A Critical Review of Environmental, Social, and Governance Disclosure Reporting Standards

Introduction

Change in global trends has created a need to explore various ways of attaining sustainable operations in creating sound environmental, social, and governance (ESG) reports. According to Otu Umoren (2015), continued business operations are only achievable when corporations adhere to their social responsibilities. On the other hand, the author emphasizes that studies indicate that a colossal number of companies fail to account for social and environmental indicators in their financial reports. Thus, such actions may negatively impact the continued operations of such entities. Rüdiger Hahn and Michael Kühne, in their 2013 literature review, "Determinants of sustainability reporting: A review of results, trends, theory, and opportunities in an expanding field of research. Journal of Cleaner Production," acknowledged that organizational reporting techniques had undergone a tremendous change from the 1970s to the current methodologies. For instance, in the 1970s, companies integrated social reports into regular reports, while the 1980s were marked by considering environmental factors in reporting organizations' performance (Hahn and Kühnen, 2013). However, it is essential to note that current report preparation practices are comprised of ecological and social aspects as defined by the Global Reporting Initiative (GRI), among other bodies.

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Despite the numerous collaborative efforts to ensure a robust standard reporting method, Hahn and Kühnen (2013) explain that the last 30 years have been marked by the multiplication of national and international benchmarks to guide corporate social disclosure responsibility. Thus, such an elevation has led to the complexity of reporting techniques, leading to inevitable disarray among firms. Hence, there is a need to critically analyze Hahn and Kühnen's (2013) review while interrelating it with available literature focusing on environmental, social, and governance disclosure (ESG) for a single and simplified referential standard guideline to help firms meet the sometimes contradictory demands for ESG disclosure from their stakeholders.

Research Methods

In their research, Hahn and Kühnen (2013) conducted a literature review to determine the trends and gaps in sustainable reporting. Similarly to this research, ElAlfy et al. (2020) also perform a literature review to identify primary CSR changes while focusing on sustainable development goals. According to Hahn and Kühnen (2013), a literature review majorly mainly entails analyzing and synchronizing information from previous studies to support a particular argument or research question and identify any missing data from the chosen literature. Hence, a systematic approach in sorting the literature related to the study question is essential in ensuring that the researchers attain their study aim.

Hahn and Kühnen (2013) adopted Fink 2010's literature review methodology, which entailed four main steps. Firstly, the researchers focused on research question identification and selection. The questions were based on the study objective to determine current trends in sustainable reporting techniques. Besides this, the individuals also participated in a database and search term choice to ensure that they only sorted relevant literature for the study. An analysis of the research techniques suggests that Hahn and Kühnen (2013) explored the Web of Knowledge database as the primary source of the literature they reviewed. However, the researchers also considered retrieving literature from ScienceDirect and Elsevier for the study for a broader context. The databases were the most considered since they have numerous articles covering management, business, and accounting research topics interconnected with sustainable management techniques and GRI. A comparison between Hahn and Kühnen (2013) and ElAlfy et al. (2020) indicated that the researchers explored various databases to sort the review material in both articles. ElAlfy et al. (2020), in this case, managed to identify 56 peer-reviewed articles out of the selected 146 pieces of research from Sci-Verse Scopus, ISI Web of Science, and Science Direct. An evaluation of this information indicates that Hahn and Kühnen's (2013) option of using the Science Direct and Web of Knowledge is accurate for their study topic. This is because not only do the platforms contain essential information on the research topic but ElAlfy et al. (2020) also integrated the same methodology into their study, making it acceptable to incorporate in search of the literature to be reviewed.

An analysis of the search terms by Hahn and Kühnen (2013) in their report indicates that the individuals were specific about using terminologies interlinked with sustainable reporting techniques. For instance, Hahn and Kühnen (2013) recorded that some of the search terms they adopted in their study included Global Reporting Initiative, GRI, social and environmental report, sustainable report, and responsible report, among other words. A survey on similar studies indicates that a colossal number of researchers also use such terms while searching for articles related to sustainable reporting or environmental, social, and governance disclosure reporting standards, as this study topic suggests. For instance,

Hahn and Kühnen (2013) practically screened their literature in the second step of their review process as required by Fink 2010's research methodology. Hahn and Kühnen (2013) preferred incorporating sources from 1999 to 2011 based on the GRI guidelines proposal timelines since they found an interconnection between sustainable reports and the development of a voluntary setting standard that lured a multifaceted GRI participation and launch. A critical analysis of other studies based on this review's study topic, which aims to explore environmental, social, and governance disclosure reporting standards, suggests that this concept is borrowed in all researchers and requires a review of the literature interlinked with the study topic. However, in most cases, researchers focus on literature dated between 10 to five years from their study dates. For instance, contrary to Hahn and Kühnen (2013), ElAlfy et al. (2020) explore researched literature from 2015 to 2020, making the screening criteria of literature range between five years. Based on this, it can be concluded that the selection criteria for Hahn and Kühnen (2013) is excellent since it provide a broader range of material under the study and also focuses on updated material, hence the attainment of relevant data.

Hahn and Kühnen (2013) proceeded to the third step of their literature review by methodologically screening the literature they chose for their research. According to the study, the step entails evaluating the content to ensure a qualitative study technique. Hahn and Kühnen (2013) adopt Mayring's concept, which involves sorting the material needed for the research before their collection and naming one identified material as a unit of analysis. The researchers further adopt the descriptive analysis technique as the second step in the methodological analysis by assessing the identified material's professional aspects by keeping records of the collected data. Lastly, data categorization to suit various study topics before evaluating the material is carried out to identify significant themes and interpret the study results (Hahn & Kühnen, 2013). Lastly, the final step of conducting a systematic literature review is to synthesize information for readers to understand easily.

Hahn and Kühnen (2013) achieved success in their research. However, the authors noted that their study's adopted systematic review had its limitations as a research methodology. For instance, the individuals not the selection process may focus on attaining Anglophone sources, limiting the researchers from accessing various sources. On the other hand, following Fink's guidelines, there was the attainment of validity and reliability testing on the consistency of the results following an analysis of several peer-reviewed articles. Lastly, despite building their research on generalizability, Hahn and Kühnen (2013) explored many studies creating room for identifying varying keywords and primarily using substantial databases that allow them to study various sources and phenomena, curbing the issue of generalizing retrieved information.

In their article, Hahn and Kühnen (2013) incorporated tables and figures to illustrate their research concepts. Thus, the authors provided a list of figures that expounded on various issues discussed in their research. For example, the researchers incorporate graphical presentations to show trends in adopting different types of reports in disclosing CSR activities from 1999 to 2011. Besides this, the individuals also present the identified research gaps in the study in a tabular manner allowing readers to find out various study questions that are yet to be discussed in recent research focusing on CSR disclosure techniques.

The Importance of Corporate Social Responsibility (CSR) Disclosure in Achieving Sustainable Study Development

Hahn and Kühnen (2013) defined CSR based on the European Commission of 2011. From the study, CSR is an organizational role that entails environmental and individual rights protection from workers, consumers, and the surrounding community, ensuring a healthy coexistence between the business and society. Researchers interlink excellent CSR execution as a prerequisite to sustainable development. Therefore, this part of the review critically analyses various literature to determine how CSR activities help attain continued economic growth from a global perspective.

Hahn and Kühnen (2013) focused on the normative concepts in the identified literature in their study to determine CSR's relevance in attaining sustainability. Firstly, the researchers defined CSR roles by critically analyzing the ISO 26000 based on social responsibility characterization. From the study, Hahn and Kühnen (2013) posited that organizations must embrace sustainability since it is interconnected with entity ethics and transparency, forming a basis for making important decisions that enhance an organization's existence. Thus, this ensures that organizations meet stakeholder needs, which is also used to determine the corporation's performance in their field. Hahn and Kühnen (2013) further explained that a company's success is determined by sustainable accounting, which helps in data analysis and interpretation in such entities, influencing excellent decision-making processes. A review by ElAlfy et al. (2020) supported Hahn and Kühnen's (2013) notion. Hahn and Kühnen (2013) explained that CSR strategy execution influences leadership styles in managing businesses, affecting a company's continued operations. Based on the two studies, it can be concluded that CSR reports form a basis for management strategies, which also contribute to the monitoring of an organization's activities, causing sustainable development in such entities.

Contrary to Hahn and Kühnen's (2013) study, Behringer and Szegedi (2016) expounded on CSR roles based on their scope. Suganthi (2020) supported Behringer and Szegedi's (2016) notion by arguing that such aspects focus on company roles, which entails exploring the available resources responsibly to ensure that future generations do not suffer the implications of natural resource overexploitation. Hence, this ensures that entities adhere to the stipulated business ethics in their operations.