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Do Board’s Corporate Social Responsibility Strategy and Orientation
Influence Environmental Sustainability Disclosure? UK Evidence
Akrum Helfaya
1
,
2
Keele University, UK & Damanhour University, Egypt
Email: a.n.ekara.helfaya@keele.ac.uk
Tantawy Moussa
2
University of Westminster, UK & Cairo University, Egypt
Email: moussat@westminster.ac.uk
This is the final peer reviewed version of the following paper: [Helfaya, A., & Moussa, T.
(2017). Do Board’s Corporate Social Responsibility Strategy and Orientation Influence
Environmental Sustainability Disclosure? UK Evidence. Business Strategy & the Environment],
which has been published in final form at [DOI:10.1002/bse.1960]. This paper may be used
for non-commercial purposes in accordance with John Wiley & Sons, Ltd and ERP
Environment terms and conditions for self-archiving.
1
Corresponding Author
2
Both authors contributed equally to this paper
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Do Board’s Corporate Social Responsibility Strategy and Orientation
Influence Environmental Sustainability Disclosure? UK Evidence
ABSTRACT
The environmental implications of corporate economic activities have led to growing
demands for firms and their boards to adopt sustainable strategies and to disseminate more
useful information. This paper investigates the impact of board’s corporate social
responsibility (CSR) strategy and orientation on the quantity and quality of environmental
sustainability disclosure in UK listed firms. We find that effective board’s CSR strategy and
CSR-oriented directors have a positive and significant impact on the quality of environmental
sustainability disclosure, and not on the quantity. Our findings also suggest that the existence
of a CSR committee and issuance of stand-alone CSR report are positively and significantly
related to environmental sustainability disclosure. When we distinguish between firms with
high and low environmental risk, we find that the board CSR practices that affect the quantity
2(quality) of environmental sustainability disclosure appear to be driven more by highly
(lowly) environmentally sensitive firms. These results suggest that board’s sustainability
practices play an important role in ensuring a firm’s legitimacy and accountability towards
stakeholders. Our findings shed new light on this under-researched area and could be of
interest to companies, policy-makers, and other stakeholders.
Keywords: Environmental sustainability disclosure, board corporate social responsibility
strategy, board corporate social responsibility orientation, corporate social responsibility
committee, UK.
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1. Introduction
The environmental implications of corporate economic activities have led to growing
demands on firms to adopt sustainable strategies and to disseminate more relevant and
reliable information on their environmental performance (Alberici and Querci, 2016; Arena et
al., 2015; D’Amico et al., 2016; Shaukat et al., 2016). Corporate Environmental
Sustainability Disclosure (CESD) can typically be defined as the process of disseminating
information related to a company’s activities, aspirations, and public image with regard to
environmental sustainability matters (Gray et al., 2001). In practice, CESD practices are
affected by the motives and values of corporate directors involved in formulating and setting
environmental policies and strategies (Lock and Seele, 2015; Neugebauer et al., 2016;
Solomon and Lewis, 2002). Thus, board-level governance can play an important role in
enhancing CESD practices (Khan et al., 2013; Michelon et al., 2015; Prado-Lorenzo and
Garcia-Sanchez, 2010). These CESD practices indicate an effective corporate commitment to
environmental responsibility and construct a firm’s image of environmental performance
designed to positively manage stakeholders’ perceptions and to legitimise its existence
(Clarkson et al., 2008; Fifka, 2013; Mallin et al., 2013).
Although Corporate Governance (CG) and Corporate Social Responsibility (CSR) reporting
practices have been well researched as separate topics, few studies have investigated their
interrelationship (Galbreath, 2010; Landry et al., 2016; Jizi et al., 2014; Schwartz, 2005;
Seto-Pamies, 2015). In particular, prior research largely neglects investigating whether
board’s CSR strategy and orientation have influence on CESD practices. This paper fills this
literature gap by investigating the influence of (i) board’s CSR strategy, (ii) board’s CSR
orientation, (iii) the existence of CSR committee, and (iv) the issuance of a stand-alone CSR
report on the quantity and quality of CESD.
Our results indicate that effective board’s CSR strategy and CSR-oriented directors (i.e.,
boards with more independent directors, female directors and audit committees’ directors
with financial expertise) have a positive and significant effect on the quality of CESD, rather
than its quantity. Moreover, the existence of CSR committee and issuance of stand-alone
CSR reports are positively and significantly related to CESD. Interestingly, when we
differentiate between firms with high- and low- environmental risk, we find that the board-
level CSR attributes affecting the quantity (quality) of CESD appear to be driven more by
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highly (lowly) environmentally sensitive firms. These results lend support to legitimacy,
stakeholder, and resource dependence theories. Thus, our paper extends the applicability and
predictive power of these complementary and overlapping theories.
This paper differs from prior research, and contributes to the literature in various ways. First,
to the best of our knowledge, this is the first study to examine how effective board’s CSR
strategy and orientation can contribute to safeguarding stakeholders’ interests via
disseminating relevant and credible CESD. It also directly responds to the call for developing
a better understanding of board attributes and CESD practices (Liao et al., 2015; Lock and
Seele, 2015; Michelon et al., 2015). Second, this paper is innovative in employing a less
subjective multi-dimensional quality model (MQM) for assessing the quality of CESD. This
MQM goes beyond the more traditional author-based disclosure index, focusing on preparer-
and user-based index that assesses the quality of environmental information (Beck et al.,
2010; Helfaya, 2012; Helfaya and Kotb, 2016). Third, our results suggest that firms with high
levels of board’s CSR strategy, CSR-oriented board, the existence of CSR committee, and
publishing stand-alone reports are more likely to disclose more relevant and credible
environmental information to gain its legitimacy and stakeholders’ satisfaction. This may
have important policy and regulatory implications (Khan et al., 2013; Landry et al., 2016;
Seto-Pamies, 2015).
The remainder of the paper is structured as follows. Section 2 presents a multi-theoretical
framework. Section 3 provides the literature review and hypotheses development, and
Section 4 outlines research design. Section 5 discusses results, and Section 6 concludes the
study.
2. A multi-theoretical perspective for CESD
CESD research has significantly increased over the last two decades with most of which
relying largely on a single theoretical perspective, such as legitimacy, agency, stakeholder,
resource dependence, institutional, and impression management theories (Alrazi et al. 2016;
Chen and Roberts, 2010; Deegan et al., 2002; Cooper and Slack 2015; Mallin and Michelon,
2011; Shaukat et al., 2016), which limits our understanding of CESD practices (Gray et al.,
1995; Haque et al., 2016). In contrast, this paper adopts a multi-theoretical perspective (i.e.
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legitimacy, stakeholder and resource dependence) as complementary rather than competing
theories, to provide a richer basis for understanding and explaining the CESD behaviour.
Legitimacy theory proves that firms can gain social acceptance and legitimise their existence
by engaging in CESD (Cho and Patten, 2007; Chen and Roberts, 2010; Deegan et al., 2002;
Mallin and Michelon, 2011). According to Suchman (1995), corporate legitimation strategies
are used to gain and maintain legitimacy (i.e., proactive strategy by good performer [the good
apple]) or to repair legitimacy after a specific environmental accident (i.e., reactive strategy
to clear the bad image by bad performer [the bad apple]) (Cho, 2009; Menguc et al., 2010).
These two legitimacy strategies, therefore, are used by firms to disclose information about
their environmental performance and strategies to different stakeholders, to offset negative
media coverage about current environmental crises and to purify this bad reputation (Lu and
Abeysekera, 2014; Samkin and Schneider, 2010; Schwartz, 2005).
Stakeholder theory is concerned with the impact of environment on firms and focuses on the
firms and its various stakeholders who form this environment (Deegan, 2007; Godfery et al.,
2010). Stakeholder theory also recognises that the influence of each stakeholder on the firm is
dissimilar, and the expectations of different stakeholders are diverse and sometimes
conflicting (Chen and Roberts, 2010). Thus, to receive the support from its stakeholders,
firms need to have a dialogue with them to balance these conflicting expectations. CESD is,
therefore, seen as part of this dialogue between firms and their stakeholders (see, Deegan and
Unerman, 2006)
Finally, and closely connected with legitimacy and stakeholder theories, resource dependence
theory (RDT) considers CESD as a tool to manage a company’s image through
communicating its output, goals, or methods of operations, and to enhance its legitimacy
(Casciaro and Piskorski, 2005; Davis and Cobb, 2010; Hillman et al., 2009; Schnittfeld and
Busch, 2016). It focusses on the effect of the environmental constraint on organisation and its
engagement in exchanges and transections with other entities for various resources (Hillman
et al., 2009; Pfeffer and Salancik, 1978; Schnittfeld and Busch, 2016). RDT has been recently
used to explain the role of the board of directors in achieving corporate sustainable
developments (e.g., Casciaro and Piskorski, 2005; Mallin et al., 2013; Shaukat et al., 2016).
It views the board as a resource for managing and controlling a company’s external
environmental risks (Pfeffer and Salancik, 1978). Hillman and Dalziel (2003) suggested that
