The Market for Corporate Responsibility Reporting in the Americas

Abstract

The largest corporations in the world are increasingly adopting international corporate responsibility (CR) reporting standards from organizations such as the Global Reporting Initiative to meet stakeholder expectations for reliable and comparable social and environmental performance data. At the same time, significant geographic variations in reporting rates remain. The goal of this paper is to explain the diffusion of international CR reporting standards within the Americas. Reporting rates cannot be explained fully by a country's population size or level of economic development. Based on a unique statistical analysis of the relative impact of institutional environments, corporate resources and strategic orientation, stakeholder pressures, and transnational trade and learning networks, this research concludes that the diffusion of CR reporting throughout the Americas to date has been fueled by a rather narrow set of corporations with the capacities necessary to implement CR reporting and the strategic orientation to benefit from it. Moreover, corporations' internal capacities and the external demands for CR reporting have been enhanced in select countries by national and transnational CR advocacy and training organizations. This has led to an uneven development of CR reporting thus far, and this unevenness is expected to continue even as overall reporting rates increase.

According to a 2008 KPMG survey of international corporate responsibility (CR) reporting trends, “[r]eporting is now the norm, not the exception, among the world's largest companies” (KPMG 2008: 4). Indeed, KPMG (4) found that “nearly 80 percent of the largest 250 companies worldwide issued reports, up from about 50 percent in 2005.” This purported mainstreaming is highly uneven, however. While over 90 percent of the largest Japanese and British companies issued CR reports in 2008, only 17 percent of the largest Mexican companies did the same (KPMG 2008:16).1 There is a temptation to frame differential reporting rates as a product of economic development, to assume that after gaining a strong foothold in the most developed economies, CR reporting will gradually spread through the developing world. While most CR reporting data show a global reporting landscape dominated by the UK, U.S., Japan, Canada, and other European countries (CorporateRegister.com 2011; KPMG 2008), there are a few significant outliers. Brazil, for instance, is widely recognized as a CR reporting pioneer and, according to KPMG's data, surpassed the U.S. and Canada in 2008 in terms of reporting rates for the top companies in each country, with 78 percent producing either stand-alone or integrated CR reports (KPMG 2008:16).

According to Schmidheiny (2006:22), “Brazil has in fact become the regional powerhouse of CSR.” Haslam (2004) also points to Argentina and Chile as outliers in South America with significant CR activity. These countries' leadership roles are often explained by favorable institutional environments. For instance, Araya (2006:27) traces Brazil's CR reporting leadership to “the advocacy and research organisation, Ibase” and their 1997 “national campaign calling on companies to publish a social report, Balançio Social.” She also explains that “[s]hortly after, the Ethos Institute was launched to promote corporate responsibility in Brazil and soon developed a set of indicators that today help companies to manage and report environmental and social performance” (Araya 2006:28).

KPMG's own explanations for reporting trends in individual countries suggest that CR reporting drivers vary by both country and sector. In Sweden, they attribute the rapid growth of CR reporting to companies “staying one step ahead of regulation,” explaining that a new law was passed in 2007 that “mandated all 55 state-owned companies to issue reports on their environmental, economic, and social performance by 2009” (KPMG 2008: 15). By contrast, they explain that in Canada

[m]any of the new entrants since 2005 are companies associated with the energy boom Canada has been experiencing. As the extractive and energy sectors grow, so do concerns about ensuring economic development in a way that leaves positive social and environmental legacies (KPMG 2008:15).

In addition to national institutional environments and industry specificities, academic studies of the diffusion of CR reporting and other CR standards point to internal corporate resources and strategic orientations, stakeholder pressures, and transnational trade and learning networks as the key influences on reporting patterns and CR performance (e.g., Campbell 2006; Delmas 2002; Delmas and Montes-Sancho, 2011; Idowu and Papasolomou 2007; Neumayer and Perkins 2004; Nikolaeva and Bicho 2011; Perkins and Neumayer 2010). This exploratory study sets out to test these hypothesized drivers of standards diffusion in order to explain the uneven diffusion of standardized CR reporting in the Americas.2 Based on a statistical analysis of the determinants of national CR reporting levels and interviews with representatives from the most popular international CR reporting standards organizations,3 this paper argues that the diffusion of CR reporting to date has been driven by corporations with strong strategic CR orientations, as well as active CR market and capacity development by transnational reporting organizations, often in cooperation with preexisting CR advocates at the national scale. These research results suggest that the market for CR reporting does not automatically result from a certain stage of economic development and/or level of civil society activity; hence we expect the uneven development of reporting to continue even as overall reporting rates increase.

The first section describes the evolution of CR reporting in the Americas, beginning with a few pioneering reporters in the 1970s and ending with the more recent development of transnational reporting standards. The second section describes the current patterns of CR reporting within the Americas, and the third section lays out the current state of the literature on CR standards diffusion and CR reporting. The paper concludes with the results of the empirical analysis and prognoses for the future of CR reporting diffusion and standardization.

The Evolution of CR Reporting

While early calls for corporate reporting of environmental standards in the U.S. paralleled growing public concerns over environmental issues in the late 1960s, there has been a dramatic increase in CR reporting over the past two decades. According to one count (CorporateRegister.com 2011), worldwide CR reporting has shown rapid and steady growth from a mere 26 reports worldwide in 1992 to 5,209 in 2010. Marlin and Marlin (2003) argue that one of the problems with early CR reporting was the perceived greenwashing of corporate performance and lack of true transparency. In their words,

[t]he first phase of CSR reporting was composed of advertisements and annual–report sections in the 1970s and 1980s that paid homage to the environment the way a person might throw a coin into a fountain along with a wish. The reports were not linked to corporate performance (Marlin and Marlin 2003).

Marlin and Marlin (2003) trace the second phase to a few pioneering reports in the late 1980s and early 1990s, including those by Ben & Jerry's (U.S.), The Body Shop (UK), and Shell Canada. They note that these pioneering efforts still lacked “generally accepted standards against which … performance could be measured” and “external validation of [auditors'] qualifications.” According to one of the founders of the Global Reporting Initiative (GRI), “[a] few companies had dabbled in environmental reporting, but there was nothing standardised, nothing robust, nothing credible” (White, as interviewed by Waddock 2007:39). These transparency and accountability deficits led to the development of third-party standards for CR reporting (Marlin and Marlin 2003). For instance, the Ceres principles (launched in 1989) urged companies to minimize their environmental impacts and report on their environmental performance. A longtime shareholder activist explained the obfuscation that drove his organization to sponsor a shareholder resolution calling on one company to endorse the Ceres principles:

when I got up – I think it was with regard to the first Ceres resolution at the annual meeting, I said I wanted to start my statement with an open book test and you, the board members, can have the environmental report in front of you. Please turn to page so and so and there's report on water. And I said, now it says that you had a whatever the percentage improvement was; however, tell me what the base was, from what to what? Nowhere in your report when you talk about changes do you give us any sense of what the actual amounts are so it's hard to judge whether that's good, bad, or indifferent (personal interview, May 2004; see Hamilton 2006).4

Starting in the 1990s, there was also an increase in academic writing and research about CR reporting, particularly around environmental issues. According to Dr. Allen White, co-founder and former CEO of the GRI, although “[e]nvironmentalism was two decades old [by the early 1990s,] the notion that companies ought to be accountable through some kind of mechanism, some kind of high-quality credible disclosure framework, seemed like an idea ready to emerge” (as quoted in Waddock 2007:38). This third phase of reporting, then, is defined by information that is generally more quantifiable and verifiable, and although significant corporate-stakeholder disputes over content and assurance issues remain, many stakeholders have coalesced around a set of international reporting standards such as the GRI. This research will consider the current landscape and diffusion of three particular international reporting standards: the GRI's G3 standard, AccountAbility's AA1000 Assurance Standard (AA1000AS), and the UN Global Compact's Communication on Progress (COP) requirement. These standards were selected because they represent the three most widely recognized international standards that involve external reporting on both social and environmental issues.

Each of these reporting standards was created to increase the quality and utility of CR reports. The GRI was conceived by the Boston-based Coalition for Environmentally Responsible Economies (Ceres) in 1997. The GRI was spun off into an independent organization in 2001 and now describes itself as a “multi-stakeholder network” with international representation throughout its governing bodies (GRI 2011a). The G3 standard includes content and quality guidelines and specific performance indicators for a range of social and environmental issues, including environmental, human rights, labor, and product responsibilities (GRI 2011b).5 AccountAbility's AA1000AS standard was created in 2003 by the UK-based AccountAbility, a research and advisory firm with international offices and advisors. The standard “was developed to assure the credibility and quality of sustainability performance and reporting” (AccountAbility 2008:5), and it is intended as an assurance mechanism for reporting on organizations' adherence to the AA1000 Accountability Principles Standard (APS). Its most recent incarnation (2008) sets out a moderate assurance level for reports based mainly on internal documentation and evidence and reserves a high assurance level for those that include evidence from external stakeholders. In contrast to the G3 standard, the AA1000APS does not set out specific outcome-based performance indicators, but rather sets out process-based criteria for adherence to the three principles of inclusivity, materiality, and responsiveness (AccountAbility 2008). Finally, the UN Global Compact's COP is a mandatory annual “public disclosure to stakeholders (e.g., investors, consumers, civil society, governments, etc.) on progress made in implementing the ten principles of the UN Global Compact, and in supporting broad UN development goals” (UN Global Compact 2011a). The UN provides a self-assessment tool for companies, including general performance guidance on environmental, human rights, labor, and other issues.

Overall, these standards address unique reporting challenges, including comparability (GRI), reliability (AA1000AS), and relevancy. Moreover, there are a host of cross-fertilizations and collaborations among them. For instance, the UN Global Compact has partnered with the GRI by promoting the GRI as a potential (but not mandatory) reporting mechanism for the COP. The two organizations have co-authored a guide that helps users accomplish this (UN Global Compact 2011b). Moreover, AccountAbility has signed a Memorandum of Understanding with the GRI and they also work closely with the UN Global Compact (personal interview with Alan Knight, Head of Standard Services, AccountAbility, May 2007).

Reporting Patterns in the Americas

The most recent data on the uptake of reporting standards show the U.S. and Brazil as the clear standouts, with Argentina, Colombia, Canada, and Mexico forming a second tier of CR reporting activity (see Table 1). As CR reporting requires significant resources and the international reporting standards were all initially developed in the U.S. or Europe, one might expect reporting levels to follow patterns of economic development. Yet the data suggest that the top CR reporters are not necessarily the wealthiest countries (by GDP/capita; see Table 1). Moreover, when population size is taken into account, Panama has the highest reporting density (reports per capita), followed by Uruguay, Trinidad and Tobago, and Paraguay. While their overall numbers may be small and these countries may not play as large a role on the international CR reporting stage, they reveal a broader geographic distribution of CR reporting activity than is often described. Indeed, Baskin (2006:34–35) finds CR reporting even more widespread among the largest corporations in Latin America and throughout the developing world, arguing that “over two-thirds of [the largest] emerging-market companies … produce a sustainability report or have a specific section on their website or in their annual report covering corporate responsibility,” including over 70 percent of Latin American companies. The next section evaluates the literature on CR reporting and standards diffusion and identifies the key potential drivers—beyond economic development and population size—of this uneven diffusion of reporting.

Table 1. CR Reporting Trends in the Americas, 2010

Country	GDP/Capita	Population	Total reports (rank)	Reports/Capita (rank)	GRI reports	AA1000AS reports	Global compact reports
AA1000AS, AccountAbility's AA1000 Assurance Standard; CR, corporate responsibility; GRI, Global Reporting Initiative.
U.S.	45,989	307,006,550	341 (1)	0.0000011107 (15)	180	1	160
Brazil	8,121	193,733,795	331 (2)	0.0000017085 (12)	134	6	191
Argentina	7,626	40,276,376	158 (3)	0.0000039229 (5)	17	1	140
Colombia	5,126	45,659,709	154 (4)	0.0000033728 (6)	17	0	137
Canada	39,599	33,739,900	107 (5)	0.0000031713 (8)	66	1	40
Mexico	8,143	107,431,225	95 (6)	0.0000008843 (16)	34	3	58
Peru	4,469	29,164,883	72 (7)	0.0000024687 (9)	20	0	52
Chile	9,644	16,970,265	56 (8)	0.0000032999 (7)	25	0	31
Panama	7,155	3,453,898	53 (9)	0.0000153450 (1)	0	0	53
Paraguay	2,242	6,348,917	26 (10)	0.0000040952 (4)	0	0	26
Uruguay	9,420	3,344,938	24 (11)	0.0000071750 (2)	1	0	23
Bolivia	1,758	9,862,860	22 (12)	0.0000022306 (10)	1	0	21
Dominican Republic	4,637	10,090,151	21 (13)	0.0000020812 (11)	0	0	21
Ecuador	4,202	13,625,069	18 (14)	0.0000013211 (13)	5	1	12
Trinidad and Tobago	15,841	1,338,585	7 (15)	0.0000052294 (3)	0	1	6
Costa Rica	6,386	4,578,945	6 (16)	0.0000013103 (14)	3	0	3
Nicaragua	1,069	5,742,800	2 (17)	0.0000003483 (17)	0	0	2
Haiti	646	10,032,619	2 (17)	0.0000001993 (18)	0	0	2
Antigua & Barbuda	12,920	87,600	0	0	0	0	0
Bahamas	21,684	341,713	0	0	0	0	0
Barbados	14,050	255,872	0	0	0	0	0
Belize	4,062	333,200	0	0	0	0	0
Dominica	5,132	73,596	0	0	0	0	0
El Salvador	3,424	6,163,050	0	0	0	0	0
Grenada	6,029	103,930	0	0	0	0	0
Guatemala	2,661	14,026,947	0	0	0	0	0
Guyana	1,518	762,498	0	0	0	0	0
Honduras	1,918	7,465,998	0	0	0	0	0
Jamaica	4,471	2,699,617	0	0	0	0	0
Saint Kitts and Nevis	10,988	49,593	0	0	0	0	0
Saint Lucia	5,496	172,092	0	0	0	0	0
Saint Vincent and the Grenadines	5,335	109,209	0	0	0	0	0
Suriname	5,888	519,740	0	0	0	0	0

Drivers of CR Reporting

AccountAbility, the organization behind the AA1000 standards, has coined the term “responsible competitiveness” for

markets where businesses are systematically and comprehensively rewarded for more responsible practices, and penalised for the converse. Strategies for realising Responsible Competitiveness aim to enhance productivity by shaping business strategies and practices, and the context in which they operate, to take explicit account of their social, economic and environmental impacts (Zadek, Raynard, and Oliveira 2005:7).

Their analysis of responsible competitiveness recognizes that “individual businesses cannot go against the grain of the market. Being responsible sometimes does and sometimes does not pay” (Zadek, Raynard, and Oliveira 2005:9). As noted above, the literature on CR reporting and the diffusion of CR standards place considerable emphasis on the role of national institutional environments in driving the uptake of CR reporting and other CR activities. The literature also highlights internal corporate resources and strategic orientations, stakeholder pressures, and transnational trade and learning networks as driving forces for CR reporting and other CR activities.

National institutional environments

While CR reporting is widely characterized as a market mechanism for governing corporations' social and environmental performance, it is still influenced by government action. In May 2001, France became the first country in the world to require publicly traded companies to report on social and environmental issues. Other European countries such as the UK and Denmark have followed suit with mandatory CR reporting requirements for at least some corporations (GreenBiz 2009), and there are several key government interventions within the Americas as well. Both Canada and the U.S. require publicly traded companies to report on environmental liabilities and other social and environmental issues that are deemed “material” to shareholder value. Moreover, both countries have issued new guidance on the materiality of issues such as climate change. In 2010, the US Securities and Exchange Commission (SEC) issued new guidance for corporations on reporting the potential impacts of climate change regulations and physical environmental changes (SEC 2010), for instance. The Canadian Securities Administrators have also issued new reporting requirements and Canada has made the reporting of greenhouse gas emissions mandatory (Stratos 2005:1). Moreover, each country also has specific pollution/toxic releases reporting requirements.

These requirements are not limited to Canada and the United States. In 2004 Mexico adopted “a toxic pollution disclosure law” and “a voluntary platform for business reporting on greenhouse gas (GHG) emissions—the GHG Protocol—promoted by the multi-stakeholder coalition led by the World Business Council for Sustainable Development and the World Resources Institute” (Araya 2006:28). And “[i]n 2000, the Chilean securities commission published requirements (Circular 1501) that public companies in Chile must follow in annual reports and the notes attached to their financial statements” including “incurred and future environmental expenditures” (Araya 2006:29).

Governments have also been directly involved in supporting the diffusion of specific international reporting standards. For instance, Georg Kell, Executive Director of the UN Global Compact, explained that governments play a very important role in helping to create the UN Global Compact Local Networks which are an essential resource in promoting the reporting mechanism (personal interview, April 2007). Similarly, Alan Knight (AccountAbility) suggests that governments can be very influential in CR reporting: “they can encourage it, they can recognize it, they can help to provide mechanisms and tools to do it” (personal interview, May 2007).

In addition to direct oversight and encouragement of reporting, governments also influence CR standards adoption through social and environmental performance regulations. For instance, studies of the ISO 14001 environmental management standard6 conclude that “governmental commitment to environmental protection is particularly important in explaining the diffusion of environmental management standards,” and that “firms may see ISO 14001 as a tool to help their organizations respond to stringent regulations” (Delmas and Montes-Sancho, 2011:111). Voluntary reporting on social and environmental issues may also be influenced by the government's legislative commitments to these issues. For instance, corporations may want to head off new legislation or help secure government contracts and permits by promoting their voluntary initiatives.

Overall, then, governments can provide direct reporting rules and incentives, but also, by design or lack of resources, create a national institutional environment that encourages stakeholders to accept market-based mechanisms for addressing social and environmental issues. Rather than looking at them in isolation, however, it is important to understand the multiple, and possibly conflicting impacts of different elements of a national regulatory environment on CR standards adoption. While a commitment to environmental protection may create an incentive for CR standards adoption, highly litigious societies provide a disincentive based on “the potential for the discovery of previously unidentified or unresolved regulatory violations” (Delmas and Montes-Sancho, 2011:114; see also Delmas 2002). In this vein, Delmas and Montes-Sancho (122) found that “firms will be less likely to adopt ISO 14001 in a national context where the number of environmental lawyers is very high—because the number of lawyers could discourage firms from exposing themselves to the potential for litigation.” Similarly, Buhr and Freedman (2001:312) find that the US “environment encourages companies to make fuller disclosure of required items in order to avoid any litigation stemming from omission of information” but argue that “[a] litigious environment also reduces the amount of voluntary disclosure provided as certain information can provide fuel for a lawsuit.” Indeed, Allen White explains that the GRI, although initiated in the U.S., sought to expand internationally because the U.S. market “simply was not receptive to non-financial reporting” (as cited in Waddock 2007: 39).

Corporate resources and strategic orientation

Implementing CR standards, reporting or otherwise, requires significant financial and human resources, and measures of wealth (at either the firm or national level) are often included in studies of standards uptake. There is also a significant literature devoted to the financial and strategic benefits of CR activities, however, suggesting that there may be positive returns from CR investments (e.g., Orlitzky, Schmidt, and Rynes 2003; Waddock and Graves 1997). The “benefits might include reputation enhancement, the ability to charge a premium price for its output, or the use of CSR to recruit and retain high quality workers” (Siegel and Vitaliano 2007:774). While these potential benefits are compelling, they are far from universal. Indeed, claims that there is a broad correlation between corporate social and financial performance are hotly contested (e.g., Nelling and Webb 2009; Perrini et al. 2009), and researchers have turned instead to the concept of “strategic CSR” (Burke and Logsdon 1996) to address the relative value of CR reporting based on a corporation's strategic orientation. Muller and Kolk (2010:7) argue that “there must be a ‘fit’ between environmental pressures and firm-internal characteristics, including managers' mental models and strategic orientation.”

In terms of the GRI, Nikolaeva and Bicho (2011:136) argue that “firms still face the basic question of the benefits of adoption.” They argue the GRI “has two characteristics—it requires significant company resources and commitment, and its benefits are highly uncertain” (Nikolaeva and Bicho 2011:141). Based on their duration model of GRI adoption by the top 500 global companies and top 100 companies from emerging markets, they find an imitative effect whereby companies are likely to follow early adopters in adopting the GRI framework, although they note that the adoption “increases at a decreasing rate,” perhaps signaling that “the availability of more information from participants” leads to a selective diffusion, with some companies determining that the potential benefits do not outweigh the costs for them (Nikolaeva and Bicho 2011:150). They also find that selective diffusion results from companies' public image-making practices and media exposure; “companies that are more engaged in PR communications regarding their CSR practices” and “companies that have greater media exposure of their CSR activities are more likely to engage with the GRI principles” (Nikolaeva and Bicho 2011:151).

Stakeholder pressure

It is understandable that companies with greater media exposure and greater investments in their brand image would be more likely to report on their CR activities. Corporations are subject to social regulation from a variety of stakeholder groups, including consumers, investors, labor unions, and nongovernmental organizations, and many of these stakeholders are including reporting demands in their campaigns around social and environmental issues (Hamilton 2009, 2006). For instance, some investors, particularly the socially responsible investment (SRI) community in the U.S., are exhorting companies to implement the GRI and other reporting standards to meet their responsibilities to shareholders concerning the materiality of social and environmental issues (Mathiasen 2010). Similar SRI drivers can be found in Brazil. While attempts to make CSR reporting mandatory were unsuccessful, Brazil was the first Latin American country to develop a corporate sustainability index. The index was launched in 2005 by “the main stock exchange, the São Paulo-based Bovespa … [as] part of a broader commitment at Bovespa to improve corporate governance and disclosure in Brazil” (Araya 2006:28). Moreover, “[s]ince 2002, a number of financial and business responsibility organisations have created an award scheme to promote best practice in non-financial reporting in Brazil” (Araya 2006:28). A recent joint report from KPMG, the UN Environment Programme, and the GRI points to the fact that “stock exchanges in emerging markets have taken initiatives requiring more transparency and better disclosure on ESG-related performance” (KPMG 2010:84). Beyond stock exchanges and shareholder advocates, other professional organizations, such as the Canadian Institute of Chartered Accountants (CICA), have played an influential advocacy role. In 2010, for instance, the CICA issued a discussion brief on environmental, social, and governance (ESG) issues and institutional investor decision making intended “to stimulate informed dialogue among interested parties about the demand for and supply of ESG disclosures used by institutional investors” (CICA 2010:iii).

Despite Brazil's leadership, Alan Knight of AccountAbility believes that the adoption of CR reporting practices has not grown at the same pace throughout Latin America as it has in Europe or the U.S. because the demand for this information is limited. He states that the region lacks the “drivers in the market place, peer pressure from competitors, and civil society pushing you” (personal interview, May 2007). Stephan Schmidheiny, founder of the World Business Council for Sustainable Development, argues,

CSR's foreign roots mean that it is not as appropriate for the region as it should be. For example, one of the region's biggest social problems is poverty, yet the tools and methodology of CSR – created in the North – do not emphasise this issue as much as they should (Schmidheiny 2006:22).

The CICA explains that while governance and environmental disclosures (particularly regarding climate change) are becoming routine, “[s]ocial information remains the least standardized category, especially with respect to the provision of relevant metrics” (CICA 2010:5). It is understandable, then, that civil society movements in the region might not be significantly engaged in CR reporting advocacy.

Reporting, particularly standardized reporting, is supposed to drive increased corporate oversight and improvements in corporate social and environmental performance. Gouldson (2004:136), for instance, argues that increased access to information about industrial emissions is associated with increased “engagement between regulators, industry and stakeholder groups,” and Nikolaeva and Bicho (2011:138) explain that the “GRI was founded with the belief that information empowers and mobilizes societal actors to demand accountability from companies” (138). The disparity in reporting levels for different social and environmental issues throws a significant wrench in the purported benefits of CR reporting for corporate stakeholders, however. Brown, de Jongb, and Levy (2009:575) explain that despite the GRI's empowerment goals, “[t]he low use of GRI reports by civil society organizations and other NGOs, consumer organizations, organized labor, and the media has been a long standing concern to the GRI Secretariat.” Just as the benefits of CR reporting for firms vary depending on their strategic orientation, the benefits to stakeholders depend on their issue of concern and their specific goals. While some socially responsible investors are interested in reliable and comparable information in order to be able to screen their portfolios or find the top social or environmental performers to invest in, other groups complain “that the information ‘is not detailed enough’, ‘does not give an adequate picture of the impacts on local communities … and social conditions’, is not ‘situation-specific’, is ‘too processes oriented, rather than performance’, or is ‘disconnected from the realities on the ground' ” (Brown, de Jongb, and Levy 2009:576).

Brown, de Jongb, and Levy (2009:575) explain that “the main problem seems structural, namely that the information in GRI reports is not very useful to their issue-specific activist tactics” (Brown, de Jongb, and Levy 2009: 575). In the words of one of their interviewees, “A single number or description are not enough: we are interested in strategies and plans behind the numbers” (Brown, de Jongb, and Levy 2009:576). This conclusion is consistent with our previous research on social and environmental campaigns targeting multinational corporations wherein we found that a key determinant of corporate change was dialogue between corporations and stakeholders around corporate strategy and other in-depth issues (such as supply chain relationships and capacities) that are generally not captured in CR reports (Hamilton 2009, 2006). Moreover, even one of the founders of the GRI explains that there is a limit to the problems that can be addressed through voluntary corporate change, hence we cannot expect all civil society groups to dedicate their resources to CR initiatives (Waddock 2007:42).

Trading and visiting up

Several authors conclude that CR standards can be a means of accessing international export markets. Schmidheiny (2006) points to Home Depot's demands for Forest Stewardship Council certification from Chilean suppliers, for instance. He concludes more generally that

[t]hose companies exporting to wealthier regions are battling a pre-conception there that companies in the South are more likely to be dirty, to be sweatshops, to be employing children, etc. So in a global, transparent market, companies in the South must be seen to be cleaner than their Northern competitors and able to prove their virtues. They then find that this even helps them do better business in their own regions (Schmidheiny 2006:23).

Similarly, Araya (2006:33) concludes that within Latin America companies with “an international sales orientation are almost 4.7 times more likely to report than companies that sell products locally or regionally.”

In addition to direct certification demands, Perkins and Neumayer (2010:361) propose that “the influence of exports may also be through noncoercive dynamics such as expanded information.” This conclusion is further supported by the “visiting-up effects” they find on the uptake of ISO 14001 and the Global Compact. Specifically, they find that higher densities of ISO 14001 certificates and GC participants in countries that businesspeople visit are correlated with higher densities in their home countries (Perkins and Neumayer 2010:362). The reporting organizations themselves have set up their own outreach throughout the Americas to facilitate knowledge transfer and learning, although the GRI and UN Global Compact have a much larger reach than AccountAbility. Unlike the GRI, which has a solid foundation in the U.S., Canada, and a few large Latin American countries, the penetration of the AA1000 throughout the Americas has been limited. Mr. Knight sees the job of AccountAbility as building the capacity in these countries so they can effectively engage, yet he said this has proven difficult as the organization has no staff on the ground in most countries and does not have the resources to create huge marketing campaigns or develop public awareness programs (personal interview, May 2007).

Georg Kell (UN Global Compact) believes that it is not necessarily the lack of financial resources available to companies that is preventing them from reporting, but rather the lack of a strong support infrastructure in many countries (personal interview, April 2007). With smaller companies, the reporting organizations serve as a particularly important resource. This point was echoed by Bastian Buck (Technical Development Coordinator for the GRI), who explained that GRI training centers are established when the GRI receives inquiries about training opportunities from corporations and nongovernmental organizations (NGOs). A decision is then made to work with local organizations if the GRI believes a viable network can be established to promote CR reporting in the region (personal interview, September 2008). Buck's description reinforces the importance of domestic CR advocacy and professional organizations in the diffusion process. Chile, for instance, has

business responsibility groups – such as Acción RSE, Fundación Pro-Humana and Vincular, all of whom, like their counterparts in Brazil, are accelerating the transfer of global reporting practice to local companies. Acción RSE, for example, has offered reporting guidance seminars for Chilean managers and Vincular is now a part of the work at GRI that addresses reporting concerns of small and medium enterprises (Araya 2006:29).

Finally, there are numerous transnational “organizations and initiatives … advocating and seeking improvement in ESG [environmental, social and governance] disclosures,” including the United Nations Principles for Responsible Investment (UN PRI) and the International Corporate Governance Network (ICGN) (CICA 2010: 2). These organizations are involved in the broader international dialogue around CR reporting, as well as the promotion of specific reporting standards and norms, including the GRI and UN Global Compact. Several Latin American organizations and firms are active participants in these initiatives. For instance, the UN PRI, an “investor initiative” promoting “responsible investment” and advocating ESG disclosure, has signatories (asset owners) in Brazil, Canada, and the U.S. (UNPRI 2011). Brazil also has a representative on the ICGN board, another nonprofit organization working to enhance corporate governance, including nonfinancial reporting (the rest of the current board is from the U.S., EU, and Japan; ICGN 2008, 2011). Finally, the United Nations Environment Programme Finance Initiative (UNEP FI), “a global partnership between UNEP and the financial sector” with “[o]ver 190 institutions, including banks, insurers and fund managers, work[ing] with UNEP to understand the impacts of environmental and social considerations on financial performance,” has a Latin American Task Force with members from Brazil, Colombia, Ecuador, Mexico, Peru, Uruguay, and Venezuela (as well as North American Task Force with members from the U.S. and Canada; UNEP FI 2011a,b). By promoting the professionalization and institutionalization of CR activities within member and partner countries, these transnational initiatives act to increase the market for CR reporting. It is important to note, however, that representation from the Americas beyond Brazil, Canada, and the U.S. is limited in most of these initiatives, although some countries are involved in more industry-centric initiatives, including Peru and Guatemala as candidate countries for the Extractive Industries Transparency Initiative.

There are clearly a broad range of potential forces, both internal and external to the firm, driving the uptake of CR reporting standards throughout the Americas. It is difficult to single out any particular drivers from the literature above to apply to the diffusion of CR reporting standards in the Americas, as experiences in other regions or with other standards and CR activities may not apply. In order to better understand this particular process of international standards diffusion, this research sets out to transform the key themes from the literature into variables that can be used to generate a model of CR reporting uptake in the Americas.

Methodology

To create a model of CR reporting uptake throughout the Americas, a series of variables covering the main themes in the literature on the drivers of CR reporting were identified and a stepwise multiple regression was run using the total number of standardized reports (GRI, Global Compact and AA 1000) issued by country for 2010 as the dependent variable. The variables selected reflect the key themes of institutional environment, corporate resources and strategic orientation, stakeholder pressure, and trade and learning networks. Complete details of all of the indicators used are provided in Table 2.

Table 2. Variables Used for Multiple Regression

Driver	Variables	Description	Source
^a These data from the Consultative Group on Sustainable Development Indicators of the International Institute for Sustainable Development measure progress on the United Nations Millennium Development Goals (http://www.iisd.org/cgsdi/dashboard.asp). ^b Agenda 21 is a United Nations environmental and development action plan launched at the Rio conference in 1992 (http://www.un.org/esa/dsd/agenda21/).
Institutional environment	Policy drivers	Combination of seven individual variables: signing and ratification of eight basic worker rights; signing and ratification of four major environmental treaties; responsible tax environment; CO2 emissions per billion dollars; private sector employment of women; stringency of environmental regulations; rigidity of employment index	AccountAbility's State of Responsible Competitiveness 2007
	Environmental governance	Combination of 12 individual variables: % of total land under protected status; ratio of gasoline price to world average; % of variables missing from the CGSDI “Rio to Joburg Dashboard”a; knowledge creation in environmental science, technology, and policy; International Union for Conservation of Nature member organizations per million population; Local Agenda 21 initiatives per million populationb; corruption measure; rule of law; World Economic Forum Survey on environmental governance rating; government effectiveness; democracy measure	2005 Environmental Sustainability Index
	International collaboration	Combination of three variables: # of memberships in environmental intergovernmental organizations; contribution to international and bilateral environmental projects and development aid; participation in international environmental agreements	2005 Environmental Sustainability Index
	Rule of law	Compilation of a large number of variables reflecting the rule of law for contract enforcement, property rights, etc., as well as crime and violence rates	World Bank Governance Indicators 2009
	Regulatory quality	Compilation of a large number of variables reflecting government's ability to promote private sector development including export/import regulations, price controls, and ease of starting a business	World Bank Governance Indicators 2009
Corporate resources and strategic orientation	Business action	Combination of seven individual variables: efficacy of corporate boards; ethical behavior of firms; wage equality for similar work; stringency of audit and accountancy standards; extent of staff training; ratio of ISO 14001/9001 certification; occupational fatalities	AccountAbility's State of Responsible Competitiveness 2007
	Private sector responsiveness	Combination of five individual variables: country's ratio of firms on the Dow Jones Sustainability Group Index; average Innovest EcoValue rating of firms headquartered in country; # of ISO 14001 certified companies per $ billion GDP (PPP); World Economic Forum Survey on private sector environmental innovation rating; participation in the Responsible Care Program of the Chemical Manufacturers Association	2005 Environmental Sustainability Index
	Social enablers	Combination of seven individual variables: corruption perception index; customer orientation; press freedom; transparency of transactions; density of NGO memberships; civil liberties; impact of clean air and water on business operations	AccountAbility's State of Responsible Competitiveness 2007
Stakeholder pressure	Exports to EU Exports to U.S.	% of country's exports sent to EU % of country's exports sent to U.S.	World Trade Organization 2009
Trade and learning networks	Reporting organization presence Number of reporting organizations	Presence of a local office of one of the international reporting organizations (yes or no) Number of international reporting organizations with a local office (0–3)	Reporting organization websites 2010
Other	National wealth	GDP per capita	World Bank, World Development Indicators 2009 (or most recent)
	Population size	Total population

Several of the indicators were selected from AccountAbility's “The State of Responsible Competitiveness 2007” report (AccountAbility 2007). This report assesses countries based on drivers of what they call responsible competitiveness (see above). The Responsible Competitiveness Index (RCI) is comprised of three composite subindicators which provide unique assessments of national institutional environments (the policy drivers indicator), corporate resources and strategic orientation (the business action indicator), and stakeholder pressures (the social enablers indicator).7 While there are some important limitations to the business action indicator in particular (because it is largely derived from executive opinion surveys), the components still provide an important picture of corporate environmental and other CR commitments, and the other two indicators provide useful indications of the regulatory environment for social and environmental issues within each country, and the potential strength of civil society pressure on governments and corporations.

The 2005 “Environmental Sustainability Index” (ESI) developed by the Yale Center for Environmental Law and Policy and the Center for International Earth Science Information Network (CIESIN) of Columbia University (in collaboration with the World Economic Forum and the Joint Research Centre of the European Commission) also provided unique indicators (CIESIN 2011).8 The ESI ranks countries based on five main categories, including “societal and institutional capacity to respond to environmental challenges” and “global stewardship.” From these categories, three indicators were chosen to reflect countries' institutional environments and corporate resources and strategic orientation. The environmental governance indicator provides an alternative assessment of government commitment to sustainability issues in a similar vein to the RCI policy drivers indicator, but using different component variables. Additionally, the participation in international collaborative efforts indicator provides a useful indication of countries' support for and participation in global sustainability initiatives. Finally, the private sector responsiveness indicator, like the RCI's business action indicator, provides a measure of corporate sustainability performance and organizational capacities. Using both the RCI and ESI indicators provides a more robust test of the relative influences of institutional environments and corporate resources and strategic orientations.

In addition to the RCI and ESI indicators, some indicators were selected from the World Bank's annual report on governance to provide more general measures of the national institutional environment, particularly regulatory quality and rule of law, with the hypothesis that an institutional environment that encourages transparent and reliable information systems and governments with greater general regulatory capacity may also encourage transparency and reporting of social and environmental performance. In order to assess the influence of export markets and learning networks, variables for export levels to the U.S. and EU (the originators of the most widely used CR reporting standards) and CR reporting organization presence were created. Finally, although countries' reporting levels did not, at first glance, match wealth or population size rankings, we still wanted to test their influence, therefore GDP/capita and total population were included in the analysis.

Results and Discussion

As detailed in Tables 3 and 4, the stepwise multiple regression produced a model with population size, private sector responsiveness, and organizational presence as the key determinants of CR reporting levels. Table 4 shows that each of these variables is positively correlated with the number of standardized CR reports issued by country, and the collinearity statistics suggest that each variable represents a unique effect.9 As shown by the standardized beta coefficients (Table 4), population size has the largest impact on reporting levels, followed by private sector responsiveness and organizational presence. The significance of population size is a predictable result, and it could be read as a proxy for the number of companies in the country; with more companies, there is likely to be a greater number of companies reporting. As we could not get comparable data on the number of companies per country to standardize reporting levels, we decided to include population size as a proxy independent variable.10 While population size predicts a good deal of the variance in reporting levels, Table 1 shows that reporting level rankings do not match population rankings, and this research aims to explain the remaining variance in reporting levels.

Table 3. Model Summaries

Model	Variables included	R	R^2	Adjusted R^2	Standard error
Model 1	Population size	0.909	0.827	0.816	45.132
Model 2	Population size Private sector responsiveness	0.947	0.897	0.883	36.046
Model 3	Population size Private sector responsiveness Organizational presence	0.966	0.933	0.919	30.047

Table 4. Coefficients for Model 3

	Standardized beta	t	Significance	Colinearity statistics
				Tolerance	VIF
VIF, variance inflation factor.
Population size	0.802	10.137	0.000	0.765	1.306
Private sector responsiveness	0.244	3.022	0.009	0.735	1.360
Organizational presence	0.197	2.755	0.016	0.940	1.064

The significance of private sector responsiveness supports the literature on the role of internal firm characteristics, such as the firm's strategic orientation, in driving CR reporting uptake. Interestingly, while the ESI private sector responsiveness variable was a significant determinant of reporting levels, the business action variable from AccountAbility's responsible competitiveness report was not. AccountAbility's business action variable is largely derived from executive surveys of national operating environments and general corporate governance strength combined with some quantitative data on the uptake of environmental management systems (see Table 2). By contrast, the ESI indicator includes more firm-level and CR-specific data, including ratios of firm membership in the Dow Jones Sustainability Index and the average EcoValue rating of firms from Innovest.11 These variables are better able to capture the ratio of firms within a country that have a strategic CR orientation, particularly with respect to environmental and sustainability issues. Results of previous research suggest that even recognizable brands are more resistant to making reporting changes than making other operational or policy changes, possibly due, in part, to the potential for future litigation or fines discussed above (Hamilton 2006, 2009). Yet it makes sense that corporations with a strategic sustainability orientation would want to publicize their actions, and, in order to counter increasing stakeholder concerns about the veracity of corporate self-reporting, adopt a recognized international reporting standard.

In addition to the incorporation of CR issues into a firm's underlying business strategy, the ESI business responsiveness indicator includes measures of firms' CR apparatus, including environmental auditing and stakeholder relations systems. Previous interviews with social and environmental campaigners and executives from corporations targeted by their campaigns also highlight the importance of having CR-specific human resources and management systems in place to manage, collect appropriate data, and report on social and environmental issues. Indeed, socially responsible investors, NGOs, and other stakeholders interviewed described the significant gulf between firms, even firms within the same industry, in terms of their understanding of social and environmental issues and how they affect their own supply chains (Hamilton 2006). These CR-specific management skills are not necessarily correlated with more general corporate governance capacities, such as the “efficacy of corporate boards” and “strength of [conventional] auditing and accounting standards” measures included in AccountAbility's business action indicator (Table 2).

The significance of the organizational presence variable suggests several possible effects. First, most of the regional offices of the international standards organizations provide training, position papers, conferences, and other resources that may drive the market for CR reporting by increasing both the demand for and supply of professionals capable of producing CR reports. Second, the visibility and activity of these organizations drive the uptake of their particular reporting standard. Third, the reporting organizations are likely to open regional offices in places with an existing CR infrastructure, whether it be domestic NGOs and/or professional firms. In other words, the organizational presence variable could be a proxy for an existing domestic CR market and infrastructure, as exists in places such as Brazil, Argentina, and other countries described above. This piggybacking on domestic CR organizations is particularly likely during the initial expansion phase for these international standards organizations as they seek out the biggest and most welcoming markets first.

One surprising finding is the absence of the various government policy and civil society variables, as well as national wealth (GDP/capita) and international trade relationships, from the model. While the literature on the diffusion of CR standards points to these factors, the absence of these variables from our model could be partly due to measurement and specification problems. For instance, AccountAbility's policy drivers variable measured government actions such as ratification of International Labour Organization worker conventions and the stringency of environmental regulations which may in fact drive firms' social and environmental performance, but not necessarily their likelihood of reporting on these issues. The more relevant government influences may be harder to quantify, including how securities regulators (e.g., the Securities and Exchange Commission in the U.S.) guide companies on the materiality of various social and environmental issues. Similarly, the social enablers measures—such as press freedom and density of NGO memberships, while useful measurements of general civil society activity do not measure whether civil society demands are oriented toward market-based mechanisms such as CR reporting, or whether they are more focused on government reforms and the traditional state-led political sphere. Indeed, CR reporting and other market-based mechanisms are not universally accepted or deployed in the face of social and environmental concerns, and there is considerable ongoing debate about the costs and benefits of—and intersections between—market-based and state-centered governance. Beyond measurement and specification issues, it is also possible that corporate CR strategy and resources and the knowledge and skills diffusion generated by standards organizations' local presence are foundational to CR reporting uptake across the board, while the relative importance of government, civil society, and other drivers may vary from country to country.

While national wealth (GDP/capita) was found to be a significant determinant of national ISO 14001 certification levels (Perkins and Neumayer 2010), it is quite possible that the perceived benefits of CR reporting are more narrowly circumscribed than those for management standards such as ISO 14001. Indeed, Perkins and Neumayer argue that the dynamics and patterns of diffusion vary for different types of CR standards. While the literature suggests that ISO 14001 certification acts as a quality signal for overseas buyers and also increases general management capacities, the perceived benefits of CR reporting are most directly applicable to well-known brands and firms with a well-publicized strategic CR orientation. If the benefits are not widely cast, then national wealth is unlikely to be a significant determinant of reporting levels, as financial resources are not the main limiting factor. Rather, it is important that a specific market for such information is present. It is also likely that during the first stage of reporting diffusion that our research addresses, the first adopter firms will be those with both a strategic CR orientation and significant financial and human resources to apply to CR issues. National wealth may become a more important differentiating factor during subsequent phases of diffusion, as the number of pioneering and well-resourced firms in some countries, particularly those in the developing world, runs low.

Finally, neither exports to the U.S. nor the European Union were found to be significant determinants of reporting levels, yet transnational linkages are clearly important drivers of reporting, as evidenced by the significance of reporting organizations' local presence. Moreover, one cannot rule out the significance of supply chain pressure on CR reporting levels in specific industries, such as resource industries besieged by transparency and corruption controversies. While our data did not include industry specification as reporting was measured at the national rather than firm level, future comparative studies of possible industry effects would provide important additional insights.

It is important to note a few additional limitations of this analysis. As it is based on a small number of cases relative to the number of independent variables, the generalizability of these results to other countries is limited (Hair et al. 1998:166). Beyond the geographic generalizability of our results (i.e., to other countries and regions), it seems that the diffusion of CR standards occurs in distinct phases, with different drivers and diffusion processes in each (Delmas and Montes-Sancho, 2011. Overall, however, the analysis provides unique insights into the development of markets for CR reporting throughout the Americas, and suggests that these markets do not simply follow patterns of national economic growth and/or transnational trade linkages. Rather, the markets for CR reporting seem to be more firm specific, and are also the product of active market making and knowledge circulation.

Conclusions: Looking Ahead

To return to KPMG's assessment that “[r]eporting is now the norm, not the exception, among the world's largest companies” (KPMG 2008:4), this research supports their assessment but argues that the future is not so easily divined from past patterns of CR reporting diffusion. This research suggests that the diffusion of CR reporting throughout the Americas to date has been fueled by a rather narrow set of corporations with the capacities necessary to implement CR reporting and the strategic orientation to benefit from it. Moreover, corporations' internal capacities and the external demands for CR reporting have been enhanced by national and transnational CR advocacy and training organizations (including the standards organizations themselves and a variety of CR-promoting domestic stakeholders). This has led to an uneven development of markets for CR reporting thus far, and this unevenness will likely continue into the future. Indeed, Baskin (2006:45) explains that there is “a wide divergence between emerging-market leaders and laggards, wider than the divergence within high-income OECD economies”. In other words, continued growth of CR reporting in the developing world beyond the current pioneering firms is not guaranteed.

This research suggests that there will not be a singular evolution and diffusion of CR reporting throughout the Americas. Rather, it is likely that the perceived costs and benefits of CR reporting versus other regulatory mechanisms for addressing these issues (and other corporate strategies for maintaining legitimacy) will vary by country, region, industry, and over time. As Perkins and Neumayer (2010) have also argued, future research should explore in more detail how domestic institutions and transnational forces combine to generate unique drivers and barriers to standards diffusion in different places.

Future research should also position national institutions and governments as active agents in the standards development and diffusion process, rather than passive recipients of external forces. Haack, Schoeneborn, and Wickert (2010) refer to this as the “diffusion-as-negotiation” rather than “diffusion-as-contagion” perspective. Rather than a “disease-like portrayal of diffusion as an automatic and inevitable infection,” “organizations are increasingly portrayed as making sense of institutional pressures, and are believed to engage proactively with them” (Haack, Schoeneborn, and Wickert 2010:10). One way in which this might manifest itself in the diffusion of CR reporting is through the content of reports. In their comparative content analysis of CR reporting in the U.S., UK, Australia, and Germany, Chen and Bouvain (2009:299) explain that

different countries vary significantly in the extent to which they promote CSR and the CSR issues that they choose to emphasize in their [Global Compact] reports. These country differences are argued to be related to the different institutional arrangements in each country.

For instance, they found “that the UK, which has a strong consumer awareness of ethical sourcing issues (Hughes 2001), displays much greater emphasis on customer and supplier-related issues in their CSR reports” (Chen and Bouvain 2009:310). These national differences are likely to affect the competition among CR reporting standards, including whether or not the GRI continues to dominate the reporting landscape or whether other national or regional standards play a more important role. Future research should examine not only the outcomes of national differences (i.e., reporting levels and content), but also the ongoing process of standards development, and how different national players and priorities contribute to standard changes over time.

Notes

1. 1

   Based on a study of the 100 largest companies in 22 participating countries (70 in Sweden), as shown in figure 1.

2. 2

   This analysis is part of a larger study on trade relations and CSR practices in the Americas. Moreover, the region provides the opportunity to compare and contrast practices among developed and developing countries.

3. 3

   Unless otherwise indicated, the personal interviews cited in this paper were conducted by phone by Daniel Tschopp in 2007 and 2008, with senior representatives from AccountAbility, the UN Global Compact, and the GRI.

4. 4

   This interview was conducted as part of a previous study on corporate responses to social and environmental campaigns. The author interviewed 41 activists, socially responsible investment managers, consultants, and corporate executives involved in a broad range of campaigns advocating for reporting, policy, and operational changes (see Hamilton 2009, 2006).

5. 5

   After this research was completed, the GRI released another update of their guidelines, the G3.1.

6. 6

   The ISO 14001 standard is a voluntary environmental management standard that aims “to provide a framework for a holistic, strategic approach to the organization's environmental policy, plans and actions” (http://www.iso.org/iso/iso_14000_essentials). In other words, it guides companies in developing internal environmental management systems, and it is also one of the most widely studied CR standards to date.

7. 7

   The complete list of data sources and variable information for the ESI and RCI indicators is available at: http://www.sedac.ciesin.columbia.edu/es/esi/a_methodology.pdf (ESI) and http://www.accountability.org/images/content/0/7/075/The%20State%20of%20Responsible%20Competitiveness.pdf (RCI)

8. 8

   The most current ESI data are from 2005, while the RCI data are from 2007. We used the most current data available at the time of research for each of the variables, and while we do not believe that the variations affect our results, they are a limitation of using existing data sets.

9. 9

   The larger the tolerance value and the lower the variance inflation factor (VIF) value, the less chance of collinearity effects. According to Hair et al. (1998:193), “[a] common cutoff threshold is a tolerance value of 0.10 which corresponds to a VIF value above 10.” As they explain, “Tolerance is the amount of variability of the selected independent variables not explained by the other independent variables,” and the VIF statistic is 1/tolerance (ibid).

10. 10

    We chose not to simply standardize the reporting levels by population size, thus removing the country size effect, because population size is an imperfect proxy for the number of corporations in a country which would be the appropriate variable to use to standardize the reporting levels.

11. 11

    Innovest Strategic Value Advisors is an investor research and advisory firm specializing in intangible value analysis, such as sustainability assessment. It was taken over by MSCI in 2010.