RESEARCH PROJECT PROPOSAL
Comparative study of nonfinancial report practices in the US, the EU, and Russia
Zoya Bragina
Higher School of Economics, Department of Management
Master’s program Strategic Management and Corporate Governance
Group 623
Introduction
Non-financial reporting has currently become a mainstream practice, driven by the potential business value generated through enhanced stakeholder reporting and communication. Stakeholders are increasingly interested in understanding the approach and performance of companies in managing the sustainability (environmental, social and economic) aspects of their activities, including the potential for value creation. For example, there is growing recognition amongst investment analysts that numerous business drivers upstream of a company’s profit and loss statement – including environmental, social and governance (ESG) factors – contribute to long term financial performance and investment returns. Changing legislative requirements and regulatory regimes, for example in relation to greenhouse gas emission reporting, are influencing the trend towards sustainability reporting.
Although there is no single, universally accepted definition of non-financial reporting this broad term is generally used to describe a company’s reporting on its economic, environmental and social performance. It can be synonymous with: triple bottom line reporting, corporate responsibility reporting, corporate citizenship reporting and sustainable development reporting but increasingly these terms are becoming more specific in meaning and therefore subsets of sustainability reporting.
Non-financial reporting is becoming more prevalent, driven by: a growing recognition that sustainability related issues can materially affect a company’s performance, demands from various stakeholder groups for increased levels of transparency and disclosure and the need for companies (and the business community more generally) to appropriately respond to issues of sustainable development.
Problem statement
The general purpose of the study is to explore the corporate non-financial reporting practices across Russia, the European Union and the US, and to reveal differences and similarities in the ways of disclosing non-financial information as well as in the common corporate social responsibility activities.
Within this broad aim the following objectives will be addressed:
· Identify the variations in the form and major features of non-financial reports;
· Recognize the issues disclosed in non-financial reports;
· Reveal and analyze the cross-cultural differences in non-financial reporting practices and propose their possible underlying reasons.
Literature review
Existing literature in corporate social responsibility considers reporting as a necessary component of societal accountability, and is of particular concern to accounting scholars. A critical review of what has been noted about corporate non-financial reporting suggests that there is considerable variability on how scholars and organizations view this process. Rob Gray (2002), one of the leading scholars on social and environmental reporting, provides excellent summary of the accounting literature in this field.
There are a growing number of empirical studies on firms' non-financial disclosure. Increasingly rigorous content analysis of published corporate reports has been employed, with perspectives from stakeholder and, political economy theories, information economics and risk management (Belal and Owen, 2007). The common normative theme within the academic literature is that CSR reporting enhances accountability (Bebbington et al., 2008). Indeed, many authors have proposed that legitimacy theory provides an explanatory frame for social and environmental disclosure (Deegan, 2002).
With respect to the quantity of non-financial reports, there is growing support that the following factors are associated with greater disclosure of environmental information through corporate communications: firm size, membership in an industry facing significant environmental issues, financial performance, media exposure, and being subject to regulatory proceedings (Adams, 2002).
There have been a number of studies looking specifically at social and environmental, information across countries (Adams et al., 1998). They provide some evidence of differences in the amount and types of disclosures across countries. The extent of these differences is difficult to determine because of the different characteristics (for example size and industry composition) of companies making up the samples from each country. In addition, the extent to which these apparent differences in reports are determined by, for example: culture; the extent of regulations demanding social (and environmental) responsibility; and, the power of pressure groups, is under-theorized.
Methodology
The general research perspective will focus on secondary data obtained from approximately 45 corporate non-financial reports issued by 9 organizations, representing similar industries of Russian, European and the US economies (3 from each region) during the last 5 years. For the list of the companies under examination see Figure 1.
IndustryCountry / Oil&Gas / Metals / Banks
Russia / Tatneft / Norilsk Nickel / Alfa-Bank
USA / Chevron / Alcoa / Citigroup
UK / BP / - / -
Switzerland / - / Xtrata / -
France / - / - / BNP Paribas
Figure 1 List of companies under examination
The analysis of the non-financial practice will be conducted taking into account the following main features of the report: accessibility, application of the standardized approach to reporting system, accordance to generally accepted reporting standards, availability of a verification statement, availability of feedback instruments and the report contents.
The content-analysis of the non-financial reports will be limited to examination of how the following information is disclosed: clearness of the long-term development strategy; description of the corporate social responsibility/sustainable development concept; connection between development strategy and corporate social responsibility/sustainable development concept; CSR approach and performance of the companies; stakeholder engagement approach; the reporting process management approach.
On the basis of the content-analysis of the non-financial reports it is also planned to reveal a series of material issues, characterizing the significance, completeness, reliability, clarity and the level of transparency of the disclosed information. The material issues are intended to be systematized in a table.
Results Anticipated
This study sets out to throw further light on the differences and similarities in the disclosure of all types of corporate non-financial information by the mean of non-financial reports across the USA, the EU and Russia.
The examination of several corporate non-financial reports is intended to suggest that non-financial reporting practices differ significantly across the regions under investigation. In particular, it is likely to reveal, for example, that Russian firms disclose less non-financial information then American and European.
References
1. Adams, C. A. Internal organizational factors influencing corporate social and ethical reporting: Beyond current theorizing. Accounting, Auditing & Accountability Journal (2002), 15 (2): 223-50.
2. Adams, C. A., Hill, W.-Y, Roberts, C. B. Corporate social reporting practices in Western Europe: legitimating corporate behavior? British Accounting Review (1998), 30: 1-21.
3. Bebbington, J., Larringa, C., Moneva, J. M. Corporate social reporting and reputation risk management. Accounting, Auditing & Accountability Journal (2008), 21 (3): 337-61.
4. Belal, A. R., Owen, D. L. The views of corporate managers on the current state of, and future prospects for, social reporting in Bangladesh. Accounting, Auditing & Accountability Journal (2007), 20 (3): 472-494.
5. Deegan, C. The legitimising effect of social and environmental disclosures - a theoretical foundation. Accounting, Auditing & Accountability Journal (2002), 15 (3): 282-311.
6. Gray, R. The social accounting project and Accounting Organizations and Society Privileging engagement, imaginings, new accountings and pragmatism over critique? Accounting, Organizations and Society (2002), 27: 687–708.