The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1356-3289.htm

CCIJ
14,1

Social disclosure rating system

for assessing firms CSR reports
Aries Widiarto Sutantoputra

34
Received October 2007
Revised August 2008
Accepted October 2008

Department of Management, Monash University, Melbourne, Australia

Abstract
Purpose The paper aims to contribute to the development of a systematic social disclosure rating
system for analysing firms social performance through their corporate social responsibility (CSR)
reports or similar social disclosures. The rating incorporates the comprehensive Global Reporting
Initiatives (GRI) 2002 reporting framework as the benchmark for measuring firms social performance.
Design/methodology/approach Literature review in the areas of CSR development, CSR
reporting, CSR reporting frameworks, GRI 2002 Guidelines will be utilised in order to create social
disclosures rating using GRI 2002 reporting framework.
Findings The rating accommodates standardized measures of social performance based on the GRI
2002 Guidelines and enables comparison of CSR practices among companies, particularly firms social
accountability to society.
Originality/value The contribution of the paper will fill the lack of standardized content analysis
measures of CSR reports, particularly social aspects of CSR. It provides a comprehensive coverage of
social indicators, which capture the wide range of issues in social theme of CSR.
Keywords Corporate social responsibility, Financial reporting, Disclosure
Paper type General review

Corporate Communications: An
International Journal
Vol. 14 No. 1, 2009
pp. 34-48
q Emerald Group Publishing Limited
1356-3289
DOI 10.1108/13563280910931063

Introduction
For more than three decades, there has been an increasing interest in corporate social
responsibility (CSR), whereby firms are being held accountable for any actions
affecting society, the community and environment. From this perspective, firms are
viewed as part of a larger economic system in which their operations might affect
components of the system and consequently the system itself (Hawken, 1993;
Rasmussen, 1997). Society nowadays is putting pressure on companies whose
irresponsible actions toward the society and environment have become a cost to society
(Beltratti, 2005). As a result, nowadays CSR is used by organizations to gain a
competitive advantage because it portrays the company as behaving contrary to the
common practices of business which tend to raid natural resources and exploit the
societies, i.e. treating them as externalities. CSR has meant that corporations no
longer detach themselves from their external environments and the conservative view
that, what matters for companies are merely competitiveness, survival and profit is
weakening. However, the argument continues until all businesses have integrated CSR
into their economic, environmental, and social operations.
Further, companies practising CSR may also want to reap the benefits of engaging in
such practices since CSR practices might have cost them a substantial amount of
resources, which they may need to justify to their shareholders. Firms may then decide to
disclose their CSR practices to inform shareholder, if not stakeholders. The decision to
disclose the CSR information may have the same drivers as the financial information
where firms disclose their financial performance to maintain their relations with

stakeholders (Neimark, 1992). This decision to disclose may be supported by regulations,

however, in many countries the reporting nature of CSR practices are still largely
voluntary.
These CSR reporting may be done through several mediums or forms such as a
separate report, section in annual report, online version in the companies web sites.
However, annual reports were found to be the main medium for disclosing CSR
practices to stakeholders (Alnajjar, 2000). CSR disclosures that are published
separately are also known as social and environmental report or CSR reports or
sustainability report. The choice of medium may be influenced by companies
availability of resources and strategic intentions to reach particular stakeholders.
Companies are expected to disclose their CSR practices, especially, when they have
been performing well in these areas (environmental, social and economic). Voluntary
disclosure theory argues that company should want to differentiate themselves from
the less responsible counterparts then they will make efforts to inform stakeholders on
their types (i.e. performances in CSR domain) (Verrecchia, 1983; Dye, 1985). This will
enable stakeholders to avoid adverse selection problem where they may rate bad CSR
performers as good or vice versa. The availability of firms CSR information will
inform their stakeholders about their performances.
In line with the voluntary disclosure theory, an environmental disclosure rating
based on a comprehensive CSR reporting framework, Global Reporting Initiatives (GRI)
2002 Guidelines, was developed by Clarkson et al. (2006) in which they argued that firms
with good environmental performance would be more forthcoming with their identity as
Green Companies, thus, they would disclose information that were hard to be imitated
by the bad environmental performers. The GRI 2002 Guidelines has shown its global
acceptance as a standard for reporting CSR practices given the fact that it helps
companies to decide on what to report and how to report the CSR information.
Another leading standard for CSR reporting, AA1000, focuses on the process of
reporting on how businesses must link the principles of accountability and
sustainability. It can be used to design a proper reporting mechanism since firms
are guided to identify their goals and target, to monitor progress against targets, to
audit (verify) and report the performance (Gobbels and Jonker, 2003). However, firms
may develop a vast range of goals/targets by themselves that lead to a vast range of
measures of CSR practices, which in many cases have caused the measurement and
comparison of CSR practices across companies difficult, if not impossible. Firms that
are using AA1000 have the freedom to decide on issues that they want to include
(Gobbels and Jonker, 2003).
GRI 2002 Guidelines already included measures of CSR performance in their
framework. Firms adopting the framework must include the specified indicators to
report their CSR practices. The framework is considered to be comprehensive since it
contains vast range of measures for social, environmental and economic performance.
Thus, in this study, GRI 2002 is preferred as standard or benchmark for the social
disclosure rating, which is introduced to measure firms social disclosure.
Owing to its nature and ambiguous state of CSR reporting at the moment,
companies have the choice on what to report and whether they want to report.
These may give companies flexibility and freedom in disclosing their CSR practices.
The users of these reports are facing difficulties in assessing the value of such
information. Studies in CSR area have often faced difficulties on measuring CSR

Social disclosure
rating system

35

CCIJ
14,1

36

performance due to the complexities of CSR issues. Clarkson et al. (2006) have
contributed in solving the CSR measurement problem partially by creating an
environmental disclosure rating system to assess firms environmental disclosure.
This current study will contribute by creating a social disclosure rating system that
can be used to complement Clarkson et al.s (2006) environmental rating. By using both
ratings, the users of CSR reports can measure and assess the information regarding
firms CSR practices in systematic ways. This in turn will enable the users to do
comparison of CSR practices across companies and industries.
The organisation of this paper is arranged as follows. The next sections describe the
related literature on CSR, CSR reporting, respectively. These will be followed with the
discussion on the credible and widely adopted CSR reporting frameworks, particularly
GRI 2002 Guidelines. A social disclosure rating system based on the GRI 2002
Guidelines is then introduced which will help the users of CSR reports to assess the
information presented regarding firms social performance. Lastly, future research
direction in this area and concluding remark for the paper are also presented.
The literature review on CSR
The case for CSR is evident now more than ever due to pressures put on businesses
regarding environmental, social and ethical issues. The coverage of CSR is wide,
ranging from issues such as the use of child labour; inequality of employment
opportunity; environmental impact; involvement in local community; products safety;
company cultures; to brand image and reputation. In developed countries in particular,
society has demanded that business operations be governed by formalised regulation.
For example, in the European Union, the European Commission (2004) has issued CSR
guidelines. de Bakker et al. (2005) claim that the need for social responsibility by
businesses, firms, and their managers was first considered in the 1950s. They however
conclude that, as yet, no consensus has been reached on the theory and concept of CSR.
A mapping of CSR research by Mathews (1997) identifies the beginning of this research
in 1971, and that the development of the literature on CSR has subsequently increased
with greater awareness of the issues. Society has put new restrictions on companies
to prevent them from carrying out inappropriate actions which the society will face in
the long-term. Companies are then expected to achieve their economic goals by
conducting business in ethically, socially, and environmentally responsible manners.
Corporation law in most countries regulates companies from undertaking any
actions that may incur inappropriate costs to shareholders. Firms must focus on
maximizing shareholders interest and that social responsibility would be yet another
cost for the shareholders as firms exist only as a result of shareholders contribution
(Friedman, 1970). It is often considered financially uncompetitive for a business to add
the cost of maintaining a holistic relationship between economy and ecology when its
competitors do not engage in the same activities (Hawken, 1993).
On the other hand, Freeman (1984) supports CSR using a stakeholder framework
that extends firms responsibilities. Stakeholders are all parties that are directly or
indirectly affected by companies decisions and actions. The support of stakeholders
determines a companys existence. The decision of a firm to consider and integrate the
interests of other stakeholders, besides shareholders, can be viewed from the firms
perspective on commercial approach Corporations and Market Advisory Committees
CAMAC (2005)[1]. The commercial approach focuses on a firms self-interest to

include non immediate stakeholders in decision-making processes. Firms then take

into account other stakeholders interests due to the fact that their demands
have impacts on firms profit maximization scheme. Companies are expected to show
their concerns on their businesses impacts, particularly those impacts that may have
been externalized or treated as externalities, to society and environment.
Based on Davis (1973), socially responsible actions within the scope of CSR are steps
taken over and above what is required by law. Meanwhile, Commission of the
European Communities defines CSR as a concept by which companies decide
voluntarily to contribute to a better society and a cleaner environment (European
Commission, 2001, p. 5). It states that behaving in a socially responsible way amounts
to going beyond compliance and investing more into human capital, the environment
and the relations with stakeholders (European Commission, 2001, p. 8). Hence,
coverage of CSR activities has been broadened from merely focusing on environmental
impacts of firms operations to firms social impacts and ethical aspects (Reynolds and
Yuthas, 2008).
Other term used to describe CSR is corporate citizenship where corporations
supplement government roles as providers of social rights, enablers of civil rights, and
as a channel for political rights (Matten and Crane, 2005). These roles exist as a result of
diminishing government control over economic, social and political systems due to
globalization (Korner, 2005). To make corporate citizenship work, firms need to
implement management systems reflecting firms social responsibility to stakeholders
and natural environmental and need to seek and implement external assurance systems,
which are endorsed by credible institutions and globally accepted (Waddock, 2004).
These assurance systems cover principles, standards of reporting and credible external
verification systems. Firms practising CSR have to show that they have embedded their
responsibility in their internal operations and also sought ways to inform their action
externally through credible reporting standards and verification standards.
Interests in CSR have been growing globally despite the perceived negative
consequence of those activities to firms shareholders. Apparently, there are some
perceived benefits that firms may receive from implementing CSR initiatives such as
gaining good reputation, getting license to operate, improving financial performance,
increasing competitive advantage and preserving long-run self interest (Davis, 1973;
Department of the Environment and Heritage, 2005; Finch, 2005; Jenkins and
Yakovleva, 2006). Firms are expected to behave responsibly not just to environment
but also to the society where they are expected to improve the welfare of their
employees and community in which they operate. Those firms that have taken up their
social responsibility are expected to integrate their responses in their internal business
operations. At the same time, it is expected that firms will disclose those practices
using credible and globally acknowledged reporting standards. In the next section,
CSR reporting is discussed to give understanding on how firms report their CSR
practices.
CSR reporting
Companies used CSR reporting as means to communicate to their stakeholders over
their management performance (Finch, 2005). The external communication of CSR
activities can help a firm to build a positive image among its stakeholders (Fombrun
and Shanley, 1990; Lafferty et al., 2002). Gray et al. (1987, p. 4) defined CSR reporting as

Social disclosure
rating system

37

CCIJ
14,1

38

the process of providing information designed to discharge social accountability and

the medium may cover annual report, special publications or reports or even socially
orientated advertising. CSR is executed through triple bottom line reporting which
declares not only financial results but also social and environmental impact of a
business (Elkington, 1999).
One voluntary reporting standard that has been generally recognized and adopted is
the GRI Sustainability Reporting Guidelines 2002. GRI (2002, p. 68, 2006, p. 3) used the
term sustainability reporting for CSR reporting and mentioned that: sustainability
reporting is the practice of measuring, disclosing, and being accountable to internal and
external stakeholders for organizational performance towards the goal of sustainable
development. The report can provide important information that is not included in
financial reports but is crucial for business decision making. Companies can use
sustainability reporting to measure their sustainability performance (i.e. economic,
social and environmental performances) over time and use them as basis to improve
their internal business practices and external communication (GRI, 2002).
Companies engaging in CSR practices can be traced through their reporting
practices. KPMG Global Sustainable Services e has produced a comprehensive survey
of CSR reporting every three years since 1993 and the latest International Survey of
Corporate Responsibility Reporting 2005 has shown a growing interest among
companies worldwide in reporting their CSR policy and activities. The survey has
included the top 250 companies of the Fortune 500 (Global 250 G250) and the top 100
companies in 16 countries (National 100 N100). One interesting finding has been that
corporate responsibility reporting has shifted from purely environmental reporting up
until 1999, to sustainability (social, environmental and economic) reporting which has
been reported by 68 per cent of G250 and 48 per cent of N100 companies (KPMG, 2005).
The overall trends in all 16 countries are showing an upward movement to disclose
more non-financial information to companies stakeholders (Figure 1). The data for
2005 also provided companies that disclosed their CSR practices as part of their annual
reports. In the following section, two leading CSR reporting frameworks, GRI 2002
Guidelines and AA1000, are reviewed and the justifications for using GRI 2002
Guidelines are discussed.
CSR reporting frameworks: GRI 2002 Guidelines and AA1000
The difficulty of measuring CSR practices, especially social performance, has
contributed to under-developed nature of comprehensive CSR reporting practices
(Abbot and Monsen, 1979). For example, the problems on how to quantify social
performances data have made the reporting on social issues more difficult. It would be
easier to quantify or measure environmental performance (e.g. reduction of waste from
production process). Not surprisingly, it has been studied by KPMG (2005) that the
global trend of CSR reporting just recently shifted from purely environmental
reporting to sustainability reporting (i.e. environmental, social and economic reporting)
in 1999. This trend is also supported by the developments of reporting framework
which accommodate companies to report on broader CSR issues such labour, human
rights, product safety, economic impacts to society.
Currently, there are two leading reporting frameworks for CSR issues, GRI 2002
Guidelines and AA1000. GRI guidelines are acknowledged for their high-international
recognition and influence whereas AA1000 standard for its unique focus on the

Social disclosure
rating system

80%

Japan

72%
71%

UK

49%
41%

Canada

19%
40%

France

21%

39

36%

Germany

32%
32%
36%

USA

31%

Finland

32%
31%

Italy

12%
29%

Netherlands*

26%
25%

Spain

11%
23%

Australia

14%
22%

Denmark*

20%
20%
26%

Sweden

18%

South Africa

1%
15%

Norway

29%
9%

Belgium

11%

10

20

30

40

50

60

70

80

90

Number and percentage of companies with CR reports (separate only), 2005

Number of companies with CR reports (separate and published as part of annual
reports), 2005
Number and percentage of companies with CR reports (separate only), 2002
*Data reported in 2002 has been revised
Source: KPMG (2005)

processes of accountability (Adams, 2004). AA1000 was developed to deal with

publics distrust of firms practices on human rights, community and economic issues
(Gobbels and Jonker, 2003). AA1000 created by Institute of Social and Ethical
AccountAbility in 1999 features: it does not attempt to identify issues to be addressed,
but rather focuses on the processes by which companies report on their impacts
(Adams, 2004, p. 735). It was expected that the process standard, AA1000, will improve
firms social and ethical performance by linking the principles of sustainability and
accountability (Gobbels and Jonker, 2003).
The focus on the process was based on the premise unless CSR are embedded in the
corporate values and unless governance systems, data collection systems, reporting
procedures, and audit are sound then CSR reporting are not the appropriate matched
of companies performance and stakeholders information needs (Adams, 2004).

Figure 1.
Corporate responsibility
reporting trend by
country, top 100 in 16
countries (2002, 2005)

CCIJ
14,1

40

AA1000 principles are influenced by the principles of financial accounting but a

distinct principle, inclusivity, is added to this standard. This principle covers the
aspirations and needs of all stakeholder groups at all stages of the accounting, auditing
and reporting process (Adams, 2004; Gobbels and Jonker, 2003). AA1000 gives
organisations the freedom in deciding which issues to include in their management
systems which later were found to create diverse range of CSR reports (i.e. varied in
contents, measures and issues) (Gobbels and Jonker, 2003).
On the other hand, GRI Sustainability Reporting Guidelines concerns primarily on
the content of sustainability reports (viz. CSR reports) but also includes some principles
or characteristics of AA1000 (Adams, 2004). The principle of inclusivity in AA1000 is
equivalent with the principle of relevance in GRI 2002 Guidelines (Gobbels and Jonker,
2003). GRI has the goal of providing standardised measures of performance indicators
for firms environmental, social and economic impacts (Reynolds and Yuthas, 2008).
Companies that adopted GRI Guidelines have been able to increase the value of
information to their stakeholders by improving the usefulness and quality the
information (Willis, 2003). GRI guidelines was created to address the demands from
stakeholders of firms environmental and social performance information, the diverse
range (i.e. vary in content, inconsistent and incomplete) of non-financial reporting
practices that resulted in lack of comparability across companies and reporting
periods, and the introduction of many reporting guidelines and framework in various
countries and sectors (Willis, 2003). The guidelines can accommodate all types of
companies, thus it may lead to a global reporting standards for CSR practices.
Adams (2004) notices that the goals differences between companies and other
stakeholders can create the gap in reporting (i.e. incompleteness). GRI addresses the
problem of completeness by initiating stakeholders communication in developing the
framework. The 2002 version requires companies to report on the output and outcomes
of stakeholder consultations. The guidelines ensure reasonable and balanced
representations of economic, environmental and social performance as well enable
comparison across time and institutions (Clarkson et al., 2006). Furthermore, GRI
guidelines have required companies commitments towards social, environmental and
economic responsibility. Those commitments are reflected on managements statements
of value with corresponding goals and quantified targets with deadline (Adams, 2004).
Further, the trends for adopting GRI guidelines are higher in the UK, the USA, and
Australia as can be seen in Table I. These data were collected and analysed from Corporate
Register database, which allows companies to lodge their CSR reports. In all three
countries, there have been increased interests to use GRI 2002 Guidelines as their standard
Country
Year

Table I.
Comparative adoption of
GRI 2002 Guidelines and
AA1000 in UK, USA and
Australia

2001
2002
2003
2004
2005
2006

Australia
GRI 2002
AA1000
0
10
14
30
32
36

0
1
5
11
15
17

UK

USA

GRI 2002

AA1000

GRI 2002

AA1000

2
7
31
44
44
43

1
3
14
15
23
24

0
6
28
39
62
60

0
0
0
1
2
2

Source: Analysed and compiled from Corporate Register database

for reporting CSR practices. There are greater and significant numbers of companies
which adopted GRI 2002 as opposed to AA1000. The comprehensiveness of GRI 2002
Guidelines has enabled companies to provide information regarding their CSR practices to
wider range of users (Willis, 2003). In addition, KPMG survey of CSR reporting has also
found 40 per cent of the sample used GRI when they selected content of Corporate
Responsibility reports, meanwhile AA1000 only accounted for less than 1 per cent (KPMG,
2005). Apparently, the CSR performance indicators in GRI 2002 Guidelines have given
firms insight on what to report and how to report their CSR practices.
The GRI (2002) requires that companies which adopt the guidelines: provide a
description of their governance and management systems to show how sustainability
is managed within an organization, and assess and report on the environmental, social
and economic effects of their activities, products and services with reference to various
indicators and guidelines. In doing so, firms must provide total disclosure of their
business activities and impacts and what has been done to reduce, restore and avoid
any social and environmental costs.
Although measures of firms social performance are largely debatable in
comparison to environmental performance measures, GRI has made great attempts
in selecting measures of social performance in areas from labour practices, human
rights and to those issues affecting consumers, community and other stakeholders
(GRI, 2002). The guidelines have provided benchmarks to measure firms attainment
on social aspects of CSR (Frankental, 2001). Moreover, measures regarding labour
practices and human rights are based on internationally recognised standards such as
International Labour Organisation (ILO) Convention and United Nations (UN)
Universal Declaration of Human Rights. Thus, in this study, GRI 2002 Guidelines is
used as the standard for the social disclosure rating. In the next section, the social
disclosure rating based on GRI 2002 Guidelines is developed to address the difficulty of
assessing firms social disclosures.
Social disclosures rating based on the GRI 2002 Guidelines
The importance of labour practices, human rights and broader social issues affecting
consumers, communities and other stakeholders has been growing globally (GRI,
2002). Companies had moved from reporting only environmental issues as part of their
responsibility to reporting their social practices both internally and externally (KPMG,
2005). Societies nowadays are concerned with the firms social impact, i.e. their
organisation impact to the social system within which they operate (GRI, 2002). Thus,
firms are expected to practice their businesses in ethical and responsible manners,
including their treatments to employees, suppliers, consumers and other stakeholders.
Firms activities are under greater scrutiny to perform well in the social aspect of their
CSR. Stakeholders will expect that firms will inform them on their activities covering
issues such as labour management, human rights issues, society, and product
responsibility. Firms are then urged to report their social impacts to stakeholders
through their CSR reporting. This particular area or reporting where the social impacts
are reported is classified as firms social disclosures.
The choice to use GRI as a base for social disclosure index is in line with the
voluntary disclosure theory. Since firms are not mandatory to disclose their social
impacts, they can opt not to report them. Even if they do report, they can choose
available voluntary codes besides GRI. Since the global trend for the adoption of GRI

Social disclosure
rating system

41

CCIJ
14,1

42

guidelines is increasing, companies that report will use the widely recognized
standards in order to get the benefits of reporting. As a consequence, firms that want to
differentiate their performance will opt to report their performance using
comprehensive frameworks such as GRI.
The social disclosures rating system will complement Clarkson et al.s (2006)
environmental rating systems since both ratings are based on GRI 2002 Guidelines.
The social rating system presented in this study also provides link to GRI 2002
Guidelines (i.e. map to GRI) (Table II). This is done to ensure that the rating covers the
comprehensive social aspects of CSR prescribed in the GRI 2002 Guidelines. As a
result, the rating comprises wide range of social aspects such as labour practices and
decent work, human right issues, society, product responsibility, and social spending.
This coverage will screen out those companies that pretend to care for their social
impact from their operations.
Voluntary disclosure theory (Verrecchia, 1983; Dye, 1985) suggests that superior
CSR performers want to differentiate themselves from the inferior performers. Thus,
they will disclose more information based on their performance to make it harder to be
copied. On the other hand, the inferior will disclose less information regarding their
CSR performance. Voluntary disclosure theory applies to discretionary disclosures
which fit with the CSR as voluntary actions taken above the requirement of law (Davis,
1973). In order to accommodate this, the index put greater emphasis on the hard
performance indicators which is considered to be objective and verifiable as opposed to
soft, unverifiable claims (Clarkson et al., 2006).
The social disclosure rating has overall maximum scores of 83 and it is differentiated
into two types of disclosure, verifiable and unverifiable. The term verifiable means that
firms will face serious legal problems if they present untrue information regarding their
social impacts. As shown in Table II, this rating puts greater emphasis in the verifiable
maximum scores (i.e. 67) as opposed to unverifiable maximum scores (i.e. 16). Further,
this division has increased the credibility of this rating system.
The rating system works as follows. Firms are awarded score of 1 if they mentioned
information which is specified in the rating whereas score of 0 is given for not
mentioning. The rating put greater emphasis on issues that can be verified (i.e. firms
will face serious litigation if they are caught lying of their social impacts). Thus, the
first part of the rating, which is called Hard disclosure items, has maximum score of
67. Only in Section A3 in this part, social performance indicators (SPI) uses a scale of 0
to 3 where firms SPI are assessed based on the completeness of the information
(i.e. companies current practices, practices from previous period and future target or
improvement). The second part, soft disclosure items, has maximum score of 16. The
items specified in this part are considered questionable since it consists of claims that
were made to address firms social impacts. The sections from each part are discussed.
In the verifiable section, the rating covers four areas governance structure and
management systems, credibility, SPI and social spending. Governance structure and
management systems, section A1 in hard disclosure items, ensure whether CSR
practices (i.e. social aspects of CSR) are embedded in their companies operations. This
will eliminate those companies which pretend to care or use these issues for public
relations purpose. There are six items prescribed under this section, e.g. whether the
firms mentioned that they are implementing ILO standards and UN Declaration of
Human Rights, the existence of committee in the board that addresses social issues.

Hard disclosure items (max score is 67)

(A1) Governance structure and management systems (max score is 6)
1. Existence of a department or management positions for addressing firms
social impacts (0-1)
2. Existence of an social and/or a public issues committee in the board (0-1)
3. Existence of terms and conditions applicable to employees and customers
regarding firms social practices (0-1)
4. Stakeholder involvement in setting corporate social policies (0-1)
5. Implementation of ILO standards and UN declaration of human rights (0-1)
6. Executive compensation is linked to social performance (0-1)
(A2) Credibility (max score is 10)
1. Firm acknowledges the use of GRI sustainability reporting guidelines (0-1)
2. Independent verification/assurance about social information disclosed in
the sustainability report (0-1)
3. Periodic independent verifications/audits on social performance and/or
systems (0-1)
4. Certification of social (labour) programs by independent agencies (0-1)
5. Product certification with respect to product safety (0-1)
6. External labour performance awards (0-1)
7. Stakeholder involvement in the Social disclosure process (0-1)
8. Participation in voluntary social initiatives endorsed by ILO or Department
of Employment and Industrial Relations in respective country (0-1)
9. Participation in industry specific associations/initiatives to improve labour
management practices (0-1)
10. Participation in other labour organizations/assoc. to improve labour
practices (if not awarded under 8 or 9 above) (0-1)
(A3) Social performance indicators (SPI) (max score is 48)a
Labour practices and decent work
1. SPI on employment information (type, numbers of employees by
region/country, employment creation and average turnover) (0-3)
2. SPI on labour/management relations (the presence of independent trade
unions and companies policies and procedures) (0-3)
3. SPI on health and safety (policies on occupational accidents and diseases,
standard injury, lost day, and absentee rates and number of work-related
fatalities) (0-3)
4. SPI on training and education (Average hours per year per employee by
category of employee) (0-3)
5. SPI on diversity and opportunity (description of equal opportunity policies,
monitoring systems) (0-3)
Human rights
6. SPI on strategy and management (description of firms policies related to the
universal declaration and the fundamental human rights conventions of
ILO) (0-3)
7. SPI on non-discrimination (policies/program/procedures preventing all
forms of discriminations in firms operations) (0-3)
8. SPI on freedom of association and collective bargaining (firms policies on
acknowledging freedom of association and collective bargaining) (0-3)
9. SPI on child labour (policies to exclude the use of child labour directly from
firms internal operations and indirectly from firms suppliers) (0-3)
10. SPI on forced and compulsory labour (policies addressing forced and
compulsory labour) (0-3)
Society
11. SPI on community (policies to manage impacts on community in areas
affected by firms operations) (0-3)

Map to GRI

Social disclosure
rating system

3.1
3.1, 3.6

43
1.1, 3.10
3.14, 3.20
3.5
3.14

3.19, 2.20,21
3.2
3.16
1.1, 3.10
3.15
3.15
3.15

LA 1, 2
LA 3, 4
LA 5, 6, 7, 8
LA 9
LA 10, 11

HR 1, 2, 3
HR 4
HR 5
HR 6
HR 7
SO 1
(continued)

Table II.
Social disclosures rating
based on GRI 2002
Guidelines

CCIJ
14,1

44

Table II.

Hard disclosure items (max score is 67)

12. SPI on bribery and corruption (policies and mechanism for organisation and
employees in addressing bribery and corruptions) (0-3)
13. SPI on political contributions (policies, management system and compliance
mechanism for managing political lobbying and contributions) (0-3)
Product responsibility
14. SPI on customer health and safety (policy protecting customer health and
safety during the use of firms product and services) (0-3)
15. SPI on products and services (policy, management systems and compliance
mechanism for product information and labelling) (0-3)
16. SPI on respect for privacy (firms policies, management systems, and
compliance mechanism for consumer privacy) (0-3)
(A4) Social spending (max score is 3)
1. Summary of dollar savings arising from social initiatives to the company (0-1)
2. Amount spent on community, political contributions to enhance social
performance (0-1)
3. Amount spent on fines related to social litigation/issues (0-1)
Soft disclosure items (max score is 16)
(A5) Vision and strategy claims (max score is 6)
1. CEO statement on social performance in letter to shareholders and/or
stakeholders (0-1)
2. A statement of corporate social policy, values and principles, codes of
conduct (0-1)
3. A statement about formal management systems regarding social risk and
performance (0-1)
4. A statement that the firm undertakes periodic reviews and evaluations of
its social performance (0-1)
5. A statement of measurable goals in terms of future social performance
(0-1)
6. A statement about specific social innovations and improvements (0-1)
(A6) Social profile (max score is 4)
1. A statement about the firms compliance (or lack thereof) with specific
social standards (0-1)
2. An overview of social impact of the industry (0-1)
3. An overview of how the business operations and/or products and services
impact the society, employees and customers. (0-1)
4. An overview of corporate social performance relative to industry peers (0-1)
(A7) Social initiatives (max score is 6)
1. A substantive description of employee training in social management and
operations (0-1)
2. Existence of response plans in case of social incidents (0-1)
3. Internal social (labour, employees and customers) awards (0-1)
4. Internal social (labour, employees and customers) audits (0-1)
5. Internal certification of employees programs (0-1)
6. Community involvement and/or donations related to society (0-1)

Map to GRI
SO 2
SO 3
PR1
PR2
PR3

SO 1, 3
SO 2, PR 1, HR 4, 5, 6, 7

1.1, 1.2, 3.7

3.19
3.19
1.1
1.1
1.2
1.2
1.2, 3.17
1.2
3.19
3.20
3.19

Notes: This table presents the rating used to assess firms social disclosures. Rating items are classified in
two categories: hard or verifiable and soft or unverifiable disclosures. The rating score is from 0 to 83
(hard disclosure max score is 67 and soft disclosure max score is 16). This rating was developed following
Clarkson et al.s (2006) formulation of environmental disclosure rating based on the GRI 2002 Guidelines. The
structure of the rating was similar with the environmental disclosure rating to maintain consistency of the
rating process for the social disclosures. Acknowledgements are given to Clarkson et al. (2006) for their
original contribution for developing the environmental disclosure rating which has formed the foundation of
this social disclosure rating. aThe scoring scale of social performance data is from 0 to 3. A point is awarded
for each of the following items: information is presented; past or previous period practices are mentioned;
future target or improvement is mentioned

Meanwhile credibility, in Section A2, shows whether the companys report is true
reflection of its CSR practices. Items that were included in this section are for example
the evidence of independent assurance or verification of social disclosures, recognition
of firms social performance through external awards. By having independent
verification, certification of social programs, product certification with respect to social
impact, these companies are willing to put their reputation for public consumption.
Stakeholders can cross check on whether they comply with their own commitments.
Further the SPI, in Section A3, show whether company provides detailed measures
of their social performance. Companies are expected to provide comprehensive
information about their social impacts. Areas such as labour practices and decent
work, human rights, society and product responsibility are covered in this section.
In order to fully understand on what are included in each item under this section, the
users are encouraged to review the GRI 2002 Guidelines. The column Map to GRI
provides direction on where the users can get more information on the items specified
in this rating.
In the social spending section of A4, a company is assessed based on their investment
in enhancing their social performance. Firms are assessed based on the information of
their investment in addressing their social impacts. They are assessed whether they
recognise any financial benefits (i.e. savings) from their investment in the society, they
endorse certain community group, and they disclose any infringements to social issues.
Firms need to inform their stakeholders in providing the actual amount of funds
invested to society, benefited from the investment and paid to settle social litigation.
Meanwhile, the unverifiable section contains claims made by firms about their
vision and strategy with respect to social issues, social profiles presented to the public
and social initiatives. These statements or claims are difficult to verify since it is more
abstract and management can make excuses on the actual implementation for these
good intentions. Thus, the scores for this part are lower to differentiate the good
social performers from the poor social performers. It will be harder for the poor
performers to imitate their good counterparts by merely reporting good practices in a
way that cannot be substantiated.
In section A5 of soft disclosures items, firms are being assessed based on their
vision and strategy claims for addressing their social impacts. Firms can always argue
that they will implement some actions to deliver their promises; however, it cannot be
guaranteed that they will deliver their promises in the future. Items that were included
in this section are for example CEO statements of firms social performance to
stakeholders, statement of measurable goals for future social performance. Meanwhile
in section A6, social profile, firms are being assessed on how they position themselves
in the public eyes based on their social impacts. In this section, firms are assessed for
example whether they mention their compliance to social standards; they mention
their industrys social impacts. In the last Section A7, social initiatives, firms claims of
their internal initiatives for addressing their social impacts are addressed. Firms then
are assessed on for example whether they have internal social (labour, employees and
suppliers) awards, they conduct internal audit for their labour practices, employees
engagement and suppliers standards. The social disclosure rating based on GRI 2002
Guidelines has been developed and discussed in this section. The rating covers wide
range of firms social impacts measures and it can accommodate the users of firms
CSR reports to assess firms social performance.

Social disclosure
rating system

45

CCIJ
14,1

46

Future research direction and concluding remarks

The finding of this study, a social disclosure rating, has contributed in helping the
users of CSR reports to assess firms social performance. Research in CSR area,
particularly its social aspects, can utilise this rating to measure firms social
performance from their CSR reports. It is important in the future to research the
accuracy of social disclosures in relation to the firms actual social performance. The
actual social performance may be in the form of third party external assessment of
firms social performance. The rating may also be benefited from further study that
may include or exclude the items in the rating as the CSR field is still progressing.
There may be some social issues that may arise in the future and could be considered
as part of firms social impacts. Thus, in the future, those items needed to be included
to ensure that those social issues are captured in the rating. It is advisable for the users
of this social disclosure rating to review the GRI 2002 Guidelines in order to familiarize
them with the items, which are specified in the rating.
The growing interest globally to use GRI 2002 Guidelines means that CSR performance
measures in the guidelines are used by firms in reporting their social and environmental
practices comprehensively. The social disclosure rating that is proposed in this study was
developed using the GRI 2002 Guidelines as the benchmark for measuring firms social
performance. Using this social disclosure rating systems coupled with Clarkson et al.s
(2006) environmental disclosure rating systems, stakeholders can assess a firms
commitment towards CSR issues and contrast them with the actual performance. The
social disclosure rating put greater emphasis on verifiable or hard disclosure items where
firms may face litigation if they misguide stakeholders with untrue information about
their social performance. The ratings is expected to assist ethical investors to screen and
select their truly responsible companies.
Note
1. CAMAC (2005, p. x) functions are regulated as: CAMAC is constituted under part 9 of the
Australian Securities and Investments Commission ACT 2001. Its functions under s 148 of
that Act include, on its own initiative or when requested by the Treasurer or the
Parliamentary Secretary to the Treasurer, to provide advice to the government on any aspect
of corporate or financial markets law reform or any proposal to improve the efficiency of the
financial markets.
References
Abbott, W.F. and Monsen, R.J. (1979), On the measurement of corporate social responsibility:
self-reported disclosures as a method of measuring corporate social involvement,
Academy of Management Journal, Vol. 22 No. 3, pp. 501-15.
Adams, C.A. (2004), The ethical, social and environmental reporting-performance portrayal
gap, Accounting, Auditing & Accountability Journal, Vol. 17 No. 5, pp. 731-57.
Alnajjar, F.K. (2000), Determinants of social responsibility disclosures of US Fortune 500 firms:
an application of content analysis, Advances in Environmental Accounting and
Management, Vol. 1, pp. 163-200.
Beltratti, A. (2005), The complementarity between corporate governance and corporate social
responsibility, The Geneva Papers on Risk and Insurances, Vol. 30 No. 3, pp. 373-86.
CAMAC (2005), Corporate Social Responsibility: Discussion Paper, Corporations and Markets
Advisory Committee CAMAC, Sydney.

Clarkson, P.M., Li, Y., Richardson, G.D. and Vasvari, F.P. (2006), Revisiting the relation between
environmental performance and environmental disclosure: an empirical analysis, paper
presented at the AFAANZ Conference Paper, Wellington.
Davis, K. (1973), The case for and against business assumption of social responsibilities,
Academy of Management Journal, Vol. 16 No. 2, pp. 312-22.
de Bakker, F.G.A., Groenewegen, P. and den Hond, F. (2005), A bibliometric analysis of 30 years
of research and theory on corporate social responsibility and corporate social
performance, Business & Society, Vol. 44 No. 3, pp. 283-317.
Department of the Environment and Heritage (2005), The State of Sustainability Reporting in
Australia 2005, Commonwealth of Australia, Canberra.
Dye, R.A. (1985), Disclosure of nonproprietary information, Journal of Accounting Research,
Vol. 23 No. 1, pp. 123-45.
Elkington, J. (1999), Cannibals with Forks: The Triple Bottom Line of 21st Century Business,
Capstone, Oxford.
European Commission (2001), Promoting a European Framework for Corporate Social
Responsibility, European Communities, Luxembourg.
European Commission (2004), ABC of the Main Instruments of Corporate Social Responsibility,
European Communities, Luxembourg.
Finch, N. (2005), The motivations for adopting sustainability disclosure, working paper,
Macquarie Graduate School of Management, Sydney.
Fombrun, C. and Shanley, M. (1990), Whats in a name? Reputation building and corporate
strategy, Academy of Management Journal, Vol. 33 No. 2, pp. 233-58.
Frankental, P. (2001), Corporate social responsibility a PR invention?, Corporate
Communications: An International Journal, Vol. 6 No. 1, pp. 18-23.
Freeman, R.E. (1984), Strategic Management: A Stakeholder Approach, Pitman, Boston, MA.
Friedman, M. (1970), The social responsibility of business is to increase its profits, The New
York Times Magazine, September, p. 13.
Gobbels, M. and Jonker, J. (2003), AA1000 and SA8000 compared: a systematic comparison of
contemporary accountability standards, Managerial Auditing Journal, Vol. 18 No. 1,
pp. 54-8.
Gray, R., Owen, D. and Maunders, K. (1987), Corporate Social Reporting, Prentice-Hall,
Englewood Cliffs, NJ.
GRI (2002), Sustainability Reporting Guidelines, Global Reporting Initiative GRI, Boston, MA.
GRI (2006), Sustainability Reporting Guidelines, Global Reporting Initiative GRI, Amsterdam.
Hawken, P. (1993), The Ecology of Commerce: A Declaration of Sustainability, Harper Collins
Publishers, New York, NY.
Jenkins, H. and Yakovleva, N. (2006), Corporate social responsibility in the mining industry:
exploring trends in social and environmental disclosures, Journal of Cleaner Production,
Vol. 14, pp. 271-84.
Korner, K. (2005), Policy making and the role of government: changing governance patterns and
CSR, Corporate Governance, Vol. 5 No. 3, pp. 151-8.
KPMG (2005), KPMG International Survey of Corporate Responsibility Reporting 2005, KPMG
Global Sustainable Services, Amsterdam.
Lafferty, B.A., Goldsmith, R.E. and Newell, S.J. (2002), The dual credibility model: the influence
of corporate and endorser credibility on attitudes and purchase intentions, Journal of
Marketing Theory and Practice, Vol. 10 No. 1, pp. 1-12.

Social disclosure
rating system

47

CCIJ
14,1

48

Mathews, M.R. (1997), Twenty-five years of social and environmental accounting research: is
there a silver jubilee to celebrate?, Accounting, Auditing & Accountability Journal, Vol. 10
No. 4, pp. 481-531.
Matten, D. and Crane, A. (2005), Corporate citizenship: toward an extended theoretical
conceptualization, Academy of Management Review, Vol. 30 No. 1, pp. 166-79.
Neimark, M.K. (1992), The Hidden Dimensions of Annual Reports, Markus Wiener Publishing,
Inc., New York, NY.
Rasmussen, L.L. (1997), Earth Community Earth Ethics, Orbis Books, Maryknoll, New York, NY.
Reynolds, M. and Yuthas, K. (2008), Moral discourse and corporate social responsibility
reporting, Journal of Business Ethics, Vol. 78, pp. 47-64.
Verrecchia, R.E. (1983), Discretionary disclosure, Journal of Accounting and Economics, Vol. 5,
pp. 179-94.
Waddock, S. (2004), Parallel universes: companies, academics, and the progress of corporate
citizenship, Business & Society Review, Vol. 109 No. 1, pp. 5-42.
Willis, A. (2003), The role of the global reporting initiatives sustainability reporting guidelines
in the social screening of investments, Journal of Business Ethics, Vol. 43 No. 3, pp. 233-7.
About the author
Aries Widiarto Sutantoputra is a PhD candidate at Department of Management,
Monash University, Australia. His main research interests are environmental sustainability,
corporate communication, entrepreneurship and corporate social responsibility. His previous
executive experience was as management consultant in a venture capital company and he also
actively involved in teaching as university lecturer in finance and management subjects.
Aries Widiarto Sutantoputra can be contacted at: aries.sutantoputra@buseco.monash.edu.au

To purchase reprints of this article please e-mail: reprints@emeraldinsight.com

Or visit our web site for further details: www.emeraldinsight.com/reprints