Corporate Social Reporting in South Africa

The objective of this review is to compare the reality of Corporate Social Reporting in South Africa with the theory of The three pillars of Corporate Social Reporting as New Governance regulation: Disclosure, Dialogue and Development. Corporate social reporting is the disclosure of a firms’ non-financial information to provide stakeholders a comprehensive understanding of their entire performance. Under the theory of the three pillars, disclosure looks into the current levels of social reporting and dialogue focuses on collaborating the values and opinions of the company and stakeholders on the disclosures. While development tries to include the dialogue to change corporate behaviours to live up to the values stated.

The goal of corporate social reporting according to David Hess is to make corporations more socially responsible and to ensure that they are working towards becoming sustainable companies. Traditionally, South Africa requires mandatory compliance to ‘a one size fits all’ corporate social reporting framework; however, Hess has discovered ‘New Governance’. This is still a regulated motion but it is “…focused on decentralised, participatory, problem-solving approaches to regulation…” (Hess, 2008, p. 450).

Dawkins and Ngunjiri found that mandatory disclosure requirements in South Africa has lead to higher levels of social reporting, yet these will often represent minimum standards. Compliance and disclosure is easier for companies with an abundance of resources which may give them an unfair advantage compared to those who say that in South Africa the costs and time requirements to reach these minimum standards is a too heavy price to pay so some companies provide superficial information (Dawkins, & Ngunjiri, 2008). This reality counteracts the goal of trying to provide all stakeholders with transparent and truthful information. Whereas, “…New Governance regulation allows for variation in performance…” (Hess, 2008, p. 473), indicating different levels of compliance for those with different levels of resources. Companies are more likely to engage in corporate social responsibility reporting if their legitimacy and credibility comes under scrutiny (Dawkins, & Ngunjiri, 2008). “Many companies are under pressure from civil society organizations and corporate accountability networks monitoring business malpractice”. (Albareda, 2008, para. 3) Firms’ will increase their transparency in the hope to positively enhance their reputation and relationships with stakeholders. In practice companies who focus on reporting quantity are looked upon more favourably than those who may focus on quality.  When governments propose minimum standards this can create a focus on focus on form over substance. This allows for stakeholders to easily compare information yet, there may be information which could be falsified or of no use.

Dialogue establishes norms and expectations for which companies can report on. Under voluntary social reporting individual firms decide their own goals and values that they choose to disclose. Hess stated that under “new governance … corporations play an active role in setting the rules… but interested stakeholders besides just the government play an active role in that process as well” (Hess, 2008, p. 458). South African companies have been influenced by differing values in specific regions as companies feel pressure to comply with regulations whilst simultaneously satisfying the regional stakeholders. With trying to please a number of groups, companies may misuse resources and efforts when these could be utilised more effectively in other areas. Before a South African company can be listed on the Johannesburg Stock Exchange they must also be listed on a new socially responsible investment index. This encourages members on the index to clearly align their social responsibilities with that of both interests of the stock exchange and individual stakeholders.  Virginia Ho (2010), the associate professor at University of Kansas School of Law “… has seen a marked increase in regulatory initiatives that give shareholders a greater voice in corporate affairs” (para. 1). Companies may face higher success rates through receiving higher levels of support from all stakeholders, when the stakeholders identify with the company. This proves New Governance would be more beneficial for both firms and stakeholders as they both have a say in setting standards, values and goals.