Corporate social and environmental disclosure CSED literature can be viewed as a subset of corporate financial disclosure literature and therefore it focuses on social disclosures. Prior studies have tested and considered both voluntary and mandatory CSED as well as environmental disclosure (Tondkar et al 2005). Cooke and Hanniffa (2005) emphasized that, many of the previous studies especially in development countries have shown an increase in their CSED in annual reports over time. This increase response to a number of factors (Mak & Eng 2003). Factors found to be associated with the quality and the type of social disclosure can be related to either corporate governance factors or company-specific characteristics. However, and according to Cooke and Hanniffa (2000) and (2005), culture is another factor that has an effect on CSED.
First of all, corporate governance is viewed as effectively delineating the responsibilities of all groups of stakeholders in a firm (Wong & Ho 2001). However, corporate social environmental reports have unfortunately become a communication tool for a firm in disclosing its positive environmental performance, but not the negative side (Mcgowan et al 2007). This in mind, guidelines such as the Global Reporting Initiative (GRI) provides a generally accepted standard to companies in order to improving the role of CSED (Mcgowan et al 2007).
In Europe after 1920s, the practices of corporate social responsibility were muted and only in the UK, the corporate responsibility was emerged with the advent of thatch rite policies. In fact, these policies aimed to restructure the UK economy in the early 1980 with its target to play a new role associated with governance and society (Dobers et al 2000).
Furthermore, UK national environmental law provides legislation for controlling the environmental damage. For example, Environmental Protection Act 1990 (EPA) which is a key piece of environmental legislation in the UK, aims to minimise the environmental impact by some practices such as; encouraging firms to invest in a new process, and changing operator practices (Foo & Hilland 2003).
2.1.1 Corporate Governance
The determinants of what information a firm should disclose in its annual reports have been investigated by a number of studies (Isshaq 2009). Prior studies emphasise that, the equality of CSED is associated with corporate governance factors (Wong & Ho 2001). Corporate governance factors found to be associated with CSED according to Cooke and Hanniffa (2000) and (2005) include; proportion of non-executive directors, ownership structure, proportion of chairman with multiple directorship, proportion of family members on board, existence of audit committee, foreign share ownership, existence of dominant personalities, and so on. Other studies agreed that as well, see (Kelton & Yang 2008; Eng & Mak 2003; Stulze et al 2007; Wong & Ho 2001). The current study focuses on the first four factors.
A non-executive director is one of the most important characters in corporate governance. In fact, CSED process is a strategy aimed to closing a perceived legitimacy gap between shareholders and management via non-executive directors (Cooke & Hanniffa 2005). Thus, non-executive directors should not just encouraging companies to act in the best interests of owners, but it has to to include other stakeholders. For example; advising on the public presentation of the firm's activities; and generally to be more interested in social responsibilities. Cooke and Hanniffa (2000) found that, there is a positive relationship between non-executive directors and voluntary disclosure in Malaysian (non-financial companies). Mak and Eng (2003) found the same relationship when they examined it in the Stock Exchange of Singapore (SES). This study found that, significant government ownership and lower managerial ownership were associated with the increase in CSED.
Although, Cooke and Hanniffa (2005) used companies listed on the main board of the (KLSE) which are the same as their study in 2000, the result still emphasises the same positive relationship. In Egypt, when there are complex  changes in terms of accounting regulations, the quality of social disclosure is increasing. Weetman and Addelsalam (2007) used 241 financial and non-financial Egyptian companies as a sample to examine whether there is an effect of several corporate governance factors on CSED with a complex change in that period. Their findings show that, a proportion of non-executive directors had an impact on CSED even though the Egyptian government controlled 80% of economic activities.
The recent study of Yang and others (2008) examined the association between corporate governance mechanisms and CSED measured by the level of Internet financial reporting (IFR) using 284 firms traded in the NASDAQ National Market. The result indicates that, a higher percentage of independent directors and audit committee members are more likely to engage in IFR. These findings suggested that, corporate governance mechanism influences a firm's Internet disclosure (voluntary disclosure) (Yang et al 2008).
The ownership structure of the firm might give rise to legitimacy issues (Cooke & Hanniffa 2005). Different groups of shareholders demand different disclosures especially if the foreign hold a high percentage of shares. Isshaq and Bokpin (2009) emphasized this by examining the interaction between foreign share ownership and corporate disclosure in Ghana Stock Exchange (GSE). They found a significant interaction between CSED and foreign share ownership. However, Mak (1991) is one of the early studies that considered the attributes of ownership structure on CSED. In his sample of listed companies in New Zealand Stock Exchange (NZSE), he found insignificant relationship between CSED and ownership and also company size. The different methods used in this study may cause the negative relationship between CSED and other governance characteristics. However, Cooke and Hanniffa (2000) and (2005) have different results in terms of the relationship between CSED and ownership structure.
The ownership structure of the company has an affect even on mandatory disclosure. When Ansah (1998) examined eight corporate attributes on the extent of mandatory disclosure for 49 listed companies in Zimbabwe (non-financial sector), he found that, ownership structure, company size, and profitability have a significant impact on mandatory disclosure. Furthermore, the two recent studies; Stulze (2007), and Yang et al (2008) have emphasized the same positive relationship between ownership structure and CSED. The farmer used a sample consists of 495 firms from 25 countries for 2000 and 901 firms from 40 countries for 2003. This is an important research because it used arrange of countries and with each single country the ownership structure is still significant in relationship with CSED. The study of Mak and Eng (2003) is the most important study which examined the impact of ownership structure that is characterized by blockholder ownership, managerial ownership and government ownership. The sample of this study was drawn from listed on the Stock Exchange of Singapore (SES) as at the end of 1995. The findings show that, ownership structure affect disclosure. In particular, managerial ownership and government ownership were significant in relationship with disclosure whereas, the relationship between the blockholder ownership and disclosure was a bit week.
Another factor of corporate governance is chairman of the board. This factor may have more influence than other board members (when the issue of share ownership is ignored). The influences of chairman of the board can extent to disclosure practices of the company. In fact, the aspect of chairman is often considered in the literature under directorship interlocks (Gooke & Hanniffa 2005). Both chairman and ratios of family members on boards were found a significant in relationship with CSED according to Cooke and Hanniffa (2000) and (2005). The international study of Stulze et al (2007) agreed that, non-executive chairman has an impact on CSED in more than 40 countries. However, the relationship between this variable and CSED may be negative in undeveloped countries, because the sample used in Stulze's study was consisted of 40 developed countries. Family member on boards is a common factor that was tested in prior studies. In similar country to the UK as Hong Kong, Wang (2001) examined four major corporate governance attributes with the extent of CSED provided by listed companies. He found that, the percentage of family members on board was associated with the extent of voluntary disclosure. The result of this study is a key point to further researches in terms of testing the impact of family control on CSED. This is because the majority of prior studies did not test this variable (the impact of family control on CSED) (Wong & Ho 2001).
Finally, the existence of an audit committee is another important factor of corporate governance factors. The functions of an audit committee include ensuring the quality of financial accounting and control system (Collier, 1993). An audit committee has influence to reduce the amount of information withheld. Forker (1992) argued that, the existence of audit committee might improve internal control. Forker found a positive relationship between the disclosure of the audit committee and the quality of share-option disclosure for UK companies. Moreover, McMullen (1996) provides a strong support for the association between the presence of an audit committee and more reliable financial reporting. The study which was done by Shun and Ho (2001) examined the relationship between the disclosure index and the existence of an audit committee. They used a sample of 610 companies in Hong Kong in late 1997 and early 1998 using a weighted relative disclosure index for measuring voluntary disclosure. The results of this study indicate that, the existence of an audit committee is significantly and also positively related to the extent of voluntary disclosure.
2.1.2 Company specific-characteristics
Prior studies found that, the type and the quality of CSED is associated with certain company-specific characteristics (Mak & Eng 2003). The Special Committee on Financial Reporting of the American Institute of Certified Public Accountants (AICPA) stated the following:
''Few areas are more central to the national economic interest than the role of business reporting in promoting an effect process of capital allocation (AICPA)'', 1994.p 2).
Legal requirements do not provide satisfactions demands to stakeholders, even regulators (the UK as an example) have enforced legislation to make sure that organizations provide at least limited set of financial as well as environmental information to third parties. Therefore, companies have different considerable in disclosing information that is not legally required (Vazquez & Arrcay 2005). In fact, many researchers have focused on corporate characteristics in order to estimate the determinants of CSED. Having said that, CSED policy is determined by a trade-off between the benefits and cost associated with disclosure. Prior literatures agreed that, the most common company-specific characteristics found associated with CSED are; company size, profitability, type of industry, leverage, gearing, listing statues, and liquidity (see; Cooke & Hanniffa (2000); Milne (2002); Petar & Sarah (1998); Cooke & Hanniffa (2005); Valahi & Lateridis (2010). The current study is considering the first five characteristics.
Prior literatures have emphasized a positive relationship between firm size and CSED. One explanation for the positive relationship is that, large organizations undertake more activities and therefore have a huge impact on society. One of the earliest studies which emphasize the same result is the study of Mak (1991). He tested the impact of firm size in New Zealand listed firm between 1983 till 1988. In addition, Naser and Wallace (1995) found the same result when they examined 85 firms listed in SEHK Hong Kong for 1991. They found almost all firms affected by their size in relation to disclosing (see also: Peter & Sarah (1998); Milne (2002); Tondkar et al (2005); Vazquez & Arcay (2005). As it has mentioned before, Cooke and Hanniffa (2000) and (2005) agreed that, company size is the most effective character. Moreover, in China with a high economic growth, this variable has an effect on CSED. Anhunipzhi and Xianbing (2009) used 175 Chinese listed companies (industry sector) in 2006 in order to assess the determinants of CSED. According to them, company size is one of the most effective factors on CSED.
The recent study by Valahi and George (2010) is an important research in terms of voluntary disclosure in the UK. This paper focuses on company's voluntary compliance with the requirements (relating to the reports) of International Accounting Standard (IAS) 1 before the adoption of IASs. The findings of this study found that, the financial measures, such as company size, leverage, profitability, and growth are significant in relationship with CSED (Valahi & Geroge 2010).
Unlike size, the relationship between CSED and profitability is slightly in conclusive (Cooke & Hanniffa 2005). The association between profitability and CSED can be explained by management in a firm. In other words, management has flexibility to undertake more extensive social responsibility practices to shareholders (Cooke & Hanniffa 2005). Joh (2003) found low firm profitability is caused by low ownership concentration. Therefore, ownership as a factor of corporate governance has an impact not just on CSED but on profitability.
Furthermore, Parke et al (1987) used a sample of 134 US listed companies (the companies were chosen from different industries) and he found no relationship between firm profitability and CSED. However, the study of Sanechez-Segura and Monterrey (2004) by testing 146 listed firms in Spain indicates a strong association between CSED and profitability. Overall, the effect of profitability on CSED can be different regarding different policies that are following in many organizations (see: Ansah (1998); Valahi & Lateridis (2010).
Type of industry is another control variable that has an effect on CSED. Usually firms tend to provide information regarding their industries' type (Tondkar et al 2005). For example, manufacturing industries will choose to disclose more information on employees compared to companies in chemical industries that are probably disclose environmental information (Cooke & Hanniffa (2005). Many of prior studies show a positive relationship between type of industry as an independent factor and CSED (see; Parker et al (1987); Milne (2002); Ansah (1998); Vazquez & Arcay (2005).
Type of industry and firm size can be explained by positive accounting theory in terms of social disclosure. This theory has been suggested to explain why companies make voluntary social disclosure. Based on the study by Milne (2002), industry type has a strong positive relationship with CSED. As it has mentioned before, the recent study by Valahial and George (2010) which tested the UK companies in 2004, indicates the impact of this variable and leverage on CSED.
Leverage ratio has association with profitability. In other words, the higher percentage of leverage in a firm the more profit a firm will achieve. When Naser and Wallace (1995) tested the determinants of CSED in Hong Kong during 1991, the leverage ratios in most of the chosen firms were low. Thus, there is a negative relationship between leverage (measured a as percentage) with CSED. However, Cooke and Hanniffa (2000) and (2005) found a positive relationship between this variable with CSED (see also; Wong & Ho (2001); Valahi & George (2010).
In highly geared firms, managements need to legitimise their actions and activities to creditors as well as shareholders. Gearing has been found to be an important factor that has an impact on CSED. Highly geared firms disclose more financial as well as environmental information to creditors. This variable has been found to be explanatory variable by Ansah (1998); Cooke & Hanniffa (2000); Cooke & Hanniffa (2005). According to Cooke and Hanniffa (2005), the four controlling variables (size, listing statues, profitability, and type of industry) were significantly related to CSED. Whereas, the variable ''gearing'' was slightly related to CSED. Moreover, table 4 which summarises literatures related to company-specific characteristics attributes to CSED is shown in an appendix.
Overall, corporate governance factors and company-specific characteristics have an impact on CSED, but it differs between companies in the same country as well as in different countries. Moreover, the international environmental factors can influence the level of a company's voluntary disclosure practices (Hoque & Elsayed (2010). From the previous literatures, corporate governance and company-specific characteristics have more positive impact on CSED in developed countries than undeveloped countries.
2.2 Prior Studies of Environmental Disclosure Practices in the UK
This sub-section intends to present reviews of the UK studies on environmental disclosure practices conducted abroad.
Gray et al (2001) tried to find s relationship between social and environmental disclosure and four variables capital employed, profit, number of employees and turnover. They took social and environmental disclosures in the annual reports of top 100 UK companies (taken from CSEAR data base) for 8 years specifically from 1988-1995 and a regression and longitudinal analysis was used. They found that, social and environmental disclosure in the UK was related to company characteristics of profitability, size and industry affiliation. In addition, this study could not find any unique relationship between any measure of disclosure and corporate characteristics. Therefore, there was a need for further research to find other factors such as organizational culture and media profile.
Harte and Owen (1992) found in their study which was done in 1992 that, only one company provided a separate report disclosing social and environmental information. Moreover, they found that, 30 percent of the companies mentioned social and environmental issues. In fact, these issues were most commonly disclosed within the chairman's statement or review of activities. Finally, most of the disclosures were narrative in nature.
Ince (1997) investigated in his study the published statements covering Environmental Policy (EP) of the UK FT-Actuaries 500 companies in 1993-1994. A content analysis of the environmental policy statements of 93 firms was carried out. In addition, this study took a stakeholders view. It was found that, many companies recognised a wide potential range of environmental stakeholders. The findings also suggested that, the size and industry might have affected stakeholder related social and environmental information.
In a survey of current practices of FTSE 350 companies in 1996, Pension Investment Research Consultant Ltd (PIRC) found that, though 65 percent of the companies reported information related to environmental issues, there was a wide range of details and overall approach, even within sectors. Even in sectors which have a significant social and environmental impact, such as general industries, reporting was patchy (Pahuja, 2009).
The UK Governments Advisory Committee on Business and Environment (ACBE) in its sixth (1996) progress report reported that the pace of environmental reporting by UK companies had slackened in the last two years (Pahuja, 2009). Only a few of the largest companies reported on environment. The study found that, the business case of environmental management is now widely accepted even among small and medium sized enterprises. In fact, environmental reports are aimed to provide information to a divers readership, but it appears that they are little used by any audience.
Stray and Ballantine (2000) used a systematic samples from six sectors (banking, electronics, automobiles, water, energy and food and drink) in the UK. Questionnaires were sent to 696 companies. The received sample was about 277 companies giving on overall response rate of 33 percent. This study found that, one-third of the companies reported environmental information and one-fifth of the remainder planned to do so in the near future. There was a positive relationship between size and social and environmental disclosure index. Moreover, 60 percent of the companies did not provide environmental policy statement. It was observed that, environmental reporting was not confined just to the use of Environmental Reports (ERs) and Annual Reports and Accounts (ARAs). Furthermore, many of the companies disclosed this information via other mediums. Finally, substantial differences in environmental disclosures were found between sectors. In other words, there were considerable variations in reporting practices within individual sectors.
2.3 CSED in the oil and gas sector
Oil and gas sector is an industrial leader in Corporate Social Responsibility (CSR). This is due to the significant growth in their corporate codes of conduct, social and environmental reporting, and the increase in CSR initiative which they are involved in (Frynas 2005). Frynas also suggests that, the reason behind why CSR has been evolving in the oil and gas sector is related to the fact that, if social projects that the business carry out fail on the business reputation. This view is supported by the legitimacy theory.
In fact, oil and gas companies have a moral responsibility to protect the environment and society in which these companies operate over and above what is required of them by law (Ewege 2007). Amaewhule (1997) agrees with this idea as he said that, as oil and gas companies pose more environmental hazards they should be more vigilant than other organizations when CSR is considered. In other words, oil and gas companies are hazardous to the surrounding environment at each stage of the process (Exploration, production, transportation and refining) (Frynas 2005). Further support comes from Frederick et al (1992) who believe that, CSR means that an organization is accountable for any effects its actions have on the people, communities and environment that it operates in. Therefore, the damaging effects oil and gas companies impose are the organisation's responsibility.
However, Bowie (1990) believes that, as long as companies are meeting the requirements of environmental law they are not violating any moral rights.
Since 1992 there has been an increasing awareness in Nigeria as to the harm that, oil spills and pollution to the local community, this has led to an increase in pressure for oil companies which working there to do more than what they have been for the surrounding communities (Amaewhule 1997). It is suggested by Warhurst and Mitchell (2000) that, as the effects oil and gas companies have on politics, society and economics are significant; they should be more attentive than companies in other different industries. Even though Frynas (2005) states that, oil and gas companies are doing this and they have engaged with their host communities a lot more than what they have done in the past, Eweje (2006) believes that, the social out cries from the society have never been so vast. Drucker (1993) said that, corporate social responsibility means making a difference in one's community, society and country, however according to Eweje (2006) this is not the case.
It is believed by Horwitz (2006) that, there are four main reasons why oil and gas companies and, furthermore mining companies, have shown a greater interest in social and environmental sustainability over recent years. Firstly, there is an increasing amount of customers who are interested in purchasing goods from companies which are demonstrating good social and environmental practices. The second reason is regarding to the governments which are showing concern about the industry as poor social and environmental performance. This can translate into economic and political problems. The third reason is related to the pressure groups. In other words, pressure groups use technology such as internet which can get information across to a vast amount of people quickly, to draw attention to the negative environmental effects of these companies. Lastly, local communities can protest against the company which creates bad publicity.
However, the pressure groups and activist organizations are heavily questioning the reasons behind why firms within oil and gas industries are increasingly embracing CSR concepts such as sustainability development especially over the past 15-20 years (Hilson 2006). It can be argued that, they have good reason to question this as there is government website dedicated to informing businesses why they should be embracing CSR activities and concepts. The rationale behind this is that, customers prefer to buy from companies which appear to be ethical. In fact, the website has a section devoted to how businesses can exploit corporate social responsibility suggests environmental and activist groups have a good right to question the reasons behind the embracement of CSR. Having said that, it cannot be assumed that the companies within oil and gas sector are embracing these concepts for the above reasons as there is no evidence to support this (Businesslink 2010).
It has been noted by many researchers that, if a firm operates in an environmentally-sensitive industry as mineral extraction, chemicals, oil and gas and forestry, they are more likely to disclose social and environmental information than any other industries (Dierkes and Preston 1977; Patten 1991; Neu et al 1998 and Niskanen and Nieminen 2001). Furthermore, the environmental reporting has attracted the most attention than any other type of CSR disclosure in recent years even it is more than corporate social disclosure (Mathewa 1997).
In relation to companies within the oil and gas sector and environmental disclosure, it is found by Clarke and Gibson Sweet (1999) that, companies within a sector that have a high environmental impact will produce environmental disclosure more than any other kind of CSR disclosure. In other words, they believed the rationale behind this was to manage the legitimacy problems they face due to the negative environmental impact their operations have.
According to Peck and Sinding (2003) ''the discovery, extraction and processing of mineral resources is widely regarded as one of the most environmentally and socially disruptive activities undertaken''. Moreover, Warhurst (2001) (cited in Jenkins and Yakovleva 2004) found that, the environmental disasters and human rights incidents that have arose over the past 40 years and contributed to the increase in public concern were a result of the mining and petroleum industries. In other words, the mining and petroleum industry is a key subject in CSR (Cowell et al 1999).
2.4 The sustainability of the oil and gas sector:
There is a major debate whether oil and mining firms are sustainable. Whitmore (2006) looked at figures from the late 1990's and found that, mining has such a large percentage of negative effects and in comparison it accounts for 0.5% of employment and 0.9% of gross world product. It can be understood from these figures clearly that, this cannot be regarded sustainable.
Furthermore, Hilson (2006) said that, just by pure nature of mining and drilling for oil it is not a sustainable practice, for the simple reason it is engaged with the extraction and depletion of non-renewable resources. It is also agreed by Wolf (2004) that, mining and drilling for oil is not sustainable, ''but how can any resources-extraction industry ever be sustainable, and what would happen if we stopped all such activities?'' He also said that, ''Companies cannot save the planet by voluntary action. Therefore, they should not pretend they can. Moreover, making it richer is quite good enough (Wolf 2004).
However, Sanchez (1998) and Crowson (1998) viewed that; it could be possible that mineral extraction is sustainable. Due to the possibility of being able to recycle minerals and non-fuel metals, mineral depletion is not an issue for the near future (Crowson 1998). Sanchez (1998) also believed it could be considered sustainable as the depletion of mineral resources can be compensated by the generation of new wealth which benefits present generations and can also benefit future generations. In fact, the definition of sustainable development provided by the World Commission on Environment and Development (1987) can provide more support for Sanchez's comment. Wolf's second comment also appears to support this. However, Sanchez can be heavily criticised. As it is well-known that, Nigeria is the Africa's largest oil producer, yet Nigeria is still one of the poorest countries in the world (Balza & Radojicic 2004).
Kiadso (2007) could not disagree more that, they are sustainable, '' Last I checked, they sell gasoline and create health hazards all over the world''. However, many people were surprised to see that, BP, shell and Chevron were ranked within the top 10 most accountable companies 2007, with BP being ranked first.
There have numerous developments within the oil and gas sector and in the role of business that has led to an increase in these companies trying to tackle the challenges of sustainable development (Jenkins & Yakovleva 2004). The first being that, mining operations and extraction of oil take place alongside indigenous people. This was traditionally seen as an obstruction to development. However, today engagement with indigenous people has become a reputational and political imperative for mineral extraction companies (Kapelus 2002). Secondly, there has been an increase in the need for governments to have partnership with businesses. The reason for this being that, they have the same objectives of addressing sustainable development issues (Hamann 2003). Moreover, Investors want to know of company's social, environmental and ethical scope before they invest in it.
The members of the society in which oil and gas companies operate are becoming more aware of the fact that, the oil and gas companies are taking from the communities but they are not putting anything back. Perhaps, this increase in awareness could be a contributing factor to the increase in importance Oil Company's associate with CSR.
Furthermore, Minto (2008) believes that, as companies within the oil and gas sector pose more of an environmental threat and have significant damaging effects on the environment they are likely to disclosure more CSR issuers, in particular environmental disclosure as they want to legitimize their behavior to the public.