Th e n on - st r a igh t for w a r d lin k be t w e e n a n t i-
cor r u pt ion a n d CSR- r e por t in g
A st u dy a sse ssin g t h e qu a lit y of CSR d isclosu r e r e ga r din g a n t i- cor r u pt ion of fou r Sw e d ish b a n k s
Elin Blom, Alexandra Larsson
Department of Business Administration
Civilekonomprogrammet International Business Program Degree Project, 30 Credits, Spring 2020
Supervisor: Richard Olsson
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ABSTRACT
In 2019, the two Swedish banks Swedbank and SEB was involved in what has been called one of the largest money laundry scandals. Money laundering is a critical sustainability issue for banks since their operations enable money from corrupt activities to be laundered into the financial system, hence diverts resources from education and health services. Corruption is a difficult topic to manage due to its invisible nature, making it hard to detect and measure compared to emissions or compliance with human rights. In the last decades, there has been an increasing demand for organizations to communicate their Corporate Social Responsibility (CSR) considerations. However, the flexibility allowed by standards and regulation in this area regarding what to disclose have been argued to undermine the reliability of CSR information.
There have been discussions whether the banks had informed stakeholders about the anti- corruption risks sufficiently, information that primarily should be communicated through sustainability and annual reports. Previous studies examining CSR reporting quality have found that companies present information in different ways, complicating a comparison of information. They have also found that such disclosure has been used as a strategy to highlight only the good work of a company and omit negative disclosures.
This study examines the quality of CSR information that is communicated in annual and sustainability reports of the four largest banks operating in Sweden; Nordea, Handelsbanken, Swedbank, and SEB. Our focus is limited to disclosure about anti-corruption for which the Global reporting initiative (GRI) provides principles in terms of what they asses to be good content and quality. We will use these principles when structuring our categories in our qualitative content analysis with quantitative elements and when we analyse and make conclusions of our results regarding the quality. We use a content analysis model called the Consolidated Narrative Interrogation Model (CONI) which integrate both qualitative and quantitative measures of CSR reporting quality. Our result show that anti-corruption disclosure differs in terms of presentation structure, which requirements from GRI that are applied and how much information that is disclosed. The overall conclusion regarding its quality is that it does not meet the reporting quality principles stated in GRI 101: foundation. We find indications of strategic legitimacy in terms of how banks disclose anti-corruption activities which is critical for the overall reporting practise since its purpose it to constitute an accurate and reliable source of information to stakeholders.
Keywords: Sustainability reporting, CSR, anti-corruption, money laundry, corruption, CONI model, Consolidated Narrative Interrogation Model, GRI, Legitimacy theory, Stakeholder theory
ACKNOWLEDGEMENTS
We would like to express our gratitude to our seminar partners for ideas and feedback in the start of our writing process. Further, we would like to thank our supervisor Rickard Olsson for guidance.
Umeå, May 2020
Elin Blom Alexandra Larsson
Concepts
CONI- Consolidated narrative interrogations model
CSR - Corporate Social Responsibility
CSR report - another name for Sustainability report
FATF - Financial action task force
GRI - Global reporting initiative
Sustainability report - another name for CSR report
TBL - Triple bottom line
Table of Contents
1. Introduction 2
1.1 Problem background 2
1.2 Problem discussion 3
1.3 Purpose 5
1.4 Research questions 5
1.5 Delimitations 5
1.6 Theoretical and Practical contribution 5
2. Theoretical framework 6
2.1 Definition of concepts 6
2.1.1 The Global reporting initiative framework 6
2.1.2 Anti-corruption 8
2.1.3 Corporate Social Responsibility Reporting (CSR) 9
2.1.4 Triple bottom line 10
2.1.5 Quality of CSR reports 11
2.1.6 CSR within the banking sector 12
2.2 Theoretical background 13
2.2.1 Stakeholder theory 13
2.2.2 Legitimacy theory 14
2.2.3 Institutional theory 15
2.2.4 Signalling theory and information asymmetry 16
2.3 Summary of the theoretical framework 17
2.3.1 Prediction of result 18
3. Research design 19
3.1 Research approach 19
3.2 Content analysis methodologies and research philosophy 19 3.3 Content analysis in sustainability accounting research 20
3.4 Literature research 21
3.5 Critical view on literature 22
4. Practical method 23
4.1. Consolidated Narrative Interrogation Model- CONI Model 23
4.2 Data and sample 24
4.2.1 Banks 25
4.2.2 Index of sustainability and anti-corruption 26
4.3 Pilot study 27
4.4 Revised CONI-Model 29
4.4.1 Step 1 Content diversity 29
4.4.2 Step 2 Content Coding 30
4.4.3 Step 3 Volumetric measurement 31
4.5 Methodology evaluation 31
4.5.1 Reliability 32
4.5.2 Validity 32
5. Empirical results 34
5.1 Content Diversity 34
5.1.1 Diversity within subcategories 35
5.1.2 Diversity analysis of anti-corruption disclosure 38
5.2 Content scores 40
5.2.1 Nordea 40
5.2.2 Handelsbanken 41
5.2.3 Swedbank 42
5.2.4 SEB 42
5.2.5 Scores of positive, negative and neutral disclosure 43
5.2.6 Analysis of scoring results 43
5.3 Volumetric measure of words 44
5.3.1 Analysis of volumetric measures 47
5.4 Structure and presentation of anti-corruption disclosure 48
5.4.1 Nordea 48
5.4.2 Handelsbanken 48
5.4.3 Swedbank 48
5.4.4 SEB 49
5.5 Analytical discussion 50
6. Conclusions 52
6.1 Conclusion 52
6.2 Theoretical and societal implications 54
6.3 Limitations 54
6.4 Future research 55
References 56
Appendix 68
Appendix 1 68
Appendix 2 72
LIST OF TABLES
Table 1 Index of Ranking in index of Sustainability 2019 of banks 27
Table 2 Number of anti-corruption keywords 46
Table 3 Appendix 1 Categories and Subcategories with definition from GRI and their
requirements 68
Table 4 Appendix 2. Disclosure types and definition 72
LIST OF FIGURES
Figure 1 Number of disclosures for all banks allocated to main categories from 2015 to 2019. 34 Figure 2 Number of disclosures in the “management approach” category. 35 Figure 3 Number of disclosures in the “communication and training” category. 36 Figure 4 Number of disclosures in the “Operation risks” category. 37 Figure 5 Number of disclosures in the “Incidents and actions” category. 37
Figure 6 overall scoring for 2015 to 2019. 40
Figure 7 Scoring results for Nordea between 2015 and 2019. 40 Figure 8 Scoring results for Handelsbanken between 2015 and 2019. 41 Figure 9 Scoring results for Swedbank between 2015 and 2019. 42
Figure 10 Scoring results for SEB between 2015 and 2019. 42
Figure 11 Circle diagram illustrating the ratio between positive/negative/neutral disclosures. 43 Figure 12 Incidents and actions: Number of disclosures per year and bank. 43 Figure 15 Quantitative measure of words. Number of words in 2015–2019 include all banks. 44
Figure 16 Swedbank: Number of words. 45
Figure 17 Handelsbanken: Number of words. 45
Figure 18 Nordea: Number of words, 2015-2019. 46
Figure 19 SEB: Number of words. 46
1. Introduction
In this chapter we will introduce the research topic of this study, problem background, purpose and research questions. Further we will describe the scope of the thesis.
1.1 Problem background
The performance of a company is each year consolidated into various financial reports and constitute the main source for stakeholders to evaluate a company. However, when assessing the environmental and social impacts of a company, the traditional financial reports are insufficient to capture such measures (Tavares and Dias, 2018, p. 52). During the last decades there has been an increased demand for organizations to disclose non-financial data and the demand is, according to Kolk (2010, p. 2), driven by a greater awareness in society about various sustainability concerns.
Apart from providing shareholders with financial reports, the scope has broadened to include more aspects and to serve more stakeholders (Fagerstrom and Hartwig, 2016, pp. 3–4). The idea of organizations’ considerations of additional aspects, besides the financial impact of their operations, is called Corporate Social Responsibility (CSR) and the disclosure of such considerations is presented in CSR reports. To clarify the meaning of CSR and sustainable development Elkington (1998) constructed the concept triple bottom line (TBL) which consists of three dimensions of sustainability; economic, environmental and social. This multidimensional approach of CSR suggests that organizations are responsible not only for making profit but also to consider other economic, social and environmental aspects of their operations. This approach can further be linked to stakeholder theory which is a theory developed by Freeman et al. (2010) implying that organizations must be operated within the interest of all its stakeholders. Smith (2003, pp. 85–86) exemplify shareholders, customers, employees, suppliers and the local community as those groups that are most widely accepted to represent the term stakeholders. The business language today is to a large extent influenced by stakeholder theory and therefore it is taken for granted that organizations must act in a socially and environmentally responsible manner in order to be successful (Gray, 2010, p. 49). By disclosing information about activities such as human rights, emissions or anti-corruption the organization strives to seek legitimacy from society.
CSR reporting can, therefore, be related to legitimacy theory, which according to Dowling &
Pfeffer (1975) suggests that a company’s right to operate is not guaranteed. Thus, it is necessary for them to legitimate themselves in order to continue to access valuable resources from society.
The legitimacy of an organization can further be threatened if the society does not approve of the way the company acts (Deegan, 2002, p. 293). CSR reporting was unlike financial reporting voluntary for organizations for many years. However, in 2017 The Swedish Annual Accounts Act (SFS 1995:1554), was amended as a consequence of an EU directive, 2014/95/EU, requiring large companies to disclose certain sustainability related information.
The regulation does not provide detailed disclosure requirements and allow for flexibility in the information that is presented. The European Commission refers to international, European and national standards of sustainability reporting as guidance when preparing CSR reports (European Commission, no date). The global reporting initiative (GRI), ISO 26000 and the global compact issued by FN are three such international organizations providing guidelines and principles for CSR reporting, where GRI is the leading standard for non-financial disclosure (Sethi, Rovenpor and Demir, 2017, p. 152). The flexibility in CSR reporting has led to questions regarding the reliability of the reports. Several studies have examined the quality of CSR disclosure and the results confirm deficiencies in quality. Holder-Webb et al. (2009, p. 516) conducted a content analysis of CSR reports of U.S firms and found that the overall disclosure was positive. This provided support in line with research findings presented by Michelon et al. (2015, p. 61) implying
that CSR-reporting could be used as a tool for rather symbolic purposes to enhance the corporate image, instead of providing substantive processes improvement. According to standards of GRI the scope of the disclosure in CSR reports is a matter of materiality, which means that the organization must evaluate its impact for a specific topic and its influence on stakeholders’
decisions. Human rights, emissions and labour rights are topics that have a direct impact on our everyday life and therefore have received a lot of attention by both CSR practitioners and researchers (Hills et al., 2009, p. 37). A topic that has not received as much attention, which according to Hills et al. (2009) might be because of its indirect impact on sustainability, is anti- corruption. According to Transparency International (2009a) corruption comes in many forms such as bribery, money laundering, and fraud. They define corruption as “the abuse of entrusted power for private gain” (Transparency International, 2009a, p. 7). Linking corruption to corporate responsibility and CSR reporting, Hills et al. (2009, p. 2) mean that organizations should secure that strategies are in place to combat corruption since it not only undermines financial performance but also diverts resources from education and health services to dishonest officials. This should further be communicated both internally and externally to increase the credibility and awareness about the anti-corruption work of a company (Barkemeyer et al., 2015, p. 350). Transparency International (2009b, p. 17) found in their study that major global companies made less effort to systematically report on corruption than other topics, which could be explained by the lack of detailed disclosure guidelines and that non-financial reporting was still in its early days. Combating corruption was included as one of the ten principles of the UN Global Compact in 2004, stating that “Businesses should work against corruption in all its forms, including extortion and bribery”
(UN Global Compact, 2014, p. 11) In 2016 GRI issued a particular standard providing anti- corruption disclosure guidelines, GRI 205: anti-corruption, which set out requirements for disclosure that should be provided by a company considering themselves having a material impact within this topic. A recent study by PWC (2019) investigated anti-corruption disclosure and reached similar conclusions regarding the quality of the current state of anti-corruption disclosure.
In the study, 100 Swedish sustainability reports were analysed and the conclusions were that it seemed to be uncertainties regarding the disclosure of, in particular, human rights and corruption as well as shortcomings regarding risks and risk management related to these topics (PwC, 2019, p. 2).
1.2 Problem discussion
Sweden is ranked as number 4 of 180 countries at the corruption perceptions index of 2019, where only Denmark, Finland and New Zealand are higher ranked (Transparency International, 2020).
The corruption perception index ranks the countries based on perceived corruption within the public sector, of businesspeople and experts. The increased demand from accounting bodies, customers and other stakeholders on companies to prepare sustainability reports indicate that such information is considered valuable. According to Hess (2009, p. 786) reporting about anti- corruption is not only valuable for external parties as a way of holding a company responsible but also to ensure that valuable knowledge is available for others to read. That could be other organizations facing similar problems. Even though Sweden is perceived as being a non-corrupt country in regard to the public sector, Transparency International (2009a, p. 3) point out the private sector as having a significant role in preventing and combating corruption. In 2019, media revealed evidence linking two of the largest banks in Sweden, Swedbank and SEB to a money laundering scandal initially tied to the largest bank in Denmark, Danske Bank (SVT Nyheter, 2019a).
According to SVT (2019b) the Swedbank stock price fell with about 14 % directly attributable to the money laundering revealing, indicating that investors were not aware of the magnitude of the money laundry risks. Banks have been neglected previously in many CSR studies, which according to Sapkauskiene & Leitoniene (2014, p. 238) is because of their insignificant direct impact on the
environment. Weber et al. (2014, p. 329) further explain this lack of studies within the financial sector by stating that banks have not faced stakeholder pressure to the same extent as many other industries in regard to their environmental impact. Sotorrío & Sánchez (2010, p. 274) mean that organizations with a greater impact on sustainability will face greater pressure from stakeholders to disclose information than those with less impact. Sotorrío & Sánchez (2010, p. 277) further exemplify companies that have high environmental impact being those within the engineering and energy/chemical sectors, and companies within the IT, health care and telecom sectors to have a high social impact. Day and Woodward (2009, p. 160) argue for the inclusion of banks in CSR research due to their size and role as a facilitator of capital in society. According to Hahn & Kühnen (2013, p. 7) GRI has emphasized environmental and social questions and have left economic concerns to existing regulations for financial accounting (e.g. US GAAP and IFRS). But as mentioned, both GRI and EU have implemented standards and directives covering a broader view of sustainability. Hence, we are able to identify an increased focus from standard setters to regulate sustainability disclosure from an economic dimension of sustainability, which until now has been highly neglected. From a literature review of 178 articles, investigating determinants of CSR reporting, Hahn & Kühnen (2013) conclude that studies have focused on three general aspects where the majority is within the adoption of CSR reporting (e.g drivers of reporting) and the extent of CSR reporting (the volume reported). Fewer studies have been conducted measuring the quality of CSR reporting (Hahn and Kühnen, 2013, p. 10).
According to Brammer & Pavelin (2006, p. 1169) there is no clear definition of quality and it has in previous studies examining environmental disclosure been measured by counting words, sentences or portion of pages. Brammer and Pavelin (2006) did not find any connections between quality and the length of disclosure in their study, which indicates that only counting words or sentences are not appropriate as a single measurement of CSR reporting quality. Hahn & Kühnen (2013, p. 17) stress that the quality of the information disclosed in CSR reports can be difficult to assess due to the subjectivity in what good quality might be. Hahn & Kühnen (2013, p. 17) do however find it necessary to study this aspect of CSR reporting in order to generate more meaningful conclusions. PwC (2019, p. 3) has found that organizations are underperforming in assessing what is important to disclose related to anti-corruption, supporting our thesis that stakeholders of Swedbank were not sufficiently informed about those risks. Except for considering what to be disclosed, the information also has to be comprehensive enough for stakeholders to be able to make correct evaluations of the information. Losing money on stock depreciation because of shortcomings in anti-corruption disclosure is one problem. However, a more conceptual problem of deficiencies in anti-corruption disclosure is that it might undermine the ability for sustainability reports to serve its purpose, which is to disclose useful information to stakeholders. Johansson (2019) stresses that reliable information is crucial for the continuing development of sustainability reporting and constitutes a prerequisite to enable accountability. According to Joseph et al. (2016), studies that focus on one particular topic are very seldom and we have not found any study that examines specifically anti-corruption disclosure within the banking sector in Sweden. Consistently, Weyzig (2009, pp. 417–418) emphasize the need for studies investigating CSR issues with potentially large impact on the function of the market, where he exemplifies corruption in particular.
Hess (2009, p. 786) states that disclosure about anti-corruption is important for stakeholders and to hold the corporation accountable for its actions. Potential problems with anti-corruption disclosure is however stressed by Wilkinson (2006, p. 105) who expresses that "issues such as [...] countering corruption do not readily generate reporting information and data in the way that environmental or health and safety issue do". Wilkinson (2006, p. 106) further states that corruption is a risk for all organizations.
In respect to the increased attention to anti-corruption and its link to sustainability, both in research and in practice, alongside with studies showing inconsistencies in disclosures regarding this topic, it would be interesting to see how disclosure of anti-corruption is presented by banks. In particular, it would be interesting to see how they, now facing increased pressure from stakeholders regarding anti-money laundering, are performing in terms of reporting quality.
1.3 Purpose
The purpose of this study is to provide an overview of the reporting practices within the banking sector regarding their anti-corruption activities and considerations. The study also aims at evaluating the quality of such disclosure based on the current leading standards and principles provided by GRI. To ensure a comprehensive evaluation and analyses of changes in reporting practices we include CSR reports for the years 2015-2019, which covers years both before and after strengthened regulation has been implemented and revealing of money-laundering activities.
1.4 Research questions
● How has the practise of anti-corruption disclosure evolved within annual- and sustainability reports from 2015 to 2019?
● Is there an identifiable difference in reporting quality of anti-corruption disclosure between the banks?
● Is there an identifiable difference in reporting quality of anti-corruption disclosure between those banks involved in money laundering investigations and those who are not?
1.5 Delimitations
The scope of this study will be limited to the four largest banks operating in Sweden;
Handelsbanken, Nordea, SEB and Swedbank. Further our data will be obtained from Annual- and Sustainability reports from 2015-2019. These reports are main communications sources to stakeholders regarding anti-corruption and is explicitly stated that they are in accordance with GRI requirements. The aim of this study is not to generalize our result to the entire banking industry.
1.6 Theoretical and Practical contribution
From a review of existing literature in the field of sustainability reporting, it appeared that a large amount of research was conducted with a focus on environmental and social aspects. Additionally, empirical studies within the financial service sector are scarce and more studies analysing CSR reporting quality is emphasized. By examining large financial institutions’ sustainability reports, we will contribute to a more diversified research base, covering more industries. Our specific focus on anti-corruption disclosure will add knowledge to the economic dimension of the triple bottom line by explaining how well anti-corruption is presented as a sustainability issue. This study aims to contribute with theoretical implications of how different theories such as stakeholder theory, legitimacy theory, and institutional theory can be understood in the research field of sustainability reporting.
The financial sector has received increased attention lately due to money laundry revealing, a sector that has not been exposed to the stakeholder pressure regarding sustainability disclosure as intense
as other industries. Our perception is that revealing of deficient anti-corruption reporting have led to an increased concern from customers, shareholders and other stakeholders regarding how financial service corporations deal with risks of committing or enabling financial crimes. By structuring the disclosure based on leading reporting standards and analysing the quality of in particular disclosure of anti-corruption issues, this study will also contribute with practical implications by identifying potential flaws in CSR reports. It will further contribute to knowledge about the current state of anti-corruption disclosures and reveal where potential inconsistencies appear. This will be valuable to users of such reports since those reports are the main source of information used to evaluate the sustainable development of a company. In the event of severe deficiencies regarding reporting quality, more strict guidelines could be considered necessary. This will also be of interest for national legislators since banks play an important role as a facilitator in the local economy thus need to be transparent about their operational risks.
2. Theoretical framework
This chapter consists of three sections. Definitions of concepts present various definitions and concepts that are fundamental and therefore require a more extensive explanation. In the theoretical background we present theories that have been used in previous CSR reporting studies.
These theories allow us to draw plausible explanations from the upcoming results. The third section is a summary where we point out the most important implications from the theoretical framework.
We also describe what results we have predicted, which are grounded on knowledge generated from the construction of our theoretical framework.
2.1 Definition of concepts
2.1.1 The Global reporting initiative framework
The Global Reporting Initiative (GRI) organization was founded in 1997, Boston, USA. They prepare and issue sustainability reporting standards with guidelines for how companies should communicate their significant impact on sustainable development. The standards serve to harmonize sustainability reporting globally and several updated versions have been released lately to increase the compliance between the GRI standards and other sustainability reporting frameworks. In 2011 GRI released guidelines called G3, the third generation of reporting guidelines (G1, G2), where expanded recommendations about gender, community and human rights were provided. In 2013 a fourth version of the guidelines called G4 was issued, this updated version was requested by stakeholders who thought the reports were including too much information about aspects that were not material, thus made it difficult to read and interpret the reports (GRI, 2015, p. 11). G4 included reporting principles and a greater focus was directed to the materiality concept. The definition of materiality was not changed in comparison to G3, but the new standards required organizations to disclose where material impacts occurred, which was not explicitly required in G3 (GRI, 2015, pp. 11–12). The current structure of the reporting framework was developed in 2016 and is called the GRI standards. There is no significant difference between the current GRI standards and G4 besides the framework structure, increased clarity and simpler language (GRI, 2016). The new GRI standards are organized into modular standards that are interrelated to each other and can be applied by any organization regardless of size, type, sector or geographic positioning (GRI, 2018a). There are three universal standards that must be applied by all companies preparing their sustainability reports in accordance with GRI (2018a, p. 4). In addition to the universal standards there are several topic-specific standards that companies can choose to report upon if they are considered material. The GRI standard 101: Foundation 2016
constitute the start for an organization to consider as it set out principles for defining reporting content and reporting quality. According to Joseph (2012, p. 94), principles as the fundamental ground when accounting for sustainability is better than rules since it allows organizations to address issues rationally instead of avoiding difficult accounting situations. GRI 102: General disclosure is the second universal standard including reporting requirements for information about the organizational context. Lastly, GRI 103: Management approach is the third universal standard which set out requirements about disclosure of how an organization identifies, analyses and respond to its actual or potential impacts. The topic specific standards are divided into three series;
200 - Economics topics, 300 - Environmental topics and 400 - Social topics. All organizations that have considered anti-corruption to be material based on the principles in GRI 101: Foundation should report why it is material, which actions are taken to manage anti-corruption and how effective those actions have turned out to be (GRI, 2018c, p. 4).
2.1.1.2 GRI 103: Management approach
GRI 103: Management approach is one of the three universal standards and sets out requirements about disclosure of how an organization identifies, analyses and respond to its actual or potential impacts. GRI 103: Management approaches, should be practiced with GRI 101: Foundation. The idea underlying the standard requirements is to provide a framework of how organisations report their impact on the environment, the society and the economy (GRI, 2018b, pp. 2–3).
Disclosure requirements 103-1 is the first requirement, which includes an explanation of the material topic and its boundaries. The organization should explain; why the topic is material, its boundaries, the organizations involvement in it, if the organization contribute to the impact and if the impact can be directly linked to the organization (GRI, 2018b, p. 6).
Disclosure requirements 103-2 demand organizations to report how the organization manage a material topic, the purpose of their approach, description of policies, commitments, goals and responsibilities (GRI, 2018b, p. 8). The information that organizations provide should give the reader an understanding of the importance of the topic, how it is managed and how they can avoid or mitigate negative impacts or advance positive impacts.
The third disclosure requirement 103-3 requires that the organization report evaluations of their approaches and how they evaluate how effective the result have been. They must also inform if they have done or will do any adjustment to their approaches (GRI, 2018b, p. 11). The guidance for disclosure 103-3 gives examples of how they monitor the effectiveness of their management approaches, such as internal or external auditing.
2.1.1.3 GRI 205: Anti-corruption
The standard GRI 205: Anti-corruption is one of the topic-specific standards that GRI has within the series of economic and is built upon three disclosures. The standard shall be complied together with GRI 101: Foundation and GRI: 103 Management approach when preparing a sustainability report (GRI, 2018c, p. 2). GRI (2018c, p. 4) define corruption as bribery, fraud, money laundering, extortion, collusion or anything that could be perceived as dishonest, illegal or something that could contribute to a breach of trust. GRI further states that corruption is linked to negative impacts on society and the environment.
The first requirement in this standard is called disclosure 205-1: Operations assessed for risk related to corruption, which addresses if corruption is a significant risk and if it is related to certain operations in the company.
The second disclosure 205-1: Communication and training about anti-corruption policies and procedures demand organizations to present the internal and external education of corruption, which is thought to be an indicator for the organization if they have what is necessary to counteract corruption (GRI, 2018c, p. 8).
The third disclosure 205-3: Confirmed incidents of corruption and action taken should provide stakeholders with information about what is happening in the organization, this by how many incidents have occurred as public investigations, prosecutions or closed cases and how the organization have managed it (GRI, 2018c, p. 9). Full disclosure requirements of GRI 205: Anti- corruption can be found in Appendix 1.
2.1.2 Anti-corruption
GRI state that corruption should be understood as practices including bribery, fraud, facilitation payments, money laundering and other practices being illegal or characterized by dishonesty and represent breaches in trust (GRI, 2018c, p. 4). Hence, not the exact same definition as by Transparency International (2009a, p. 7) by whom it is expressed as “the abuse of entrusted power for private gain”, but with the fundamentals being the same pointing at situations that are characterized by the dishonesty of trust and illegal actions. In studies were anti-corruption is examined we have identified a variety of approaches to the definition. Joseph (2016) performed a comparative study among Malaysian and Indonesian companies and their anti-corruption disclosures in CSR reports. He used “bribery” and “corruption” interchangeably. In the study by Joseph (2016, p. 2898) bribery was defined as being “the taking or giving of a sum of money, services etc, given or offered to somebody in return for, often dishonest help”. Hess (2009) also relate corruption to particularly bribes and describe that there are strong incentives for organizations both to avoid and accept bribes in the private sector. The acceptance of a bribe is a direct cost to the company and since it is internationally disapproved it can lead to reputational damage. However, the incentives to accept or give bribes for organizations can according to Hess (2009, p. 782) be viewed as a competitive necessity for companies in the short run. Barkemeyer et al. (2015) made an international comparison between anti-corruption disclosures among private companies. According to them, corruption occurs when decision-makers breach his or her impartial position to benefit themselves or any closely related party. Barkemeyer et al. (2015, p. 350) further explain corruption as economic decisions being made when the arm’s length principle is abandoned, meaning that the circumstances surrounding a transaction or deal between a set of parties are not independent or the same as if it was made between another set of parties.
Another concept closely linked to corruption is money laundering. The Financial action task force (FATF) is an independent intergovernmental body developing policies to protect the global financial system against money laundering and terrorist financing. They describe money laundering as the proceeds of corruption and related to bribery since the money received from unethical or illegal actions often is laundered through the financial system, making it possible to use the money as if they were completely legal (FATF, 2013, p. 13). This is conducted by disguising the source and identity by the depositor. FATF (2013, pp. 7-9) recognize that financial institutions, such as banks, are extra vulnerable to money laundering and therefore issue recommendations about the training of employees and customer due diligence to improve prevention and protection against it.
FATF standards are focused on anti-money laundering (AML) and countering of terrorist financing (CTF) but also include measures to identify corruption risks. In 2017, as a result of the FATF guidelines, a new law entered into force in Sweden requiring the financial sector among others, to evaluate and take measures on risks for being used for money laundering and terrorist financing
(Regeringskansliet, 2017). Challenges regarding AML and CTF for banks are according to Mugarura (2016) the borderline of becoming a criminal investigator instead of a for-profit organization with high ethical standards for its customers and employees. On the other hand, banks are businesses and therefore governed by regulatory guidelines, which means that the bank must conduct sufficient inquiries to be satisfied that the money that is deposited is not the results of a crime (Mugarura, 2016, p. 82).
The aim of this study is to examine reporting practises and its quality regarding anti-corruption, hence not the quality of the operational activities against corruption itself. We find this important to point out since we are in no position to evaluate the actual anti-corruption activities solely based on sustainability reports. Neither have we found a framework that is widely accepted and detailed in describing best practices to combat corruption. An understanding of corruption and its components in relation to the financial system is, however, necessary for us in order to evaluate how sufficient the reported information is.
2.1.3 Corporate Social Responsibility Reporting (CSR)
Before introducing a general description of Corporate Social Responsibility reporting, it is appropriate to start by clarifying what CSR is. Gray et al. (1996, p. 51) explain CSR in a wide aspect that CSR provides a way to “fill the gap between responsibility and accountability”.
According to Sethi (1975, p. 58), Corporate Social Responsibility as a concept has in some ways lost its meaning due to its usage in different contexts and having different meanings to different individuals. Grankvist (2009, p. 17) argue that CSR is the three areas of obligations that corporations have; economic, environmental and social. The economic aspect is the financial aspect, that the corporation’s aim is to earn as much as possible for the corporation and its shareholders. The environmental aspect is that the corporation will not affect the environment or natural resources in a negative aspect in the long-term. The social aspect is to be a good citizen, take account of employees’ health and wellbeing. These aspects, together with the company's morale, determine how a company prioritize and run the corporation (Grankvist, 2009, p. 18).
Carroll & Brown (2018) present another way to describe CSR, which is word by word. First, corporate is similar to all businesses regardless of size or corporate form. Second, social refers to society, which is referred to as a community, a country and even the whole world. And lastly, responsibility which is stated as corporations being held accountable for everything falling subject to their way of operating (Carroll and Brown, 2018, pp. 42–43). Another definition is found in the European Commission (2011, p. 6) stating CSR as “the responsibility of enterprises for their impacts on society [...] to fully meet their corporate social responsibility, enterprises should have in place a process to integrate social, environmental, ethical, human rights and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders.”.
Hence, the exact meaning of CSR differs in some aspects depending on who is approaching it.
According to Davis (1973, pp. 312–313) a corporation is not socially responsible if they only follow the minimum requirements of the law. Davis (1973) argue that social responsibilities go beyond the law and that the obligation of a corporation lies beyond the economic, technical and legal requirements. This view is also advocated by Freeman et al. (2010, p. 237) who argue for additional considerations of corporate social responsibility beside satisfying its shareholders. Some argue that this is the opposite of Friedman & Friedman’s (1962, p. 133) shareholder theory, who point out shareholders as the primary stakeholder for organizations to consider. There are others who argue that these theories are not the opposite of each other based on the argument that in order to satisfy shareholders and to generate long term returns, other stakeholders must be considered (Smith, 2003, p. 86). Our view is that CSR work should be conducted in favour of all stakeholders and not only for shareholders. Additionally, CSR reports should be providing reliable and accurate
information about CSR activities in order for stakeholders to make a complete assessment of the organization. This means that disclosure, even though it might affect the economic performance negatively, should be presented.
According to Freeman et al. (2010, p. 235) the different explanation of CSR has the same aim, that corporations have a greater obligation than financial consideration. Sethi (1975, pp. 59–60) further explains that CSR and its approach is depending on the culture and that corporate social performance can be explained by legitimacy. Different cultures explain why there are different values in societies. Corporations tries to get legitimacy by being transparent of their actions and its social impact. Corporate behaviour is a response on market forces and Sethi (1975, p. 60) explains corporate behaviour as social obligations, which can be connected to the stakeholder theory, that stakeholders can affect a corporation.
The development of sustainability reporting has taken a few shifts with regard to its focus and nature. In the 1970s the financial reports were sometimes complemented with a social report. Later on, in the 1980s, the environmental issues became the main focus and, in some ways, replaced the social concerns. In the 1990s organizations started to take both social as well as environmental aspects into consideration and joint reports were issued as a complement to financial reports (Hahn and Kühnen, 2013). Sustainable reporting is according to Burritt and Schaltegger (2010, p. 832) a process of information for executive officers as well as stakeholders about the sustainability development of a company. Corporate social responsibility has during the last two decades also developed to serve management decisions and processes more systematically and strategic, by becoming more integrated to the business model, particularly regarding the environmental and social dimension (Windolph, Schaltegger and Herzig, 2014, p. 318). Windolph et al. (2014, p. 238) point at the absence of the economic dimension in such management tools which restraints the ability to pursue a balanced management of issues in all dimensions. The risks of neglecting the economic dimension in the link between the organization model and CSR has also been highlighted by Hills et al. (2009, p. 2) who called for businesses to act proactively against corruption. Anti- corruption does not have a given spot in the corporation structure and this has negative effects for corporations in terms of reduction of public trust and high costs inflated in various activities of a company (Hills et al., 2009, pp. 6–7).
2.1.4 Triple bottom line
To understand the triple bottom line concept its appropriate to start with an examination of the original single bottom line. Each year, a company must compile a large amount of numerical data which is then structured into various financial statements that serve as the main source when analysing and evaluating the financial performance of a company. The bottom line in these statements is the residual capital left after costs are subtracted from revenues, equating the profit of the year. Elkington (1998) developed a framework for wider economic sustainability than just profit and called it the triple bottom line. According to Henriques and Richardson (2004) the triple bottom line (TBL) is one of the main instruments to address sustainability within a business. As stated before, the theory addresses three dimensions of sustainability, environmental, social and economic. Henriques & Richardson (2004, p. 3) summarize the TBL, as the theory which guides businesses to address not just only economic value, but also environmental and social values. The TBL is sometimes referred to as the three Ps as in Profit, People and Planet. We will further refer to it as TBL. The economic dimension is often interpreted as financial performance, for example, a company’s ability to pay dividends (Henriques and Richardson, 2004, p. 26). However, they stress the necessity to view the economic dimension in a much broader sense. According to Henriques and Richardson (2004), theoretical the three dimensions of TBL are separated but in
practice they intervene in each other. The economic dimensions should be seen in how society uses natural- and human resources for the welfare, an example could be that financial reports do not take account of their impact of society by their localization as for example employment (Henriques and Richardson, 2004, pp. 156–157). Hart (1997, p. 67) argue that the sustainability crises are political and social, but that corporation alone has the means to do something about it. Henriques and Richardson (2004, pp. 19–20) present several cases where investors have demanded corporations to be transparent about their work with sustainability in regard to both economic, environmental and social aspects, and where these corporations have responded.
Within accounting, the reporting and presentation of financial transactions are regulated by impartial legislation and detailed standards such as IFRS and the US GAAP. In terms of non- financial reporting and presentation (e.g social and environmental activities) regulation by law is not as common and the regulation is not detailed. This could, according to Schaltegger (cited in Henriques & Richardson, 2004, p. 21) lead to bad information and low quality in reports. Most research within TBL has been within the environmental aspect of sustainability, this due to that stakeholders have been satisfied with that aspect, but it has also created a gap within the economic aspect of sustainability. (Henriques and Richardson, 2004, p. 21).
2.1.5 Quality of CSR reports
The quality of CSR reports is closely related to transparency, suggesting that companies should be open about their approaches to certain CSR activities and how their operations affect sustainability related topics. A common approach to assess CSR reporting quality in previous studies have been to measure the absence or presence of indexes, frequency of words or sentences and volume of certain topics in a proportion of a page (Khan et al., 2011, pp. 3–4). For these procedures of examining quality an underlying assumption is that quantity is highly correlated with the importance of that specific aspect (Krippendorff, 2004, p. 59). The quality principles presented by GRI specifies how transparent sustainability reporting should be prepared and none of the principles; accuracy, balance, clarity, comparability, reliability and timeliness state the extent of disclosure to be an indication of high-quality information. Instead, GRI provide examples of how to test these principles along with the requirements.
The principles found in GRI 101: Foundation are divided into principles defining reporting content, which helps companies to decide which content to include and principles defining reporting quality, ensuring high quality and proper presentation of the information disclosed (GRI, 2018a, pp. 7–9).
There are four principles defining reporting content; Stakeholder Inclusiveness, which implies that the report shall identify the stakeholders of the company and how the corporation has responded to their expectations and interests. Sustainability context, including a presentation of the performance of the company in a wider context, how they contribute and their aim of contributing for the future.
The Materiality principle suggests the reports shall cover significant topics within economic, environmental and social impacts or could influence decisions of stakeholders. Within financial reports it is generally accepted that materiality is the verge of what would influence an economic decision from a statement for a stakeholder (GRI, 2018a, p. 10). Materiality defines what is important to disclose and decides the extent of disclosure (GRI, 2018a, p. 10). Completeness is a principle requiring information to be complete by containing the material topic, their restrictions and reflections on the three dimensions (GRI, 2018a, p. 12). There are six principles underlying the reporting quality concept; balance, comparability, accuracy, timeliness, reliability and clarity.
Accuracy is grounded on the assumption that a stakeholder is able to estimate the performance of a corporation from their report, which therefore must be accurate and detailed. There are several
definitions of accuracy and according to the Cambridge dictionary (Cambridge University Press, no date) the definition is; exact, correct or without any mistakes. Tests for measuring accuracy of CSR disclosure are; indications that the information provided have been measures, if margin or errors for such measurements are provided and if statements are consistent with other reported information (GRI, 2018a, p. 13).
Balance according to GRI (2018a, p. 13) is how the corporation both present negative and positive aspect of their performance, this to give the stakeholder an overall view without any bias, that the report does not influence the stakeholder in any direction.
Clarity is about how the information is presented within the sustainability report, that the information is clear, understandable and accessible for stakeholders in a simple approach (GRI, 2018a, p. 14).
Comparability is a continuance of clarity that the information within the sustainability report shall be comparable over time within the company, one to two years, and with other corporations also that significant modifications shall be identified and be accounted for (GRI, 2018a, pp. 14–15).
Reliability is according to GRI (2018a, p. 15) that an external party should be able to examine and verifying the information provided in reports.
Timeliness, for a sustainability report to fulfil all the requirements according to GRI (2018a, p. 16) it must also be released on a scheduled basis since the information is supposed to constitute the ground for stakeholder decisions.
2.1.6 CSR within the banking sector
Banks can be seen as an engine in the financial system and an important part of the societal infrastructure in their role as a financial intermediary, canalising money from those with an excess of capital to those with a deficit (Swedish Bankers, 2014). The financial crisis that started in 2007 was a practical example of what a vital role the financial sector plays in society and what consequences can be expected when problems occur in it. Trust for the financial system is to a large extent based on extensive regulation, which has been strengthened since the crisis to ensure that banks have a larger economic buffet (Swedish Bankers, 2014, p. 14). Operational safety and effective risk management are particularly important for banks compared to other organizations as it is common to perceive banks as institutions of public trust (Krasodomska, 2015, p. 407).
Krasodomska (2015, pp. 407–408) further exemplifies business ethics, community involvement, transparency of reporting, and training of employees as areas that have received increased attention lately by the financial sector.
Even though the banking activity itself is not causing environmental damages or issues such as working conditions are not being as critical as for industry corporations, banks must consider CSR issues in the companies where they enable capital flows. This link between the financial sector and sustainable development is explained by Scholtens (2009, pp. 161–162) as indirect through the financing of projects or investing in other companies, which in turn might cause sustainable damages. In his study, Scholtens (2009) assessed the social responsibility of several international banks by looking at four indicators, of which one was sustainability reporting. For the assessment, he made an assumption that banks that published sustainability reports had committed itself to socially responsible behaviour (Scholtens, 2009, p. 162). The indicators were applied on 32 international banks and the results by Scholtens (2009) placed the two Scandinavian banks Nordea
and Handelsbanken among the lowest scores in regard to their aggregated commitment to social responsibility. For example, Scholtens (2009, p. 168) could not establish whether Handelsbanken had a code of ethical conduct, offered education and training facilities, or had equal opportunity policies for its employees, which he could do for the majority of the other banks. Regarding Nordea, Scholtens (2009, p. 167) could not find an explicit supply chain policy with sustainability requirements. To evaluate the social responsibility performance of banks from a broader perspective, Weber et al. (2014) examined differences between the financial sector and other sectors underlying the assumption that banks faced less stakeholder pressure than industrial sectors.
Thus, gives a reason to expect worse social responsibility performance than other sectors. Weber et al. (2014, p. 326) presented results consistent with this assumption showing that banks performed significantly less well in regard to business ethics and reporting than the average of the examined sample.
Even though studies show that the financial sector is underperforming in regard to CSR compared to other industries, it seems that an improvement has been made over the years (Scholtens, 2009, p. 173; Weber et al., 2014, p. 329; Krasodomska, 2015, p. 416).
2.2 Theoretical background
2.2.1 Stakeholder theory
The stakeholder theory was developed in 1984 by Edward Freeman. According to Freeman et. al (2010, pp. 63–64), the theory should not be used for one purpose but instead as a framework of recognizing value. The basic approach is to create value for stakeholders and how a business could or should work, where different groups such as customer, suppliers, employees, financiers, stockholders, lenders, communities and managers interact and create value (Freeman et al., 2010, pp. 24–25). Further, Freeman et al. (2010, p. 26) define stakeholders as “those groups without whose support, the business would cease to viable”. Tse (2011, p. 53) addresses the stakeholder theory by emphasizing that all stakeholders’ interests should be taken into account within a company, and not only the interests of the shareholders. This also suggests that stakeholder theory question a conventional assumption regarding organizational management, namely that the pursuit of increased profits is not a primary concern for companies (Laplume et al., 2008, p. 1153). The fundamental idea of stakeholder theory is that an organization will increase its possibility to survive by interacting with more stakeholders since it prevents unforeseeable problems and enable access to valuable resources (Laplume et al., 2008, p. 1166). It has also been found that stakeholder management is positively correlated with financial performance and the persistence of financial performance (Laplumee et al., 2008, p. 1167). Besides the economic performance of a firm, Choi
& Wang (2009, p. 896) argue that investing in stakeholder relations can enhance the implementation of strategic changes and help the company out of unfavourable situations. Choi &
Wang (2009, p. 896) exemplify increased willingness among suppliers to share knowledge and motivated employees as two among many other benefits. Stakeholder theory can be seen as quite controversial since it assumes that corporations can continue to operate even though the interests of the owners of a company are not prioritized. This can sometimes be understood as if increasing profit is no longer a goal that must be fulfilled, which according to Smith (2003, p. 86) is a misperception of the stakeholder theory and point out that the owners are stakeholders as well, with interests that must be addressed.
Stakeholder theory in a CSR reporting context is according to Gray et al. (1996, pp. 45–46) highly centred around the company, implying that the company is the one who identifies its stakeholders rather than society, which further suggests that the company will invest more resources to manage
their most important relationships. One way to manage a stakeholder group is by disclosing information, which thereby constitutes a link between responsibility and accountability. We have already discussed the well-debated concept of Corporate social responsibility and by issuing CSR reports, a company can also be held accountable for their actions towards its stakeholders. By following the assumption of stakeholder theory being centred around the organization, also referred to as the “management perspective”. Gray et al. (1996, pp. 66–67) argue that the company will respond to stakeholder pressure from those who, in some way, interact financially and affects the financial accounting of the company. The problem with this managerial perspective of stakeholder theory is to determine to whom and to what extent responsibility reaches (O’Riordan & Fairbrass, 2008, p. 747). Stakeholder pressure and its effect on CSR reporting quality have been examined by several researchers. Sweeney & Coughlan (2008) conducted a content analysis on CSR report reports where they found customers and employees to be the primary stakeholder groups in financial services. Rudyanto & Siregar (2018) conducted a study where they found significant results that companies, having customers as their main stakeholders, had higher reporting quality than those not having consumers as their main stakeholders. They also found that pressure from employees was negative for the reporting quality, which could be explained by employees perceiving sustainability reporting as unnecessary usage of resources and potential value damaging (Rudyanto & Siregar, 2018, p. 243).
2.2.2 Legitimacy theory
Legitimacy theory is grounded on the underlying idea of corporations and society being dependent on one another by a so-called “social contract” (Branco and Rodrigues, 2006, p. 236). Society demands goods and services whereas a corporation demands economic, social and political benefits from society as a return. Following this logic, corporations failing to respect this contract will face negativities. Since society is dynamic, the need for goods and services is not permanent and organizations therefore, according to Shocker & Sethi (1973), must legitimize themselves.
Lindblom (1994; cited in Gray et al., 1995, p. 54) presented four strategies that corporations should adopt to receive legitimacy. The first strategy is to focus on a narrow group of relevant stakeholders who should be informed about actual changes in the performance of an organization. The second strategy implied that the organization should change the perception of these stakeholders without changing its actual performance. Third, the changed perception could be accomplished by drawing attention from one issue to another. And lastly, the aim is to end up changing the expectations from stakeholders of the company performance. Hence, Lindblom (1994, cited in Gray et al., 1995, p.
54) favour one way for companies to regain or maintain legitimacy, and that is by disclosing information to society. Suchman (1995, p. 575) state that legitimacy literature can be categorized into strategic legitimacy and institutional legitimacy. Strategic legitimacy assumes that company leaders can control the legitimacy process. Dowling & Pfeffer (1975, p. 125) argue that this view implies that companies can pursue certain actions to gain legitimacy and thus could it be seen as a resource that companies are able to affect. Contrary, institutional legitimacy assume that the degree to which the existence of a company is accepted by society is determined by the context in which an organization operate, implying that the individual organization is in no position to control its legitimacy. Researchers approaching this view, therefore, emphasize to study legitimacy on the basis of entire fields and sectors, and not individual organizations (Suchman, 1995, p. 576).
Legitimacy theory has constituted a fundamental theory in explaining CSR reporting in several studies (Day & Woodward, 2009; Hahn & Lülfs, 2014; Michelon et al., 2015). The link between stakeholder theory and legitimacy theory has been well debated in the area of CSR reporting, suggesting that legitimacy is achieved when an organization’s stakeholders perceive a correlation between their values and norms and the way the company operate. Further, Day & Woodward (2009, p. 161) implies that CSR disclosure is necessary for stakeholders to make this assessment.
In terms of reporting quality, Michelon et al. (2015) refer to the expression of the double-edged sword of organizational legitimacy, problematizing the difference between symbolic legitimacy and substantive legitimacy. Symbolic legitimacy suggests that the disclosure is entirely used to support a positive image of the company, while a substantive approach means that the reports provide actual commitments and information that show signs of setbacks as well as progress regarding different sustainability approaches (Michelon et al., 2015, p. 60). Relying on legitimacy theory, one would according to Michelon et al. (2015) expect to see disclosure of concrete actions and its implications for stakeholders of those following a substantive approach. The substantive approach implies that the CSR reporting practices are improving information quality, suggesting that even events that are negative for the company are disclosed. Organizations following a symbolic approach instead discloses “empty sentences” which offers deficient information for stakeholders to properly evaluate the CSR work of the company by camouflaging negative events (Michelon et al., 2015, pp. 62–63). From these approaches we will also be able to discuss reporting quality from a legitimacy perspective.
2.2.3 Institutional theory
Institutional theory is another well-established theory used to describe organizational behaviour and has been used in CSR research to explain CSR reporting (Tavares & Dias, 2018, p. 54). The word “institutional” has various meanings in different research fields. Zucker (1987, p. 54) presented two elements for the definition in the organizational research field, “(a) a rule-like, social fact quality of an organized pattern of action (exterior)” and “(b) an embedding in formal structures, such as formal aspects of organizations that are not tied to particular actors or situations (nonpersonal/objective)”. Zucker (1987, p. 443) argue that organizations operate in environments characterized by normative pressures from states, competitors and other external parties, where also to the organization itself can raise normative pressure. At first glance it might seem to be the same logic as stakeholder theory, describing an organizations behaviour as influenced by its stakeholders. That is, however, not the case since a fundamental part of institutional theory is that organizational behaviour is the result of historical actions and wider economic governance and norms, thus not a voluntary strategic choice taken by one company (Brammer et al., 2012, p. 7). Institutional theory can be related to institutional legitimacy while stakeholder theory is more related to strategic legitimacy. Theorists supporting institutional theory suggest that institutional legitimacy is achieved when organizations conform to established long- term institutional norms (Chen & Roberts, 2010, p. 661). This means that companies will be rewarded with legitimacy if they follow the general patterns and values in the environment which they operate in. Chen & Roberts (Chen & Roberts, 2010, p. 661) further argue that when organizations follow institutional pressures, strategic decisions might be reduced since they will be rewarded for this in terms of legitimacy, resources and stability. Barkemeyer et al. (2015) have studied corruption in the context of sustainability reporting, in which they promote institutional theory as a starting point for investigating how organizations disclose information about corruption.
Barkemeyer et al. (2015) mean that the institutional pressure on corporate involvement in anti- corruption can be approached from different levels; sectoral, global and national pressures among others. The sectoral differences showed that the banking sector had better coverage of anti- corruption disclosure than the mining sector, even though both of them are perceived of having a similar and high risk of exposure to corruption (Barkemeyer et al., 2015, p. 362).
2.2.3.1 Mimetic isomorphism
One question related to institutional theory in the organizational field was to understand why companies, operating in different environments, still were very similar in their structures (DiMaggio & Powell, 1983). DiMaggio & Powell, (1983) investigated homogeneity of organizations and argue that even though organizations change their goals and strategies, multiply organizations doing the same thing will construct an environment that makes it difficult to change in subsequent years. In other words, the aggregate effect of the change by an individual company will be a reduced diversity within the institutional environment (DiMaggio & Powell, 1983, p.
149). To describe the homogeneity of an institution DiMaggio & Powell (1983) refer to something called mimetic isomorphism. This is homogeneity among organizations that results from uncertainty, which can arise when new organizations enter into a new field and apply the same procedures as the existing organizations in that field already do (Chen & Roberts, 2010, p. 656).
Guidelines for CSR reporting issued by GRI and other standard setters were initially not clear or detailed, which according to Nikolaeva & Bicho (2011, p. 139) made organizations seek the best information elsewhere in the institutional environment, often from other practitioners who already had adopted certain guidelines. This could according to Nikolaeva & Bicho (2011) be favourable from a resource-saving- perspective when there is high uncertainty about the right way to operate.
Nikolaeva & Bicho (2011, p. 153) further argue that when the legitimacy threat for not adopting a GRI guideline is large enough, an organization will have incentives to adopt it without any further reflection of its potential benefits. The GRI guidelines have become more extensive and detailed but still allow for much flexibility regarding the content and nature of the reports. Additionally, studies have presented corruption being a rather difficult topic for corporations to approach because of its nature. The arguments supporting mimetic isomorphism could, according to us, therefore be applied on CSR disclosure of anti-money laundering activities since there seems to be a high uncertainty regarding best practice reporting together with a strong demand for banks to address this issue.
2.2.4 Signalling theory and information asymmetry
Information asymmetry exists in a number of situations which has expanded the usage of signalling theory in several research fields. Two management scholars that are well-cited is Ross (1977) who developed models to explain how the financial structure could be a signal about it returns and Spence (1973) explaining how prospective employees must signal their qualifications to distinguish themselves from others. Since those pioneers presented their work, Connelly et al.
(2011) mean that the fundamental concepts of signalling theory have become blurred and that no systematic description of the underlying ideas can be found. Connelly et al. (2011, p. 44) therefore collected and analysed studies and key concepts in signalling theory and then constructed a timeline, starting with a signals sending a signal to a receiver who respond with a countersignal.
Regarding CSR reporting the company is the signaller who signals information to stakeholders by their CSR reports. Stakeholders receive the information, evaluate it and perhaps act upon it. The content of CSR disclosure can be both positive, negative, quantitative and qualitative. In signalling theory, positive disclosures are in focus since it is assumed that the main objective of signalling company actions are to strategically gain some sort of positive response (Connelly et al., 2011, p.
45). A study conducted by Hasseldine et al. (2005, p. 18) compared quality and quantity of environmental disclosures in annual reports and found that disclosure of higher quality is more likely to enhance the environmental reputation of the company. Hasseldine et al. (2005) applied the same quality characteristics as Spence (1973) which suggested that disclosure of high quality is costly and hard for others to imitate. The scoring system used by Hasseldine et al. (2005, p. 6) therefore gave greater scores to quantitative and verifiable information, and less to purely narrative information. Consequently, the main conclusion expressed by Hasseldine et al. (2005, p. 24) was
