rolls Royce Holding

not found -

exclued - -

AstraZeneca

Sustainibility

Report + Sust.

Data Summary

GRI referenced 39 Aston Martin

Sustainibility

Summary +

Annual

non GRI 31

Johnson Matthey Integrated Report in accordance -

core 52

Canada Canada

Nutrien

Sustainable

Development

Report

GRI referenced 28 Magna International Sustainibility

Report non GRI 6

Methanex

Responsible Care

and Sustainability

Report

non GRI 37 Linamar not found -

exclued - -

Bausch Health CSR Report non GRI 17 NFI Group Inc.

Environmental

Social

Governance

Report

non GRI 19

51

Code Law Countries

China China

Sinopec

Sustainable

Development

Report

GRI referenced 44 SAIC Motor not found -

exclued - -

ChemChina not found -

exclued - - Dongfeng Motor

not found -

exclued - -

Sinopharm not found -

exclued - - Beijing Automotive Group

not found -

exclued - -

Hengli Group not found -

exclued - - China FAW Group Corporation

not found -

exclued - -

PetroChina

Environmental,

Social and

Governance

Reprot

GRI referenced 32 Guangzhou Automobile

Industry Group

not found -

exclued - -

Sinochem* Sustainibility

Report GRI referenced 16 Zhejiang Geely holding Group

Social

Responsibility

Report

non GRI 55

Jardine Matheson Sustainibility

Report non GRI 35

Germany Germany

BASF SE Integrated Report in accordance -

comprehensive 46 Volkswagen AG

Sustainability

Report

in accordance -

comprehensive 54

Bayer AG Integrated Report in accordance -

comprehensive 57 BMW Group

Sustainable

Value Report

in accordance -

comprehensive 50

Fresenius SE & Co. KG Integrated Report GRI referenced 20 Daimler Sustainability

Report

in accordance -

comprehensive 32

Japan Japan

52

Mitsubishi Chemical Sustainibility

Report non GRI 38 Toyota Motor

Sustainibility

Data Book GRI referenced 52

Sumitomo Chemical Sustainibility

Report GRI referenced 64 Honda Motor

Sustainibility

Report

in accordance -

comprehensive 52

Toray Chemical Integrated Report non GRI 28 Nissan Motor Sustainibility

Report

in accordance -

core 58

France France

Sanofi CSR Report in accordance -

core 54 PSA Groupe (Peugeot) CSR Report

in accordance -

core 72

Arkema

Reference

Document

(Integrated

Report)

in accordance -

core 50 Renault

not found -

exclued - -

Air Liquide

Reference

Document

(Integrated

Report)

GRI referenced 39 Michelin

Annual and

Sustainable

Development

Report

GRI referenced 10

Faurecia

Registration

Document

(Integrated

Reprot)

GRI referenced 49

*only Sinochem Int. Is listed, it was the only CSR report the author could find

reports also analysed by the research assistent

53

Appendix C: Detailed Scoring Criteria

Disclosures: Scoring Criteria Scoring Method

Performance data is

presented

Performance data is

disclosed (in

any form or nature).

Information provided may be

presented:

• in any form or nature;

• by descriptions in words or

quantified in numeric terms; or

• in a general or specific context.

Performance data is

presented relative to

previous periods

Performance data of

previous periods is

presented.

Information that relates to performance

compared to previous period.

Performance data is

presented relative to

targets

Performance data is

reviewed against

previously set targets.

Information related to set targets is

included. Information may include:

• actual performance compared

to the set targets

Performance data is

presented both in

absolute and

normalised form

Performance data is

disclosed in raw data and

also presented in ratio or

percentage.

Information is presented in both raw

and comparative data. Raw data may be

presented in absolute numeric terms

and also reflected as a ratio or

percentage of comparable data.

Performance data is

presented at

disaggregate level

Performance data is

presented

with breakdown.

Information may be presented with

breakdown details relative to:

• Business unit; or

• Geographic segments; or

• Projects; or

• Gender; or

• Age; or

• Subcategories

54

Appendix D: Detailed Scoring Index and Differences to Clarkson et al’s

(2008) and Ong’s (2016) Scoring Indices

Detailed Scoring Index

Company Name

Hard Disclosure Items

Environmental

GRI

Standard (if

applicable)

Data

Present

Relative

to

Previous

Period

Relative

to

Targets

Absolute

and

Normalised

Form

At

Disaggregate

Level

Min-

Max

Score

(0-6)

Emissions (max. Score 30) 0

Total direct greenhouse gas (GHG)

emissions by weight (Scope 1) / total

GHG emissions

305-1 0

Energy indirect GHG emissions

weight (Scope 2) 305-2 0

Other indirect GHG emissions weight

(Scope 3) 305-3 0

Initiatives to reduce greenhouse gas

emissions and reductions achieved. 305-5 0

Emissions of ozone-depleting

substances by weight. 305-6 0

NOx, SOx, and other significant air

emissions by type and weight. 305-7 0

Water (max. Score 20) 0

Total water withdrawal / Water

Consumption 303-3 0

Total water discharge 303-4 0

Recycled and reused water - 0

Initiatives to reduce water

use/withdrawal

- 0

55

Social

Employment (max. Score 30)

0

Total workforce - 0

Total number of new employee hires 401-1 0

Employee turnover 401-1 0

Parental leave 401-3 0

Equality in management

positions/women in management

positions

405-1 0

Employment of people with

disabilities 405-1 0

Occupational Health and Safety

(max. score 20)

0

Rates of injury or accidents or work

related fatalities - 0

Occupational diseases. 403-10 0

Education, training 403-5 0

Initiatives to improve employee’s

health - 0

Soft Disclosure Items

Min-

Max

Score (0-

1)


Senior decision maker (CEO, chair)

statement on sustainability

performance in letter to shareholders

and/or stakeholders

102-14

A statement of corporate sustainability

policy, values and principles, codes of

conduct

-

Management Approach (max. Score

4) 103 0

56

Disclosure on Management Approach

Emissions -


Water

303-1

303-2


Employment -


Occupational Health and Safety -

Scoring Index

Hard Disclosure Items (max. Score

100)

Environmental (max. Score 50) 0

Emissions 0

Water 0

Social (max. Score 50) 0

Employment 0

Occupational Health and Safety 0

Soft Disclosure Items (max. Score 6)


Management Approach (max. Score 4) 0

Total Score (106) 0 / 106

57

Differences to Clarkson et al’s (2008) and Ong’s (2016) Scoring Indices

The scoring index differs from Clarkson’s (2008) and Ong’s (2016) indices, because it does not

include the scoring criteria “relative to peers”. The author decided to delete it, because after

analysing more than 10 reports, not a single company had scored a point.

It differs from Ong’s (2016) index for following criteria:

• Added:

o Water discharge

o Water recycled and reused

o Initiatives to reduce water withdraw

o Employment of people with disabilities

o Initiatives to improve employee’s health

• Split: “Total direct and indirect GHG emissions” into:

o Total direct greenhouse gas (GHG) emissions by weight (Scope 1) / total GHG

emissions

o Energy indirect GHG emissions weight (Scope 2)

o Other indirect GHG emissions weight (Scope 3)

• Split: “Total number and rate of new employee hires and employee turnover by age

group, gender, and region” into:

o Total rate of employee hires

o Total employee turnover

Ong’s (2016) index covers more topics and compared to this scoring index, missing categories

cover: governance structure; credibility; spendings on sustainability related expenditures;

economic performance; market presence; indirect economic impacts; materials; energy;

biodiversity; waste; products and services; compliance; transport; labour performance

indicators; equal remuneration for women and men; non-discrimination; freedom of association

and collective bargaining; child labour; forced and compulsory labour; security practices;

indigenous rights; assessment; remediation; local communities; corruption; public policy; anti-

corruption behaviour; compliance; customer health and safety; product and service labelling;

marketing communications; customer privacy; compliance; vision and strategy claims and

sustainability initiatives.

58

Appendix E: Reports used to develop Search Words & Search Words

Reports used to develop the Search Words:

Legal Origin Country Sector Company Name

Code Law France Automotive Groupe PSA

Code Law Japan Automotive Nissan Motor

Common Law Canada Chemical Nutrien

Common Law United States of America Chemical Sherwin-Williams

Search Words:

Target goals result

Emissions

Emission indirect emission

Greenhouse GHG

Scope 1 2 3

Reduce save

Ozone-depleting VOC ozone-producing volatile organic compounds

SO2 AND NO2

tonnes CO2

kg/car kg/sales unit usage

Water

Water water management

Water withdrawal water abduction

Water discharge

Reuse recycle reduce save

59

Employment

Employees workforce number of employees total employees

Hire

Turnover attrition

Parental maternity paternity

Management position personnel women female

Disability

Occupational Health and Safety

Rate of injury accident incident

Disease illness

Prevent improve

Training education

Nonfinancial target goal

Soft measures

Code of conduct ethics values governance compliance

60

Appendix F: Statistical Analysis

Skewness

Total

Score

Environmental

Score

Social

Score

Emission

Score

Water

Score

Employment

Score

Safety

Score

N Valid 45 45 45 45 45 45 45

Missing 0 0 0 0 0 0 0

Skewness -,198 -,095 ,268 -,315 ,170 ,263 ,200

Std. Error of

Skewness

,354 ,354 ,354 ,354 ,354 ,354 ,354

Total Score: z-value = -0,198/0,354 = -0,559 < 1,96

Environmental Score: z-value = -0,095/0,354 = -0,268 < 1,96

Social Score: z-value = 0,268/0,354 = 0,757 < 1,96

Emission Score: z-value = -0,315/0,354 = -0,889 < 1,96

Water Score: z-value = 0,170/0,354 = 0,480 < 1,96

Employment Score: z-value = 0,263/0,354 = 0,743 < 1,96

Safety Score: z-value = 0,2/0,354 = 0,564 < 1,96

T-Test:

Law N Mean Std. Deviation

Total Score common 22 34,36 13,824

code 23 43,78 15,550

Environmental Score common 22 16,09 8,223

code 23 18,65 8,222

Social Score common 22 10,86 5,858

code 23 19,43 8,393

Emission Score common 22 11,14 5,258

code 23 12,52 6,097

Water Score common 22 5,95 3,062

code 23 6,26 3,306

Employment Score common 22 6,18 3,996

code 23 12,70 5,732

Safety Score common 22 5,41 2,789

code 23 6,65 3,725

61

Levene's Test for Equality of Variances

t-test for Equality of

Means

F Sig. Sig. (2-tailed)

Total_Score Equal variances assumed ,330 ,569 ,038

Equal variances not assumed ,037

Environmental_Score Equal variances assumed ,036 ,851 ,302


Social_Score Equal variances assumed 3,806 ,058 ,000


Emission_Score Equal variances assumed ,707 ,405 ,420


Water_Score Equal variances assumed ,414 ,523 ,749


Employment_Score Equal variances assumed 4,659 ,037 ,000


Safety_Score Equal variances assumed 3,872 ,056 ,213


If Levene’s test for equality of variances is p>0,05 the variance in scores is not statistically relevant

Total Score: p-value = 0,569 > 0,05 → 0,038 < 0,05 → accept H0: scores are not significantly different

Environmental Score: p-value = 0,851 > 0,05 → 0,302 > 0,05 → reject H0: scores are significantly different

62

Social Score: p-value = 0,058 > 0,05 → 0,0001 < 0,05 → accept H0: scores are not significantly different

Emission Score: p-value = 0,405 < 0,05 → 0,418 > 0,05 → reject H0: scores are significantly different

Water Score: p-value = 0,523 > 0,05 → 0,749 > 0,05 → reject H0: scores are significantly different

Employment Score: p-value = 0,037 < 0,05 → 0,0001 < 0,05 → accept H0: scores are not significantly different

Safety Score: p-value = 0,056 > 0,05 → 0,213 > 0,05 → reject H0: scores are significantly different

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