Stricter standards needed for corporate reporting
Corporate social and environmental reporting is not a new practice for companies, but an Illinois State faculty member is asking how much value the practice adds to society.
Professor of Accounting Den Patten is skeptical of the value of this reporting due to the lack of regulated reporting standards. “Since the mid-90s, companies have been increasingly disclosing social and environmental issues in separate, standalone reports,” said Patten. “However, there aren’t any rules or laws governing this type of corporate social responsibility (CSR) information provision. It’s strictly voluntary.”
Reports can include topics such as employee related concerns, ecological issues, fair labor practices, sustainability, and corporate giving. Efforts like 2002’s Global Reporting Initiative help promote sustainability reporting, but Patten notes that the guidelines give companies a lot of flexibility in what and how they complete the report.
“If we don’t have a uniform measurement, then reporting may not yield the transparency and comparability that would seem to underlie meaningful sustainability reporting,” he said. Patten added corporations can pick and choose what information they want to share, which means they generally focus much more heavily on positive information.
Patten believes when reported accurately, information can be a powerful tool to help companies perform better. “In the 1980s the Toxics Release Inventory was implemented by Congress. This required companies to report to the Environmental Protection Agency the toxins they released into the environment,” said Patten. “When the first report came out, people were stunned at the amount of toxins companies were releasing. As a result of the reporting, by the 1990s there was a significant decrease in the amount of toxins being released.”
Patten’s work has been published among top journals including Accounting, Organizations and Society, and Journal of Accounting and Economics. He has also presented his findings at conferences in Scotland, New Zealand, France, and Portugal. In addition, he has presented at schools in Europe and North America, including the prestigious Wharton School at the University of Pennsylvania.
He hopes to spread awareness so that stricter regulations will eventually be put in place for social and environmental reporting. This move would allow society to compare performance across organizations equally. “I would like to see a framework that is similar to that of financial reporting, requiring corporations to disclose a set of social and environmental metrics,” he said. “I think businesses can do a lot of good, but they don’t do everything they should given the power and their place in society,” he said.