The absence of corporate social responsibility reporting in Bangladesh

TL;DR: In this article, the authors focus on the lack of disclosure on three particular eco-justice issues: child labour, equal opportunities and poverty alleviation, and examine why this is the case and thereby illuminate underlying motives behind corporate unwillingness to address these issues.

About: This article is published in Critical Perspectives on Accounting.The article was published on 2011-10-01 and is currently open access. It has received 267 citations till now. The article focuses on the topics: Corporate social responsibility & Publicity.

Summary

1. Introduction

• He asserts that, even in its ethical guise, CSR is “inevitably ideological” (p. 168) and is used to legitimate corporations as “better than the state at delivering progress and the social good” (p. 165).
• She continues that if the rights of corporations are extended such that “they are being expected to solve complex social and political problems” (p.146), then in return they would claim political power in addition to their already significant economic power.
• Eco-justice is concerned with intragenerational and intergenerational equity (Bebbington, 2001; Lehman, 2002).
• The paper then proceeds with a theoretical discussion of CSR reporting, before considering the research procedures adopted in the collection of data.

2. The Bangladeshi context

• Belal (2008) presents a study of the CSR disclosures made within the corporate annual reports (related to the year 1999/2000) of 87 Bangladeshi companies4 using a framework of 20 disclosure categories including the categories of poverty alleviation, equal opportunities and child labour.
• The findings of this study highlight the extent of CSR reporting under different categories and is summarised in Table 1. 4 79 of them came from top 100 listed companies and 8 are public sector enterprises all of which belong to the Bangladesh Chemical Industries Corporation (BCIC).

INSERT TABLE 1 HERE

• The above table indicates that while high numbers of companies made disclosures under the categories of human resource development (62%) and recognition of relevant stakeholders (80%), very few or no companies made disclosures under the categories dealing with the eco-justice issues of child labour (0%), equal opportunity (0%) and poverty alleviation (4%).
• Various domestic companies in these sectors supply goods and services to many large global companies around the world.
• The democratic era together with an export led economy has enabled Bangladesh to achieve remarkable economic growth in recent times; however, growth has not benefitted everybody in Bangladesh, as evidenced by the current levels of poverty, which is examined in more details below.
• Against this back drop a number of pressure groups and non governmental organisations (NGOs) have emerged and they claim to target positive social change in Bangladesh.
• In 2001 Bangladesh ratified ILO Convention No. 182 related to the worst forms of child labour; however, it has not yet ratified ILO’s Minimum Wage6 Convention No. 138.

3. Theoretical Perspectives on CSR and its Reporting

• The exploration of corporate motivations behind CSR reporting is an important research tradition within the CSR reporting literature (Owen, 2004).
• Many researchers have used a legitimacy perspective (Deegan, 2002; Deegan, Rankin, & Tobin, 2002), which suggests that organisations require legitimacy to be able to continue to operate, and that organisations use CSR reporting to legitimise their relationship with the society and various stakeholders7.
• Echoing and developing this argument Cooper and Sherer (1984, p.218) suggest that political economy of accounting “should recognize power and conflict in society, and consequently should focus on the effects of accounting reports on the distribution of wealth and power in society.”.
• Lukes (2005) identifies a third dimension of power whereby “the most effective and insidious use of power is to prevent such conflict from arising in the first place” (p. 27).
• Within the CSR reporting literature a number of studies explicitly comment upon reasons for its absence and a number of factors are identified as important in determining such absences.

4. Research Method

• The other parts of the interviews dealt with various issues relating to managerial perceptions of the need for and role of stakeholder consultation in CSR reporting, the relevance of prominent social accounting standards and the key factors driving the CSR reporting agenda in Bangladesh.
• The results thereof have been reported elsewhere.
• By following these procedures 23 interviews were obtained from companies across ten industrial sectors representing a wide variety of industrial sectors present in Bangladesh (See Table 2).
• The authors can see, however, that none of these 23 companies reported anything in terms of child labour (disclosure category 5) and equal opportunities (disclosure category 7).

INSERT TABLE 2 HERE

• The key informants are company secretaries with two exceptions (interviewees 2 and 7) where other relevant senior managers were interviewed.
• Most of the company secretaries are members of the professional accounting institutes in Bangladesh.
• They were selected as interviewees for several reasons.
• In the second stage, transcripts were reread with an eye on emerging patterns/issues which were classified using open codes.
• This code collapsing process generated five key themes which reflect reasons for the absence of CSR reporting in Bangladesh.

5. Understanding the absence of CSR and its reporting in Bangladesh

• In this section the authors explore the absence of CSR reporting from the context of Bangladesh.
• In particular, the authors describe the reasons for non-disclosures provided by their interviewees.

Lack of Resources

• Belal and Owen (2007) argue that it is more likely that companies in developing countries will be put under pressure (by the international market forces, international agencies and the head office in the case of multinational subsidiaries operating in developing countries) to comply with the requirements of international social accounting standards/codes.
• Some of them expressed the view that CSR reporting might be more appropriate for larger companies with more resources.
• But the authors have to bear in mind that this [CSR reporting] does require additional cost involvement which is always a constraint.
• (Interviewee 6) Further to funding constraints another interviewee pointed out the limitation of time available to provide additional voluntary disclosures:.
• You know their annual reports need to be prepared within 120 days of the balance sheet date.

The profit imperative

• A number of interviewees indicated a concern that CSR and its reporting would be considered to be a departure from shareholders’ wealth maximisation objective.
• (Interviewee 16) In response to a question related to poverty alleviation of the communities surrounding their operations several interviewees argued that it is a problem to be addressed by the government:.
• The authors do not want to disclose this because of the fear of backlash from their profit seeking shareholders who will hold us responsible for the loss related to defaulted loans.
• The authors are a commercial organisation with the objective of making profits.
• At the same time the authors do realise that to do well in the long term there has to be upliftment of the peoples around us.

Lack of Legal Requirements

• Like many other countries of the world CSR reporting is not a mandatory requirement in Bangladesh.
• The minimum disclosure the authors make is due to the legal compulsion so they do not make complete disclosures.
• (Interviewee 19) [The authors company] always oppose any sort of engagement of child labour.
• The authors are providing an excellent working environment to their employees.
• (Interviewee 6) The above quotations illuminate corporate unwillingness to engage (Martin & Hadley, 2008) with CSR reporting in general and the reporting of eco-justice issues in particular.

Lack of Awareness/Knowledge

• Given the fact that the phenomenon of CSR reporting is comparatively new to the companies in developing countries many of them may not be familiar with its processes and requirements.
• (Interviewee 14) Every company has a social responsibility, which needs to be communicated through social disclosures.
• You will see the difference between this year’s report and that of ten years back.
• One fairly typical comment illustrates this point: Moreover, corporate culture is yet to develop here.
• (Interviewee 9) Another issue surrounding the unawareness of CSR reporting is the lack of demand for disclosures.

Poor Performance and Fear of Bad Publicity

• Two more factors, which conflict with the lack of awareness suggested above, for not disclosing relate to the fact that companies were not actually undertaking enough social activities and that additional disclosure could bring adverse publicity, particularly if the disclosures are not positive.
• But in their job advert the authors do say that we’re an equal opportunity employer.
• (Interviewee 4) Several companies refrained from disclosure because of a fear of bad publicity: …….on certain areas, for example, child labour and right to collective bargaining, the authors are not good performers.
• We’re already under tremendous pressure (closure, penalty, etc.) from the Department of Environment (DoE) and don’t want to add fuel to the fire by disclosing their weaknesses.

6. Discussion and Conclusions

• According to their interviewees, the main reasons for non-disclosure include lack of resources, the profit imperative, lack of legal requirements, lack of knowledge/awareness, poor performance and fear of bad publicity.
• The absence of CSR reporting due to a lack of knowledge/awareness and resources may be particularly relevant in the context of developing countries.
• In line with political economy of accounting the authors maintain that silence on these issues is designed to serve corporate interests and benefit powerful stakeholder groups such as management and shareholders (Guthrie & Parker, 1990).
• Let us consider further the plight of a family living in poverty in Bangladesh where an important wage earner is a child.
• The systematic imperative for profits requires companies to operate in certain ways that continue to gather wealth and power within a select minority of the global population.

Figures

Table 1 Extent of CSR by Bangladeshi Companies

Table 2 CSR Profile of Interviewees

Frequently asked questions

Q1. What are the contributions mentioned in the paper "The absence of corporate social responsibility reporting in bangladesh" ?

This paper aims to broaden the present corporate social responsibility ( CSR ) reporting literature by extending its focus to the absence of CSR reporting within a developing country, an area which, to date, is relatively under researched in comparison to the more widely studied presence of CSR reporting within developed Western countries. In particular this paper concentrates upon the lack of disclosure on three particular ecojustice issues: child labour, equal opportunities and poverty alleviation. The authors examine why this is the case and thereby illuminate underlying motives behind corporate unwillingness to address these issues. Given these findings the paper raises some serious concerns as to why corporations would ever be expected to voluntarily report on ecojustice issues where performance is poor and negative publicity would be generated and profit impaired. The findings suggest that the main reasons for non-disclosure include lack of resources, the profit imperative, lack of legal requirements, lack of knowledge/awareness, poor performance and the fear of bad publicity. Further research is still required to uncover current injustices and to imagine what changes can be made. 

Q2. What are the future works mentioned in the paper "The absence of corporate social responsibility reporting in bangladesh" ?

The possibility of individual companies and/or governments to change the system appears unlikely and Harvey ( 2000, p. 234 ) argues that “ real political change arises out of simultaneous and loosely coordinated shifts in both thinking and action across several scales ”. In light of their work the authors call for further research to uncover the silencing of injustice and also to gain, in the words of Harvey ( 2000 ) the “ courage of their minds ” ( p. 255 ) “ to think strategically and tactically about what to change and where, about how to change what and with what tools. The authors are also mindful of the concerns raised by Hanlon ( 2008 ) and Llewellyn ( 2007 ) that CSR itself could actually further increase the rights and powers of these organisations. 

Q3. What is the main argument for the legitimacy perspective?

Many researchers have used a legitimacy perspective (Deegan, 2002; Deegan, Rankin, & Tobin, 2002), which suggests that organisations require legitimacy to be able to continue to operate, and that organisations use CSR reporting to legitimise their relationship with the society and various stakeholders7. 

Q4. How much participation does the ILO (2008) report for children?

In fact the ILO (2008) figures identify Bangladesh as having a 13.4% participation rate in the labour force for children aged 5-14 years. 

Q5. What is the main argument for the absence of CSR reporting in Thailand?

They argue, however, that in reality a failure to enforce legislation, a lack of effectiveness by Thai social and environmental pressure groups, and an absence of mandatory social and environmental disclosures, explains this continued absence. 

Q6. What is the reason for the absence of CSR reporting in developing countries?

It is true that corporate managers in developing countries need necessary training to achieve the required skills and knowledge to be able to embark on CSR reporting activities, which would require commitment of additional resources that might be lacking, particularly in domestic companies, as suggested by some interviewees. 

Q7. Why do some interviewees not disclose these important issues?

A number of interviewees expressed the view that the main reason for not disclosing these significant issues is the absence of legal requirements.