Skip to main content
SpringerLink
Log in

Are Sustainability Disclosures Fraudulent?

  • Chapter
  • First Online:
Sustainability and Social Responsibility of Accountability Reporting Systems

  • 1447 Accesses

Abstract

Firms’ financial statements have a well-established set of guidelines for their preparation, presentation, review, and release to the general public. In addition, there has been a great deal of research concerning the sections of the report that are more important. For instance, the net income figure is extremely important and therefore auditors will focus their review procedures to ensure the veracity of this number. In contrast, the procedures used to prepare and release information about a firm’s sustainability activities and its socially responsible performance are not nearly as formal as those for financial statements . There is increasing evidence that stakeholders do use this corporate socially responsible (CSR ) information to make decisions concerning their interactions with firms. However, it is not established which specific information in the broad range of a firm’s CSR disclosures is most critical for the different decisions made by stakeholders . The combination of a lack of a well-established reporting framework and a lack of agreement on the most important attributes describing the firm’s sustainability activities makes it difficult to determine whether a material misstatement of CSR activities has occurred. This paper looks at the incentives to disclose favorable CSR information and omit unfavorable CSR information, situations in which this might have occurred, and finally how these disclosures might be viewed as fraudulent .

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 149.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 199.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 199.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    An objective distance would be agreed upon measureable difference, while a semantic distance would be idiosyncratic, “I feel that this firm does a good (or bad) job of using locally sourced produce.”

  2. 2.

    Initiating a process of communicating CSR information may backfire if the firm stops producing this information or if the release is temporally proximate to some irresponsible event (Morsing et al. 2008).

  3. 3.

    Even if CSR information is not quantitatively material if it can be shown to be used it may be qualitatively material (Securities Exchange Commission 1999).

References

  • Adams C, Narayanan V (2007) Standardizing sustainability reporting. In: Unerman J, Bebbington J, O’Dwyer B (eds) Sustainbility accounting and accountability. Routledge, London, pp 70–85

    Google Scholar 

  • Akisik O, Gal G (2011) Sustainability in business, corporate social responsibility and accounting standards: an empirical study. Int J Account Informat Manag 19(3):304–324

    Article  Google Scholar 

  • Akisik O, Gal G (2014, December). Financial performance and reviews of corporate social responsibility reports. J Manag Control 25(3–4):259–288

    Google Scholar 

  • Backhous KB, Stone BA, Heiner K (2002) Exploring the relationship between corporate social performance and employer attractiveness. Bus Soc 41(3):292–318

    Article  Google Scholar 

  • Banjo S, Yadron D (2014, September 8). Home depot confirms data breach. Wall Street J

    Google Scholar 

  • Bauman CW, Skitka LJ (2012) Corporate social responsibility as a source of employee satisfaction. Res Organ Perform 1–24

    Google Scholar 

  • Brat I (2015, August 21) Food Goes ‘GMO Free’ with same ingredients. Wall Street J B1

    Google Scholar 

  • Brown TJ, Dacin PA (1997) The company and the product: corporate associations and consumer product responses. J Market 61(1):68–84

    Article  Google Scholar 

  • Carreyrou J, McGinty T (2014, September 8) A fast-growing medical lab tests anti-kickback law. Wall Street J

    Google Scholar 

  • Chan KK, Misra S (1990) Characteristics of the opinion leader: a new dimension. J Advert 19(3):53–60

    Article  Google Scholar 

  • Chasan E (2015, August 18) Court decision could affect conflict minerals audits. Wall Street J

    Google Scholar 

  • Chasan E, Maxwell M (2014a, September 16) Supplier maze. Wall Street J

    Google Scholar 

  • Chasan E, Maxwell M. (2014b, September 16) The big number. Wall Street J

    Google Scholar 

  • Cilluffo FJ, Cardash S (2015, August 17) Economic espionage: a case for why the U.S. needs to push back. Wall Street J

    Google Scholar 

  • Clarkson MB (1995) A stakeholder framework for analyzing and evaluating corporate social performance. Acad Manag Rev 20(1):92–117

    Google Scholar 

  • Cochran PL, Wood RA (1984) Corporate social responsibility and financial performance. Acad Manag J 27(1):42–56

    Article  Google Scholar 

  • Dhaliwal DS, Radhakrishnan S, Tsang A, Y Y (2012) Nonfinancial disclosure and analyst forecast accuracy: international evidence on corporate social responsibility disclosure. Account Rev 87(3):723–759

    Article  Google Scholar 

  • Federal Trade Commission (n.d.) Cases and proceedings. http://www.ftc.gov/enforcement/cases-proceedings. Accessed 5 May 2014

  • Financial Accounting Standards Board (2008) Statement of financial accounting concepts no. 2 qualitative characteristics of accounting information. Financial Accounting Foundation, Norwalk, CT USA

    Google Scholar 

  • Fitzgerald P (2105, August 21). U.S. settles fraud case with background screener altegrity. Wall Street J B3

    Google Scholar 

  • Fornaro JM (2011) SEC Guidance on disclosure related to climate change. J Account 211(1):42–47

    Google Scholar 

  • Global Reporting Initiative (2006) Sustainability reporting guidelines. Global Reporting Initiative, Amsterdam

    Google Scholar 

  • Global Reporting Initiative (2011) Sustainability reporting guidelines version 3.1. Global Reporting Initiative, Amsterdam, The Netherlands

    Google Scholar 

  • Godfrey PC, Merrill CB, Hansen JM (2009) The relationship between corporate social responsibility and shareholder value: an empirical test of the risk management hypothesis. Strag Manag J 30(4):425–445

    Article  Google Scholar 

  • Harder A, Kendall B (2015, Aug 9) Industry, states set to fight EPA greenhouse gas rules. Wall Street J

    Google Scholar 

  • Henning E (2015, Aug 13) Deutsche bank employees charged in emissions trading case. Wall Street J

    Google Scholar 

  • Herzig C, Schaltegger S (2006) Corporate sustainability reporting: an overview. In: Bennett M, Burritt R, Schaltegger S (eds.), Sustainability accounting and reporting (pp. 301–324). Dordrecht, London

    Google Scholar 

  • Heyes AG (1996) Lender penalty for environmental damage and the equilibrium cost of capital. Economica 63(250):311–323

    Article  Google Scholar 

  • Hockerts K, Moir L (2004) Communicating corporate responsibility to investors: the changing role of the investor relations function. J Bus Ethics 52(1):85–98

    Article  Google Scholar 

  • Homburg C, Koschate N, Hoyer WD (2005) Do satisfied customers really pay more? A study of the relationship between customer satisfaction and willingness to pay. J Market 69:84–96

    Article  Google Scholar 

  • Hooghiemstra R (2000) Corporate communication and impression management—new perspectives why companies engage in corporate social reporting. J Bus Ethics 27(1/2):55–68

    Article  Google Scholar 

  • Kent S (2015, July 28) BP swings to second-quarter loss on lower oil price, deepwater horizon deal. Wall Street J

    Google Scholar 

  • Khanna M, Quimio WR (1998) Toxics release information: a policy tool for environmental protection. J Environ Econom Manag 36(3):243–266

    Article  Google Scholar 

  • Lin K, Chasan E (2015, August 5) In conflict minerals, ethical investors gain ability to rank companies. Wall Street J

    Google Scholar 

  • Madden TJ, Roth MS, Dillon WR (2012) Global product quality and corporate social responsibility perceptions: a cross-national study of halo effects. J Int Market 20(1):42–57

    Article  Google Scholar 

  • Maignan I, Ferrell OC (2001) Corporate citizenship as a marketing instrument—concepts, evidence and research directions. Eur J Mark 35(3/4):457–484

    Article  Google Scholar 

  • Miller JW, Smith R (2015, Aug 3) Impact of EPA’s emissions rule on industry to vary. Wall Street J

    Google Scholar 

  • Mohr LA, Webb DJ, Harris KE (2001) Do consumers expect companies to be socially responsible? The impact of corporate social responsibility on buying behavior. J Consumer Affairs 35(1):45–72

    Article  Google Scholar 

  • Morsing M, Schults M, Nielsen KU (2008) The “Catch 22” of communicating CSR: findings from a Danish study. J Market Commun 14(2):97–111

    Article  Google Scholar 

  • O’Dwyer B (2011) The case of sustainability assurance: constructing a new assurance service. Contemp Account Res 28(4):1230–1266

    Article  Google Scholar 

  • OECD (2013) OECD due dilligence guidance for responsible supply chains of minerals from conflict-affected and high-risk areas, 2nd edn. OECD Publishing, Paris

    Google Scholar 

  • Öberseder M, Schlegelmilch BB, Murphy PE (2013) CSR practices and consumer perceptions. J Bus Res 66:1839–1851

    Article  Google Scholar 

  • Perks KJ, Farache F, Shukla P, Berry A (2013) Communicating responsibility-practicing irresponsibility in CSR advertisements. J Bus Res 66(10):1881–1888

    Article  Google Scholar 

  • Riordan CM, Gatewood RD, Bill JB (1997) Corporate image: employee reactions and implications for managing corporate social performance. J Bus Ethics 16:401–412

    Article  Google Scholar 

  • Sala E (2014, July 7) On the future of the oceans. Wall Street J

    Google Scholar 

  • Securities and Exchange Commission (2010) Commission guidance regarding disclosure related to climate change; final rule 17 CFR parts 211, 231, 241. Securities and Exchange Commission, Washington, DC

    Google Scholar 

  • Securities and Exchange Commission (2012) 17 CFR Parts 240 and 249b RIN 3235-AK84 Conflict Minerals. US Government Printing Office, Washington, DC

    Google Scholar 

  • Securities Exchange Commission (1999) Staff accounting bulletin no. 99. United States Government, Washington, D.C

    Google Scholar 

  • Silverstone H, Sheetz M (2007) Forensic accounting and fraud investigation for non-experts, 2nd edn. Wiley, Hoboken, NJ

    Google Scholar 

  • Spegele B (2015, July 20) China war on pollution benefits from economic slowdown. Wall Street J

    Google Scholar 

  • Thompson P, Cowton C (2004) Bringing the Environment into Bank Lending Implications for Environmental Lending. British Account Rev 36:197–218

    Article  Google Scholar 

  • Time (2010, Nov 8) The world. Time, 19

    Google Scholar 

  • Turban DB, Greening DW (1996) Corporate social performance and organizational attractiveness to prospective employees. Acad Manag J 40(3):658–672

    Article  Google Scholar 

  • United States Congress (2010) Dodd-Frank wall street reform and consumer protection act. U.S. Government Printing Office, Washington, DC

    Google Scholar 

  • Vanhamme J, Grobben B (2009) Too good to be true! The effectiveness of csr history in countering negative publicity. J Business Ethics 85(2):273–283

    Article  Google Scholar 

  • World Commission on Environment and Development (1987) Our common future. Oxford University Press, Oxford

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Isenberg School of Management, University of Massachusetts, Amherst, MA, USA

    Graham Gal

Authors
  1. Graham Gal
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Graham Gal .

Editor information

Editors and Affiliations

  1. Trakya University, Edirne, Turkey

    Kıymet Tunca Çalıyurt

  2. Universiti Teknologi MARA, Kedah, Malaysia

    Roshima Said

Rights and permissions

Reprints and permissions

Copyright information

© 2018 Springer Nature Singapore Pte Ltd.

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Gal, G. (2018). Are Sustainability Disclosures Fraudulent?. In: Çalıyurt, K., Said, R. (eds) Sustainability and Social Responsibility of Accountability Reporting Systems. Accounting, Finance, Sustainability, Governance & Fraud: Theory and Application. Springer, Singapore. https://doi.org/10.1007/978-981-10-3212-7_4

Download citation

Publish with us

Policies and ethics

Search

Navigation