Corporate social andenvironmental disclosure byIndonesian listed companieson their corporate web sites

Hadrian Gery DjajadikertaSchool of Accounting, Finance & Economics and Centre for Innovative Practice,

Edith Cowan University, Perth, Australia, and

Terri TrireksaniMurdoch Business School, Murdoch University, Perth, Australia

Abstract

Purpose – The purpose of this paper is to measure the extent of corporate social and environmentaldisclosure (CSED) made by Indonesian listed companies in the Indonesia Stock Exchange (IDX) ontheir corporate web sites, and to investigate the relationship between the company’s environmentalsensitivity and the extent of the corporate social and environmental web site disclosure.Design/methodology/approach – The corporate social and environmental web site disclosureexamination in this study was conducted at the company level, with the target sample of Indonesianlisted companies that provided their profiles on the IDX web site. The sample consisted of bothsensitive and non-sensitive companies. Content analysis was used to analyse the data.Findings – The results of this study suggest that the extent of CSED made by Indonesian listedcompanies on their corporate web sites is low and the nature of disclosure is mostly descriptive,without any specific time frame. The most disclosed information is “community”, followed by “humanresources”. It is found that there is no significant difference between the extent of CSED in bothsensitive and non-sensitive industries. Overall, the results indicate that the practice of CSED inIndonesia is still at an early stage. It seems that most of the companies in this study still have a lackof understanding about CSED, and the main reason for their disclosure is to gain societal recognition ofthe adequacy of their social behavior.Originality/value – In the lack of studies which explore the practice of CSED within the developingcountry context, and in media other than annual reports, this paper provides some insight about thepractice of CSED made by Indonesian listed companies on their corporate web sites.

Keywords Indonesia, Corporate social responsibility, Web sites, Disclosure,Corporate social and environmental disclosure

Paper type Research paper

1. IntroductionSince the early 1970s, and particularly since the 1990s, the disclosure of social andenvironmental information, referred to as corporate social and environmentaldisclosure (CSED), has been increasing in popularity and acceptance among businessentities, academics, and practitioners (e.g. Allen and Kearins, 2001; Clarkson et al.,2008; Cooper and Owen, 2007; Deegan, 2002a; Jenkins, 2005; Secchi, 2007; van Stadenand Hooks, 2007). This reporting practice relates to the issue of corporate socialresponsibility (CSR), in which a business entity, as a member of the society, is expectedto address economic, social, and environmental issues in a way that aims to benefitpeople and communities (Kok et al., 2001; Leonard and McAdam, 2003; Owen andScherer, 1993). The growing practice of CSED has been influenced by a few key drivers,such as: business pressures from investors, competitors, and consumers; regulatory

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Journal of Applied AccountingResearch

Vol. 13 No. 1, 2012pp. 21-36

r Emerald Group Publishing Limited0967-5426

DOI 10.1108/09675421211231899

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pressures from governments and non-governmental organizations; and globalization(Chapple and Moon, 2005; Haigh and Jones, 2006).

A number of theoretical perspectives have been used to investigate the practice ofCSED, including classical political economy theory, stakeholder theory, and legitimacytheory. These theoretical perspectives are concerned with the impacts of society on theCSED practices of companies, and indicate that companies will respond to the society’sexpectations and perceptions by communicating their actions and activities throughpublic documents and media (O’Donovan, 2002).

CSED is predominantly voluntary in nature, and hence, the comprehensiveness,comparability, and credibility of the disclosure are difficult to determine (Beets andSouther, 1999; Gray, 1990). Adams et al. (1998) suggested that the extent of CSED canbe obtained by studying and understanding the disclosure quality and the factorsinfluencing the disclosure. The quality of disclosure is an important attribute ofCSED since its indicators imply what the disclosure is communicating and maysuggest the meaning or importance of the disclosure.

There is a growing body of literature that focusses on the extent of CSED (seee.g. Secchi, 2007). However, most of these studies have been conducted in the contextof western developed countries, such as those in Australia, Canada, the UK, the USA,or New Zealand (see e.g. Brown and Deegan, 1998; Deegan and Rankin, 1996;Deegan et al., 2002; Gray et al., 1995; Raar, 2002; Snider et al., 2003; Thomson andBebbington, 2005; Tilt, 1994; van Staden and Hooks, 2007). It has been much suggestedthat the extent of CSED may be country-dependent (e.g. Adams et al., 1998; Chappleand Moon, 2005; Gray et al., 1996; Hackston and Milne, 1996; Williams, 1999).Companies which operate in a particular country face an economic and culturalenvironment, moral judgment, political systems, and civil systems, specific to thatcountry. These lead to the differences in the extent of CSR practices across countries(Adams et al., 1998). However, it is difficult to examine the interaction between thesecountry-specific elements and the extent of CSED since little has been published onCSED practices in developing countries.

In the Asian context, most of the CSED studies have been conducted in thedeveloped or newly developed countries such as Japan, Singapore, and Malaysia(see e.g. Ahmad and Sulaiman, 2004; Belal, 2001; Fukukawa and Moon, 2004;Ramasamy and Hung, 2004; Rashid and Ibrahim, 2002; Thompson and Zakaria, 2004).There is a lack of CSED studies done in the Asian countries which are considered to be“less developing” and poorer (see Belal, 2001). This has led to a need for more effort tobe invested in CSED research in developing countries. In response to this need, thisstudy focusses on the extent of CSED made by Indonesian listed companies.

Indonesia is the biggest country in the South East Asia region, which is locatedcentrally on the world’s trade routes and has a complex and varied social andgeographical environment. Indonesian companies, for some time now, have been facinga number of factors exposing them to CSED practices. These include the issues ofpoverty alleviation, health and safety of the environment, pollution, social and politicalinsecurity, and the high needs for direct foreign investment (Goyal, 2006; Raynardand Forstater, 2002). The latest statistical data from the Indonesian Statistical Bureauin 2008 showed that 35 million people in Indonesia, or 15 percent of the population ofthe country, live below the poverty line (Biro Pusat Statistik, 2008). In addition topoverty, Indonesia has also been considered as one the worst countries in connectionwith deforestation. Indonesia has lost more than 70 percent of its original frontierforests (Hills, 2005). The higher levels of poverty and deforestation have been identified

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as triggers for a higher level of CSED made by companies ( Jenkins, 2005; Panwar et al.,2006). This especially applies to those companies involved in business related to theconsumption of natural resources. It has been suggested that disclosing social andenvironmental information is important for companies to project a positive imageand gain public credibility (e.g. Leonard and McAdam, 2003; Milne et al., 2000;Ratanajongkol et al., 2006; Thompson and Zakaria, 2004).

Indonesia has seriously needed foreign direct investment since the 1997 economiccrisis. However, investors and lenders have been slow to return to Indonesia becauseof lack of corporate transparency (e.g. Greenlees, 2005). Donaldson (2005) said that “inthe global market economy, the role of a company is about more than maximizingprofits alone. CSR means doing business with integrity and fairness – and it may evenimprove the bottom line” (p. 4). Margolis and Walsh (2003) reviewed 127 empiricalstudies published between 1972 and 2002, dealing with the relationship betweenCSR and firm financial performance, and concluded that the compilation of findingsindicated a positive relationship between CSR and firm financial performance. Thisfact suggests a need for a higher level of CSED to be performed by companies to attractforeign direct investment (Donaldson, 2005; Goyal, 2006).

It is also important to examine the practice of CSED in Indonesia in relation to thecountry’s culture. Hofstede (1980, p. 26) defined culture as “the collective programmingof the mind which distinguishes the members of one human group from another.” Witha population of about 225 million, an area of 1.9 million square kilometers, dozens ofexisting ethnic groups, and hundreds of different local dialects (United Nation, n.d.),Indonesia clearly has a highly diverse culture. It also has a quite high disparity acrossits regions and groups of people, in terms of economic and social status, technologicalinfrastructure, and natural resources (Djanali, n.d.). Williams (1999) utilized Hofstede’s(1980) culture concept to investigate the practice of CSED in the Asia-Pacific region,and found that companies in countries with lower scores on cultural indicators, suchas masculinity and uncertainty avoidance, provide a higher level of CSED comparedto their counterparts in countries with higher scores on these cultural indicators.Hofstede’s (n.d.) country culture scores for Indonesia show less than moderate levels forboth masculinity and uncertainty avoidance factors (46 and 48 out of 100, respectively).These low cultural scores could suggest that Indonesian listed companies may have atendency to provide an adequate amount of CSED.

Finally, the major focus of prior CSED studies has been the extent of disclosures incompanies’ annual reports (see Deegan and Rankin, 1997). Unerman (2000) mentionedthe risk of obtaining incomplete disclosure by focussing only on annual reports. It hasbeen suggested that other media may be used by companies as an alternative way fordisclosure, providing a better source of information (e.g. Stanwick and Stanwick, 1998;Tilt, 2001; Zeghal and Ahmed, 1990). Gunawan et al. (2009) investigated the extent ofCSED in the Indonesian listed companies’ annual reports for the years 2003-2006 usingthe content analysis approach. They found that the amount of disclosure was limitedbecause the companies are still uncertain about the benefits of CSED, and they havebeen looking for a better alternative medium for their CSED other than annual reports.

One medium that has increasingly received the most attention in relation tocorporate disclosure is the web site (Coupland, 2006; Matherly and Burton, 2005;Oyelere et al., 2003; Wheeler and Elkington, 2001; Xiao et al., 2004). There are a numberof reasons why companies use the web site for voluntary disclosure. First, they usethe web site to disclose information because of the interactivity and broad coverage ofthe internet (Deller et al., 1999; Lodhia, 2004; Marston and Polei, 2004; Matherly and

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Burton, 2005). Second, the web site not only provides a more cost effective way fordisclosing corporate information, it also provides more space and format flexibility(e.g. hyperlinks, sounds, or videos) than hard copy reports (Ashbaugh et al., 1999;Debreceny et al., 2002).

Chapple and Moon (2005) investigated CSR web site reporting in seven Asiancountries: India, Indonesia, Malaysia, the Philippines, Singapore, South Korea, andThailand. They concluded that CSED does vary considerably among Asian countrieswith Indonesia considered as one of the least CSED active countries. Unfortunately,they did their analysis on the web site reporting made by only the top 50 companies (byoperating revenue) of each country without considering the types of industry in whichthe companies operate in. Additionally, the study did not describe clearly how thegrounded theory was used to determine the extent of disclosure by each company.

The main purposes of this study are to measure the extent of CSED made byIndonesian listed companies in the Indonesia Stock Exchange (IDX) on their corporateweb sites, and to investigate the relationship between the company’s environmentalsensitivity and the extent of the corporate social and environmental web sitedisclosure.

The remainder of this paper is organized as follows. The second section provides areview of the theoretical framework applied in this paper and relevant literatureon CSED, and develops two research propositions. The third section describes theresearch methods. This is followed by discussion of the findings. The paper ends withconclusions and suggestions for future research.

2. Literature review and research propositionsGray et al. (1996) stated that according to political economy theory, business activitiesoccur in a social, political, and economic framework. There are two perspectives withinthe political economy theory: classical and bourgeois. Classical political economytheory emphasizes on structural conflict, inequality, and the role of the nation, whichleads to rules for mandatory disclosure. Bourgeois political economy theory, on theother hand, perceives the interactions between groups in a pluralistic way, in whichcorporations are formed by the stakeholders, and the social and economic environmentin which they operate in (Gray et al., 1996). There are two sub-theories within thebourgeois political economy framework: stakeholder and legitimacy theories.Stakeholder theory is an organization-centered theory (Roberts, 1992) that representsa concept in which companies integrate social and environmental concern withintheir business operations and their relationships with stakeholders (Wilson, 2001).Legitimacy theory avows that companies focus on the societal recognition of theadequacy of their social behavior (Deegan, 2002b; Nasi et al., 1997). Gray et al. (1995)argued that these two theories are overlapping and hence may “enrich, rather thancompete, for our understanding” (p. 66). Prior CSED studies have applied bothstakeholder and legitimacy theories (e.g. Brown and Deegan, 1998; Deegan et al., 2002;Delmas and Toffel, 2004; Donaldson and Preston, 1995; Mitchell et al., 1997;Wilmshurst and Frost, 2000), and have proven that both theories provide their ownjustification in explaining social and environmental disclosure.

Accounting systems in Indonesia are regulated by the Indonesian Institute ofAccountants (IAI). The Financial Accounting Standard Board (Dewan StandarAkuntansi Keuangan) of the Indonesian Institute of Accountants (DSAK-IAI) hasdeveloped a Statement of Financial Accounting Standards (Pernyataan StandarAkuntansi Keuangan (PSAK)) to provide guidance for business entities in preparing

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their financial statements (see www.iaiglobal.or.id/). The country has adoptedInternational Accounting Standards since more than a decade ago. Within theIndonesian PSAK, there has been no specific requirement for CSED, and there has beenno disclosure requirement for companies listed on the IDX. There are a few accountingstandards that relate to environmentally sensitive industries such as PSAK 29 for theoil and gas industry, PSAK 32 for forestry enterprises, PSAK 33 for the general miningindustry, and PSAK 34 for construction contracts. However, in practice, CSED inIndonesia is voluntary. Indonesia also has a few environmental regulations that areproduced by its Ministry of Environment, a government agency that handlesenvironmental issues. However, the implementation of these regulations is ratheruncertain (see www.menlh.go.id/). Considering these facts, this study follows thebourgeois political economy perspective, because it suits the corporate social andenvironmental practices in Indonesia, in which corporations are formed by thestakeholders, and the social and economic environment where they operate, and are notbound by rules for mandatory disclosure.

Gunawan et al. (2009), in their study of CSED made by the Indonesian listedcompanies in their annual reports for the years 2003-2006, found that the amount ofdisclosure was limited. This is consistent with Chapple and Moon’s (2005) findings intheir analysis of web site reporting made by the top 50 Indonesian companieswith the highest operating revenue, which showed a low percentage of companiesreporting their CSR extensively on their corporate web sites. Unfortunately, therewas no mention of the companies’ industry types in Chapple and Moon’s (2005) study.Considering that there are no developing country-based studies that providecomprehensive reports on corporate social and environmental web site disclosure, thisstudy develops a tentative proposition by adopting the findings by Chapple and Moon(2005) and Gunawan et al. (2009), namely:

P1. The extent of CSED made by Indonesian listed companies on their corporateweb sites is low.

The type of industry in which a company operates in has been identified as one ofthe most important factors affecting CSED (e.g. Cowen et al., 1987). Companies whichoperate in environmentally sensitive industries have higher political visibility and areperceived as more environmentally damaging than those which operate inenvironmentally non-sensitive industries, and therefore, have a greater incentive forprojecting a positive image to ward off undue pressure and criticism from society,by providing significantly more CSED in their reports (Deegan and Gordon, 1996;Patten, 1991). However, prior research findings provide inconsistent results in relationto the significance of the industry effect on CSED. Some studies indicate a significantrelationship between the type of industry and the extent of voluntary disclosure (e.g.Adams et al., 1998; Brown and Deegan, 1998; Choi, 1999; Cowen et al., 1987; Deeganand Gordon, 1996; Hackston and Milne, 1996; Williams, 1999). However, Gray et al.(1995) and Gunawan et al. (2009) found insignificant relationship between type ofindustry and the extent of corporate disclosure. Gunawan et al. (2009) use Indonesiancompanies’ data in their study. Hence, this study poses the following proposition byadopting their findings, namely:

P2. Indonesian listed companies in sensitive industries will provide a relativelysimilar extent of CSED on their corporate web sites compared with theircounterparts in non-sensitive industries.

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3. Research methods3.1 SampleDeegan and Gordon (1996) described the sensitive industries as those which areperceived as more environmentally damaging than those which operate inenvironmentally non-sensitive industries. Raar (2002) found that two industrygroups are more sensitive than the others. The first group has higher risks in terms ofenvironmental impact, which includes groups of diversified resources, mining, energy,paper and packaging, chemicals, agricultural, and property. The second group hashigher risks related to consumers, which includes groups of food and householder,alcohol and tobacco, building materials, retail, tourism, leisure and sport, health care,and biotechnology. Roberts (1992) and Hackston and Milne (1996) provided a similarview by categorizing the following industry groups as sensitive industries: agriculture,petroleum, chemical, forestry and paper product, automobile, and airline.

In the Indonesian context, Gunawan et al. (2009) classified the types of industriesinto two groups, sensitive and non-sensitive industries, based on the IndonesianCapital Market sector categories. These are relevant to this study, and hence adopted.Companies classified as sensitive industries are as follows:

(1) agriculture, including plantation, animal husbandry, fishery, and forestry;

(2) mining, including coal mining, crude petroleum and natural gas production,metal and mineral mining, and land/stone quarrying;

(3) basic industry and chemicals, including cement, ceramics, glass, porcelain,metal and allied products, chemicals, plastics and packaging, animal feed,wood industries, and pulp and paper;

(4) miscellaneous industries, including machinery and heavy equipment,automotive and components, textile and garment, footwear, and cable;

(5) consumer goods industries, including food and beverages, tobaccomanufacturers, pharmaceuticals, cosmetics, and house ware;

(6) property, real estate, and building constructions;

(7) infrastructure, utilities, and transportation, including energy, toll road, airport,harbor, and allied products, telecommunications, transportation, andconstruction; and

(8) trade, services, and investment, including wholesale, retail trade, restaurant,hotel, and tourism.

Companies categorized as non-sensitive industries are as follows:

(1) finance companies, including banks, financial institutions, securitiescompanies, insurance, and investment funds;

(2) advertising, printing, and media;

(3) computer and services;

(4) investment companies; and

(5) others, such as provider companies and broadcasting companies.

The CSED examination in this study was conducted at the company level with thepopulation consisting of 362 Indonesian listed companies that provided their profiles

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on the IDX web site in September 2008. This population consisted of 263 sensitiveand 99 non-sensitive companies. The population was sampled using stratified randomsampling to achieve a sufficient sample size for each group (i.e. sensitive and non-sensitive industries), and to enable a valid statistical comparison between groups to bemade, and accordingly improve industry results and analyses (Cooke, 1989; Ng, 1985;Wilmshurst and Frost, 2000). Companies were selected if their corporate web sites wereavailable at that time. A final sample of 110 listed companies, consisting of 80 sensitiveand 30 non-sensitive companies, was used. This represented 30 percent of thepopulation in each of the classifications.

3.2 Content analysisData from the companies’ web sites on the social and environmental disclosure werecollected and analyzed to determine their extent using a form of textual analysisknown as content analysis. Content analysis is “a research technique for makingreplicable and valid inferences from data to their context” (Krippendorff, 1980, p. 21).It consists of systematic procedures for studying the content of a written medium(Wolfe, 1991). The application of content analysis was carried out by converting thequalitative information on the web sites into scores (quantitative). The content analysismethod has been widely used and considered as the most common form of datameasurement used in CSED research (see e.g. Gray et al., 1995; Ng, 1985).

To ensure that the analysis could be done objectively, a set of guidelines for thecoding process was established. This included a detailed coding worksheet, clearlydefined environmental themes, clearly defined quality dimension items, and a set ofdecision rules. A content analysis pre-test was undertaken prior to the coding of thesample data in order to ensure that the instructions, themes, and score componentsused in the coding process were clear, so that the content analysis process could bedone consistently and systematically, and come up with reliable results.

To assess the extent of the disclosure on the basis of dimensions, the CSED iscategorized by themes and scored based on the three dimensions of evidence,timeframe, and specificity (see Table I). This approach was adopted and modifiedfrom Cross and Djajadikerta’s (2004) research framework on the examinationof voluntary environmental disclosure, which was based on the previous work ofFreedman and Wasley (1990), Ingram and Frazier (1980), Walden and Schwartz (1997),and Wiseman (1982).

Eight themes of disclosure measurement were used in this study, which wereadopted from Gunawan et al.’s (2009) study, namely environment, energy, human

Dimension Item Score

Evidence Monetary/quantitative 3Non-monetary/qualitative 2Declarative 1No evidence 0

Time frame Future 2Present 2Past 1No time frame 0

Specificity Specific 1General 0

Table I.Components of

disclosure extent score

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resources, community, products, sustainability, external relations, and other issuesin CSED. These are the most cited and relevant themes in CSED literature (seeDeegan et al., 2002; Kuasirikun and Sherer, 2004; Raar, 2002; Ratanajongkol et al., 2006;Thompson and Zakaria, 2004; Wilmshurst and Frost, 2000).

All layers in each corporate web site were analyzed. If there was no evidence ofCSED for a particular theme, a score of 0 was awarded. If CSED was present for aparticular theme, the score for each theme was determined by scoring each dimensionitem of the disclosure, based on the scoring system described in Table I. The total scorefor each theme represents a measure of extent, referred to in this study as a disclosureextent score (DES). The DES for each theme ranges from 0 to 6, with a DES of sixrepresenting an extremely high extent of CSED. The total disclosure extent score(TDES) for each company is a total of the DES for each of the eight themes, whichgives a TDES range of 0-48 for each company.

4. Findings and analyses4.1 The extent of CSED made by Indonesian listed companies on their corporateweb sitesDescriptive statistics for the CSED based on themes are presented in Table II. Thedescriptive statistics indicated that the extent of CSED made by Indonesian listedcompanies on their corporate web sites was low, with an extent index of only 0.15. Only12.5 percent of the companies in the target sample received an average score of 4 andabove, and 67.5 percent of the companies in target sample received an average scoreof o1. This provides a reasonable level of support for P1. It is also consistent with thatreported by Chapple and Moon (2005) with regard to CSR web site reporting made bythe top 50 Indonesian companies, and the findings by Gunawan et al. (2009) withregard to CSED made by Indonesian companies in their annual reports, and hencecan provide some stronger indication that CSED practice in Indonesia is still at aninfant stage.

The nature of the disclosure was mostly declarative, without any specific timeframe. As an example, a declarative statement similar like this was quite easily foundin almost all web sites, “The company, in working together with the communitiessurrounding the company’s operations, strives to protect and preserve the forest fromillegal logging, with the aim of managing the forest on a sustainable manner. Towardsthis aim, the company would provide the necessary training and human resource

Theme Score range Mean SD Extent indexa

Environment 0-6 1.09 1.64 0.18Energy 0-5 0.40 1.05 0.07Human resources 0-6 1.52 1.71 0.25Community 0-6 1.77 2.21 0.30Products 0-5 0.45 1.12 0.08Sustainability 0-6 0.69 1.49 0.12External relations 0-6 0.36 1.01 0.06Other issues 0-5 0.96 1.53 0.16Overall 0-41 7.25 9.99 0.15

Note: aExtent index¼mean/maximum possible score

Table II.Indonesian CSEDdescriptive statistics(n¼ 110)

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support so that the company and the communities may jointly develop and benefitfrom the forestry resources without sacrificing the environmental needs[1].” However,only two out of 30 non-sensitive companies, and eight out of 80 sensitive companies,provided monetary evidence, clear time frame, and specific information. Theseincluded two banks, one basic industry and chemicals, one consumer goods, oneautomotive, and five mining companies. One example of the disclosure is as follows:

We at MedcoEnergi feel a strong sense of responsibility to improve the economic skills of thecommunities in and around our areas of our operations. We have been achieving this goalof growing the level of economic security for these citizens through our Micro FinancingServices program (MFS). The MFS program aims to help improve the economic welfare ofcommunities around the Company’s operational areas through the provision of revolvingloans to micro scale productive enterprises. The concept of the MFS program is developed tosupport economic activities that foster entrepreneurship, community based, using localresources, and sustainable. The MFS program comes under the responsibility of the MFSDivision created in 2003, and is conducted along a standardized operating procedure thatfacilitates evaluation of its effectiveness. [y] Up to the year 2007, the amount of loansdisbursed on the Company’s operational areas in South Sumatera and East Kalimantantotaled close to Rp 1.2 billion, which were distributed to 1,132 partners. These partners for themost part are traders and vendors in the informal economic sector such as vegetable vendors,cake and snack makers, groceries shop owners and food sellers, fuel sellers, motor vehicleand electronic repair shops, and similar other productive enterprises (statements wereshortened to suit this paper)[2].

Looking at the disclosure on each theme, “community” information had the highestdisclosure score (1.77), followed quite closely by “human resources” information (1.52).However, if we see the percentage of companies that disclosed their social andenvironmental information (as seen in Table III), “human resources” is the informationthat has been most disclosed by companies on their web sites (60 percent of the totalsample), followed by “community” information (48.18 percent of the total sample). Thisis consistent with the findings by Gunawan et al. (2009) which showed that “humanresources” and “community” information was disclosed in their annual reports bymost companies in their sample. This result may indicate that most Indonesiancompanies so far have perceived their corporate social and environmentalresponsibility as only a responsibility to the welfare of other human beings. In thiscase, they particularly focussed on the welfare of their own employees and lessfortunate or poor families. Consequently, most of the CSED focussed on employeebenefits, and donations or scholarships. This finding to some extent supports theinitial suggestion that the corporate social and environmental practices in Indonesiaare affected by the bourgeois political economy perspective. Some of the companies in

Theme Number of companies (%)

Environment 52 47.27Energy 17 15.45Human resources 66 60.00Community 53 48.18Products 19 17.27Sustainability 26 23.64External relations 15 13.64Other issues 41 37.27

Table III.The percentage ofIndonesian listed

companies disclosing theirsocial and environmental

information

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this study incorporate social and environmental concern within their relationshipswith their stakeholders – mainly their employees and the community. These companiessimultaneously seek to gain societal recognition of the adequacy of their socialbehavior.

Some of the disclosure on the “environment” and “other issues” information wasnotable. This disclosure mainly focussed on the companies’ awareness and efforts topreserve the environment, and awards for social and environmental activities. Therehas been no significant disclosure made on the “energy,” “products,” “sustainability,”and “external relations” themes.

4.2 Extent of CSED on the Indonesian listed companies’ corporate web sites by typeof industryThe means of the scores on CSED of Indonesian listed companies in the sensitiveindustries as compared to those of their counterparts in the non-sensitive industriesare shown in Table IV. The Mann-Whitney test was conducted to analyze the data. Atao0.01, it was found that there were no significant differences for all themes and theoverall scores. At ao0.05, although there were significant differences for two themes(“community” and “other issues”), these differences vanished for the overall scores.Consequently, there were no significant differences between the overall scores of theCSED of Indonesian listed companies in the sensitive and non-sensitive industries.These findings provide a reasonable level of support for P2. They are also consistentwith those reported by Gunawan et al. (2009), and therefore, can provide some strongerindication that the level of practice and understanding of Indonesian listed companiesin both sensitive and non-sensitive industries with regard to CSED are still verylimited.

5. ConclusionsThe results of this study suggest that the extent of CSED made by Indonesian listedcompanies on their corporate web sites is low. This is consistent with that reported byChapple and Moon (2005) and Gunawan et al. (2009), and therefore, provides someevidence that CSED practice in Indonesia is still at an early stage. It appears that most

Sensitive industries (n¼ 80)Non-sensitive

industries (n¼ 30)

Theme Range Mean SDExtentindexa Range Mean SD

Extentindexa

Mann-Whitneytest (p)*

Environment 0-6 1.19 1.80 0.20 0-4 0.83 1.09 0.14 0.91Energy 0-5 0.50 1.18 0.08 0-2 0.13 0.51 0.02 0.11Human resources 0-6 1.43 1.81 0.24 0-5 1.77 1.38 0.29 0.06Community 0-6 1.51 2.18 0.25 0-6 2.47 2.19 0.41 0.02**Products 0-5 0.44 1.16 0.07 0-3 0.50 1.04 0.08 0.66Sustainability 0-6 0.75 1.68 0.13 0-2 0.53 0.78 0.09 0.20External relations 0-6 0.41 1.10 0.07 0-3 0.23 0.73 0.04 0.49Other issues 0-5 0.88 1.56 0.15 0-5 1.20 1.42 0.20 0.03**Overall 0-41 7.10 10.81 0.15 0-29 7.67 7.54 0.16 0.09

Notes: aExtent index¼mean/maximum possible score; *not significant at ao0.01; **significant atao0.05

Table IV.Indonesian CSED scoresby type of industry

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of the companies still have a lack of understanding about CSED and its benefits,and their main reason for the CSED is to gain societal recognition of the adequacy oftheir social behavior. These results may also indicate the issue of costs of reporting.Thompson and Zakaria (2004) have argued that lack of understanding, perceivedbenefits, and reporting costs of CSED, may contribute to the low extent of CSED.

It has been suggested earlier that the type of industry in which a company operatescould affect the extent of CSED (e.g. Cowen et al., 1987). This study has found that theoverall CSED scores of Indonesian listed companies on their corporate web sites aresimilar in both sensitive and non-sensitive industries. This is consistent with thefindings of Gunawan et al.’s (2009) study on CSED made by Indonesian listedcompanies in their annual reports. The nature of disclosure of both the Indonesianlisted companies in sensitive and non-sensitive industries is mostly descriptive withoutany specific time frame. The most disclosed information was “community,” followedby “human resources.” The only exception that can be noted is that for the sensitiveindustries the extent indexes for “community” and “human resources” disclosure arevery close, 0.25 and 0.24, respectively, while for the non-sensitive industries the extentindexes for “community” and “human resources” disclosure are quite different, 0.41and 0.29, respectively. The cause of this huge variance can be attained from theevaluation of the data, which indicates that some financial institutions put in placesignificant amounts of monetary support to the community in the forms of donationsor scholarships. It is not clear whether this action was derived by the companies’higher level of awareness about their corporate social and environmental responsibility,or it was simply a part of the companies’ marketing campaign since they do businessdirectly with the public.

There are some implications that can be gained from this study, especially forbusiness entities who wish to improve the extent of their CSED, for accountants whowish to contribute to the knowledge of CSED, and for the Indonesian accountingprofessional body that can play a significant role in improving the practice of CSED.The empirical fact that the Indonesian listed companies’ CSED extent is low suggeststhat more awareness and understanding in the concept and benefits of CSED areneeded in order to increase the practice of CSED in Indonesia. Accountants can havea significant role in enhancing the knowledge of companies to conduct social andenvironmental reporting by promoting other reports to accompany financialstatements or annual reports, such as CSR reports or sustainability reports. Some“learning” interventions may also be undertaken by the Indonesian AccountingStandards Board through the development of social and environmental reportingstandards or guidelines.

Finally, as always there are limitations that should be considered. First, findingsreported in this study come from a single medium of corporate reporting, which is theweb site. Second, the companies used in this study are Indonesian listed companies,and hence they are mostly big companies. I encourage similar studies to be undertakenin other sample companies using different determinant factors for CSED (i.e. companysize, company age, or financial performance), and on the extent of CSED made bycompanies in different media for corporate reporting (i.e. annual reports, internalreports, or special CSED reports, such as environmental or sustainability reports).Third, I believe that there are other factors that contribute to the extent of CSEDmade by companies. Future work, using other variable sets or in-depth case-basedstudies, is strongly recommended to explore further relationships among thevariables.

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Notes

1. www.sumalindo.com/

2. www.medcoenergi.com/page.asp?id¼320003

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Corresponding authorHadrian Gery Djajadikerta can be contacted at: h.djajadikerta@ecu.edu.au

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