Conclusion
The use of Carnegie and Napier’s seven factors allows for a
systematic comparison between the evolution of financial
reporting and CSR reporting. In terms of Period, financial
reporting has evolved into a comparable and reliable
market-based resource over the last 100 years. However,
its evolution is not complete, limitations within existing
standards remain and efforts toward global convergence
continue. Relative to this timeline CSR reporting is still in
its infancy. CSR reporting has come a long way since early
reports were first issued, however, in terms of providing
decision-useful information there will still be many deficiencies
in comparability until there is one agreed upon
global standard. Even though the GRI’s G3 are the most
widely used method of reporting, almost one-third of
reporting companies still do not use this standard (KPMG
2011). The use of different standards still limits the comparability
of CSR reports.
The factors of Products and Practices highlight the fact
that CSR reporting is still in its early stages. The use of
different reporting standards and potential convergence of
standards has impacted both financial and CSR reporting.
The convergence of financial reporting is in its final stages
with the Roadmap toward harmonization paving the way
toward one set of agreed upon financial reporting standards.
However, opponents to financial accounting harmonization
continue to argue that comprehensive, rigid
rule-based standards, such as U.S. GAAP, may not be
appropriate for all nations, just as the interpretive, principles-
based IFRSs may not be appropriate to the unique
social, political, and economic environment of some
countries (Maines et al. 2003). Similarly, opponents to
CSR reporting harmonization would argue that there is not
one standard that meets the needs of all stakeholders. For
example, the GRI’s G3 is viewed by some companies as
being too rule-based. Some feel that the G3 indicators
either are not appropriate, are too costly to gather, or are
not useful for their stakeholders. The principle-based
standards of the AA1000 Series are viewed by critics as
being too open to interpretation. They argue that if you let
companies develop their own standards, then they will be
selective in what they report (Buhmann 2006; Reider-
Gordon 2013). Similar concerns exist with the Global
Compact’s COP. If organizations are given the freedom to
use their own indicators there will be incentives to misrepresent
the actual CSR performance of the company.
These concerns are addressed by the reporting organizations
to some extent by promoting stakeholder engagement
in the process of identifying relevant information to be
reported and having the reports reviewed externally for
reliability purposes. However, the convergence of CSR
reporting standards faces some additional issues as different
stakeholders may request different information for
different reasons. A customer might require that a company
is ISO 14000 certified, while their parent company may
report using the G3 (which could be assured through
AccountAbility’s Assurance Standard) and an influential
NGO may pressure them to participate in the UN’s Global
Compact. Different stakeholders, and the reporting organizations
themselves, may have different goals. It may be
difficult to convince reporting organizations to give up
autonomy or possibly even their existence to develop an
agreed upon standard. With so many parties involved, any
possible harmonization of CSR reporting standards may be
a long and arduous process. However, the different CSR
reporting organizations appear to be more interconnected
and supportive of one another as opposed to the more
competitive and contentious relationship that exists
between financial accounting standard organizations. This
could lead to a more efficient harmonization process. Only
time will tell. If CSR reporting is to be used as a marketbased
mechanism for bringing about change, then comparability
and consistency are necessary qualities for CSR
reports.
The Profession factor identified the different relationships
that exist between the reporting organizations. The
major CSR reporting organizations appear to be more
interconnected and supportive of one another as opposed to
the more competitive and contentious relationship that
exists between the IASB and the FASB as IFRS become
the globally accepted standard. With approximately 2,000
companies now using the G3 standards, the GRI is gaining
credibility as becoming the most globally recognized and
adopted CSR reporting standard. The AA1000 Series
Standards are even promoted on AccountAbility’s website
as being designed to complement the GRI standards. The
endorsement of the UN Global Compact in 2006, which
recommended the use of the GRI standards, brought an
additional level of legitimacy to the standards.
The Propagation factor showed how external organizations
and bodies have played a key role in promoting and
legitimizing financial reporting. For example, the European
Union (EU) played an important role in legitimizing IFRS
when member countries were required to use them (Guggiola
2010). Supranational organizations, such as the UN,
OECD, IMF, and/or World Bank, can serve similar roles in
promoting and legitimizing CSR reporting (Tschopp et al.
2012a, b). CSR reporting proponents argue that strengthening
international participation in CSR processes may
bolster CSR reporting legislation at the national level
(Fonteneau 2003; Christian Aid 2004). Many of the intergovernmental
organizations discussed in this article have
already been active in promoting CSR reporting. In particular,
the UN Global Compact has developed a globalnetwork to accomplish this. They have also developed
working relationships with the other standard organizations
to promote CSR reporting in general, not necessarily just
their own COP. All these organizations have the potential
to play an important role in the future promotion and diffusion
of CSR reporting. The UN Global Compact already
encourages the use of the G3 for use in their COP. The
OECD has not identified or promoted the use of a specific
CSR reporting standard, nor has the World Bank, however,
the opportunity exists as the World Bank has promoted the
use of IFRSs. Relative to financial reporting, the involvement
of these external organizations in CSR-related issues
is greater due to the nature of the organizations, whose
missions and goals included sustainable development.
The Places factor showed how financial reporting and
CSR reporting are at different phases in the evolutionary
process. Financial reporting has reached a point where
most countries now accept IFRSs and the US have created
the Roadmap toward convergence. CSR reporting is just
starting this process. Similar to how the Securities Act of
1933 and the Securities Exchange Act of 1934 were
milestones in the development of financial reporting, several
European countries are now mandating some level of
CSR reporting (Aaronson 2007; Tschopp et al. 2012a).