Graduate School of Communication
Master Thesis
Mandatory CSR Regulations – A Promoter of Transparency?
The Implementation of Mandatory Corporate Social Responsibility Reporting in
Eu-rope and its Consequences for the Transparency of CSR Reports of the EuEu-ropean
Automotive Industry
by
Vincent Raffelberg Student number: 11934468 Date of birth: April 6, 1994 Email: vincent.raffelberg@raffelberg.de
Master’s Programme Communication Science
Supervisor: Dr Irina J. Lock
Email: I.J.Lock@uva.nl 28th June 2019
Abstract
Transparency is an essential requirement for any kind of organizational communication, as it can enable the accurate assessment and monitoring of corporate actions. Especially in the aftermath of the diesel emission scandal that put the automotive industry under public scrutiny, the corporate social responsibility (CSR) reports of European car manu-factures should not constitute an exception to this rule. With the implementation of the European Directive 2013/34/EU, organizations are obliged to disclose CSR data in an-nual reports by 2018, which allows for the direct comparison of voluntary and mandato-ry reporting across Europe for the first time in CSR reporting histomandato-ry. Recent studies have researched the content characteristics of CSR reports and features such as their credibility and reporting quality, the overall transparency of reports however has not received a lot of attention yet. Therefore, this study conducts a quantitative content analysis of 24 CSR reports of car manufacturers from 5 European countries with the aim to determine whether mandatory CSR reports achieve a greater level of transparency than voluntary reports. Transparency is conceptualised as a multidimensional construct along communication theory. The results indicate that mandatory and voluntary reports do not score high on transparency, demonstrating opportunities for future improve-ments. Significant evidence confirming an increase of transparency in mandatory re-ports published in 2018 was not found. CSR rere-ports are mostly lacking in-depth infor-mation on GRI indicators, which provides the valuable takeaway for car manufacturers that improvements in this specific area can essentially help to increase the transparency of their reports.
Keywords: CSR, sustainability reporting, mandatory regulation, transparency, automotive industry
The Implementation of Mandatory Corporate Social Responsibility Reporting in Europe and its Consequences for the Transparency of CSR Reports of the European
Automotive Industry
In today’s fast paced age of information, news about corporate scandals, wrong-doings, and deceptions are nothing out of the ordinary and spread rapidly via channels of social media to an immense audience. Organizations have realized the ever more in-creasing importance of providing transparent insights into their behaviour, decision making and actions in order to maintain or re-establish an organization-stakeholder rela-tionship of mutual trust. Hon and Grunig (1999), state that stakeholders are interested to understand the organizations whose actions have far reaching impacts on their lives as well as on the environment and community that they are living in. Therefore they exer-cise pressure on organizations to continuously inform them not only about financial, but also about their sustainability practices. As a result, organizations that fail to disclose information transparently raise the suspicion that they are intentionally doing so to keep something hidden from the eyes of the public (Hon, 2006).
In order to satisfy the public’s demand for transparent provision of in-formation organizations have to develop effective ways to communicate with internal and external stakeholders. One medium that proved very effective in the dissemination of messages about the financial, social, and environmental performance of organizations are corporate social responsibility reports. Since the 1990s corporate social responsibil-ity (CSR) started to emerge as a ubiquitous concept in the realm of organizational com-munication (Ihlen, Bartlett, & May, 2011). The implementation of CSR strategies and disclosure of CSR records is of particular interest to organizations, as this practice does not only allow stakeholders to get an insight on their corporate activities but even more so seems to provide the organizations with a perfect opportunity to set themselves apart from competitors in terms of their reputation, in a socially observant and extremely con-tested market environment (Bebbington et al, 2008; Carroll & McCombs, 2003, Sethi,
Martell, & Demir, 2016).
Until recently, organisations in Europe were neither obliged to report their corporate social responsibility activities, nor did they have to follow certain rules and regulations when publishing their annual CSR reports. This lead to the severe criti-cism that information provided in voluntary CSR reports create a distorted picture of reality, as organizations “cherry-pick” and disclose information that sheds a positive
light on the their organisational reputation while intentionally excluding information that create less favourable associations with the organisation among the public (Milne and Grey, 2013, p.17). As a result CSR reporting was accused of lacking transparency, credibility, and possibilities of comparison, in fact even labelled a mere belief system that creates the impression of full disclosure but in reality stands in harsh contrast to the actual concept of transparency (Coombs & Holladay, 2013).
As multiple scholars criticize voluntary CSR reporting (Coombs & Holladay, 2013; Crawford & Clark Williams, 2011; Devin, 2016; Milne and Grey, 2013), others advocate that the implementation of mandatory regulations could indeed lead to an in-creased level of transparency, comparability, credibility, and quality of CSR reports (Gulenko, 2018; Habek & Wolniak, 2016; Ioannou & Serafeim, 2017; Kaya, 2016; Llena & Hernandez, 2007).
In response to the voiced criticism towards voluntary CSR reporting and ac-knowledging academic research, in 2014, the European Parliament passed a new di-rective that compels large organisations and groups to disclose non-financial and diver-sity information in form of an annual stand-alone or integrated report as of 2018 (EC, 2014). The regulatory change in CSR reporting offers the opportunity to examine, more specifically, compare and contrast voluntary vs. mandatory CSR reports of organiza-tions, for instance by taking factors such as credibility, (not) addressed topics (Lock & Seele, 2016), audiences engaged, and styles of reporting into account.
This study sets the focus on the investigation of CSR reports of the European automotive industry. The automotive industry is by far one of the largest industrial branches in Europe, generating a trade surplus of €90.3 billion for the EU, providing roughly 13.3 million jobs that account for 6.1% of the total EU employment, and func-tioning as a vital source of government revenue, as taxation on motor vehicles alone, amounts to €413 billion annually (European Automotive Manufacturers Association, 2019).
Apart from its sheer size and influence, there is a second reason why this indus-try is especially intriguing to look at under the aspect of CSR. The production process of cars involves the import, fabrication, and processing of various resources and materials, as well as the emission of pollutants and the disposal of manufacturing waste. Addition-ally, the use of the final product is inextricably tied to the constant consumption of re-sources in form of fossil fuels and the resulting air pollution. All of that suggests that the automotive sector has an enormous social, environmental and economic impact, of
which the public is increasingly aware and demands to be informed about by the manu-facturers. The major European car manufacturers publish CSR reports, in which they report on their diverse CSR initiatives, ranging from climate protection, emission reduc-tion, and renewable energy, to diversity and human rights initiatives and report these in their CSR reports as well as on other information regarding their environmental, social and economic performance.
A third and last reason for putting the focus on the European automotive sector is an aspect of a more situational nature. In 2015 the automotive industry faced a severe crisis during the Diesel emission scandal, being found guilty of falsifying emission lev-els, provoking anger and scepticism among the stakeholders. One would assume that this event made it even more explicit that carmakers need to increase the level of trans-parency of their CSR reports in an attempt to reconcile with the deceived parties. Under the EU directive, there is now the possibility to identify in what ways voluntary sustain-ability reports differ from mandatory sustainsustain-ability reports. The aim of this study is to gain a particular insight on how the shift from voluntary to mandatory reporting may have had an impact on the depth, accuracy, timeliness, comprehensibility, and balance of information provided in CSR reports and in turn on the transparency of those reports. For precisely this reason, the proposed research question that this thesis aims to find answers to reads as the following:
RQ: Which consequences did the implementation of mandatory EU CSR reporting regulations in 2018 have on the level of transparency of the CSR reports of European car manufacturers?
The upcoming section of this paper will provide a review of the existent litera-ture devoted to the concept of transparency, contextualize its significance for the auto-motive industry, and briefly discuss recent developments in CSR standardization litera-ture. Following the literature review, there will be an elaboration on the methodological approach, as well as a presentation of the results of the analysis of the CSR reports, and a last section including the discussion of these results, final conclusions, limitations and suggestions for future research.
Literature Review
Transparency – A Two-Sided Conceptbe-comes evident that the concept of transparency has been conceptualized from a vast variety of viewpoints, across a wide range of academic disciplines in the past. Inter alia transparency has been a topic of discussion in the fields of philosophy (Han, 2012; Tye, 2014), and sociology (Baudrillard, 1993; Moore, 2017), economics (Best, 2007; Suman-jeet, 2015) and management studies (Berggren & Bernshteyn, 2007; Eggert & Helm, 2003), as well as in political (Birchall, 2011; Fairbanks, Plowman, & Rawlins, 2007), and journalism studies (Allen, 2008; Craft & Heim, 2009; Curry & Stroud, 2019; Plaisance & Deppa, 2009; Singer, 2006).
Of greater significance for this study however, is the extensive body of research on transparency conducted in the realm of communication studies and public relations. In the context of organization-stakeholder relationships Jahansoozi (2006), mentions a number of characteristic features of responsible organizational behaviour namely trust, accountability, collaboration, cooperation, and commitment which can occur as benefi-cial outcomes of transparency and help to reinforce relationship building processes. Similarly, scholars including (Bowen, 2004; Bowens, 2007; Fombrun & Rindova, 2000; Rawlins, 2008; Tapscott & Ticoll, 2003), argue that integrating the concept of transpar-ency into organisational culture enhances reputational performance, accountability, and can facilitate the maintenance and restoration of trust in a particular organization. Tak-ing the Dieselgate scandal as an example, transparency could have proven as an ex-tremely valuable asset after the crisis when the automotive industry had to assume re-sponsibility for the deliberate act of deception and find ways to repair the disrupted rela-tionship with its stakeholders.
While some researchers (Schnackenberg and Tomlinson, 2016; Williams, 2005), are viewing information as the fundamental component of transparency, Grunig & Huang (2000) argue that transparency is not to be reduced to the sole purpose of infor-mation provision but rather should be understood as a process that involves on-going participation of both the organization and its stakeholders in the acquisition, distribu-tion, and creation of information. Additionally, Christensen and Langer (2009) detect a correlation between transparency and symmetrical information processes.
Although the majority of scholars is convinced of the positive outcomes of transparency and appears to praise it as a miraculous panacea solving many issues con-cerning organization-stakeholder relationships (Schnackenberg & Tomlinson, 2016), a universally accepted definition or theoretical framework of the concept, that acknowl-edges organizational communications seems to be essentially missing (Wehmeir &
Raaz, 2012). In a recent study Lee & Boyton (2017) review previous communication literature on transparency and propose that there is an observable shift from an instru-mental approach to transparency to an understanding of transparency as an intrinsic val-ue in itself. They argval-ue that the instrumental view follows the logic that more infor-mation generates superior societal outcomes such as for instance trust in and credibility of messages, while simultaneously decreasing negative social impacts, such as the ex-clusion of specific publics. According to the authors the high value that has been at-tributed to the practice of information disclosure is reflected in the ever-expanding transparency guidelines, which require societal actors to disclose more and more infor-mation (Lee & Boyton, 2017).
However, lately this instrumental approach has become heavily criticized as scholars argue that the mere provision of information does not aid to transparency but in many cases actually creates more ambiguity and darkness around particular topics (Rawlins 2009). Regarding this problematic O’Neill (2006), states that most of the offi-cial communication that is originally disseminated with the intention to create greater transparency, is actually incomprehensible to the addressed recipients or overly clut-tered with irrelevant information, making it extremely difficult for audiences to distin-guish between what’s relevant and what’s not.
Correspondingly, Heald (2006), even though seeing transparency as an instru-mental value, highlights that while it is crucial to transparency efforts that the organiza-tion “opens up” by making informaorganiza-tion available to the public, the audience capability to comprehend and process the given information is a necessary prerequisite, as other-wise openness will not have transparency as its ultimate result. In that sense one could say that while openness exclusively revolves around the organizations efforts to openly communicate and make information visible to the public, the concept of transparency should take into account both the characteristics of the organization and the inquisitive audiences outside of the organizational scope. Similarly Christensen (2002), views transparency as the final result of an alignment processes between the various interpreta-tions of messages by parties internal or external to an organization.
The traditional understanding of transparency as a functional communication tool however seems to severely lack these important insights, as it curtails transparency to the one-directional emission of information and manifests the idea of an organization-centric control over communication flows, neglecting the importance of the audience that is receiving, interpreting and reacting towards the disseminated messages.
For this reason a modern perspective on the concept stresses that transparency needs to be understood as an intrinsic value that does not in the first place derive from the process of information disclosure but rather from the companies willingness to give up control over relevant information, thereby enabling stakeholders to exercise external pressure, which in turn forces organizations to communicate and act as socially respon-sible, legitimate, and accountable players (Lee & Boyton, 2017). This performative ap-proach to organizational transparency makes power imbalances between organizations and stakeholders, which are characteristic of the instrumental approach a subject of dis-cussion and acknowledges the importance of the role that both parties play in the con-duct of transparent forms of communication. Siding with the performative transparency approach but not entirely neglecting the functional role of transparency Rawlins (2009), defines organizational transparency as:
“…the deliberate attempt to make available all legally releasable information -whether positive or negative in nature - in a manner that is accurate, timely, balanced, and unequivocal, for the purpose of enhancing the reasoning ability of publics and holding organizations accountable for their actions, policies, and practices’’ (p.75).
On the one hand the definition provided by Rawlins picks up on one element of instrumental transparency by suggesting the disclosure of all legally releasable infor-mation while on the other hand stressing the significance of intrinsic qualities of this information such as balance, unequivocalness, accuracy and timeliness (Lee & Boyton, 2017). This multi-layered perspective on transparency, in contrast to other conceptuali-zations, couples intrinsic and instrumental qualities of the concept and therefore pro-vides an interesting starting point and framework with which the investigation of CSR reports will be conducted.
In line with Rawlins’ definition and the view on transparency expressed by Heald (2006), Gower (2006) describes the essence of organizational transparency as the efforts that an organization undertakes in order to assure that its decision-making and organisational behaviour are discernable and comprehensible to outside parties that are interested to understand those processes. By looking at the transparency of CSR reports in terms of the qualities defined by Rawlins it will become possible to see how far these organizational efforts reach in actual practice in the European automotive industry.
The Importance of Transparency in the Automotive Sector
In the context of the European automotive industry the value of transparent communication of information takes a central role for multiple reasons. Looking at the structure of operations of car manufacturers it becomes clear, that cars are assembled in many production steps, which are not all carried out at the same manufacturing site but in fact take place at various geographical locations around the globe. The same applies to the dispersed network of suppliers and sub-contractors that are providing materials or other services to the manufacturers. The far-reaching scope of operations makes it really difficult to understand and assess the sourcing and use of resources and materials, sup-ply chain structures, furthermore to keep an overview of the various social and envi-ronmental activities of the car manufacturers and the market environments served in and outside of the European Union. In that sense, making the communication of such infor-mation more transparent, does not only allow for an accurate understanding on behalf of the stakeholders of how the automotive industry operates its business but additionally puts stakeholders in the position to hold manufacturers accountable and responsible for their actions (Bovens, 2006).
Aside from the social and environmental impact tied to the production process of vehicles that was already described in the introduction there is another reason why transparency is vital to the communication of European car manufacturers. Due to the diesel emission scandal in 2015, the credibility of the entire car industry took a severe hit. In order to rebuilt trust in the automotive sector, the manufacturers have to signal their willingness to disclose corporate information that can be trusted again. According to Fombrun & Rindova (2000), stakeholder interaction that is founded on principles of transparency will result in higher rates of trust, commitment and support, even in times of crisis, as stakeholders will value the companies’ efforts to meet common interests and values. In this regard, the implementation of transparency at the root of all organization-al communication could help the automotive manufacturers to overcome the credibility crisis and restore the relationship of trust, which is of utmost importance for the conduct of successful business.
Lastly, all of the arguments above have looked at the effects of transparency on parties external to the organization, however transparent organizational communication about the organizations’ CSR operations, gives employees the feeling that they are working for a company with high moral and ethical standards, that they can sympathize with, which in turn motivates them to be more engaged in the workplace (Jiang & Men,
2017). Employees working in the automotive industry might have felt that the emission scandal disrupted the alignment between their personal set of ethical and moral stand-ards and the values of the organization they are working for. Through transparent organ-izational communication the car manufacturers have the opportunity to reaffirm that the companies values and beliefs are morally and ethically sound and worth to be held up by its employees.
The Transition from Voluntary to Mandatory CSR Reporting in the EU The term corporate social responsibility reporting relates to the practice of communicating social, environmental and economic information and activities of an organization to the diverse range of stakeholders who are affected by those activities. Crane & Glozer (2016), highlight the versatile benefits of CSR reporting for stakeholder management, image enhancement, the maintenance of legitimacy and accountability, behaviour change, and organizational sensemaking. Furthermore, (Malik, 2015) stresses its positive impact on employee productivity, capital market performance, Brown et al. (2006) connect good CSR practices with the reinforcement of beneficial relationships with media, policymakers, and regulatory bodies, and Lock & Seele (2016) argue that voluntary standardization positively affects the credibility of CSR reports.
However due to the voluntary nature of reports in the early ages of CSR report-ing, there also emerged criticism towards the practice of CSR disclosure. According to Milne & Gray (2013), because of lacking regulations, reports are sparsely stakeholder inclusive, exclusively cherry pick elements that are putting the organization in a better light, and tend to neglect major social issues that are tied to the conduct of their busi-ness. Crawford & Clark Williams (2011), argue that CSR reports provide organizations with the possibility to issue self-laudatory statements with the sole purpose of manipu-lating the public’s perception of their corporate activities, and Devin (2016) introduces the notion of half-truths, which refers to the practice of presenting truthful information, but omitting significant elements of it.
A plausible solution to these problems could be the introduction of standardized mandatory CSR reporting requirements at national and European level (Habek & Wolniak 2013). In fact some countries in the European Union, inter alia France and Spain, Norway, and Denmark have already implemented them on national level, but international comparisons remain difficult (Pedersen et al., 2013). Generally, Ioannou & Serafeim (2017) find that mandatory regulations of CSR have a positive effect on the
comparability and credibility of CSR reports. Habek & Wolniak (2016), investigate CSR reports of selected European member states and find that the CSR reports of organ-izations located in countries with mandatory reporting regulations are of higher quality. In accordance with Llena & Hernandez (2007) who analysed mandatory reports in Spain, Gulenko (2018), argues as well that consequences of mandatory reporting are an increase in the quality of reports, and in the number of organizations who are reporting their CSR activities, suggesting that the introduction of mandatory reporting will have similar effects on German companies. Looking at the national regulation of CSR in France, Kaya (2016) states that mandatory reporting helped to improve CSR reports in terms of comparability and standardization of measures, which enables benchmarking. With the implementation of the European Directive 2013/34/EU, all organiza-tions are obliged to disclose CSR data in annual reports by 2018, which allows for the direct comparison of voluntary and mandatory reporting across Europe for the first time in CSR reporting history. Following the observations and insights that were gained through this literature review, during the course of the study it is going to be an essential question whether the new ways of CSR reporting brought about by the mandatory EU reporting regulations are solely ensuring greater visibility of information or if they can actually increase the level of transparency of CSR reports, in this specific case the CSR reports of the European automotive industry.
The existent literature on transparency reveals, that the major pitfall of studies with an instrumental approach is to misconceive transparency as a unidimensional con-cept rather than seeing it as the complex multi-layered construct it actually is. To avoid this common mistake, the study at hand is going to take the transparency dimensions proposed by Rawlins (2009) as a theoretical foundation to find answers to the presented research question. Deriving from the 5 dimensions comprehensibility (unequivocalness), accuracy, completeness/information depth, timeliness, and balance the following Hy-potheses were formulated:
H1: As a consequence of the introduction of mandatory CSR reporting laws, CSR reports of European car manufacturers for the year 2017 are more transparent than their CSR reports for the year 2016.
H2: CSR reports of European car manufacturers for the year 2017 are more comprehensible than their previous CSR reports for the year 2016.
H3: CSR reports of European car manufacturers for the year 2017 are more accurate than their previous CSR reports for the year 2016.
H4: CSR reports of European car manufacturers for the year 2017 provide greater information depth than their previous CSR reports for the year 2016.
H5: CSR reports of European car manufacturers for the year 2017 disclose information in a timelier manner than their previous CSR reports for the year 2016.
H6: CSR reports of European car manufacturers for the year 2017 are more balanced than their previous CSR reports for the year 2016.
H7: CSR reports of French car manufacturers for the year 2014 more transparent than their previous CSR reports for the year 2013.
H8: CSR reports of French car manufacturers for the year 2017 are more transparent than their CSR reports for the year 2014.
Methodology
Research DesignIn order to investigate the presented research question, quantitative content anal-ysis was chosen as the most suitable methodological approach, as multiple previous scholars concerned with the analysis of CSR reports successfully applied this method in their research (Campbell, 2003; Lock & Seele, 2016). The sample for this study consists of integrated and stand-alone annual CSR reports of the entire European automotive industry from the two years in which the shift from voluntary to mandatory CSR
report-ing brought about by the Directive 2014/95/EU took place, namely the years 2016 and 2017.
However, it had to be taken into account that some of the companies comprised within the sample, are situated in European countries, which implemented forms of mandatory CSR reporting at an earlier stage on national level already, among them France with the NRE act in 2001 (Chelli, Durocher, & Richard, 2014). In addition, the Article 225 of t he Grenelle II act, crafted in 2010, introduced the yet strongest re-quirements for transparency disclosures on environmental, social and governance mat-ters on a national level, becoming effective as of December 7, 2013 (Doucin, 2013). For this reason, additionally to the 2016 and 2017 CSR reports of French car manufacturers, this study looked at a subsample of CSR reports from the transition years on national level, namely 2013 and 2014 to gain deeper insights on the consequences of national CSR reporting regulations and the shift from national reporting regulations to mandato-ry EU regulations.
The units of analysis of this study were the annual integrated or stand-alone CSR reports of European car manufacturers, which were systematically retrieved from the respective companies’ websites. Only reports covering the transition years from volun-tary to mandatory CSR reporting were considered for the coding. By following this pro-cedure an equal distribution of voluntary and mandatory reports in the sample could be guaranteed. Both human as well as software coding was applied in the data collection process. The codebook specifically established for this study encompassed 13 adminis-trative, 20 content, 34 GRI G4 indicator, and 14 industry specific indicator variables retrieved from the GRI Automotive Sector Supplement (see Appendix A for a detailed list of all variables and coding instructions).
A singular coder coded the entire sample, summing up to approximately 90 hours of coding. In order to assure the reliability of the codebook and the findings of this study, two rounds of coder training were conducted, within which 15% of the sam-ple was double coded by a second coder, who was not involved in the development of the initial codebook. De Swert (2012), highlights that especially for dichotomous and categorical variables, which are commonly used in content analysis, for which one value appears very rarely, Krippendorff’s alpha values return drastically low even with very few mistakes of the coders (p.8). This seems to be the case for this study as well, as the coder agreement is very high and coding mistakes are a scarcity. Knowing that charac-teristic of Krippendorff’s Alpha, it can be justified that the few variables with low
KALPHA values are nevertheless accepted for analysis since coding mistakes are iso-lated cases (see Appendix B for a detailed list of Krippendorff’s 𝛼 values).
Sample
The ten companies investigated in this study were namely: Audi AG,
Volkswagen AG, Daimler AG, BMW Group, Porsche AG (Germany), Fiat Chrysler Group (Italy), Groupe PSA, Groupe Renault (France), Volvo AG (Sweden), Aston Mar-tin Ltd., (UK). The sample size did encompass all European car manufactures that pub-lished integrated or stand-alone sustainability reports for both of the years 2016 and 2017. Since that was not the case unanimously all car manufacturers the sample size did not equal the population of car manufacturers in Europe. In the main sample there was a total amount of 20 reports published in English language, out of which all ended up be-ing coded. The subsample consisted of the reports of two companies namely, PSA, Re-nault (France), adding up to a total of 4 reports. Measured by the amount of employees the biggest company in the overall sample had 642.292 employees whereas the smallest company had 3707 employees (M = 172,208.50, SD = 166,392.18). The company with the longest history of reporting, reported its first report in 2002, while the company with the shortest reporting history, issued its first report for the year 2015 (M = 2007.42, SD = 4.26) Other sample characteristics can be found in the table below (Table 1). Table 1. Descriptive statistics of the sampled CSR reports indicated in percentages.
The relatively small sample size is due to the limited amount of car manufac-tures operating in Europe and the lacking availability of published reports for the years 2016 or 2017.
Report format Application level GRI or UNGC guidelines
Stand-alone Integrated Yes No Yes No
Reports main
sample % 75.00 25.00 90.00 10.00 100.00 0.00 Reports
Measures
The five dimensions of transparency were identified on the basis of the theoreti-cal approach to transparency proposed by Rawlins (2009) and operationalized by means of the indicators required to obtain the “in accordance” - core option of the GRI G4 re-porting guidelines (2015), and the indicators listed in the GRI Automotive Sector Sup-plement (2004). To help companies with the development of their CSR reports, several reporting guidelines have been published by organizations in the past, for instance by the Global Reporting Initiative (GRI) and the UN Global Compact (UNGC). European companies are by no means obliged to structure their CSR reports in accordance with these reporting guidelines but the majority a companies does make use of them as they provide a solid framework that substantially facilitates non-financial reporting. Accord-ing to Roca & Searcy (2012), GRI is the most widely known and referred set of volun-tary guidelines for corporate sustainability reporting, focusing on companies’ profiles, their visions and objectives towards sustainability, as well as on their sustainability ef-forts and performance. The amount of companies that report according to GRI steadily increases (Marimon et al., 2012), which in turn allows for greater comparability among the reports and enhances their level of transparency (Fernandez-Feijoo, et al., 2014). In addition, a fairly recent KMPG survey on corporate social responsibility reporting found that the GRI framework is the most commonly used, with 75 per cent of the world’s largest 250 companies applying it in their reports (KPMG, 2017). For these reasons the GRI G4 reporting framework and its indicators were selected as a basic component for the operationalization of this study.
Each of the five transparency dimension resulted in an individual summative scale, considering the unequal amount of items measuring the separate dimensions and the varying scope of reporting efforts connected to them (see Table 1 for weighting). An overall transparency score was then calculated by summing up the individual scores of the separate transparency dimensions, resulting in a maximum possible transparency score of 36.5 points per report.
The dimension readability was measured with the help of the Flesch-Kincaid Reading Ease index using the online tool Readabler for the calculation. The dimension balance was measured using the text analysis software QDA Miner/Wordstat, and a sentiment dictionary provided by Wordstat that grouped words into the categories posi-tive versus negaposi-tive, thereby assessing the balance of wording in the respecposi-tive CSR reports. The operationalization of the other transparency dimensions is explained in the
table below (Table 2), which also displays the corresponding measured variables. The statistical test performed to investigate the assumptions of the hypotheses, included the execution of multiple independent t-tests, and a multiple regression,
Overall, the twenty reports included in the main sample covering the years 2016 and 2017 display a transparency mean of M = 23.67 (SD = 3.93, Min = 14.61, Max = 28,47). The French reports included in the subsample covering the years 2013 and 2014 display an overall transparency mean of M = 23.07 (SD = 1.50, Min = 21.37, Max =
24.49).
Regarding the validity of the established scales measuring the sub-dimensions of transparency, it can be said that most of the variables constituting the scales have been used and verified in the operationalization of previous content analysis studies (Lock & Seele, 2016).
Table 2. Operationalization of transparency dimensions and measured variables.
Comprehensibility
(Scale: 0-7.5) Accuracy (Scale: 0-10)
Completeness (Scale: 0-10) Sub-dimensions Variables Sub- di-mensions Variables Sub-dimensions Variables
Readability V14 Assurance V23-25 GRI G4
In-dicators V34-81 Accessibility V15-V21 Adherence
to GRI V26
Language
avail-ability V22 Method V27-V30
Timeliness (Scale: 0-4) Balance (Scale: 0-5)
Sub-dimension Variables
Sub-dimension Variables
Recent data V31 Wording V33
Results: The Transparency of CSR Reports
Hypothesis TestingTo approach the overarching research question whether the mandatory CSR re-ports of European car manufacturers for the year 2017 are more transparent in direct comparison to their voluntary reports for the year 2016, summative scales of the five transparency dimensions, comprehensibility, accuracy, completeness, timeliness and balance where calculated. Weighting and summing up the transparency dimensions, an overall transparency scale, was established ranging from 0-36.5. A table providing a detailed overview of the mean scores of each transparency dimension for the entire sample can be found on the next page (Table 3).
H1 stated that as a consequence of the introduction of mandatory CSR reporting laws, CSR reports of European car manufacturers for the year 2017 are more transparent than their CSR reports for the year 2016. It has to be noted that the results of the t-test performed for the analysis of Hypotheses 1-6 have to be treated with caution since in contrast to the overall transparency and overall scores of the transparency dimensions, which are approximately normally distributed, the individual scores for 2017 and 2016 are not normally distributed. Additionally the compared groups are of small size (n =10), what implies that the statistical power of the tests is low. Reports from 2017 had a slightly higher transparency mean (M = 24.17, SD = 4.00) than reports from 2016 (M = 23.16, SD = 4.03). However the results were not significant t (18) = - 0.5, p = .291. Thus the hypothesis was not supported.
To test H2, which assumed that CSR reports of European car manufacturers for the year 2017 are more comprehensible than their previous CSR reports for the year 2016, an independent samples t-test was performed. Reports from 2017 had a slightly higher comprehensibility mean (M = 4.73, SD = 0.68) than reports from 2016 (M = 4.53, SD = 0.87). However these results did not turn out to be significant t (18) = - 0.58, p = .285. The hypothesis was not supported. To test H2, which assumed that CSR reports of European car manufacturers for the year 2017 are more comprehensible than their pre-vious CSR reports for the year 2016, an independent samples t-test was performed. Re-ports from 2017 had a slightly higher comprehensibility mean (M = 4.73, SD = 0.68) than reports from 2016 (M = 4.53, SD = 0.87). However these results did not turn out to be significant t (18) = - 0.58, p = .285. The hypothesis was not supported. H3 stated that CSR reports of European car manufacturers for the year 2017 are more accurate than their previous CSR reports for the year 2016, and was tested by performing
3. Overview of overall transparency levels of all CSR reports and mean scores of transparency dimensions.
Comprehen-sibility Accuracy Completeness Timeliness Balance Total
Max. points 7.5 100% 10 100% 10 100 % 4 100% 5 100% 36.5 100% Voluntary 2016 4.53 60.40% 6.08 60.80% 4.58 45.8% 3.80 95,00% 4.18 83.60% 23.16 63.60% Mandatory 2017 4.73 63.07% 6.58 65.80% 4.76 47.60% 3.80 95,00% 4.30 86.00% 24.17 66.30% France 2013 3.86 51,47% 6.67 66.70% 4.24 42.40% 3.00 75,00% 5.0 100% 22.76 62.36% France 2014 3.87 51.60% 7.08 70.80% 4.65 46.50% 3.00 75,00% 4.77 95.40% 23.37 64.03% France 2017 4.91 65.47% 8.75 87.50% 5.59 55.90% 4.00 100% 4.88 97.60% 28.13 77.07%
an independent samples t-test. Reports from 2017 had a slightly higher accuracy mean (M = 6.58, SD = 2.37) than reports from 2016 (M = 6.08, SD = 2.75). However the re-sults were not significant t (18) = - 0.44, p = .335 and therefore the hypothesis was not supported.
In order to test H4, which stated that CSR reports of European car manufacturers for the year 2017 provide greater information depth than their previous CSR reports for the year 2016, an independent samples t-test was performed. Reports from 2017 had a slightly higher completeness mean (M = 4.77, SD = 0.70) than reports from 2016 (M = 4.58, SD = .67). However these results did not turn out to be significant t (18) = - 0.61, p = .274. H4 was not supported.
To test H5, which stated that CSR reports of European car manufacturers for the year 2017 disclose information in a timelier manner than their previous CSR reports for the year 2016, an independent samples t-test was performed. The mean timeliness score of reports from 2017 were compared to the mean timeliness score of reports from 2016. Reports from 2017 had the same mean (M = 3.80, SD = 0.63) as reports from 2016 (M = 3.80, SD = 0.63). However these results were not significant. Hence H5 was not sup-ported.
H6 stated that CSR reports of European car manufacturers for the year 2017 are more balanced than their previous CSR reports for the year 2016, and was tested per-forming an independent samples t-test. The test revealed that reports from 2017 had a slightly higher balance mean (M = 4.30, SD = 0.48) than reports from 2016 (M = 4.18, SD = 0.53). However the results were not significant t (18) = - 0.52, p = .307. Thus the hypothesis was not supported by the results.
To test H7, which assumed that reports of French car manufacturers for the year 2014 more transparent than their previous CSR reports for the year 2013, an independ-ent samples t-test was performed. It has to be noted that the results of the t-test per-formed for the analysis of Hypotheses 7-8 have to be treated with caution since in con-trast to the overall transparency and overall scores of the transparency dimensions, which are approximately normally distributed, the individual scores for 2013 and 2014 are not normally distributed. Again the compared groups are of very small size (n =2). The results showed that reports from 2014 had a slightly higher transparency mean (M = 23.37, SD = 1.58) than reports from 2013 (M = 22.76, SD = 1.96). However the results were not significant t (2) = - 0.34, p = .384. H7 was therefore not supported.
more transparent than their CSR reports for the year 2014, and was tested by performing an independent samples t-test. The test compared the mean transparency score of French reports from 2017 with the mean transparency score of French reports from 2014. Re-ports from 2017 had a much higher transparency mean (M = 28.13, SD = 0.48) than re-ports from 2014 (M = 23.37, SD = 1.58). However the results were not significant t (2) = -4.07, p = .062. Hence the hypothesis was not supported.
Analysis of Control Variables
To assess whether other variables have an influence on the transparency of the CSR reports, a linear regression was conducted, controlling for company size, GRI ad-herence level, reporting framework, reporting history, and report format. While the assumption of normal distribution of the residuals was met the assumption of homosce-dasticity was not met. Furthermore the regression model as a whole proved to be signif-icant, F (5, 18) = 5.23, p = .004, and was considered reliable. The strength of the predic-tion is relatively strong: 49% of the variapredic-tion in the dependent variable transparency scale can be predicted by the five independent variables (adjusted R2 = 0.48). The
dummy variable established for the variable first report issued, b* = 0.54, t = 4.35, p < .001, 95% CI [0.39, 1.12] significantly predicted the transparency scale, whereas the other variables did not.
Discussion
Before starting the discussion, it is important to note that for all tested hypothe-ses the results did not turn out to be significant, which might be due to the fact that the sample size for the main sample and the subsample lie just below the critical benchmark of the value 25, leading to a decrease of statistical power. The significance value indi-cates whether the findings of the statistical test are generalizable to an entire population outside of the scope of the investigated sample. Therefore the findings of this study are not generalizable to the reports of the entire European automotive industry but only provide insights into the characteristics of CSR reports investigated in the sample. An-other reason for the insignificant results is the minimal deviation between voluntary and mandatory reports regarding their mean scores on the transparency scale, as well as on the majority of the individual transparency dimension scales.
Looking at the overall transparency of voluntary reports from 2016 and manda-tory reports from 2017 the minimal variation of the standard distributions and means
indicate that the difference in transparency between voluntary and mandatory CSR re-ports is in fact not a substantial one. Therefore it can be said that mandatory rere-ports do not achieve a transparency level that is superior to the transparency level of voluntary reports, which contradicts the initial assumption.
With regards to comprehensibility of the reports form 2016 and 2017 the rather small variation of the standard deviations and means suggested that mandatory reports do not substantially exceed the comprehensibility level of voluntary reports. This means that they do not provide and indicator index of the applied reporting framework more frequently, and are not easier to access, read, or navigate through.
In contrast, the accuracy scores of the reports from 2016 and 2017 show a big-ger variation of the standard deviations. Although the statistical significance level was not met, the findings can be described as meaningful, implying that in a bigger sample there is the chance that the accuracy of mandatory reports might be higher as compared to voluntary reports. This would imply that they are providing more information on the methodology of the reports, including the data collection, measurement techniques, and sources of data.
Regarding the completeness/information depth of reports from 2016 and 2017 the standard deviations vary little, suggesting that mandatory reports do not provide more complete and elaborate information on the GRI indicators than voluntary reports.
In terms of timeliness reports of 2016 and 2017 show that the standard deviation and means are actually remaining the same for both years, meaning that there is abso-lutely no difference between voluntary and mandatory reports with regards to the recen-cy of the presented data or the indication of the reporting recen-cycle.
With regards to balance of reports, it can be said that the similar standard devia-tions indicate that mandatory reports are not substantially more balanced, in terms of negative vs. positive wording than voluntary reports.
In addition to the focus on the shift from voluntary to mandatory EU CSR re-porting, this study intended to gain deeper insights on the consequences of the adaption of national CSR reporting regulations and the shift from national reporting regulations to mandatory EU regulations. Comparing the overall transparency of French reports from 2013 with low national regulation to the reports from 2014 with strict national mandatory regulation, the findings indicate that there is a rather substantial variation of the standard deviations. Although the results were not significant, they can be labelled meaningful, as one could assume that in a bigger sample there is the possibility that the
reports published under strict national mandatory regulation are more transparent than the reports published under low national regulation.
Examining the transition from strict national mandatory regulations in 2014 to mandatory EU regulations in 2017 and its implications for the transparency levels of the French CSR reports for the respective years, the findings suggest that there is indeed a high variation in the standard deviations and means. Keeping in mind the statistical in-significance, the meaningful difference suggest that in a bigger sample there is the pos-sibility of finding proof for the superior transparency of French CSR reports published under EU regulations.
Controlling for the administrative items of this study, it was found that while the company size measured by the number of employees, and the format of the report did not have an impact on transparency, the reporting history of a company essentially did. The findings suggest that with every additional year of reporting experience the score for transparency increases by 0.73 points, which is indeed interesting to discuss. Manda-tory regulation of CSR reporting, although not having an immediate influence on the transparency of the most recent reports of European car manufacturers, in the long run seems to be likely to enhance their transparency at least in an indirect form. The reports of manufacturers who gain reporting experiences over a longer period of time display greater transparency levels. The EU directive obliges organizations to publish reports consistently and therefore companies who have been reporting for years as well as com-panies who just started to report on their CSR practices will steadily improve the trans-parency of their reports, as they get more familiar, experienced, and develop new skill sets.
In conclusion, looking at all reports that were analysed during this study, it becomes evident that they do not score high on transparency, demonstrating the need to identify the dimensions of transparency that need increased attention and continued improvement. The fact that both voluntary and mandatory reports score relatively high on comprehensibility, accuracy, timeliness, and balance, while scoring disproportionately low on completeness/information depth, which referred to the level of detail in which GRI indicators where presented, indicates that volun-tary as well as mandatory reports are mostly lacking more in-depth information on the included indicators. The low score on the completeness of the reports can also be traced back to the observation that only few reports, disclose in-depth infor-mation or any inforinfor-mation at all on the crucial sector specific indicators. A
promis-ing solution to achieve higher overall transparency levels of the CSR reports of European car manufactures could therefore involve the improvement of the detail of information that is provided per GRI indicator. Although this study shows that current mandatory reports apparently do not exceed voluntary reports in terms of transparency, it also suggests that the EU Directive 2013/34/EU paved the way for slow but steady long-term improvement of the transparency of future reports, driv-en by the increasing reporting experidriv-ence of organizations.
Limitations and Suggestions for Future Research
It goes without saying that the study at hand does have certain limitations. One of them derives from the fact that the GRI Automotive Sector Supplement, used to iden-tify sustainability information that is important to disclose for the automotive industry in specific, dates back to the year 2004 and encompasses a relatively small amount of addi-tional indicators. Even though the indicators included are still of substantial relevance from a present day perspective, over the time span of the last 15 years the automotive sector has definitely gone through some major transformation processes, regarding new techniques and automation of fabrication processes, the use of materials, and the con-sumption of resources just to name a few aspects. An updated version of the sector sup-plement that acknowledges the latest developments of the automotive industry, could not only increase its value for car manufactures who are using it to improve the infor-mation value of their reports, but would also enable researchers to analyse the CSR re-ports more thoroughly.
A second limitation was already touched upon in the methodology section name-ly the insufficient inter-coder reliability for a small amount of the coded variables. Even though it was argued that this is mainly due to the dichotomous or categorical nature of the variables and not because of coding mistakes, further improvements may be
achieved by conducting additional rounds of coder training or refining the codebook to facilitate the coding of complex variables.
As a further limitation it has to be noted that the reliability of the transparency dimension scales was not measured with any additional reliability test since items were validated in previous studies.
Lastly, the most impactful yet inevitable limitation of this study is the small sample size that might have caused insignificant findings, which in turn lead to the re-jection of hypotheses that probably would have been supported in the scope of a bigger
sample. As 2018 marked the first year of mandatory CSR reporting in Europe and the sample encompassed all available reports of the European automotive sector there was no option of expanding the sample at this point in time. Future research should therefore try to replicate this study in two years time from now, since then there will be the oppor-tunity to compare reports from multiple years of voluntary reporting to reports from multiple years of mandatory reporting, and to possibly generate significant findings that may prove the superior transparency of mandatory CSR reports and the importance of the EU Directive in obtaining this superiority.
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Appendix A: Coding sheet
ADMINISTRATIVE VARIABLES
ID Variables Coding rules
V1/ AI1
Name of coder Open code
V2/ AI2
Date of coding Open code
V3/ AI3
Report ID Open code
V4/ AI4
Company name Open code
V5/ AI5
Country Nominal
V6/ AI6
Report name Open code
V7/ AI7
Report title Open code
V8/ AI8
Year Open code
V9/ AI9
Reporting period Open code V10/
AI10
Type of report Nominal: stand-alone or integrated V11/
AI11
First report issued Open code V12/
AI12
Company size Open code
V13/ AI13
Reporting framework Nominal: GRI G4, GRI Standards, UNGC, not specified
CONTENT VARIABLES
ID Variables Coding rules
CO1 0-100 V15/
CO2
Table of contents Nominal: yes/no V16/
CO3
Electronic navigation helps in PDF
Nominal: yes/no V17/
CO4
Augmented reality options / QR codes
Nominal: yes/no V18/
CO5
Impressum/ Imprint Nominal: yes/no V19/
CO6
Available as free download Nominal: yes/no V20/
CO7
PDF open (copy paste possible) Nominal: yes/no V21/
CO8
GRI/UNGC Index Nominal: yes/no V22/
CO9
Language options Ordinal: 1, 2, 3+ V23/
AC1
Assurance Nominal: yes/no
V24/ AC2
Type of Assurance Ordinal: none (0), internal (1), external (2) V25/
AC3
Level of assurance Ordinal: none (0), limited (1), reasonable (2), combination (3)
V26/ AC4
Adherence level GRI Ordinal: none (0), in accordance - core (1), in accordance - comprehensive (2)
V27/ AC5
Methodology section Nominal: yes/no V28/
AC6
Data analysis Nominal: yes/no
V29/ AC7
Data measurement Nominal: yes/no V30/
AC8
Sources of data Nominal: yes/no V31/
T1
Recency of data Nominal: yes/no V32/
T2
Reporting cycle Nominal: yes/no V33/
B1
Balance Amount of pos./neg. words in report (soft-ware): scale 0-100
Appendix B: Inter-coder Reliability per Coded Variable
GRI INDICATOR VARIABLES Coding rulesV34-81/ C1-48
GRI Performance indicators (core) +
Automotive Sector Supplement Information Depth
Scale 0-3: 0 = not, 1= qual., 2 = quant., 3 = qual. & quant/ very comprehensive description
Variables KALPHA Value
Variables KALPHA Value
Variables KALPHA Value
V1/AI1 / V34/C1 1 1 V2/AI2 / V35/C2 1 V68/C35 1 V3/AI3 1 V36/C3 1 V69/C36 1 V4/AI4 1 V37/C4 1 V70/C37 1 V5/AI5 1 V38/C5 1 V71/C38 1 V6/AI6 1 V39/C6 1 V72/C39 .0000 V7/AI7 1 V40/C7 1 V73/C40 1 V8/AI8 1 V41/C8 1 V74/C41 1 V9/AI9 1 V42/C9 1 V75/C42 1 V10/AI10 1 V43/C10 1 V76/C43 .0000 V11/AI11 1 V44/C11 1 V77/C44 1 V12/AI12 1 V45/C12 1 V78/C45 1 V13/AI13 1 V46/C13 1 V79/C46 1 V14/CO1 1 V47/C14 1 V80/C47 1 V15/CO2 1 V48/C15 1 V81/C48 1 V16/CO3 1 V49/C16 1 V17/CO4 1 V50/C17 1 V18/CO5 1 V51/C18 1 V19/CO6 1 V52/C19 1 V20/CO7 1 V53/C20 1 V21/CO8 1 V54/C21 1 V22/CO9 1 V55/C22 1 V23/AC1 1 V56/C23 1 V24/AC2 1 V57/C24 1
Appendix C: Codebook
Administrative ItemsV1/AI1. Coder name: 1st coder: Vincent 2nd coder: Theresa
V2/AI2. Date of Coding: Date (dd.mm.yy): ________
V3/AI3. Report specific ID (assigned by coder): CI: ID contains company name and year of the report. Open code: ______
V4/AI4. Company: The name of the company Open code: _________ V25/AC3 1 V58/C25 1 V26/AC4 1 V59/C26 1 V27/AC5 1 V60/C27 1 V28/AC5.1 -.2500 V61/C28 1 V29/AC5.2 1 V62/C29 1 V30/AC5.3 1 V63/C30 1 V31/T1 1 V64/C31 1 V32/T2 1 V65/C32 1 V33/B1 1 V66/C33 1
V5/AI5. Country: The country of origin of the company.
1 Czech Republic (NOT INCLUDED IN SAMPLE) 2 Germany
3 France
4 United Kingdom 5 Italy
6 Spain (NOT INCLUDED IN SAMPLE) 7 Sweden
V6/AI6. Name of the report: The name of the report, e.g. “Sustainable Value Report”.
Open code: ________
V7/AI7. Title of the report: The title of the report, e.g. “Driving Performance and Innovation”, without the year indication.
Coder instructions (CI): If there is no title, leave this field blank. Open code: _________
V8/AI8. Year of the report: The year that is indicated in the title or on the title page of the report, e.g. 2016; 2016/2017.
Year: __________
V9/AI9. Reporting Period: The year the report refers to. In case it does not refer to the calendar year, please code the most recent year (e.g., reporting period:
08/2016-08/2017, code 2017).
CI: The reporting period is usually indicated in the section “about the report” or within the
GRI table. Conduct a hypertext search for the terms *period* or *reporting period*. Year:
