The explanatory effect of CSR committee and assurance services on the adoption of the IFC performance standards, as a means of enhancing corporate transparency

Abstract

Purpose In view of the significant deficiencies that have been observed in corporate social responsibility (CSR) reporting practices, some companies have undertaken a new communication strategy based on a combination of the GRI guidelines and the IFC Performance Standards (termed the GRI-IFC strategy). This paper aims to analyse the role of the CSR committee and of assurance services in promoting this novel practice. Design/methodology/approach The authors use an unbalanced sample of 750 international companies that operate in emerging markets for the years 2011-2016, in which logistic and ordinal regressions are applied to the panel data to test the research hypotheses. Findings The results show that the existence of a CSR committee facilitates adoption of the GRI-IFC strategy, thus promoting sustainable management policies and systems and enhancing communication with stakeholders. In addition, these specialised committees often commission assurance for sustainability reports, to reinforce strategies aimed at improving corporate transparency. Research limitations/implications The analysis of mediation shows that diverse characteristics of corporate governance mechanisms interact in improving sustainability and business transparency. Practical implications There is an evident need for greater commitment by institutions to sustainability, for example by requiring greater specialisation of the members of the CSR committee in social and environmental issues. In addition, consideration should be given to including the creation of a CSR committee as a good practice, within the code of corporate governance and to establishing a specific framework for the committee’s actions. Social implications The previously cited impacts of this paper all contribute indirectly to a greater social welfare by generating higher levels of transparency, ethics and corporate performance. Specifically, higher quality verification services will have an impact on the improved functioning of the financial and capital markets, as well as in decision-making by internal and external stakeholders with more reliable information that will favour the implementation of more sustainable processes that in the short and long term will mean more companies who are responsible towards the environment and society. Originality/value This novel study explains why companies adopt voluntary strategies in compliance with GRI guidelines, seeking to provide better CSR disclosure.

How market value relates to corporate philanthropy and its assurance. The moderating effect of the business sector

“…The endogeneity, together with the existence of heteroscedasticity and autocorrelation problems, led us to apply the estimator proposed by Arellano and Bover (), based on the dynamic models introduced by Hansen (). This estimator allowed us to obtain consistent estimators (García‐Sánchez et al, ). Then, we employed a generalized method of moments (GMM) (Arellano & Bond, ; Hansen, ).…”

“…Then, we employed a generalized method of moments (GMM) (Arellano & Bond, ; Hansen, ). Concretely, we used a two‐step system estimator (Arellano & Bover, ) developed by Roodman () to correct for endogeneity and control for the unobservable heterogeneity (García‐Sánchez et al, ; Villarón‐Peramato et al, ). We considered 1‐year lagged values of variables to ensure they were uncorrelated with the error term (Pindado & Requejo, ).…”

“…Assurance is more frequent in sensitive and consumer sector, both related to perceived legitimacy (Ackers, ). We must consider that there is a mimetic process among companies in the same sector related to environmental and social sustainability, which may lead to the adoption of the same assurance policies (García‐Sánchez, Gomez‐Miranda, David, & Rodríguez‐Ariza, ). In addition, assurance credibility is higher in industries where assurance is more common and the assurer is a professional accountant (Pflugrath, Roebuck, & Simnett, ).…”

Drivers of the CSR report assurance quality: Credibility and consistency for stakeholder engagement

“…Finally, the specialization of the board through the creation of a CSR committee, oriented to monitor the CSR systems and policies implemented in organizations, could be understood as a compromise with the implementation of better disclosure policies and favour the contract of assurance services in order to improve the stakeholders' engagement (García‐Sánchez, Gómez‐Miranda, David, & Rodríguez‐Ariza, 2019a, 2019b).…”

“…Following the previous literature, the most effective boards adopt decisions consistent with the objectives of the company and the stakeholders (Peters & Romi, 2015). In general, the effectiveness of this monitoring body is associated with its specialization, independence and diversity and, taking into account the complexity of the CSR, the inclusion of a greater number of directors and more activity than the usual ones that allow the strategies to be addressed more precisely in terms of sustainability (García‐Sánchez, Gómez‐Miranda, David, & Rodríguez‐Ariza, 2019a, 2019b).…”