Critical Perspectives on Accounting 24 (2013) 350–359

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Critical Perspectives on Accounting

journal homepage: www.elsevier.com/locate/cpa

A research note on standalone corporate social responsibility reports:

Signaling or greenwashing?
Lois S. Mahoney a,*, Linda Thorne b,1, Lianna Cecil c, William LaGore a,2
a
Eastern Michigan University, 425 Owen Hall, Ypsilanti, MI 48197, United States
b
York University, 4700 Keele St., North York, Ontario M3J 1P3, Canada
c
Eastern Michigan University, United States

A R T I C L E I N F O A B S T R A C T

Article history: Over the past two decades, more and more U.S. firms are voluntarily issuing costly
Received 23 December 2011 standalone Corporate Social Responsibility (CSR) Reports. Nevertheless, firms’ motivations
Received in revised form 4 September 2012 for issuing standalone CSR Reports are not clear. In this paper, we consider two different
Accepted 17 September 2012
explanations: signaling and greenwashing. The first explanation, signaling, proposes that
Available online 28 September 2012
firms use standalone CSR Reports as a signal of their superior commitment to CSR, which
suggests firms with stronger social and environmental records will be more likely to issue
Keywords:
standalone CSR Reports as compared to those without. The second explanation,
Environmental
Social greenwashing, proposes that firms use standalone CSR Reports to pose as ‘‘good’’
Sustainability corporate citizens even when they do not have stronger social and environmental records.
To provide insight into these explanations we compare the CSR performance scores of
Mots clés: firms that issue CSR reports to those firms that do not. We control for firm size, leverage,
Environnemental profitability and industry. We find that firms that voluntarily issue standalone CSR Reports
Social
generally have higher CSR performance scores, which suggests that firms are using
Développement durable
voluntary CSR Reports to publicize stronger social and environmental records to
Keywords: stakeholders.

Palabras clave:
Ambiental
Social
Sostenibilidad
ß 2012 Elsevier Ltd. All rights reserved.

1. Introduction

Stakeholders bestow benefits on firms they perceive to be ‘‘good’’ corporate citizens. ‘‘Good’’ corporate citizens are
granted preferential investment opportunities (Sen et al., 2006), have access to capital at lower costs (Orlitzky, 2008), find it
easier to attract and retain employees (Greening and Turban, 2000; Turban and Greening, 1997), and they are the recipients
of beneficial consumer behavior (Marin et al., 2009). To reap the benefits conferred on ‘‘good’’ corporate citizens, firms wish
to be perceived as ‘‘good’’ by their stakeholders.

* Corresponding author. Tel.: +1 734 487 0157.

E-mail addresses: lois.mahoney@emich.edu (L.S. Mahoney), lthorne@schulich.yorku.ca (L. Thorne).
1
Tel.: +1 416 736 5062; fax: +1 416 736 5963.
2
Tel.: +1 734 487 3320.

1045-2354/$ – see front matter ß 2012 Elsevier Ltd. All rights reserved.
doi:10.1016/j.cpa.2012.09.008
 L.S. Mahoney et al. / Critical Perspectives on Accounting 24 (2013) 350–359 351

In the absence of mandatory disclosure of corporate social responsibility (CSR) information, it is difficult for stakeholders
to determine which firms are, in fact, ‘‘good’’ (Gugerty, 2009). The resources needed to gather the available information about
firms’ commitment to social and environmental activities may be difficult to find or not be available (Belal and Cooper, 2011).
Voluntary disclosures of CSR activities are dispersed over an extremely wide range of sources, including media releases,
annual reports, web sites, supplemental disclosures (10-K) as well as standalone CSR Reports.
Voluntary standalone CSR Reports are known by many different names, including ‘‘Sustainability Reports’’,
‘‘Environmental Reports’’, ‘‘GRI Reports’’ and ‘‘Citizenship Reports’’. Standalone CSR Reports are separate compilations of
social and environmental information (Dilling, 2009). Regardless of what they are titled, these reports meet three criteria: a
focus on social and environmental issues, distinction from the firm’s annual report, and content that is not prescribed by
mandatory reporting criteria. CorporateRegister.com (2011) reports that the number of firms issuing voluntary CSR Reports
in the U.S. grew from just two in 1991, to 154 in 2001, and over 500 different firms and entities in 2010.3 Furthermore, a 2011
survey of CSR by KPMG International noted that nearly 95% of the largest 250 companies in the world are now issuing these
standalone CSR Reports.
Though the U.S. lags behind other countries in their issuing of standalone CSR Reports4, issuance of these voluntary
reports is increasing (CorporateRegister.com, 2011). By investigating U.S. firms’ motivation for issuing CSR reports, we gain
insight into whether firms that use standalone CSR Reports are in fact ‘‘good’’ corporate citizens with strong performances in
social and environmental arenas or just trying to appear to be so (Sikka, 2011; Cormier et al., 2004). Not only will this
investigation aid us in assessing whether there is a bias in voluntary CSR Report disclosures, but also adds to our
understanding of the strategy firms adopt for their voluntary CSR disclosures.
This paper is organized as follows. The next section develops the hypotheses. This section will be followed by sections
outlining our methodology, our results and supplementary analysis, and finally, a discussion of our findings.

2. Hypotheses

Our research attempts to understand whether U.S. firms issue standalone CSR Reports as a substantive signal of concern for
society and the environment, or alternatively, whether standalone CSR Reports are issued in an attempt to legitimize firms’
concerns for social and environmental issues (Lyon and Maxwell, 2011). There are several theories that consider the association
between voluntary CSR disclosures and CSR performance, which are generally consistent with either a voluntary disclosure
perspective to which signaling theory belongs, or theories grounded in a socio-political perspective to which greenwashing
belongs (cf., Clarkson et al., 2011a,b). These theoretical perspectives have a significant amount of overlap (Deegan, 2002), but
also have points of difference that can result in contrasting predictions of firms’ behavior (Clarkson et al., 2008).
Both theories assume benefits will accrue to ‘‘good’’ corporate citizens and stakeholders will punish ‘‘bad’’ corporate
citizens. Both theories assume that disclosure is costly (e.g., Verrecchia, 1983), and according to both theoretical
perspectives, firms will undertake voluntary disclosure when the benefits of providing standalone CSR Reports outweigh the
associated costs (Li et al., 1997).
One significant difference between the theoretical perspectives is the relative costs and benefits imposed on those that do
not ‘‘honestly report’’. On the one hand, signaling theory considers that the ‘‘costs’’ imposed by society on those that do not
‘‘honestly’’ report will be a sufficient deterrent so that ‘‘bad’’ corporate citizens will be less willing to voluntarily report than
‘‘good’’ corporate citizens. On the other hand, greenwashing considers that the ‘‘benefits’’ conferred to ‘‘bad’’ corporate
citizens is greater than those conferred to ‘‘good’’ corporate citizens. As a result, signaling theory suggests that ‘‘good’’
corporate citizens will be more likely to employ CSR disclosures, whereas greenwashing suggests that ‘‘bad’’ corporate
citizens will be more likely to employ CSR disclosures (Clarkson et al., 2008). The next section outlines the two theoretical
explanations leading to contrasting predictions.

2.1. Signaling explanation for issuing standalone CSR reports

The first explanation, signaling, draws from voluntary disclosure theory, which suggest that firms use standalone CSR
Reports as a substantive signal of their superior commitment to CSR (Clarkson et al., 2008; Al-Tuwaijri et al., 2004; Brammer
and Pavelin, 2004; Berthelot et al., 2003). Voluntary disclosure theory suggests that firms are voluntarily disclosing social
and environmental information to signal their actual superior position regarding CSR activities (cf., Healy and Palepu, 2001;
Verrecchia, 1983). According to a voluntary disclosure explanation, firms issue standalone CSR Reports to ensure that
stakeholders are aware of the appropriateness of the firms’ actions taken on social and environmental issues (Gray et al.,
1995; Clarkson et al., 2011a,b).
Voluntary disclosure theory suggests that ‘‘good’’ firms will use standalone CSR Reports to signal that the firm is a
‘‘good’’ corporate citizen (cf., Dye, 1985; Lizzeri, 1999). Even though disclosure is costly, ‘‘good’’ firms will benefit from

3
CorporateRegister.com hosts the world’s largest online directory of CSR and estimates that it has access to over 90% of the world’s published CSR Reports
(CorporateRegister.com, 2011).
4
For example, two-thirds of non-reporting G250 companies are based in the U.S. (KPMG, 2011a,b); therefore, it is particularly important to understand
the motivations of U.S. firms for issuing standalone CSR Reports.
352 L.S. Mahoney et al. / Critical Perspectives on Accounting 24 (2013) 350–359

making stakeholders aware of their ‘‘good’’ performance, while firms that are not ‘‘good’’ may be punished by stakeholders5
(e.g., Verrecchia, 1983). Therefore, firms will undertake voluntary disclosure when the benefit of providing standalone
voluntary information, such as CSR Reports, outweighs the associated costs (Li et al., 1997). As applied to CSR performance,
Prado-Lorenzo and Garcia-Sanchez (2010) argue that companies with the superior CSR performance will try to obtain a
competitive advantage by voluntarily providing relevant CSR information. Consequently, companies with inferior CSR
performance will avoid distributing CSR information that would adversely affect their reputations (Prado-Lorenzo and
Garcia-Sanchez, 2010).
Signaling theory assumes that it is less costly for a firm with stronger performance to engage in voluntary disclosure
than one with weaker performance (Verrecchia, 1983). Although scarce, there is some support for the argument that firms
with stronger CSR performance will find it less costly to disclose CSR data than firms with weaker CSR performance in the
domain of voluntary CSR reporting.6 Sinclair-Desgagne and Gozlan (2003) present theoretical models where external
agents punish firms that purport to be ‘‘good’’ corporate citizens when they are not, and the Nike-Kasky Case (2002)
provides evidence that supports their models. Prior to 2002, Nike issued standalone CSR Reports that included false claims
regarding labor practices of its subcontractors in the third world. When the claims were subsequently proven false,
stockholders took legal action against Nike, which was subsequently settled when Nike agreed to pay $1.5 million to a labor
standards organization (Murray, 2005).7 This example shows that stakeholders are willing to punish false disclosures
included in CSR Reports.
As applied to the standalone CSR Reports, the signaling argument suggests that firms with stronger CSR performances will
incur lower costs when issuing standalone CSR Reports than firms with weaker CSR performances. Because it is less costly for
firms with stronger CSR performances, it follows that they will be more likely to issue standalone CSR Reports than those
with weaker CSR performance. This gives rise to our first hypothesis, consistent with a voluntary reporting perspective:

H1. Firms that issue standalone CSR Reports have stronger CSR performance than firms that do not issue standalone CSR
Reports.

2.2. Greenwashing explanation for issuing standalone CSR reports

The second explanation, greenwashing, emerges from a socio-political perspective that suggests that firms use
standalone CSR Reports to influence and enhance stakeholders’ perceptions of the appropriateness of their firm’s pro social
and environmental actions (Guidry and Patten, 2010; Lyon and Maxwell, 2011). The socio-political perspective encompasses
legitimacy theory, stakeholder theory, and political economy of accounting theory, which all suggest environmental
disclosure is a function of political and social pressures (Clarkson et al., 2008; Gray et al., 1995). Gray et al. (1995) view both
legitimacy and stakeholder theories being within the framework of political economy theory, which insists that the domain
of economics cannot be studied in isolation from the political, social and institutional considerations. This explanation also is
consistent with Holder-Webb et al. (2009) who suggest that CSR disclosures are undertaken to build or maintain legitimacy
with the social environment. Legitimacy exists when the firm’s value system is congruent with that of its stakeholders
(Lindblom, 1994).
Greenwashing is a legitimation strategy that occurs when firms voluntarily issue CSR Reports to promote an impression
of legitimate social and environmental values, which may or may not be substantiated (Lindblom, 1994; Neu et al., 1998).
Lindblom (1994) suggests that one path to legitimation is to manipulate stakeholders’ perceptions through association with
legitimatizing symbols, which may include targeted disclosures (Deegan, 2002). For instance, if stakeholders perceive
voluntary CSR Reports to be a symbol of ‘‘good’’ corporate citizenship, then firms would deflect stakeholders’ pressure by
issuing standalone CSR Reports. It follows that firms may voluntarily issue standalone CSR Reports to legitimize their status
with stakeholders, and accrue the benefits of being a ‘‘good’’ corporate citizen even when they have not made any attempt at
actual conformity.8
According to a greenwashing explanation, firms issue standalone CSR Reports to pose as strong corporate citizens even
when they are not (Greer and Bruno, 1996). Greenwashing involves selective disclosure of positive social and environmental
actions resulting in misleading and biased reporting. An example of Greenwashing was presented in Adams (2004) who

5
Firms issue standalone CSR Reports to avoid adverse selection, because in the absence of a positive signal that a firm is a ‘‘good’’ corporate citizen,
stakeholders will assume that a firm is ‘‘bad’’ (Milgrom, 1981).
6
Prior empirical research suggests that proprietary costs vary according to firm size (Cormier and Magnan, 2003).
7
Immediately after the settlement was reached, Nike stopped producing its standalone CSR Report for three years. In 2005, Nike started once again to
voluntarily reissue its standalone CSR Reports, and has been presented as an industry leader due to its extremely high levels of transparency and disclosure
(Murray, 2005).
8
Lindblom (1994) describes four different paths to legitimization used by firms involving a combination of voluntary CSR disclosure and substantive
actions: (1) Change in actions and selectively inform stakeholders of ‘‘new’’ conforming actions, which may or may not involve neutral and unbiased
reporting; (2) No change in actions and unbiased reporting of existing actions; (3) No change in actions, and manipulation of stakeholders’ perceptions
through association with legitimate symbols, which involves misleading reporting; and, (4) No change in actions, but change stakeholders expectations, and
also may involve biased reporting. Only the second strategy involves unbiased reporting, which is consistent with signaling. Three of Lindblom’s (1994)
strategies involve biased or misleading reporting, and are consistent with greenwashing.
 L.S. Mahoney et al. / Critical Perspectives on Accounting 24 (2013) 350–359 353

compared a company’s actual environmental performance to its environmental reporting and found very little disclosure of
its negative environmental performance, which was attributed to a firm’s attempt to portray itself as a good corporate
citizen.
Greenwashing occurs when firms are willing to incur costs to voluntary disclose biased and misleading social and
environmental information so that their stakeholders believe that they are ‘‘good’’ (Guidry and Patten, 2010; Cho et al., 2010;
Lyon and Maxwell, 2011). While Greenwashing may not involve false disclosures, it may include those firms that
conveniently exclude damaging disclosures. Some examples of ‘‘advantageous’’ omission in CSR Reports is reported by Belal
and Cooper (2011) who found a number of companies in Bangladesh that were not in compliance with labor-related laws did
not disclose their non-compliance in order to avoid negative publicity and potential restrictions on their activities. Belal and
Cooper (2011) suggest that non-disclosure serves corporate interests and benefits particular stakeholder groups including
management and shareholders. It follows that greenwashing implies that voluntary CSR disclosures do not (necessarily)
correspond with actual social and environmental performance (Cho and Patten, 2007) and can be used to help mediate the
effect of poor environmental performance on environmental reputations (Cho et al., 2010).
Greenwashing suggests that firms with weaker social and environmental performance records acquire a greater benefit
from influencing stakeholders’ perceptions of the firms’ CSR performance than firms with stronger social and environmental
records (Clarkson et al., 2008; Patten, 2002). It follows that we would expect weaker corporate citizens to more likely issue
standalone CSR Reports to manipulate stakeholders’ perceptions of the firms’ social and environmental position than
stronger corporate citizens. This gives rise to our second hypothesis, which is consistent with a greenwashing perspective.

H2. Firms that issue standalone CSR Reports have weaker CSR performance than firms that do not issue standalone CSR
Reports.

3. Methodology

3.1. Sample selection

Our method involved obtaining a sample of firms that issue standalone CSR Reports and matching it to similar firms that
do not issue standalone CSR Reports. Our primary sample included those U.S. publicly held firms that issued standalone CSR
Reports in 2006. On the basis of size and industry, we match our primary sample of firms that issue standalone CSR Reports to
a set of comparable U.S. firms that do not.
The list of firms issuing standalone CSR Reports was obtained from CorporateRegister.com. CorporateRegister.com
estimates to have over 90% of the world’s published CSR Reports (CorporateRegister.com, 2011), making it the world’s largest
online directory of CSR Reports. CorporateRegister.com only publishes CSR Reports that contain quantitative data. A total of
230 different US entities issued CSR Reports in 2006. Of these entities, 16 were non-profit or governmental entities and 14
were foreign subsidiaries reducing the sample size to 200 companies. An additional 33 companies were removed (30 private
and 3 public companies) as no CSR performance score was available for them, reducing the sample size to167. Finally, 11
companies were removed due to missing financial data resulting in a final sample size of 156. These 156 public firms were
matched (based on SIC code and Total Assets) to firms that had not filed standalone CSR Reports in 2006 and had a Total CSR
performance score available from KLD, resulting in a combined sample size of 312 firms.

3.2. Measures

3.2.1. Measurement of CSR performance

We use CSR performance scores from the KLD database as a proxy for U.S. firms’ CSR performance. Scores are measured by
using the KLD index developed by KLD Research & Analytics, Inc. and used extensively in prior research (e.g., Dawkins and
Fraas, 2011; Graves and Waddock, 1994; Hillman and Keim, 2001; Johnson and Greening, 1999; McGuire et al., 2003; Thorne
et al., 2009; Waddock and Graves, 1997). The KLD database is a private database that compiles all publicly available data on
firms’ social and environmental actions across a number of important performance attributes, which were determined by a
knowledgeable group of individuals not connected with the firms (Waddock and Graves, 1997). The KLD index scores are
based upon data gathered from a broad range of sources; both internal and external to the firm (see Waddock and Graves,
1995 for further details). Subsequently, this multidimensional index has been regarded as one of the best information
sources available to researchers studying CSR (Hillman and Keim, 2001) and is considered the dominant source for CSR
performance scores of U.S. public firms (e.g., Albinger and Freeman, 2000; Greening and Turban, 2000; Hillman and Keim,
2001; Johnson and Greening, 1999; Mahoney and Roberts, 2007; McGuire et al., 2003).
KLD provides Total CSR performance scores for firms traded on the U.S. stock exchanges. The Total CSR performance
score is based on a comprehensive evaluation of seven dimensions of community, corporate governance, diversity,
employee relations, environment, human rights and product, and is used to measure CSR performance of a firm. Each of
these dimensions is made up of several categories. Each category is given two ratings, one for strength and one for
weaknesses, on a scale of 0–2. A score of 0 indicates no strengths or no concern; a score of 1 indicates some strength or
some concerns, while a score of 2 represents a major strength or a major concern. Total CSR performance scores are
354 L.S. Mahoney et al. / Critical Perspectives on Accounting 24 (2013) 350–359

calculated by summing the strength performance scores across all categories in each of the seven dimensions for each
company and subtracting the sum of the weaknesses performance scores across the same categories for the seven
dimensions.9

3.2.2. Measurement of control variables

Size, leverage, industry and financial performance have been noted in prior research as factors that affect CSR (Graves and
Waddock, 1994; Mahoney and Roberts, 2007; Ullmann, 1985). Burke et al. (1986) noted that larger firms may have greater
exposure to external constituents and thus may need to respond more openly to stakeholders’ demands. Thus, smaller firms
may not exhibit as many socially responsible behaviors as larger firms. In keeping with prior research, we use Total Assets as
a proxy for firm size and ROA as a proxy for firms’ financial performance (Mahoney and Roberts, 2007; Roberts, 1992;
Waddock and Graves, 1997, 1994).10 Leverage and industry may also cause differences in the relationships between CSR and
other company measures (Graves and Waddock, 1994; Mahoney and Roberts, 2007; Waddock and Graves, 1997). Industries
are represented by dummy variables in our model and broken down by four-digit Standard Industrial Classification (SIC)
code per Graves and Waddock (1994). Leverage is calculated as the relationship of debt-to-equity. Information on 2005 total
assets, ROA, 2005 debt-to-equity, and SIC codes were obtained from the Compustat database.

3.3. Statistical analysis

3.3.1. H1 and H2 analysis

H1 and H2 are competing hypotheses. Hypothesis 1 posits that firms that issue standalone CSR Reports have higher CSR
performance scores than firms that do not issue standalone CSR Reports. In direct contrast to H1, H2 posits that firms that
issue standalone CSR Reports have lower CSR performance than firms that do not issue these reports. We have two tests of H1
and H2. Our first test is an independent t-test of Total CSR performance scores between firms that issue standalone CSR
Reports and firms that do not issue standalone CSR Reports. This test does not include any control variables.
Our second test of H1 and H2 attempts to determine if there is a difference in Total CSR performance scores between firms
that issue standalone CSR Reports and those that do not, while controlling for firm profitability, leverage, size, and industry.
This second test is a logistic regression with the dependent variable being whether the firm issued a standalone CSR Report or
not. The dependent variable Match was set equal to 1 if the firm issued a standalone CSR Report and 0 otherwise. Our
independent variable is the Total CSR performance score to operationalize corporate citizenship, and we also control for firm
profitability (ROA), leverage (Debt-to-equity = Total Debt/Total Equity), size (Assets = Total Assets in millions), and industry
(according to SIC code), because the decision to issue standalone CSR Reports may be impacted by other factors. We use the
following logistic equation:

Match ¼ b0 þ b1 CSRi;tþ1 þ b2 ROAi þ b3 Debt-to-equityi þ b4 Assetsi þ b5 Industryki þ eit (1)

where: i = firm, t = time, Match = 1 if firm issues standalone CSR Report; 0 otherwise, CSR = Total Corporate Social
Responsibility Score, ROA = Return on Assets, Debt-to-equity = Total Debt/Total Equity, Assets = Total Assets in Millions,
Industryk = 1 if industry k; 0 otherwise; k = 1, 2. . . 7 (number of SIC codes minus one), eit are independent, normally
distributed error terms with mean 0 and variance s2.

4. Results

4.1. Descriptive statistics

Table 1 shows the means, standard deviations, and correlations for our independent, dependent and control variables for
the entire sample of firms, including both firms that issue standalone CSR Reports and those who do not. The average Total
CSR performance score for the entire sample is .20. The average Total Assets, Debt-to-equity and ROA for the entire sample
is $65,006 million, 3.68 and 5.36, respectively.
The means, standard deviations, and correlations for the sample of firms that issue standalone CSR Reports and for the
sample of firms that do not are shown in Table 2 and Table 3, respectively. Table 2 shows that Total CSR performance score is
.64 for firms who issue standalone CSR Reports. The average Total Assets, Debt-to-equity and ROA for the sample of firms
with standalone CSR Reports are $89,155 million, 5.27 and 6.34, respectively. Table 3 shows that Total CSR performance
score is 1.05 for firms that do not issue standalone CSR Reports. The average Total Assets, Debt-to-equity and ROA is
$40,856 million, 2.09 and 4.37, respectively. Total CSR performance is significantly related to ROA at p < .05 for firms that
issue standalone CSR Reports. For firms that do not issue standalone CSR Reports, Total CSR performance is significantly
related to Total Assets. Thus, firms that issue standalone CSR Reports have a higher Total CSR performance than firms that do
not issue standalone CSR Reports.

9
Total CSR Performance scores for the sample ranged from a low of 10 to a high of 14.
10
In supplemental analyses, we used various measures of firm size taken from previous studies: total sales and total assets (Waddock and Graves, 1997);
total sales (Pinkston and Carroll, 1993); and log of total sales (Goll and Rasheed, 2004; Ruf et al., 2001).
 L.S. Mahoney et al. / Critical Perspectives on Accounting 24 (2013) 350–359 355

Table 1
Correlations with total CSR performance for combined sample.

Variable Mean SD Total assets Debt-to-equity ROA

Total assets $65006 183280

Debt-to-equity 3.68 15.032 .210*
ROA 5.36 6.979 .148* .091
Total CSR performance .20 3.889 .089 .088 .105

** p < .05.
* p < .01.

Table 2
Correlations with total CSR performance for firms that issue standalone CSR reports.

Variable Mean SD Total assets Debt-to-equity ROA

Total assets $89155 218064

Debt-to-equity 5.27 17.670 .184**
ROA 6.34 5.104 .291* .223**
Total CSR performance .64 4.497 .021 .125 .201**
* p < .01.
** p < .05.

Table 3
Correlations with total CSR performance for firms who do not issue standalone CSR reports.

Variable Mean SD Total assets Debt-to-equity ROA

Total assets $40856 136653

Debt-to-equity 2.09 11.621 .237*
ROA 4.37 8.350 .092 .373*
Total CSR performance 1.05 2.950 .165** .089 .022
* p < .01.
** p < .05.

4.2. H1 and H2 results

Hypothesis 1 is that firms that issue standalone CSR Reports have stronger CSR performance than firms who do not issue
standalone CSR Reports, and in direct contrast is H2 that states firms that issue standalone CSR Reports have weaker CSR
performance than firms who do not issue these reports. Table 4 presents the results of the independent t-tests comparing
Total CSR performance scores for firms that issue standalone CSR Reports to those who do not. Table 4 shows that Total CSR
performance is significantly higher (p < .01) for firms that issue standalone CSR Reports than for those that do not issue
standalone CSR Reports. These results support H1 and the signaling explanation that firms who issue standalone CSR Reports
have stronger CSR performance. Table 4 does not provide support for H2 and the greenwashing explanation.
Hypothesis 1 and 2 were also tested using logistic regression where the dependent variable was whether or not a firm
issued a standalone CSR Report. Table 5 reports the results of this logistic regression. Table 5 shows a significant positive
association between Total CSR performance and the issuing of standalone CSR Reports at p < .01 level, after controlling for
ROA, Debt-to-equity, Total Assets and Industry. Thus firms that issue standalone CSR Reports have significantly higher CSR
performance scores. These results are consistent with H1, the signaling explanation.

4.3. Supplementary analysis

In order to assess the robustness of the results, we performed several additional tests of the models presented in the
paper. We evaluated whether our analysis was biased due to the inclusion of firms in our ‘‘matched sample’’ that had
previously issued standalone CSR Reports but were no longer doing so. A sensitivity analysis was considered on a sample of
companies where firms were removed from the original sample that had issued standalone CSR Reports anytime during the
previous three years, along with the company to which they were matched. The resulting sample was 135 firms that were
not currently issuing standalone CSR reports and had not previously issued these reports in the prior three years and the 135

Table 4
Results of independent T-tests of CSR means.

Standalone reporting firms CSR Non standalone reporting firms CSR T Statistic

Total CSR performance 0.64 1.05 3.90*

* p < .01.
356 L.S. Mahoney et al. / Critical Perspectives on Accounting 24 (2013) 350–359

Table 5
Logistic regression between the decision to issue standalone CSR reports and CSR performance scores.

Dependent Issue Report (1 issued report, 0 otherwise)

Independent
Total CSR performance 0.143 (3.72)*
Control
2005 ROA 0.046 (1.90)
2005 Debt-to-equity 0.041 (1.31)
2005 Total assets 0.000 (1.97)**
Pseudo R square .084
N 312
Chi2 36.51*

Industry-specific intercepts not reported.

* p < .01.
** p < .05.

Table 6
Results of logistic regression of GRI used in standalone CSR reports.

Dependent GRI (1 used GRI in CSR Report, 0 otherwise)

Independent
Total CSR performance 0.123 (2.25)**
Control
2005 ROA 0.070 (1.27)
2005 Debt-to-equity 0.063 (0.87)
2005 Total assets 0.000 (2.29)**
Pseudo R square .175
N 133
Chi2 31.13*

Industry-specific intercepts not reported.

* p < .01.
** p < .05.

companies there were matched too, resulting in a total sample size of 270 firms. Our independent t-test shows that average
Total CSR performance scores (0.67) of firms that issued stand-alone CSR was significantly higher than Total CSR
performance scores (1.19) of firms that did not issue these reports at p < .01. Additionally, our revised logistic regressions
results were consistent with our prior reported results as Total CSR performance scores were significantly related at p < .01
level to the issuance of standalone CSR Reports. Thus, we conclude that the prior issuance of standalone CSR Reports did not
affect our results as presented.
We extended our supplementary analysis to consider firms that choose to follow the Global Reporting Initiative (GRI)
reporting framework in their standalone CSR Reports. The GRI is widely acknowledged as the leader in the development of
sustainability reporting guidelines (Ballou et al., 2006; Woods, 2003). The GRI frameworks contain principles and indicators
that firms use to benchmark social and environmental performance with respect to laws, norms, codes, performance
standards and voluntary initiatives (GRI, 2008). Extending our reasoning to GRI firms, we expect that the 53 firms that adopt
GRI standards in their standalone CSR Reports have higher CSR performance scores when compared to those 103 reporting
firms that do not adopt GRI standards.
Table 6 shows the results of our logistic regression equation that compares Total CSR performance between firms that
follow GRI standards and those that do not, while controlling for profitability leverage and size variables. Total CSR
performance is significant at p < .05, which means that firms that adopt GRI standards in their standalone CSR Report have
higher CSR performance scores than firms that do not follow GRI standards in their standalone CSR Reports.11
Our final supplemental analysis considers different operationalizations of firm size. Following previous studies, firm size
was measured as Total Sales and Total Assets (Waddock and Graves, 1997); Total Sales (Pinkston and Carroll, 1993); and log
of Total Sales (Goll and Rasheed, 2004; Ruf et al., 2001). Using these different measures, our findings did not change.

5. Discussion

The purpose of our research is to provide insight into the motivations behind why firms choose to issue voluntary
standalone CSR Reports. We consider whether voluntary standalone CSR Reports are used as a signal of superior social and

11
Sample size was reduced to 133 as logic regression automatically dropped observations for certain SIC codes that predicted failure or success perfectly.
When these SIC codes were dropped from the logistic regression to test the entire sample of 156 firms, Total CSR performance was still significantly
positively associated with the decision to follow GRI standards at p < .05.
 L.S. Mahoney et al. / Critical Perspectives on Accounting 24 (2013) 350–359 357

environmental performance or to manipulate stakeholders’ perceptions of a firm’s pro social and environmental actions
through greenwashing (Clarkson et al., 2008). The first explanation, signaling, suggests firms with ‘‘good’’ social and
environmental records will be more likely to issue standalone CSR Reports as compared to those without ‘‘good’’ social and
environmental records. The second explanation, greenwashing suggests that standalone CSR Reports are published primarily
to influence stakeholders’ perceptions that firms are concerned with social and environmental issues. Greenwashing
suggests that firms use standalone CSR Reports to pose as ‘‘good’’ corporate citizens even when they are not, through biased
reporting tending to be overly positive about their pro-social and environmental actions, and neglecting or avoiding the
reporting of negative social and environmental actions (Lindblom, 1994; Adams et al., 1995; Adams, 2004).
Greenwashing may help explain why companies with ‘‘bad’’ social and environmental activities voluntarily release their
social and environmental activities in a positive light (Adams, 2004) and fail to disclose negative environmental performance
or disclose it in less detail (Adams et al., 1995; Belal and Cooper, 2011) to protect their self-interests. The Bourgeois variant of
political economy theory argues that environmental disclosures are a response to pressure from various stakeholders (Gray
et al., 1995; Branco and Rodrigues, 2007; Ramanathan, 1976). Following this argument, Williams (1999) suggests that if a
firm is perceived to be engaging in negative social actions, it will lose society’s endorsement and likely fail, and to maintain
right standing in society, firms will voluntarily report on their social and environmental activities, and will ‘‘greenwash’’ poor
environmental performance by emphasizing positive social actions and failing to disclose poor performance (Adams et al.,
1995; Belal and Cooper, 2011).
We compare the CSR performance scores of firms that issue CSR reports to those firms that do not issue CSR reports to
provide insight into these explanations. We control for firm size, leverage, profitability, and industry (Cormier and Magnan,
2003). We find that U.S. firms that voluntarily issue standalone CSR Reports generally have higher CSR performance scores,
which supports the signaling theory explanation that voluntary CSR Reports are used primarily by U.S. firms with good social
and environmental records so that stakeholders are aware of their ‘‘good’’ records.
Our results show that U.S. firms issuing standalone CSR Reports are in fact better corporate citizens than firms that do not
issue standalone CSR Reports, which is consistent with a signaling theory perspective. Signaling theory suggests that ‘‘good’’
corporate citizens issue standalone CSR Reports to eliminate information asymmetries that may be preventing them from
reaping the benefits of their actions. Signaling suggests that firms use standalone CSR Reports as a signal of their superior
commitment to CSR, and ‘‘good’’ firms are prepared to undertake the ‘‘costs’’ of voluntary CSR reporting to obtain the benefit
conferred upon ‘‘good’’ corporate citizens.
Our results have several implications. First our findings imply that U.S. firms issue standalone CSR Reports because
stakeholders cannot distinguish between ‘‘good’’ and ‘‘bad’’ corporate citizens (in the absence of mandatory disclosure).
‘‘Good’’ corporate citizens use voluntary standalone CSR Reports to ensure that they obtain the positive benefits bestowed on
‘‘good’’ corporate citizens by society. It follows that disclosures in voluntary CSR reports cannot be extrapolated or
considered to be representative of the entire population of U.S. firms, as they primarily reflect ‘‘good’’ social and
environmental firms that are ensuring that they gain recognition from society for their positive actions. Thus, our results
support Adams (2004) suggestion that mandatory disclosure in the U.S. is needed to obtain an unbiased understanding of
social and environmental performance.
Secondly, our results highlight the importance of activist stakeholders and stakeholder pressure for social and
environmental reporting, as our findings suggest that, in the absence of mandated disclosure, it is critical that society
rewards ‘‘good’’ corporate citizens for their positive social and environmental policies and actions. Stakeholder pressure can
motivate companies to adopt various environmental practices (Buysse and Verbeke, 2003; Eesley and Lenox, 2006; Deegan
and Blomquist, 2006). For example, Deegan and Blomquist (2006) find that a stakeholder group, WWF-Australia, influenced
the Australian minerals industry to change its environmental reporting by developing an environmental reporting scorecard.
The pressure the WWF-Australia was able to exert through its environmental scorecard led to changes in environmental
disclosures and changes in the Australian environmental code for the minerals industry.
Our findings reinforce an important implication of Lyon and Maxwell’s (2011) study that stakeholders must be active and
willing to punish firms that inappropriately report their voluntary disclosures of social and environmental activities. Thus,
our findings expose that without mandated disclosure, full transparency regarding firms’ social and environmental actions is
dependent upon stakeholder pressure.
Third, another implication following from our findings is that stakeholder pressure for firms to take positive social and
environmental actions may be less in the U.S. than in other countries across the globe. Given two-thirds of non-reporting
G250 companies are based in the U.S. (KPMG, 2011a,b), our findings underscore that stakeholder pressure for transparent
reporting of social and environmental performance may not be as prevalent in the U.S. as compared to other countries (e.g.,
Australia, see Deegan and Blomquist, 2006). Future research is needed to consider the factors that may account for the
differences and the ‘‘lag’’ between voluntary standalone CSR Reports in U.S. firms as compared to other national contexts.
Finally, our supplemental analysis shows that firms that voluntarily issue CSR Reports that follow GRI guidelines also use
GRI guidelines to signal their superior corporate citizenry over firms that do not follow these guidelines. Thus, our findings
reinforce claims by KPMG International (2008, p. 10) that ‘‘corporate responsibility reporting is building value for companies
in many ways’’ and ‘‘enhancing reputation by providing truthful and robust information on tough issues’’.
Like all research, ours has limitations associated with the measures, methodology and sample size. First, the results of our
study cannot be extended beyond the U.S. Also, we rely on the use of the KLD scores as a proxy for actual CSR performance,
although the KLD, like all quantitative measures, has its inherent limitations (see Chatterji and Levine, 2006; Chatterji et al.,
358 L.S. Mahoney et al. / Critical Perspectives on Accounting 24 (2013) 350–359

2009; Schreck, 2011). Furthermore, our analysis was limited to considering only whether or not firms issue standalone CSR
Reports. We did not measure or consider the variation in quality of the CSR Reports, although we are aware that there may be
variation in the quality of CSR Reports issued by a firm. Future research that integrates qualitative and quantitative
approaches to CSR research is needed to explore quality differences across reports, and to build further upon our
understanding of the attributes of firms that voluntarily issue CSR Reports. For example, future research may consider the
quality of the CSR Report and the extent to which the information contained in the CSR Report is new information or is
information that is already publicly available.

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