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...Initiative and ISO 14001. The main body the paper presents the findings of research, conducted in March 2005, into the reported corporate responsibility behaviour of 127 leading emerging-market companies from 21 emerging markets across Asia, Africa, Latin America, and Central and Eastern Europe. It compares their reported behaviour with that of over 1,700 leading companies in high-income OECD (Organisation for Economic Co-operation and Development) countries. The paper concludes that reported CR in emerging markets (especially South Africa, Brazil, India and parts of Eastern Europe) is more developed than commonly thought, often exceeding standards in some high-income countries/ regions. In the process, an initial attempt is made to analyse some of the key drivers for the uptake of CR in emerging markets.
* Corporate responsibility
* CSR
* Emerging markets
* Environment
* Business ethics
* OECD
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THIS PAPER ASSESSES THE EXTENT TO WHICH COMPANIES IN EMERGING markets are showing an interest in corporate responsibility (often called CSR), and how this compares with companies in developed economies. It starts with the examination of a range of generic indicators. Membership of the Dow Jones Sustainability Index (DJSI), corporate reporters registered with the Global Reporting Initiative (GRI), and ISO 14001 certification are each analysed in terms of their emerging-market/developed-market breakdown. The main body of the paper presents the findings of research undertaken into the state of corporate responsibility (CR) reporting in emerging markets. The corporate website and annual report of 127 leading companies in 21 emerging markets were examined. (1) Each company was assessed against a number of indicators, using a methodology comparable to that used by a leading research agency. The results were then compared with existing data on companies in high-income OECD (Organisation for Economic Co-operation and Development) countries, to which the author had access. Aspects of CR that were explored in this study included corporate social investment (CSI), business ethics, environmental policies and management systems, equal opportunities, women on corporate boards, training, and health and safety. (2)
The research was undertaken to test the assumption that interest in, take-up and reporting of corporate responsibility in emerging-market companies was likely to be significantly lower than among companies in developed economies. It concentrated on comparing the situation in emerging-market companies with that of companies in OECD countries. (3) As the paper will demonstrate, the available evidence suggests that, overall, there is not a vast difference in the approach to reported corporate responsibility between leading companies in high-income OECD countries and their emerging-market peers.
CR in emerging markets has recently received attention from both academics and practitioners. Recent editions of The Journal of Corporate Citizenship (JCC) have cast a spotlight on Latin America (Ice 21), Africa (JCC 18) and Asia (JCC 13). A number of studies have emphasised comparative cross-country analysis (see, for example, Peinado-Vara 2004; EWMI 2004; (4) KPMG 2005; Welford 2005), although these have largely been region, specific or covered a relatively limited number of emerging-market economies. There have also been a number of country-specific studies including work on India (see, for example, Mohan 2001; CSM 2001; Kumar et al. 2001), South Africa (e.g. Visser 2005; Malan 2005; KPMG 2004), Malaysia (e.g. Ramasamy and Ting 2004; ACCA 2004), Mexico (e.g. Gundermann 2004) and Czech Republic (e.g. Trnkova 2004), among others. In addition, literature and practice emerging from socially responsible investment (SRI) analysts has thrown light on CR in emerging markets: for example, work emanating from the Asian Corporate Governance Association/CLSA (2004), the International Finance Corporation (IFC 2003), and the Association for Sustainable and Responsible Investment in Asia (ASRIA 2003).
Based on a reading of the literature, Table 1 summarises the current state of CR in a number of emerging markets. Generalisations are made with the strong caveat that each region is large and contains a wide variety of countries, histories and experiences.
This study attempts to add to the existing knowledge base by conducting a comparative analysis of companies in both emerging markets and developed economies, and ensuring data is available from a far wider range of countries than has been analysed previously. It attempts to go beyond measuring whether companies report on various dimensions of corporate responsibility by measuring the extent/quality of their reported behaviour. It shares a shortcoming of many existing studies in that it is based on analysing corporate self-reporting.
Analysis of three generic indicators
Emerging-market companies make up only 3-8% of the FT500, the 500 largest globally traded companies. (5) Even using the much larger Dow Jones Global Index of 2,500 companies, emerging-market companies make up only 4.6%. What is the percentage involvement of emerging-market companies in some major indices, initiatives and management systems that can be seen as proxy indicators of corporate responsibility? Three broad-brush indicators were studied: inclusion on the Dow Jones Sustainability Index (DJSI), registration with the Global Reporting Initiative (GRI) and the uptake of ISO 14001 certification. (6)
The DJSI regularly analyses each of the approximately 2,500 companies on the Dow Jones World Index. Using a relatively demanding sector-based methodology, it identifies the most sustainable companies on a range of environmental, social and management/strategic criteria. The approximately 10% of companies assessed as most sustainable are included on the DJSI. In short it is a 'best-in-sector' measure comparing the largest global companies in all major sectors. (7) While 4.6% of the eligible companies are from emerging markets, a small but still significant 2.8% of the 318 companies that make it onto the DJSI come from emerging markets. Put another way, 309 (or 12.9%) of the companies listed in high-income countries make it onto the DJSI, compared with a smaller, but respectable, 7.8% of emerging-market companies. This gap would be smaller still if adjusted to take company size into account. Looking at the specific companies that make it onto the DJSI, one finds that not only are some emerging market companies...
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