ASSESSMENT TOOL OF CSR REPORTING FOR MONITORING THE COMPANY ACTIVITY

Abstract

“ASSESSMENT TOOL OF CSR REPORTING FOR MONITORING THE COMPANY ACTIVITY” The present invention provides assessment tool of CSR reporting for monitoring the company activity. The main purposes of this paper are regarding the CSR reporting which is a very important activity now days. The main aim of the company is why the company should consider reporting and what the benefits they get from this report are. The methodology we have adopted and formatting a company report in the field of CSR. the positivity and generosity of CSR strategy which will not be recapitulated towards the published company’s performance in CSR is insufficient. The study is based on limited data which arise from market imperfections. Since CSR and sustainability is an emerging domain for researchers, practitioners and public policy makers, the sources and types of information are limited. However the data, observations, analysis and recommendations presented in the book will prove to be extremely useful for the various stakeholders in the field of CSR.

Specification

Description:TECHNICAL FIELD
[0001] The present invention relates to the field of automated assessment systems, and more particularly, the present invention relates to the assessment tool of CSR reporting for monitoring the company activity.
BACKGROUND ART
[0002] The following discussion of the background of the invention is intended to facilitate an understanding of the present invention. However, it should be appreciated that the discussion is not an acknowledgment or admission that any of the material referred to was published, known, or part of the common general knowledge in any jurisdiction as of the application's priority date. The details provided herein the background if belongs to any publication is taken only as a reference for describing the problems, in general terminologies or principles or both of science and technology in the associated prior art.
[0003] A corporate social responsibility is a practice of internal and external document companies use to communicate the CSR efforts and their impact on triple bottom line. It is an approach which provides corporate transparency which is a key indicator for stakeholder's company's performance and monitors their activities. The CSR reporting is voluntary in nature. However some jurisdictions mandate large organizations to disclose their social and environmental performance, assisting investors and consumers to assess the organization's non-financial impacts. In recent times, the term CSR reporting has been used interchangeably with the term ESG (Environmental Social and Governance) reporting. As per customer opinion, if the company is socially responsible, it will affect the buying decisions of the company. Most important part is that every enterprise informed their customers regarding CSR activities and heir reporting through proper way of communication. Now a day's large, medium and small enterprises provides comprehensive annual reports to public. In this report they give their detailed information regarding the company policy on the basis of focussed area of obligation under the CSR related concepts.CSR activities is a way of communicating the ideas to various stakeholders of the company. It is a matter of better reputation with prestige and efficient work of management.
[0004] CSR report has to fulfil four effective aspects:
[0005] A. Credibility - The top management has to be fully supported to the credibility of CSR report, details of corporate policy, introduction of personnel responsibilities, methods of data collection and the objectives. It is increased by the involvement of shareholders with their positivity and influenced by third parties verification.
[0006] B. Management of social responsibility - A successful CSR should depends upon the fulfilment of adopted strategies, effectiveness of corporate governance structure and the association of stakeholders towards the company's benefit.
[0007] C. Performance of Company -The main motto of this report is an analytical view of corporate performance in CSR. The company has to provide both quantitative and qualitative data on the impacts of processes, company products and services in the market, working environment, local communities and the environment. The measured results must be put into context through benchmarking. As a reference point can be used company data from the same area, current trends or company goals set out in the following period.
[0008] D. Creation of the Report: In this report the actual time period and the calculation of business unit has properly mentioned. Descriptive standards are used and verified by independent authority. List of Indicators has been published. Feedback has been given by the readers on the basis of Performance of CSR reports.
[0009] Over the last few decades, there has been a great deal of academic research into the social reporting practices of corporations operating in different parts of the world. Researchers and academics working in the realm of corporate social responsibility (CSR) have shifted their focus from measuring corporate social responsibility disclosure (CSRD) to exploring its determinants (Eng & Mak, 2003; Ghazali, 2007; Khlif & Souissi, 2010; Kotonen, 2009; Purushotahman, Phil, & Ross, 2000; Saleh, Zulkifli, & Muhamad, 2010). Academic researchers have made rigorous efforts to explore the financial and non-financial determinants of the social and environmental disclosures made by the corporate sector, including: size of the business (Eng & Mak, 2003; Hackston & Milne, 1996; Haniffa & Cooke, 2005; Said, Yuserrie, & Haron, 2009), financial performance (Oeyono, Samy, & Bampton, 2011; Roberts, 1992; Waddock & Gravess, 1997), age of the company (Cormier, Magnan, & Velthoven, 2005; Rahman, Zain, & Al-Haj, 2011), board characteristics (Hossain & Reaz, 2007) and nature of the industry. The motivation for this paper emerges from the realisation that most of the research in this sphere of knowledge has explored CSRD in the western world, and only a small number of studies have been conducted into CSRD and its determinants in developing economies such as India, Pakistan, Malaysia and Indonesia. There has been little research on the Indian corporate sector despite the strong global contri- bution of the Indian economy. To the best knowledge of the authors, only a few studies have explored the determinants of voluntary CSRD in the Indian context. Three decades ago, Singh and Ahuja (1983) conducted a study on the determinants of CSRD on public sector companies. Hossain and Reaz's (2007) study was limited to the banking sector and the index used considered only eight items related to CSR (out of a total of 65 items). There is a need for a comprehensive research study in the Indian context that explains the level of CSRD and the factors explaining disclosures. Besides the existing gap in the literature on CSRD in the Indian context, the other motivation for this study is the need to measure and understand the level of CSRD and its determinants before the application of the Corporate Social Responsibility Voluntary Guidelines issued by the Ministry of Corporate Affairs, India (2009), the Guidelines on Corporate Social Responsibility for Central Public Sector Enterprises (2010, 2012) and the Companies Bill 2012, which has made CSR disclosures mandatory in India. As per the guidelines, CSR is a company's commitment to operate in an economically, socially and environmentally sustainable manner, while recognising the interests of various stakeholder groups. These guidelines provide for resource allocation towards CSR projects in relation to their declared profits in a particular year and include regulations for the implementation, monitoring and reporting of social disclosures. They became law in 2013 after the Companies Bill 2012 passed through the upper house of India's parliament. These regulatory changes may have an impact on social performance and CSRD by companies in India in the future. Therefore, this study will contribute to the existing literature on the determinants of CSRD by providing an overview of the level of CSRD in the pre-mandatory regime. Future research into CSRD can use the findings of this study as a comparative base to measure the impact of the CSR legislation in India.
[0010] Conversely, Friedman (2002) was one famous critic of CSR and expressed his view as:"there is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud".
[0011] However, this view can be perceived as insufficient, as companies affect their surrounding by different activities and potential investors are requesting companies to integrate social and environmental responsibilities into their primary decisions (Mallin et al., 2013).
[0012] Study made by McKinsey (2010) shows that a majority of executives consider sustainability important, but far from all of them invest in CSR related activities. One reason could be a lack of a clear definition of CSR among consumers and investors. In fact, over 20 percent of companies do not have a clear definition of CSR and definitions vary across companies. However, most executives agree on the value of CSR. 76 percent claim that CSR contributes positively to shareholder value in the long run since it is considered to improve both the brand and the reputation of companies (McKinsey, 2010).
[0013] In light of the foregoing, there is a need for Assessment tool of CSR reporting for monitoring the company activity that overcomes problems prevalent in the prior art associated with the traditionally available method or system, of the above-mentioned inventions that can be used with the presented disclosed technique with or without modification.
[0014] All publications herein are incorporated by reference to the same extent as if each individual publication or patent application were specifically and individually indicated to be incorporated by reference. Where a definition or use of a term in an incorporated reference is inconsistent or contrary to the definition of that term provided herein, the definition of that term provided herein applies, and the definition of that term in the reference does not apply.
OBJECTS OF THE INVENTION
[0015] The principal object of the present invention is to overcome the disadvantages of the prior art by providing assessment tool of CSR reporting for monitoring the company activity.
[0016] Another object of the present invention is to provide assessment tool of CSR reporting for monitoring the company activity that highlights that a firm's industry affiliation and profitability significantly influence its CSRD.
[0017] Another object of the present invention is to provide assessment tool of CSR reporting for monitoring the company activity, wherein the non-financial variables and social reputation also determine the communication of social efforts.
[0018] Another object of the present invention is to provide assessment tool of CSR reporting for monitoring the company activity, wherein the results are crucial and match with expectations because of the 'business case + caring model', long-established CSR tradition and high reputation of the companies seriously involved in CSR in India.
[0019] Another object of the present invention is to provide assessment tool of CSR reporting for monitoring the company activity, wherein the study has some limitations as it considered the data for only one year from the annual reports of the sample companies and did not consider some other corporate disclosure sources, such as media and corporate websites.
[0020] Another object of the present invention is to provide assessment tool of CSR reporting for monitoring the company activity, wherein the errors inherent in the rating scale due to human judgment and bias remain a limitation. Regarding future research, the financial and non-financial determinants model could be replicated and confirmed in other developing countries.
[0021] The foregoing and other objects of the present invention will become readily apparent upon further review of the following detailed description of the embodiments as illustrated in the accompanying drawings.
SUMMARY OF THE INVENTION
[0022] The present invention relates to assessment tool of CSR reporting for monitoring the company activity. CSR has sustained the attention of academics, researchers, non-government organizations and governments over a long period and has emerged as an important dimension of companies' operational activities (Vilanova, Lozano, & Arenas, 2009). The increased globalization of trade, the rise in the strategic importance of stakeholder relationships and the growth of corporate image management has been key drivers of the increased importance of CSR (Azim, Ahmed, & Islam, 2009). Unfortunately, CSR does not yet have an accepted universal definition. Current CSR definitions are ambiguous and differing interpretations (Valor, 2005) and perspectives (Balasubramanian, David, & Fran, 2005) have been adopted. Dahlsrud (2008) analysed 37 definitions of CSR originating from 27 authors and covering the period 1980-2003. Rather than attempting a comprehensive definition of CSR, the definition used here is that given by the World Business Council for Sustainable Development (World Business Council for Sustainable Development, 1998): 'The commitment of business to contribute to sustainable eco- nomic development, working with employees, their families, the local community and society at large to improve their quality of life.'
[0023] This paper examined the current level of CSR in the well represented and fast-emerging Indian economy with its large corporate sector. This is a comprehensive study that makes a value-adding contribution to the existing CSR literature by investigating various financial and non-financial determinants of CSRD in India. The study found that overall disclosures are low; these results are similar to those reported by earlier studies in developing countries (Chaudhri & Wang, 2007; Azim et al., 2009; Menassa, 2010). The results highlight that a firm's industry affiliation and profitability significantly influence its CSRD. The finding that profitability determines CSRD in a positive manner is similar to results reported by Roberts (1992), Waddock and Gravess (1997) and Wu (2006). The study could not confirm any association between CSRD and risk, which is also consistent with earlier research (Haniffa & Cooke, 2005). Non-financial variables and social reputation also determine the communication of social efforts. These results are similar to results shown by previous studies into the nature of industry-influenced CSRD (Rizk et al., 2008; Kotonen, 2009). The results are crucial and match with expectations because of the 'business case + caring model', long-established CSR tradition and high reputation of the companies seriously involved in CSR in India. The study has some limitations as it considered the data for only one year from the annual reports of the sample companies and did not consider some other corporate disclosure sources, such as media and corporate websites. Content analysis was performed by one of the authors to eliminate inter-rater bias and the coding of a sample of 10 companies was crosschecked by the other author. Nevertheless, the errors inherent in the rating scale due to human judgment and bias remain a limitation. Regarding future research, the financial and non-financial determinants model could be replicated and confirmed in other developing countries. Future researchers could investigate the motivations behind CSRD by the corporate sector by conducting interviews with managers and boards of directors.
[0024] While the invention has been described and shown with reference to the preferred embodiment, it will be apparent that variations might be possible that would fall within the scope of the present invention.
BRIEF DESCRIPTION OF DRAWINGS
[0025] So that the manner in which the above-recited features of the present invention can be understood in detail, a more particular description of the invention, briefly summarized above, may have been referred by embodiments, some of which are illustrated in the appended drawings. It is to be noted, however, that the appended drawings illustrate only typical embodiments of this invention and are therefore not to be considered limiting of its scope, for the invention may admit to other equally effective embodiments.
[0026] These and other features, benefits, and advantages of the present invention will become apparent by reference to the following text figure, with like reference numbers referring to like structures across the views, wherein:
[0027] No Figure.
DETAILED DESCRIPTION OF THE INVENTION
[0028] While the present invention is described herein by way of example using embodiments and illustrative drawings, those skilled in the art will recognize that the invention is not limited to the embodiments of drawing or drawings described and are not intended to represent the scale of the various components. Further, some components that may form a part of the invention may not be illustrated in certain figures, for ease of illustration, and such omissions do not limit the embodiments outlined in any way. It should be understood that the drawings and the detailed description thereto are not intended to limit the invention to the particular form disclosed, but on the contrary, the invention is to cover all modifications, equivalents, and alternatives falling within the scope of the present invention as defined by the appended claim.
[0029] As used throughout this description, the word "may" is used in a permissive sense (i.e. meaning having the potential to), rather than the mandatory sense, (i.e. meaning must). Further, the words "a" or "an" mean "at least one" and the word "plurality" means "one or more" unless otherwise mentioned. Furthermore, the terminology and phraseology used herein are solely used for descriptive purposes and should not be construed as limiting in scope. Language such as "including," "comprising," "having," "containing," or "involving," and variations thereof, is intended to be broad and encompass the subject matter listed thereafter, equivalents, and additional subject matter not recited, and is not intended to exclude other additives, components, integers, or steps. Likewise, the term "comprising" is considered synonymous with the terms "including" or "containing" for applicable legal purposes. Any discussion of documents, acts, materials, devices, articles, and the like are included in the specification solely for the purpose of providing a context for the present invention. It is not suggested or represented that any or all these matters form part of the prior art base or were common general knowledge in the field relevant to the present invention.
[0030] In this disclosure, whenever a composition or an element or a group of elements is preceded with the transitional phrase "comprising", it is understood that we also contemplate the same composition, element, or group of elements with transitional phrases "consisting of", "consisting", "selected from the group of consisting of, "including", or "is" preceding the recitation of the composition, element or group of elements and vice versa.
[0031] The present invention is described hereinafter by various embodiments with reference to the accompanying drawing, wherein reference numerals used in the accompanying drawing correspond to the like elements throughout the description. This invention may, however, be embodied in many different forms and should not be construed as limited to the embodiment set forth herein. Rather, the embodiment is provided so that this disclosure will be thorough and complete and will fully convey the scope of the invention to those skilled in the art. In the following detailed description, numeric values and ranges are provided for various aspects of the implementations described. These values and ranges are to be treated as examples only and are not intended to limit the scope of the claims. In addition, several materials are identified as suitable for various facets of the implementations. These materials are to be treated as exemplary and are not intended to limit the scope of the invention.
[0032] The present invention relates to assessment tool of CSR reporting for monitoring the company activity.
[0033] The CSR scene in India is unique for multiple reasons. The first and most important is the country's 'family-centered' style of management- most of the large corporations in India are controlled by family groups (Sundar, 2000). CSR has been practised by leading family corporations for over 100 years as a family tradition (Balasubramanian et al., 2005; Sagar & Singla, 2004). Thus, selection of CSR initiatives (benefactions for education, medical facilities and so forth) is influenced by the specific cultural and social preferences of the individual family. For example, the founders of the Tata Group established the JN Tata Endowment Fund in 1892 to encourage Indian scholars to take up higher studies abroad. This was the first of a large number of philanthropic initiatives by the Tata Group. Over generations, members of the Tata family have contributed much of their personal wealth to the many trusts that they have created to benefit Indian society. The second unique feature of CSR in India is the lack of a formal and widely accepted mechanism for corporate reputation ratings such as Kinder Lydenberg Domini (KLD), Fortune, Moskowitz and Business Ethics; thus, corporate social performance (CSP) is not promoted. In India, Karmayog provides a rating for companies on the basis of their so- cial performance (Karmayog, 2004), but the extent to which companies themselves and various stakeholders value these ratings has not yet been investigated. The conferring of various awards by the government and other social agencies provides recognition of companies' social and environmental endeavours. Companies voluntarily report their CSR efforts/awards in various business dailies, annual reports and websites. Better-performing CSR companies are more concerned about the read-ability of their CSRD (Abu & Ameer, 2011).
[0034] The third feature is the sets of guidelines for CSR reporting in India: the Corporate Social Responsibility Voluntary Guidelines (2009 and 2010) issued by the Ministry of Corporate Affairs, the Guidelines on Corporate Social Responsibility for Central Public Sector Enterprises (2010, 2012) and now the Companies Bill 2012. However, not all companies adhere to these guidelines because the observance of law is generally quite poor in India (Prieto‐Carrón, Lund‐Thomsen, Chan, Muro, & Bhushan, 2006). This fact is confirmed by poor implementation, monitoring and reporting of CSR mechanisms in Indian government companies (Report o. CA 22). It also inspires research into the question that if legal compliance is poor, what else might drive companies to disclose or not to disclose? Finally, India is a fast-growing economy that has witnessed substantial corporate and economic growth in recent years, particularly in the post-liberalisation era. Former United Kingdom (UK) Prime Minister Gordon Brown advised that India could emerge as the fastest growing economy in the world in the next 10 years (Hindustan Times, 2010). India is the first country in the world to mandate the spending of 2% of the average net profits of three years immediately preceding the reporting period (Companies Bill 2012). In addition, boards of directors are required to disclose the contents of CSR policy in their reports. Given the uniqueness of Indian corporations, research into the degree of CSRD - and the factors that drive companies to make high or low CSRD - attracts a great deal of interest.
[0035] Relationship between CSR disclosures and financial corporate characteristics:
[0036] CSR disclosures and company size: The existing literature reports that the size of a company influences its social disclosures (Dierkes & Preston, 1977; Patten, 1991; Roberts, 1992; Hackston & Milne, 1996; Adams et al., 1998). This leads to the hypothesis that larger firms disclose CSR information to a greater extent than smaller firms (Aras et al., 2010; Gray et al., 2001; Hossain & Reaz, 2007; Purushotahman et al., 2000; Siregar & Bachtiar, 2010). Porwal and Sharma's (1991) study argued that larger Indian firms in both the public and private sectors made greater CSRDs than smaller firms. It is understandable that larger companies make more disclosures because they tend to receive more attention from the general public and are therefore under greater pressure to exhibit social responsibility. Moreover, these companies are likely to have more shareholders who are concerned with the social programmes undertaken by the company (Cowen et al., 1987), greater visibility in supply-chain management (CSRWORLD survey report 2002 series), a greater need to legitimise their actions and limit governmental interference in their business activ- ities (Purushotahman et al., 2000), and more infrastructure and higher cash flows at their disposal (Crisóstomo et al., 2011). Therefore, the directional hypothesis is formulated by relating CSRD to company size:
[0037] H1. Large-sized companies tend to disclose more CSR information than small-sized companies.
[0038] H1a. Firms with a higher level of sales disclose CSR information to a greater extent than firms with a lower level of sales.
[0039] H1b. Firms with a higher level of total assets disclose CSR information to a greater extent than firms with a lower level of total assets.
[0040] Relationship between CSR disclosures and profitability:
[0041] The literature's research results on corporate profitability as a determinant of CSRD appear inconclusive. They present a mixed reaction in the form of a positive, negative or uncertain relationship between a firm's profitability and CSRD. Some researchers failed to find any associ- ation between profitability and CSRD (Porwal & Sharma, 1991; Hackston & Milne, 1996; Aras et al., 2010). Other researchers found a positive and significant relationship between profitability and CSRD (Oeyono et al., 2011; Roberts, 1992; Waddock & Gravess, 1997). Crisóstomo et al. (2011) argued that spending resources on CSR can only be justified to the shareholders and creditors by excess cash flows arising from higher portability. Further, a few studies have asserted that there is a negative relationship between CSR initiatives and disclosures and financial performance, on the premise of the high cost of extensive charitable contributions, community development plans, the maintenance of facilities in economically depressed locations and the establishment of environmental protection procedures (McGuire, Sundgren, & Schneeweis, 1988; Siregar & Bachtiar, 2010; Rahman, 2011). Regarding the market rate of return, some studies indicated that CSR has an impact on the financial markets (Shane and Spicer, 1983). Some researchers examined the value-relevance of corporate environmental reputation (CER) information and its potential usefulness to investors in predicting future earnings (García-Ayuso and Larrinaga, 2003; Hussainey and Salama, 2010). These researchers contend that the firms with higher CER scores exhibit higher levels for the share-price anticipation of future earnings than the firms with lower CER scores. Saleh et al. (2010) examined the relationship between CSRD and the market prices of stock, and reported that CSRD can be leveraged to attract institutional investors to actively invest in public limited companies with strong CSR practices. Thus, empirical results provide evidence that CER information influences market prices. Based on the mixed results shown by earlier studies investigating the relationship between profitability and CSRD, three measures of profitability are considered: first, profit after tax (PAT) at the beginning and end of the year; second, a relative measure return on capital employed (ROCE); and third, a market-based measure (that is, the market price for the shares of the respective company). The discussion above leads to the development of the following hypotheses exploring the connection between CSRD and financial performance:
[0042] H2. Firms with higher profitability disclose CSR information to a greater extent than those with lower profitability.
[0043] H2a. Firms with higher PAT at the beginning of the year disclose CSR information to a greater extent than those with lower PAT.
[0044] H2b. Firms with higher PAT at the end of the year disclose CSR information to a greater extent than those with lower PAT.
[0045] H2c. Firms with a higher ROCE disclose CSR information to a greater extent than those with a lower ROCE.
[0046] H2d. Firms with higher stock market prices disclose CSR information to a greater extent than those with lower stock market prices.
[0047] CSRD and risk:
[0048] The relationship between CSRD and risk is not as widely explored by academic researchers as CSRD's relationship with firm size and profitbility. However, a significant relationship between CSRD and risk is traced in the earlier literature, highlighting that firms with a higher degree of debt/equity ratio (DER) make higher CSRD (Khlif & Souissi, 2010; Purushotahman et al., 2000). Siregar and Bachtiar (2010) concluded that leverage does not have a significant impact on corporate social reporting. Based on the empirical findings of these studies, the following hypotheses are suggested to test the relationship between CSRD and risk:
[0049] H3a. Firms with higher financial leverage disclose CSR information to a greater extent than firms with lower financial leverage.
[0050] H3b. Firms with higher values for beta disclose CSR information to a greater extent than firms with lower values for beta.
[0051] Note, risk is considered in terms of financial leverage measured through the debt to equity ratio (DER) and the market systematic risk, beta.
[0052] CSRD and industry: The insights provided by the literature present a mixed answer to the question of whether industry affiliation influences the communication of social information. A large number of studies, mostly conducted in developed countries, have established that industry sector is significantly associated with amount of corporate social disclosure (Cowen et al., 1987; Roberts, 1992; Tilt, 1994; Hackston & Milne, 1996; Adams et al., 1998; Gray et al., 2001; Graafland et al., 2003; Kotonen, 2009). However, other researchers trying to associate corporate social reporting with in- dustry size could not gather enough evidence to confirm or refute the association (Andrew et al., 1989; Purushotahman et al., 2000). The relationship between CSRD and industry groups has not been widely explored in the Indian context. The relationship between industry and corporate social disclosure can be the result of consumer perceptions, government pressure (Cowen et al., 1987) or the environmental or social impacts of a particular industry (Cowen et al., 1987; Dierkes & Preston, 1977; Patten, 1991; Roberts, 1992; Hackston & Milne, 1996). The need for CSR and CSRD can be the result of the supply of resources peculiar to that industry; for example, Murthy and Abeysekera (2008) suggested that a shortage of skilled labour in the software sector in India might have led to CSRD practices in the human resources (HR) category. The discussion above forms the foundation for the following hypothesis associating industry and CSRD:
[0053] H4. The specific industry to which a firm belongs establishes/determines the level of CSR disclosures by that firm.
[0054] CSRD and age of firm: Previous research has established that the age of a firm influences the CSR involvement of the firm and that long-established firms are likely to make greater voluntary social disclosures. Some researchers (Cormier et al., 2005; Roberts, 1992) reported a positive relationship, while others (Rahman et al., 2011) denied any relationship between the age of the firm and CSR disclosures. The hypothesis testing the relationship between CSRD and age is as follows:
[0055] H5. Long-established companies disclose more CSR information than newly established companies.
[0056] Relationship between CSRD and non-financial corporate characteristics: The research community tends to explore newer attributes to explain CSRD-for example, the political economy framework, reduced cost of capital, culture, research and development intensity, and corporate governance characteristics (Dhaliwal, Li, Tsang, & Yang, 2011; Ghazali, 2007; Khlif & Souissi, 2010; Kotonen, 2009; McWilliams, Siegel, & Wright, 2006; Purushotahman et al., 2000; Saleh et al., 2010). This paper attempts to investigate a new variable in CSRD research as it makes an effort to determine the role of corporate reputation in explaining CSRD level.
[0057] CSRD and corporate reputation: Reputation is a measurement of organisational character (Devine & Halpern, 2001). Bebbington, Larrinaga-Gonzalez, and Moneva (2008) proposed that a negative social or environmental incident affects an organisation's reputation, which in turn has a second-order impact on corporate legitimacy. There is no doubt that firms use CSRD to influence public perceptions, to legitimise their actions (Abu & Ameer, 2011; Saleh et al., 2010), to protect and enhance their reputation and image (Neu, Warsame, & Pedwell, 1998; Hooghiemstra, 2000; Saleh et al., 2010; Abu & Ameer, 2011) and for increased visibility (Burke & Logsdon, 1996). CSRD favourably influences the reputation of a firm (Fombrun & Shanley, 1990; Zyglidopoulos, 2001; Siltaoja, 2006; Hidayat, 2011). Socially reputed firms tend to make more CSRDs to maintain their CSR image. For example, firms such as the Tata Group, the Birla Group, Infosys and Wipro need to make disclosures to assure the public of their continuous provision of socially desirable ends and that they are not deviating from the high standards established in the past (Deegan, 2010, 331). Hence, we make the follow- ing hypothesis:
[0058] H6. More socially reputed companies make greater CSRDs than less socially reputed companies.
[0059] Research methodology: The purpose of this research is to investigate the association between CSRD and corporate financial characteristics such as profitability, risk and size, and non-financial factors such as age, industry and corporate reputation. This objective has been achieved by investigating the CSRDs made by the top 100 companies in the Bombay Stock Exchange (BSE) 500 index and relating their disclosure levels to financial and non-financial determinants. The content analysis method is used to measure the CSRD of the sample companies.
[0060] Construction of CSEEE index: An index is constructed based on an extensive list of items of social importance (Hackston & Milne, 1996; Hall, 2002) and earlier CSRD indices used to capture India's specific disclosure items (Porwal & Sharma, 1991; Singh & Ahuja, 1983). Some items specific to the Indian context, such as reservation to minority communities - scheduled castes and scheduled tribes, midday meals for children, mass-marriage programmes and so forth - were included based on a pilot study of the annual report disclosures of 20 Indian companies. Another category - emission of carbon and harmful gases - was added to reflect recent changes in the social and environmental reporting arena. This process generated a total of 111 items. Cronbach's alpha was run to assess the reliability/internal consistency of the disclosure index. The value of Cronbach's alpha on standardised items (N = 111) is 0.864 and 15 items with zero variance are excluded from the final index. The final CSEEE index consists of 96 items (given in Appendix A), classified under seven themes, as used by Kansal and Singh (2012): community development (CD), HR, product and services-safety and innovation (PSI), environment (ENV), energy (ENG), emissions (EMN) and 'Others CSR'. The data regarding corporate financial characteristics has been taken from the Prowess database managed by the Centre for Monitoring the Indian Economy (CMIE).
[0061] First, a univariate regression analysis is run to explore various independent variables that could finally be used in multiple regression models. Prior research used different measures of profitability such as return on sales, assets and equity to discover whether using different measures of profitability lead to measurable improvements (Callan & Thomas, 2009). The financial explanatory variables used are sales, total assets (proxy for size), PAT, ROCE, market prices (that is, an average of the closing market price for the last 365 days-proxy for the market rate of return), DER (an accounting measure of financial leverage) and beta (the systematic risk relating to stock and financial markets). The natural log of total assets, total sales and PAT is used because of a high level of skewness of these variables. Previous studies used total assets/ log of total assets as a proxy for the size of the company (Eng & Mak, 2003; Hackston & Milne, 1996; Haniffa & Cooke, 2005; Said et al., 2009). Relative measures of profitability have also been widely used by many CSRD researchers (Eng & Mak, 2003; Haniffa & Cooke, 2005). The awards and certifications received by a company in various categories of CSR are used as a proxy for corporate reputation. Social reputation is measured on a rating scale of 0-6, representing the number of CSR categories in which a company has received awards or certifications. A company is regarded as socially reputed for a CSR category if it receives any award/certification in that category. As there are six categories of CSR (ENV, ENG, HR, PSI, CD and EMN), any company could earn a maximum of six. The rating scale better measures corporate reputation than the absolute number of awards because companies can receive multiple awards for the same endeavours from different social constituents. The age of the firm has been extracted from the Prowess database as the number of years since its establishment, as used by previous research studies (Roberts, 1992; Yong, Chang, & Martynov, 2011).
[0062] The following simple regression model is used to explore the relevant predictors and five different multiple regression models are used to understand the specific contribution of each explanatory variable in determining the CSEEE scores:
Model 1: CSEEE score = α + β1IND + ε (3)

Model 2: CSEEE score = α + β1IND + β2logPATt−1 + ε (4)

Model 3: CSEEE score = α + β1IND + β2logPATt−1 + β3logTAt + ε (5)

Model 4: CSEEE score = α + β1IND + β2logPATt−1 + β3logTAt
+ β4logPATt + ε (6)

Model 5: CSEEE score = α + β1IND + β2logPATt−1 + β3logTAt
+ β4logPATt + β5Age + ε (7)

Model 6: CSEEE score = α + β1IND + β2logPATt−1 + β3logTAt
+ β4logPATt + β5Age + β6SocRepu + ε (8)
where:
IND is the industry classification; PAT is the profit after taxes;
logPATt − 1 is the log of PAT at the beginning of the year; logTAt is the log of total assets of the firms;
logPATt is the log of PAT for the current year; SocRepu is the social reputation scale.
[0063] It is clear that CSR performance enhances corporate reputation (Friedman & Miles, 2001; Lewis, 2003; Fombrun, 2005; Kolk, 2005; Bertels & Peloza, 2008; Ferns, Emelianova, & Sethi, 2008). Further, corporate reputation has a positive relationship with stock market returns and a negative relationship with social risk (Spicer, 1978; Herremans, Akathaporn, & McInnes, 1993). For firms with high CSP, reputational ratings can improve their relationships with bankers and investors, facilitating their access to capital (Spicer, 1978). These companies can also attract better employees (Greening & Turban, 2000) and/or increase their current employees' goodwill, which in turn can improve financial outcomes (McGuire et al., 1988; Waddock & Gravess, 1997).
[0064] Therefore, corporate managers should employ CSR to enhance the reputation of their company in the eyes of its stakeholders and subsequently disclose this CSR information to influence stakeholders because various stakeholders want to see positive contributions to social and environmental causes (Melo & Garrido-Morgado, 2011).
[0065] Implications of the study India has taken a strong and distinctive stance on CSR reporting by the corporate sector and this may have serious policy implications. The Companies Bill 2012 sets out how large companies in India shall conduct and report CSR. The approach followed by the Companies Bill 2012, 'Spend your CSR budget or explain', relies on stakeholder pressure. Top-performing and large companies that fail to spend and/or report their CSR budgets will be vulnerable to loss of reputation. The current study highlights the fact that not only the size of a company (as reported by earlier studies) but also its corporate reputation significantly affects its level of CSRD. The more socially reputed companies are more inclined to spend their CSR budget and make higher CSRD because of their reputations.
[0066] India's Ministry of Corporate Affairs is currently fixing the rules of the CSR game. This study provides useful inputs into the design of CSR rules because the results of the study provide timely information on the pre-legislation CSRD scenario. It may also provide warning signals to corporate management in cases where the level of CSRD is very low in the pre-egislation period. The study argues that the impact of these guidelines on the reporting pattern of Indian companies may be evident in the coming years. It also provides a basis of comparison for future research in this domain. The International Integrated Reporting Council has recently issued a reporting framework that requires organisations to publish material information about their strategy, governance, performance and prospects in a clear, concise and comparable format. It is expected that this integrated reporting framework will underpin and accelerate the evolution of corporate reporting, reflecting developments in financial, governance, management commentary and sustainability reporting. The framework may provide opportunities for the management of Indian companies to disclose more value relevant information to various stakeholder groups, which is a key requirement of the Companies Bill 2012 in India.
[0067] This paper examined the current level of CSR in the well represented and fast-emerging Indian economy with its large corporate sector. This is a comprehensive study that makes a value-adding contribution to the existing CSR literature by investigating various financial and non-financial determinants of CSRD in India. The study found that overall disclosures are low; these results are similar to those reported by earlier studies in developing countries (Chaudhri & Wang, 2007; Azim et al., 2009; Menassa, 2010). The results highlight that a firm's industry affiliation and profitability significantly influence its CSRD. The finding that profitability determines CSRD in a positive manner is similar to results reported by Roberts (1992), Waddock and Gravess (1997) and Wu (2006). The study could not confirm any association between CSRD and risk, which is also consistent with earlier research (Haniffa & Cooke, 2005). Non-financial variables and social reputation also determine the communication of social efforts. These results are similar to results shown by previous studies into the nature of industry-influenced CSRD (Rizk et al., 2008; Kotonen, 2009). The results are crucial and match with expectations because of the 'business case + caring model', long-established CSR tradition and high reputation of the companies seriously involved in CSR in India. The study has some limitations as it considered the data for only one year from the annual reports of the sample companies and did not consider some other corporate disclosure sources, such as media and corporate websites. Content analysis was performed by one of the authors to eliminate inter-rater bias and the coding of a sample of 10 companies was crosschecked by the other author. Nevertheless, the errors inherent in the rating scale due to human judgment and bias remain a limitation. Regarding future research, the financial and non-financial determinants model could be replicated and confirmed in other developing countries. Future researchers could investigate the motivations behind CSRD by the corporate sector by conducting interviews with managers and boards of directors.
[0068] Various modifications to these embodiments are apparent to those skilled in the art from the description and the accompanying drawings. The principles associated with the various embodiments described herein may be applied to other embodiments. Therefore, the description is not intended to be limited to the 5 embodiments shown along with the accompanying drawings but is to be providing the broadest scope consistent with the principles and the novel and inventive features disclosed or suggested herein. Accordingly, the invention is anticipated to hold on to all other such alternatives, modifications, and variations that fall within the scope of the present invention and appended claims.
, Claims:We Claim:
1) A method for evaluating the extent of Corporate Social Responsibility Disclosure (CSRD) by a firm, wherein the level of CSRD is determined by analyzing the relationship between a firm's financial characteristics and its CSR disclosure practices, the method comprising the steps of:
- measuring the firm's size based on its sales and total assets;
evaluating the firm's profitability based on profit after tax (PAT), return on capital employed (ROCE), and stock market prices;
- assessing the firm's financial leverage through debt to equity ratio (DER) and beta values;
- categorizing the firm based on its industry affiliation;
determining the firm's age and reputation; and
- associating the firm's CSRD level with these financial and non-financial characteristics.
2) The method as claimed in claim 1, wherein a firm's size is quantified by its total sales and total assets, and the logarithmic values of these measures are used to normalize the data due to high skewness.
3) The method as claimed in claim 1, wherein profitability is measured using profit after tax (PAT) at the beginning and end of the fiscal year, return on capital employed (ROCE), and the market price of the firm's shares as proxies for financial performance.
4) The method as claimed in claim 1, wherein risk is evaluated through financial leverage (debt-to-equity ratio) and market risk (beta value), and the correlation between these risk indicators and CSRD is examined.
5) The method as claimed in claim 1, wherein the firm's industry classification is used to identify industry-specific CSR disclosure patterns, with higher disclosures being associated with industries that have greater environmental, social, or consumer impact.
6) The method as claimed in claim 1, wherein the firm's age is used as a factor, and it is hypothesized that longer-established companies disclose more CSR information than newly established companies.

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