Failing to regulate social and environmental reporting in Spain

Failing to regulate social and environmental reporting in Spain
Mercedes Luque and Carlos Larrinaga
Grupo de Investigación ERGO
Universidad de Burgos
mlvilches@ubu.es
1
Abstract
This paper contributes to understand the production of normativity in the Spanish CSR
context. This examination draws on previous literature recognizing that governmental
intervention in regulating CSR reporting does not guarantee alone better disclosure
levels (Bebbington et al., 2012). More specifically, this theoretical perspective is
applied to explore the attempt made by the Spanish government to implement the
Danish reporting model through the Sustainable Economy Law 2/2011 of 4 March (SEL
hereafter), as a member of the Ministry of Spanish Employment and Labour noted
(2011). The Danish government requires by Law the 1,100 largest companies to
disclose their CSR performance in their annual reports (PWC, 2011), achieving a high
degree of compliance by companies. In the Spanish SEL, Article 39.3 recommends
corporations with more than 1,000 employees to elaborate an annual sustainability
report which should be submitted to the State Council on CSR. Such regulation has
turned out to be a failure in terms of the number of companies producing sustainability
reports and the quality of those reports. This investigation examines the sustainability
reports published by the largest Spanish companies and interviews relevant actors in the
Spanish CSR regulatory field.
By examining in detail the failed attempt to produce normativity by the Spanish law,
this paper contributes to the current debates over CSR reporting regulation and, more
specifically, to the understanding of the prospects of the EU new directive 2014/95/EU
on non-financial disclosure, requiring member states to make a range of social,
environmental and employee related disclosures mandatory for large companies.
The findings of this paper are consistent with the argument made in previous literature
that suggests that governmental regulation of CSR reporting does not guarantee alone
better disclosing levels and that a normative climate is necessary to accompany changes
in the law. Additionally, the paper finds that, apart from the state, a multiplicity of
actors, pulling in different directions and with different levels of power, participated in
the production of normativity and, eventually, molded the corporate (non-)response to
the Spanish Sustainable Economy Law. These findings have provided insight to
understand why SEL approval has not produced any significant increase in CSR
disclosure in Spanish businesses.
Above all, the findings of this paper are important for analyzing the prospects of the EU
Directive on non-financial reporting. Member states have already developed
heterogeneous initiatives, with different objectives, and it is possible that they will
continue doing so.
2
1. Introduction
In October 2014 the European Union different EU member states have already
developed initiatives to regulate corporate social and environmental disclosures. Such is
the case of the Spanish Sustainable Economy Law 2/2011 of 4 March (SEL hereafter),
which in article 39, item 3, introduces a recommendation for corporations exceeding
1,000 employees to elaborate an annual sustainability report that is to be submitted to
the “State Council on CSR” (SCCSR hereafter), which is a stakeholder consultation
process sponsored by the Spanish government.
Such attempt to regulate CSR disclosure is consistent with the argument often made in
the literature that only regulation can increase the quality and the comparability of
reported information and discharge the corporate accountability with stakeholders (see,
for example, Deegan, 2002). However, this perspective has been problematized in
studies reporting empirical evidence in comparative policy contexts (Bebbington et al.
2012; Chauvey et al. forthcoming) that show how governmental intervention in CSR
disclosure alone does not guarantee better disclosing levels from the private sector.
Bebbington et al. (2012, p. 90) contend that “a formal legislation alone may not be
sufficient to create a norm” and suggest that a better understanding of the production of
normativity requires the adoption of new perspectives which shed light on how
normativity comes into being. For example, as Edelman (1990) notes, changes in legal
rules may not be sufficient for the production of an “institutional change”, being a
adopted Directive 2014/95/EU on non-financial disclosure1, with the stated aim of
rising corporate social and environmental reporting to a similar level across all EU
member countries. This Directive is part of the “renewed EU strategy 2011-2014 for
Corporate Social Responsibility” (COM 2011 681 final), which stressed the need to
encourage companies to work on the path of sustainable growth, responsible business
behavior and sustainable employment generation to, among other things, restore the
investor and consumer needed trust, lost in the economic and social crises. According to
Directive 2014/95/EU companies of a certain size2 are asked to make a minimum of
disclosures about social and environmental issues, which include a description of the
business, the policies related to those issues, the outcome of those policies, the main
risks involved in those issues and key non-financial performance indicators.
As a Directive, this EU regulation will not affect companies until it is transposed to the
domestic law in the different EU member states. However different EU member states
have already developed initiatives to regulate corporate social and environmental
disclosures. Such is the case of the Spanish Sustainable Economy Law 2/2011 of 4
March (SEL hereafter), which in article 39, item 3, introduces a recommendation for
corporations exceeding 1,000 employees to elaborate an annual sustainability report that
1
Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014.
2
Companies with more than 500 employees and whose balance exceeds 20 million or turnover of more
than 40 million euros per year.
3
is to be submitted to the “State Council on CSR” (SCCSR hereafter), which is a
stakeholder consultation process sponsored by the Spanish government.
Such attempt to regulate CSR disclosure is consistent with the argument often made in
the literature that only regulation can increase the quality and the comparability of
reported information and discharge the corporate accountability with stakeholders (see,
for example, Deegan, 2002). However, this perspective has been problematized in
studies reporting empirical evidence in comparative policy contexts (Bebbington et al.
2012; Chauvey et al. forthcoming) that show how governmental intervention in CSR
disclosure alone does not guarantee better disclosing levels from the private sector.
Bebbington et al. (2012, p. 90) contend that “a formal legislation alone may not be
sufficient to create a norm” and suggest that a better understanding of the production of
normativity requires the adoption of new perspectives which shed light on how
normativity comes into being. For example, as Edelman (1990) notes, changes in legal
rules may not be sufficient for the production of an “institutional change”, being a
normative climate necessary to accompany changes in the law.
The Spanish SEL was mentioned in the EU working papers as a precedent of the EU
Directive (European Commission, 2013). However, this regulation ended up (only)
recommending corporations with more than 1,000 employees to elaborate an annual
sustainability report, to be submitted to the SCCSR. This regulation has resulted in a
failure in terms of the number of companies disclosing information on CSR and the
quality of their reports. This contrasts with another precedent cited by the EU proposal
for the Directive (European Commission, 2013), the Danish regulation, which requires
the 1,100 largest companies to disclose their CSR performance in their annual reports
(Danish Government, 2012), achieving a higher degree of compliance by companies3.
In this regard, it is interesting to note that the Spanish regulation attempt tried to
emulate the Danish reporting model, according to different industry observers
(Barañano, 2009; PWC, 2011).
This paper explores the specific regulation route followed in Spain and tries to provide
insight into which were the specific circumstances and actions that resulted in a
regulatory failure. In particular, we are interested in studying the participation of a
multiplicity of state and non-state actors in this regulation process. This exploration
contributes to existing debates over CSR reporting regulation, providing insight into
3
The Danish government requires by law the 1,100 largest companies to disclose in their annual reports
information about their CSR performance (PWC, 2011). The Danish Action Plan for CSR (2012-2015)
(Danish Government, 2012) contends that the notions of CSR and transparency are an essential part of the
agenda for growth in response to financial crisis. According to this plan, to make sure the companies have
the right tools necessary, the Danish government proposed to improve the guidance provided to the
companies.
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which is the role that the state can play (or is willing to play) in the regulation of CSR
reporting. This study also contributes to the understanding of the prospects of the EU
new directive on non-financial disclosure (which is the aim of this special issue).
The empirical investigation in this paper is based on multi-method approach. On the one
hand, we conducted nine qualitative interviews with participants in the stakeholder
dialogue process (SCCSR) that develops and manages different aspects of the SEL
regulation. On the other hand, we conducted a content analysis of a sample of the
sustainability reports published by the companies affected by the SEL regulation to
analyze the evolution of reporting quality as a consequence of the new regulation. This
multi-method approach allowed us to study the fundamental issues implicated in the
production of normativity in Spain.
The rest of the paper is structured as follows. The next section describes the multimethod approach adopted in the empirical investigation. Section three describes the
results of the content analysis, supporting the argument that the regulation was a failure.
Section four tries to provide an explanation for the lack of normativity of the SEL,
based on two main arguments: the lack of a normative climate for CSR reporting
regulation and how power was mobilized by those opposing the regulation to lead it to a
failure. Finally, section five provides some concluding comments.
2. Research Methodology
Considering the complexity of the research question, the empirical investigation is
multi-method in approach. This methodological approach is consistent with previous
literature (Bebbington et al. 2012). We conducted qualitative interviews with relevant
actors in the regulatory field to understand how social and environmental reporting
norms came into being, with a focus on the initiatives taken by the Spanish government.
We also performed a content analysis of a sample of the sustainability reports published
by large Spanish companies to explore whether the quality of sustainability reporting
changed as a result of the Spanish government initiatives.
Qualitative interviewing
We conducted an in-depth investigation through semi-structured interviews (Alvesson,
2010; Miller and Crabtree, 1999; Wengraf, 2001) with relevant actors that participated
in SCCSR stakeholder dialogue process. The SCCSR was created by the Spanish
government in 2008 by Royal Decree 221/2008, as an "advisory and consultative" body,
under the Ministry of Employment. This body is a relevant actor in the regulation of
sustainability reporting in Spain, because the SEL regulation establishes that
sustainability reports of large companies should be submitted to this institution. The
then socialist Spanish government took this initiative after waiting for months in vain
5
for the Spanish business sector to sponsor such a kind of institution. According to
Lozano et al. (2005) governments in Spain, Greece and Portugal created such
consultative bodies with a multi-stakeholder approach to debate the notion of CSR and
how this could be translated into public policies.
The SCCSR was integrated by 56 individuals that allegedly represented the four groups
that were considered as having the greater stakes in corporate social responsibility
(Olcese and Alfaro, 2014): the government itself, the business sector, most
representative trade unions and other civil society organizations (especially nongovernmental organizations). The SCCSR was organized into five working groups that
dealt with different issues (Olcese and Alfaro, 2014): (i) The role of CSR in the crisis;
(ii) transparency, communication and reporting standards and sustainability reporting;
(iii) consumption and socially responsible investment; (iv) CSR and education; and (v)
management of diversity, cohesion and cooperation for responsible development.
However, soon after the approval of the SEL regulation in March, 2011, the
conservative Partido Popular won the general elections (by the end of 2011) and
SCCSR was reorganized into three working groups (Olcese and Alfaro, 2014): (i) CSR
promotion; (ii) socially responsible investment for pension funds; and (iii) corporate
governance. By 2012 about 80 meetings had taken place (Cinco Días, 2012), but neither
the business sector nor the representatives of civil society were happy with the results.
By interviewing different actors participating in SCCSR we can gain insight about the
different views, the conflicts and the alliances that arouse in the dynamics of this
stakeholder dialogue process, which in turn can help us to obtain explanations for the
institutional outcomes of the Spanish CSR reporting regulation process (see also Archel
et al. 2011). We conducted nine interviews with five relevant actors (see appendix 1)
between November 2014 and January 2015. Some of these interviews were performed
in person, but others were carried out by telephone. Consistently with the exploratory
nature of this research, and the characteristics of qualitative interviews, the interview
guide evolved, in an interactive process, as the interpretation progressed, with new
questions being added for exploring concerns that emerged in previous interviews
(Miller and Crabtree, 1999). Interviews were recorded and transcribed. As regards the
analysis, interview transcripts were read in an interpretive and reflexive way, rather than
in a literal way (Miller and Crabtree, 1999).
Content analysis: the quality of sustainability reporting
Article 39, item 3, of the SEL regulation establishes a recommendation to corporations
with more than 1,000 employees to elaborate on an annual basis a sustainability report,
which has to be submitted to the SCCSR. In this empirical study we examine the
sustainability reports published by the largest Spanish companies to explore the
evolution of reporting quality/comprehensiveness before and after the issuance of the
SEL regulation. This information can allegedly illustrate the failed attempt to regulation
sustainability reporting in Spain through the SEL.
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We explored whether large companies produced any sustainability report at all and
which is the quality of a sample of the published sustainability reports. As concerns the
former, we identified and gathered from SABI database all those incorporated privately
held companies with more than 1,000 employees in 2010-2013, resulting in more than
400 companies per year. The Global Reporting database was used to obtain the list of
companies that had issued sustainability reports for 2010-2013.
As concerns the quality of sustainability reports, the content of a sample of
sustainability reports was analyzed. Content analysis is ‘‘a technique for gathering data
that consists of codifying qualitative information in anecdotal and literary form into
categories for deriving quantitative scales of varying levels of complexity’’ (Abbott and
Monsen 1979, p. 504). This approach has been used extensively in social and
environmental disclosure research (Blacconiere and Patten, 1994; Gray et al. 1995), and
requires analyzing reports for the presence or absence of disclosure across a set of
information items (Guidry and Patten, 2010).
We assessed the reporting quality and comprehensiveness of a sample of the companies
issuing sustainability reports (see appendix 2) using a modified version of Clarkson et
al’s (2008)4 comprehensive environmental disclosure scale, which was extended to
cover economic and social issues. The measure of reporting quality is based on an
assessment of the extent to which reports include disclosure items and follow the
preparation guidelines recommended by the Global Reporting Initiative. As Ballou et al.
(2006) argues, the GRI is viewed as having the most accepted reporting framework in
the social and environmental arena. Therefore, we used the GRI G3 and G4 reporting
guidelines to extend Clarkson et al.’s scale. However, it must be acknowledged that not
all proponents of improved sustainability reporting believe the GRI standards
adequately capture business sustainability (Gray, 2006) and there are certainly other
guidelines available for sustainability reporting (e.g. Sustainability/UNEP, ISO 14031),
and other ways of assessing its quality.
Regarding the establishment of rules for coding and measurement, a search was made
for each disclosure item in the electronic copies of the sustainability reports. In general,
a value of 1 was given to each disclosure item if it complied with the GRI requirements
included in the sustainability reporting scale and 0 otherwise (Archel et al; 2008). In the
specific case of PIs, a score from 0 to 6 was assigned following Clarkson et al. (2008).
Accordingly, one point was given for each of the following informational aspects: (1)
4
Clarkson et al. (2008) comprehensive environmental disclosure scale. This 95-point index was largely
based on GRI guidelines and consists of two major sections. The ‘‘hard disclosure items’’ include four
sub-sections labeled as (1) governance and structure management, (2) credibility, (3) environmental
performance indicators (EPIs) and (4) environmental spending, whereas ‘‘soft disclosure items’’
comprise three sub-sections classified as (1) vision and strategy claims, (2) environmental profile and (3)
environmental initiative.
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the report presents performance data about the specific disclosure item; (2) the reports
provides comparing information with other companies about this disclosure item; (3)
the report provides historical information that allows to compare performance with
previous periods; (4) the report presents performance data against targets; (5) the report
presents performance data in both absolute and relative terms; and (6) the report
presents performance data by segments. In order to ensure that data collection (Jones
and Shoemaker 1994; Milne and Adler 1999) was reliable, two coders conducted the
thematic content analysis independently.
3. The quality of sustainability reports and its evolution
The results of the analysis (table 1) show that most large Spanish companies are not
following the recommendations about sustainability reporting included in the SEL
regulation. Furthermore, the passing of the new law did not cause any significant
increase in the number of large companies issuing sustainability reports. Rather the
reverse, the percentage of companies producing sustainability reports fell in 2010 by 4%
and has stabilized in 11% thereafter.
The quality of sustainability reports (N=20) provides a different picture. Although
disclosure quality remains at around 40% of the total possible score, the examination of
the same companies over the years shows an light increase in the quality of
sustainability reports.
[Table 1: to be inserted about here]
This situation contrasts with the results of the Danish regulation. According to the
Danish Business Authority (2013), the outcomes of the Danish regulation were superior
that the ones achieved by the Spanish SEL: (i) in the course of the first three years of
the legal obligation (since 2009) nearly 50% of the companies reported on CSR for the
first time; (ii) 76% of the Danish companies used international CSR principles,
compared with 56% in 2010 and 59% in 2009; (iii) there have been significant
improvements in reporting practices in a number of areas. Compared with the Danish
regulation, the Spanish SEL has resulted in a failure, as corporate transparency on CSR
concerns.
In the following sections we try to provide an explanation of the Spanish regulatory
failure with the assistance of the insights obtained from the qualitative interviews.
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4. An interpretation of the causes of the regulatory failure
This section analyzes the attempt made by the Spanish government to implement the
Danish reporting model (PWC, 2011) through SEL regulation. This analysis is inspired
by the literature that has looked at the regulation of CSR reporting. The literature
examining empirical evidence in comparative policy contexts (e.g. Chauvey et al.
forthcoming; and Bebbington et al., 2012) recognizes that governmental intervention in
regulating CSR reporting does not guarantee alone better disclosing levels. In this
regard, Bebbington et al. (2012) elaborated on the notion that practices that create
relatively stable patterns of expectations could explain the convergence around a given
set of reporting norms. In this regard, reporting norms are likely to be explained by the
existence of broader agreements in society, rather than by the existence of law.
An agreement about CSR reporting did not exist in the Spanish case, something that
could account for the failure of the government’s attempt to regulate this activity. This
section is structured around two issues in which this lack of agreement was articulated:
the lack of a normative climate for CSR reporting regulation (and singularly the
diversity of views about CSR and the opportunity of regulating CSR) and how power
was mobilized by those opposing the regulation to lead it to a failure.
The lack of a normative climate for CSR reporting regulation
The SCCSR had a major role to play in the SEL’s regulation about CSR reporting. This
law, in article 39, item 2, established that providing reporting guidelines (characteristics,
indicators and reporting models, were the terms used in the law) for the Spanish
companies was SCCSR’s duty. The law also mandated that those guidelines had to
conform to “the principles of management transparency, good governance, commitment
to the local and to the environment, respect for human rights, improving labor relations,
promoting the integration of women, effective equality between women and men, equal
opportunities and universal accessibility for the disable and sustainable consumption”
(SEL, article 39).
When the SEL was approved, a working group on “transparency, communication and
reporting standards and sustainability reporting” was already active in the SCCSR. A
union officer that participated in the stakeholder consultation process describes the
optimistic atmosphere of the moment:
“In the early days, there were several working groups and many representatives
of the civil society participated, trying to reach agreements and solutions”
(SCCSR member; union officer)
Those familiarized with social and environmental accounting research will not find
particularly unexpected the problem encountered by those groups working on issues
9
such as indicators and reporting models (issues that probably were initially considered
as neutral): the regulation of CSR reporting emerged primarily as a political issue, with
different camps supporting different discourses, as Archel et al. (2011) have already
described. As a result
“When the civil society representatives proposed some issues to be reported,
business representatives insisted that so much detail was unnecessary” (SCCSR
member; independent expert)
CSR reporting lacked the normative climate required for a reporting regulation to
succeed. The CSR reporting field was characterized by different views that, for the sake
of simplicity, could be grouped in the corporate and the civil society camps. On the one
hand, the corporate world developed a sort of regressive business case discourse. Archel
et al. (2011) identified a business case of CSR discourse that could be more consistent
with the views expressed by the marketing director of a large company:
“CSR is about business, so any governmental intervention with the aim of
making some indicators mandatory would be meaningless” (SCCSR member;
independent expert)
But a somewhat cruder version of the business perspective about CSR emerged since
2012. In June the Spanish Confederation of Employers' Organizations (Confederación
Española de Organizaciones Empresariales; CEOE) made a case for abolishing the
SCCSR and SEL’s article 39, with three main arguments (Cinco Días, 2012): first, the
SCCSR had been ineffective; second, the debates and the documents produced in the
SCCSR assessing and examining CSR actions by the government, unions, consumer
associations and civil society, were too inquisitorial and could discourage further
companies to engage in CSR activities; and, third, the distinction between companies
that (emerging from SEL’s article 39) could unwarrantedly discriminate companies and
distort free market competition.
On the other hand, civil society stakeholders had entirely different expectations about
CSR reporting regulation. For example, a representative of a foundation for the disabled
argued that social organizations are negatively affected by the lack of such regulation.
She explained this negative effect as follows:
“In my organization we strive to promote the employment of disabled people.
But if companies aren´t required to report their compliance with the minimum
percentage of disabled people employed required by law, then the integration of
disable people in the job market is at stake”
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In a similar vein:
“Customers are demanding the regulation of CSR reporting by large
corporations providing basic services, such as financial services” (SCCSR
member; independent expert).
Contrasting views about CSR reporting regulation were expressed in an overtly political
way, preventing the existence of a normative climate for CSR reporting regulation.
Bebbington et al. (2012) have suggested that normativity of CSR reporting depends
upon its congruence with previous similar practices or stable patterns of expectations
about CSR reporting. In Spain, CSR reporting was disputed, rather than normatively
agreed. As a result, the SCCSR has failed thus far to provide the CSR reporting
guidelines that were mandated by SEL. Further, the SCCSR is now less active than it
was in 2008 and has transformed itself over the years into a forum for exchanging ideas
(Coller et al. 2014; Fernández Martín et al. 2011). Along the same lines, the SCCSR has
not established any mechanism for the submission of sustainability reports by
companies.
The content analysis carried out in this investigation suggests that the Spanish
regulation did not have any effect in corporate practices. The Spanish multi-national
companies that have continued to produce sustainability reports, indicating that a
normative climate and a convergence of reporting practices existed for them, but in a
sphere different than the nation-state (Higgins and Larrinaga, 2014). By opting to
expand the field of action to private companies with more than 1,000 employees, the
regulation of CSR reporting requires a greater effort by the Spanish government.
Interest and power differentials
The lack of a normative climate and shared expectations about CSR reporting means
that the regulation of CSR reporting is unsettled and contested, with conflicting interests
mobilizing different forms of power to shape CSR reporting norms. It is, however,
difficult to identify a dominant logic of CSR, as Archel et al. (2011) do, because of the
existence of CSR reporting battlefields between the different logics.
The first battlefield identified in this study is SCCSR representativeness, whose
composition, despite being created in 2008, has always been controversial. From one
side, unions and civil society organizations complained about the absence of a true
inclusive social dialogue. For example, one trade union document contrasted the
11
Spanish and the Danish models 5, attributing the higher consensus in the Danish
reporting model to a more inclusive approach. They also criticized the fact that:
“Business lobbies count as stakeholders in the SCCSR, while in fact they are a
quite different actor.” (SCCSR member; union officer)
From the other side, the Spanish Confederation of Employers' Organizations considered
that the composition of the SCCSR was unbalanced and should warrant the leadership
of the main actors in CSR –“companies and the associations that represent them” –,
suggesting that they should amount to 50% of the council (Cinco Días, 2012).
The second battlefield concerned the role of the state in CSR. The state is a special and
distinctive regulating actor that characterizes modern society. However, the neoliberal
state is no longer a Westphalian state (Bebbington et al. 2012), with the income of large
multinational corporations exceeding the power and GDP of some developed countries
(Schöner and Palazzo, 2008). Additionally, there is an increasing number of actors that
compete with the state in the regulation of corporations (e.g. the Global Reporting
Initiative in the field of sustainability reporting), with governments increasingly playing
mediating and facilitating roles (Archel et al., 2009).
In Spain, the socialist party platform for the 2004 elections included a clause on
corporate social responsibility stating that “a law will establish the obligation for listed
companies to comply with transparency requirements in such a way that those
companies prepare a triple bottom line account, on economic, social and environmental
performance, as part of their annual report” (PSOE, 2004, p. 135). In this regard, it
could be argued that in 2004 the socialist party was inclined to support the perspective
of the trade unions and the civil society.
The socialist party eventually won the elections in 2004, but triple bottom line reports
were never made compulsory for Spanish companies. Instead, in 2011 SEL only
vaguely recommended companies to prepare sustainability reports, mandating the
SCCSR to issue a set of reporting guidelines. This mandate is shocking, considering the
existence of international reporting guidelines. Furthermore, the fact is that the SCCSR
has been unable to agree such guidelines. In contrast, CSR reporting was made
mandatory by the Danish government (CSR Danish Action Plan 2012-2015).
The Popular Party, more inclined to support the business perspective, won the general
elections in 2011, and did not modify the CSR aspect of SEL. But, it could be argued
that the position of the Spanish Confederation of Employers' Organizations about the
SCCSR’s representativeness was enabled by the new political situation in 2012.
5
http://www.ccoo-servicios.info/noticias/54146.html
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As concerns the second battlefield, it could be argued that the state played an
insignificant role in two acts. In the first act, the 2004 socialist promises of making CSR
reporting compulsory were gradually transformed into a vague recommendation by the
end of its term in office, a process that was described by Archel et al. (2012), when they
concluded that the institutional outcomes represented the perspectives of only a subset
of the actors involved in the stakeholder consultation processes. In the second act, it was
clear that the SCCSR would even not be able to produce the reporting guidelines or any
other significant outcome.
The third battlefield consisted in certain tactics that were used to favor specific
objectives. Those tactics included procedures for setting the agenda and for making
decisions. Agenda setting aspects can be found in the initial focus (from the law itself)
on developing indicators and reporting formats, something around which is very
unlikely that a politicized stakeholder council could ever reach an agreement. External
references, both in terms of accepted reporting guidelines and academic/professional
experts, were not considered. It is interesting to note that the working groups did not
include any researcher on social and environmental reporting. Agenda setting elements
can also be found in the reorganization of the SCCSR working groups, after the
approval of SEL. Interestingly, “transparency, communication and reporting standards
and sustainability reporting” was included in the reorganization in the working group
dealing with “CSR promotion”. A final, less subtle, agenda setting aspects included
threats to leave working groups if certain aspects were discussed. For example, business
stakeholders left the “indicators” working group in protest for the discussion of tax
avoidance schemes:
“When the discussion switched to the regulation of tax avoidance reporting
…they [business stakeholders] left the group” (SCCSR member; union officer)
Further tactics concerned the procedure for decision making, i.e. the need to reach a
consensus to approve any document, something that was unfeasible given the lack of a
normative climate, as previously described. As a result, the working group dealing with
reporting has approved a document with a list of indicators, but any progress on what
should be reported under each indicator is still lacking.
“It’s true that there is a table with indicators approved by the SCCSR plenary in
May 2011 (…) This table includes the indicators, but very little progress has
been made in terms of what is the information that each indicator should
include; this is why the SCCSR does not receive the information of any
company, as the SEL suggested” (SCCSR representative; independent expert;
emphasis added)
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This table with indicators was included in a document called "Transparency,
communication and reporting standards and CSR reports"6, approved by on May 3,
2011. This document was prepared, as required by article 39, of the SEL, where it is
stated that the government will make available a set of characteristics and indicators for
self-evaluation in social responsibility and reporting models or references, all in
accordance with international standards. The same article mandates the SCCSR to
elaborate such guidelines.
5. Concluding comments
This paper explores the attempt to regulate social and environmental reporting by
Spanish companies through the Sustainable Economy Law in 2011. This regulation is
relevant for the EU Directive on non-financial reporting, approved in October 2014,
since the preparatory EU documents cited the Spanish regulation as a precedent for this
Directive. The empirical investigation of this paper is based on qualitative interviews
with participants in State Council on CSR that was in charge of developing different
aspects of such regulation and on a content analysis of a sample of the sustainability
reports published by the regulated companies.
The content analysis revealed that the Spanish regulation did not have any effect on the
number of companies issuing sustainability reports, which has remained at 11% of the
companies affected by the regulation. When the regulation entered in force, the quality
of the sustainability reports increased slightly, but it is difficult to conclude whether
there is a relationship. The SEL can be qualified as a failed attempt to regulate CSR
reporting, based on the following considerations: a very low percentage of companies
produced sustainability reports; the SCCSR has been unable to produce the reporting
guidelines required by law; and the SCCSR is not receiving sustainability reports from
companies, as required by law.
Interviews with SCCSR members and ideas drawn from the literature on normativity
production allowed us to provide some understanding of the process that led to this
failure. On the one hand, it seems that a normative climate did not exist for CSR
reporting in Spain. Finding a common ground in terms of the understandings about CSR
and CSR reporting was very unlikely, since the discussions about CSR were framed
from the outset in partisan terms and even the law (and the SCCSR itself) was a
contested matter. The common ground of CSR reporting was empty in Spain. This
finding contrasts with Archel et al. (2011), since we could not find anything like a
6
Document retrieved from: http://www.empleo.gob.es/es/sec_trabajo/autonomos/economiasoc/RespoSocEmpresas/docs/110503_GRUPO_DE_TRABAJO_DE_TRANSPARENCIA_COMUNICA
CION_Y_STANDARDS_DE_LOS_INFORMES_Y_M.DE_SOSTENIBLIDADl.pdf
14
dominant discourse that shaped CSR reporting norms. We found, instead, open conflict
and the problematization of every aspect of the regulation that eventually led to its
failure.
How this political framing led to the failure of the Spanish regulation was also explored
in this paper through the analysis of different battlefield in which those conflicts were
evident: SCCSR representativeness, the role of the state in CSR and the tactics used to
favor specific objectives. The state emerged in this case as a partisan whose allegiances
oscillated from 2004 to 2011, something that can explain the subsequent relaxation of
the CSR reporting rules.
The findings of this paper are consistent with the argument made in previous literature
that suggests that governmental regulation of CSR reporting does not guarantee alone
better disclosing levels and that a normative climate is necessary to accompany changes
in the law. Further, this analysis shows that regulation needs to be read between the
lines, i.e. different attributes of the law erode its normativity, as Bebbington et al.
(2012) suggested. Examples would include leaving the specifics to bodies that cannot
reach an agreement or omitting the consequences of non-compliance.
The findings of this paper are important for analyzing the prospects of the EU Directive
on non-financial reporting. Member states have already developed heterogeneous
initiatives, with different objectives, and it is possible that they will continue doing so.
In essence, this paper shows how difficult the regulation of CSR reporting is likely to
be.
15
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18
Table 1
Sustainability reporting by companies covered by SEL regulation
2010
2011
2012
2013
Number of companies covered by SEL
regulation, article 39
406
417
420
407
Of which, disclosing a sustainability report
according to GRI databases (percentage):
63
(15%)
49
(11%)
47
(11%)
46
(11%)
Quality of sustainability reports (N=20)
(as percentage of the maximum)
68,17
(36%)
71,11
(38%)
73, 84
(39%)
78,24
(42%)
19
Appendix 1: interviews (in progress):
Interviewee
CSR Secretary in Spanish
office. Before he worked for
the same organization in
Brussels.
Employee of a recognized
social foundation
Fundraising director of
recognized humanitarian
organization
Union officer at the federal
and regional level (Madrid
and Seville).
Organization
Role in SCCSR
Private non-profit
Representative of an
organization whose
organization interested in
primary purpose is the
business side.
protection and
representation of
business interests.
Private social foundation
Regular accompanist of a
for physically disabled
vocal who represents a
people
social foundation.
Humanitarian
This person always has up
organization focused on to date with CSCSR through
the fight against poverty
the organization
and social discrimination.
representative in this
Council.
One of the largest unions
Representative on the
in Spain.
Permanent Commission of
CSCSR
University professor
University and
organizations promoting
CSR
Independent expert in CSR
CSR Technical support in
the Human Resources
Department
Private company
Indirect of the business side
Marketing director
Human resources director
ancillary components
automotive industry
Private company frozen Indirect view of the business
food sector
side
Private company vehicle- Indirect view of the business
specific spare parts
side
industry
20
length
Phone interview
of 15 min.
Phone interview
of 25 min.
Phone interview
of 20 min.
Two interviews
between 50-60
min each one:
the first in the
CCOO office in
Seville, and the
other by phone.
Phone interview
of 40 min.
Interview in the
company`s
Burgos
headquarters of
30 min.
Phone interview
of 20 min.
Phone interview
of 20 min.
Appendix 2: sustainability disclosure scale (Items)
(1) Governance and structure management (max 7/7)
1.
2.
3.
4.
5.
6.
7.
Existence of a Department and/or management positions for environmental management (0-1)
Stakeholder involvement in the policies establishment in the organization (0-1)
Implementation of ISO 14001 at the plants and/or the company (0-1)
Implementation of ISO 26000 at the plants and/or the company (0-1)
Implementation of ISO 8000 at the plants and/or the company (0-1)
Implementation of EMAS at the plants and/or the company (0-1)
Executive compensation is linked to social, economic and environmental performances (0-1)
(2) Sustainability Initiatives (max 2/2)
8. Internal enviromental audits (0-1)
9. Protocols to cope with accidents at works (0-1)
(4.1) Economic Performance Indicators (max 24/24)
10. EPI on direct economic value generated and distributed (0-6)
11. EPI on procedures for local hiring and proportion of senior management from the local community (06)
12. EPI on indirect economics impacts, describing them (including the extent of the same) (0-6)
13. EPI on the proportion of spending on locally-based suppliers at significant locations of operation (0-6)
(4.2) Environmental Performance Indicators (max 48/48)
14. EPI by weight and volume (0-6)
15. EPI on energy use and/or energy efficiency (0-6)
16. EPI on water use and/or water use efficiency (0-6)
17. EPI on impacts on protected or unprotected areas high in biodiversity (0-6)
18. EPI on greenhouse gas emissions (0-6)
19. EPI on waste generation and/or management (recycling, re-use, reducing, treatment and disposal) (0-6)
20. EPI on environmental impacts of products and services (0-6)
21. EPI on compliance performance (e.g. accidences, reportable incidents) (0-6)
(4.3) Social Performance Indicators (max 96/96)
22. SPI on the total number and rate of employee turnover by age group, gender, and region (0-6)
23. SPI on rates of injury, occupational diseases, lost days, and absenteeism (0-6)
24. SPI on average hours of training per year per employee (0-6)
25. SPI about the composition of governance bodies and breakdown of employees per category (0-6)
26. SPI about the ratio of basic salary of men to women by employee category (0-6)
27. SPI on the percentage and total number of significant investment agreements that include human rights
clauses (0-6)
28. SPI of the total number of incidents of discrimination and actions taken (0-6)
21
29. SPI about freedom of association (0-6)
30. SPI about significant risk for incidents of child labor (0-6)
31. SPI on percentage of significant suppliers and contractors that have undergone screening on human
rights and actions taken (0-6)
32. SPI about forced or compulsory labor (0-6)
33. SPI about the impacts of operations on communities(0-6)
34. SPI on total number of business units analyzed for risks related to corruption (0-6)
35. SPI about the procedures used in the life cycle of products and services(0-6)
36. SPI about the type of product and service information required by procedures and the requirements (06)
37. SPI about programs related to advertising, promotion and sponsorship (0-6)
(3) Compliance spending (max 3/3)
38. Non-monetary sanctions as a result of infringements of environmental law (0-1)
39. Non-monetary sanctions as a result of infringements of social law (0-1)
40. Significant sanctions as a result of infringements of norms about the supply and use of the products(01)
(4) Vision and strategy claims (max 2/2)
41. CEO statement on environmental performance in letter to shareholders and/or stakeholders (0-1)
42. Existence of response plans in case of environmental accidents (0-1)
(5) Sustainability profile (max 3/3)
43. Description of key impacts, risks and opportunities (0-1)
44. Marked served (0-1)
45. Scale of the reporting organization (0-1)
Total máximum posible score
22
(185/185)
Appendix 3: Large Spanish companies examined (in progress):
N=20
Abengoa
Abertis
Accenture
ACS
AGBAR
AREAS
Amadeus
Banco Popular
Banco Santander
CLH
Enagas
Endesa
FCC
Heineken Spain
Mahou Group
Meliá Hoteles
ONO
Repsol YPF
Telefónica
Vodafone
23