Corporate environmental reporting on the internet: an exploratory study
International Journal of Managerial and Financial Accounting
Environmental disclosure (ED) is now considered to be a 'key' medium through which to communicate a corporations 'environmental' performance to its stakeholders. The rapid growth of 'Internet' technology has created the ability for firms to 'disseminate' information to the 'global' audience by removing all 'geographical' barriers. In this study, we explore the status of ED made by 39 corporations during the year 2005-06, by using "content" analysis methodology. In order to examine the quality
... amine the quality of ED by these corporations on their Websites, we followed Technology Adoption Model. The empirical data used in this study is based on the online Annual Reports, and disclosure made on their Websites. A careful analysis of the information collected indicates that corporations provide more ED on their Websites, in sharp contrast, to reporting made within their Annual Reports. Fortunately, most of the corporations making ED on their Websites consider 'environmental' information to be 'very' significant to the 'visitors' of their Websites. However, ED in Annual Report is general, broad and narrative in nature, without specifically discussing the "environment management policy" followed by the corporation and/or "statement of assurance" from the corporate management regarding compliance with the external standards, if any. We feel that this needs to be improved soon, since narrative comments do not reflect the contribution of the corporation towards the betterment of the environment. However, corporations are still adapting ICT, and as yet, do not fully exploit all of its capabilities. Thus, there is considerable scope for corporations to improve their Internet-and Web-based corporate EID. provide financial information on the Internet, among others: reducing the cost of and time to distribute the information; communicating with previously unidentified consumers of the information; supplementing traditional disclosure practices; increasing the amount and type of information reported, and improving access to potential investors for small corporations. As Hunter and Smith (2009) observe, "Use of Internet financial disclosure is effectually a method of marketing a corporation to shareholders and investors. IFR disclosure has at least two major 'economic' effects. First, the Internet alters information processing costs, and with it the demand and supply of financial information in 'capital' markets. Second, IFR creates a demand for 'standardization'; this led to development of XBRL (www.xbrl.org). In fact, XBRL stands for "eXtensible Business Disclosure Language". Corporations can use XBRL to save costs and streamline their processes for collecting and disclosure financial information. Consumers of financial data can receive, find, compare and analyze data, much more rapidly and efficiently if it is in XBRL format. Moreover, XBRL can handle data in different languages and accounting standards. Business organizations across the globe are facing the challenge of disseminating 'environmental' information as the 'public' concerns regarding these issues have increased. For instance, Wilmshurst and Frost (2000) have defined "environmental disclosure as those disclosures that relate to the impact corporation activities have on the physical or natural environment in which they operate." Therefore, environmental disclosure (ED) aims to communicate whether natural resources have been used responsibly by the corporate world. In fact, corporate ER is growing in importance due to the increased demand for environmental performance information, and the prospect that such information will improve financial performance. However, there are wide variations in ED across-corporations, and divergent views on why corporations 'voluntarily' provide ED. In this context, Dawkins and Fraas (2011), lucidly explains: "Voluntary disclosure includes information that is not required by law or code of practice (e.g., Annual Reports and proxy statements), or goes beyond what is required, and is useful for stakeholder decision-making." Essentially, there are two explanations for voluntary disclosure that are termed as 'legitimacy' theory and 'voluntary' disclosure theory: voluntary disclosure approach focuses on "acclamations of good performance," while the legitimacy approach is directed toward "excusing poor performance." Now-a-days, the Internet has been widely employed by several 'progressive' corporations for providing their ED information. Many of the largest corporations usually have an Internet and Website for making their financial and ER. Compared with the 'traditional' printed Annual Reports, the Internet offers many more opportunities to communicate corporate information, and allows a wealth of up-to-date, unofficial, critical, and alternative channels of accounting information to compete with the official channels. In this context, Abdelsalam and Street (2007) , very appropriately observes, "Internet is serving as an important tool to facilitate a better functioning of financial markets by enhancing corporations' ability to prepare investors' with up-to-date, timely information. As the financial market is facing globalization, liberalization, and economic crisis and downturn, timely information is frequently required to assist users in decision-making." In this case, the most valuable information is the one that can reduce information "asymmetry". Business firms are always looking for a new tool for disseminating information to external users. One of the 'innovative' tools that are available in the market is 'Internet' technology (Alarussi et al., 2009) . Through enhanced disclosure on the Internet, the "agency risk" that usually results from information 'asymmetries,' would be considerably reduced. Moreover, firms disclose additional information about the managers' actions, and the economic reality of the corporation in order to www.hrmars.com/journals 178 (A) Environmental Disclosure on the Websites: Willman (2007) very strongly argued that "corporations are failing to exploit the enhancement of Web technologies in disseminating the financial reports, which makes the presentation of financial disclosure via Internet similar to paper-based disclosure except for its much greater speed of distribution." The ED on Websites of respective corporations has been examined in two different categories. First, an analysis has been done on the level at which environmental information has been reported: at the 'home-page' level, or under any 'specific' category level. Secondly, 'content analysis' has been used to analyze the extent of ED. Following Yang (2005) research work, these two examinations together provide a measure of the 'quality' of the Websites of these corporations concerning ED. The well-known, technology adoption model (TAM) was developed by Davis. It suggests that users' decision to adopt an information technology is primarily determined by their attitudes towards: (1) usefulness, and (2) ease of use. First, a user must have a reason to adopt the Internet as an information and communication channel. Thus, the TAM is embraced. Second, an IP Web portal consists of digital information and an information delivery infrastructure. However, browsers, search engines, encryption, networking systems etc. are outside the limit of Websites. Accordingly, information quality (IQ) and system quality (SQ) are of prime importance for IP Web portal users. McKinney et al. (2002) defined Web-based IQ as "users' perception of the quality of information presented on a Web site." The dimensions suggested include usefulness of content, and adequacy of information. However, system quality (SQ) refers to "customers' perception of a Website's performance in information retrieval and delivery." Here, the four key attributes are: usability, accessibility, privacy/security, and interaction. For this study, we aim to measure the 'quality' of Websites of Indian corporations concerning environmental information accessibility and extent of disclosure. Therefore, the model of Yang has been slightly modified to fit into our research objective (Chatterjee and Mir, 2008). Therefore, Figure 1 provides the measure of quality of Websites of respective Indian corporations to obtain environmental information items. For the purpose of this study, we measure IQ by examining 'adequacy'. However, the measurement of 'usefulness of content' is not possible in the context of ED on the Websites of these corporations, as most of the ED is narrative in nature, and does not refer to a specific time period. Similarly, SQ has been measured by 'usability' only for the purpose of this study, as other dimensions are not relevant to the research objective, and data analysis of this study. (B) Environmental Disclosure in the Annual Reports: As mentioned earlier, "content analysis" has been used to analyze the extent of ED in the Annual Reports of selected 39 sampled corporations. Previous studies in regard to ER have analyzed Annual Reports by using content analysis (Ahmed and Sulaiman, 2004; Cunningham and Gadenne, 2003; Harte and Owen, 1991) . Accordingly, this study also uses content analysis to be in line with the available literature. According to the US General Accounting Office (GAO, 1982), "Content analysis refers to a set of procedures for collecting and organizing information in a standardized format." Content analysis can provide the answer to question "what?" As this study examines the particulars of ED made by sampled corporations, this method has been found to be quite suitable.