This document summarizes a study that investigates internet environmental reporting (IER) practices of Chinese listed companies from 2002 to 2006. The study finds that IER is increasingly being used in China to disclose social and environmental activities and policies. Companies are increasingly using phrases like "sustainability" and "corporate social responsibility" in their IER. Website-specific reporting of social and environmental issues, performance, and activities has been adopted as the main approach to IER by Chinese companies. Both the quantity and coverage of disclosures have steadily increased, though reporting practices and levels of disclosure vary considerably across companies due to lack of standards and guidelines for IER in China.

1. Issues in Social and Environmental Accounting
Vol. 1, No. 1, June 2007
Pp. 91-108
Corporate Environmental Reporting on the Web –
An Exploratory Study of Chinese Listed Companies
Tianxi Zhang
School of Management
Shanghai Jiaotong University, China
Simon S. Gao
School of Accounting, Economics and Statistics
Napier University Edinburgh, UK
Jane J. Zhang
School of Accounting, Economics and Statistics
Napier University Edinburgh, UK
Abstract
While the literature has given a considerable attention to internet financial reporting, limited
studies mainly from developed economies have emerged to explain and predict corporate be-
havior relating to corporate environmental reporting on Websites. This preliminary study at-
tempts to fill a gap by investigating Internet environmental reporting (IER) in China and exam-
ining the current IER practice of Chinese top listed companies. This study finds that IER is
increasingly used in China to disclose corporate social and environmental activity and policy.
Companies are increasingly using the phrases of ‘sustainability’ and ‘corporate social responsi-
bility’ in their IER. Website-specific reporting concerning social and environmental issues,
performance and activities has growingly been adopted by Chinese top listed companies as the
main approach to IER. Both the quantity of disclosure and the areas of coverage have steadily
increased. While IER in China is developing, there remains a considerable discrepancy in terms
of reporting practices and the levels of social and environmental information disclosed. There
are no generally accepted standards and guidelines for IER in China, and the data/information
disclosed are largely incomparable. External auditing of IER remains a problem.
Key words: Accounting; China,, Chinese Listed Companies, Corporate Social and Environ-
mental Disclosure, Internet Environmental Reporting, Sustainability, Website.
Tianxi Zhang is Professor of Accounting and the Head of Department of Accounting, School of Management, Shanghai
Jiaotong University, China, email: txzhang@sjtu.edu.cn. Simon S. Gao is Professor of Accounting and Finance at
School of Accounting, Economics and Statistics, Napier University Business School, Napier University Edinburgh, UK
and also a visiting professor to Shanghai Jiaotong University where he jointly developed this paper over his several
visits from 2004 to 2007, email: s.gao@napier.ac.uk. Jane J. Zhang is Lecturer of Accounting at Napier University
Business School, UK, email, ja.zhang@napier.ac.uk. The authors wish to thank two anonymous referees for valuable
and constructive comments on the earlier draft

2. 92 T. Zhang, S. S. Gao, J. J. Zhang / Issues in Social and Environmental Accounting 1 (2007) 91-108
I. Introduction CER differs from financial reporting
(Cormier & Gordon, 2001). The former
With the increases in the awareness of is largely voluntary with little formal
environmental issues, both the level of rules available and backing of quantita-
environmental disclosure and stake- tive measures and benchmarks; the latter
holder demands for environmental infor- is to a large extent based on the pre-
mation are increasing (Sumiani et al., scribed rules and standards with the dis-
2007). In 2005, 52 per cent of the world closure of substantial quantitative infor-
250 biggest companies issued separate mation. The understanding of CER and
reports on corporate environmental corporate behavior towards CER is
(including social) information, compared mostly subject to the local phenomena
to 45 per cent in 2002 (KPMG, 2002; where the corporations conduct busi-
2005). Environmental disclosure is nesses. CER is influenced by the eco-
broadly defined as the disclosures of nomic development, as different stages
social and environmental information, of social and economic development
both qualitative and quantitative made prompt different national concerns over
by organizations to inform or influence a social and environmental issues and dif-
range of audiences (Mattews, 1993; ferent types and levels of demand for
O’Dwyer, 2002). Corporate environ- social and environmental information
mental reporting (CER) is an extension (Xiao et al., 2005). As Xiao et al. (2005)
of traditional reporting in that it broad- document that people in developed
ens the scope of the discipline by ad- economies are less concerned about their
dressing more issues, such as employee- basic material needs, but more con-
related matters, and the environment and cerned about their social and cultural
concerned audiences, including employ- needs, quality of life, equity, justice,
ees, consumers, and the general public and issues arising from polluted air, wa-
(Mattews, 1993). ter, land, etc. People are more aware of,
and sensitive to, these social and envi-
Typically, CER has been developed to ronmental issues, compared with citi-
measure environmentally induced finan- zens in developing or less developed
cial impacts or the ecological damage countries (Xiao et al., 2005).
(Guo, 2005). By adopting these meas-
ures it can transfer the power of knowl- As one of the largest developing econo-
edge to the society and increase the mies, China has made significant pro-
transparency of the organizations as re- gress in its economy over the past two
gards the impacts of their activities to a decades. Environmental issues which
wider range of stakeholders. Indeed, were suffering from industrialization and
CER presents an image of all possible economic transformation have attracted
interactions between the world and an attention in China (Ling & Isaac, 1996).
organization (Gray et al., 1995). Over China’s Environmental Protection Law
the past three decades CER has been was promulgated in 1989 which stipu-
growing rapidly across the world and lates environmental protection responsi-
over 1000 companies in all major busi- bilities at various levels, including the
ness sectors have been engaged in envi- corporate environmental responsibility.
ronmental reporting (Scott & Jackson, The government and public bodies have
2002). increasingly pressured Chinese busi-

3. T. Zhang, S.S. Gao, J. J. Zhang / Issues in Social and Environmental Accounting 1 (2007) 91-108 93
nesses to consider the environmental ing the recent trends of IER in China and
impacts of their operations and to dis- examining the current IER practice of
close such information (Xu, 1999; Ma & Chinese listed companies. In this study,
Ortolano, 2000). environmental reporting was broadly
defined to include the disclosure of so-
During the economic reform, many Chi- cial and environmental information by
nese stated-owned enterprises were an organization. This study offers an
transferred into stock-holding companies analysis of the subjects reported and the
and listed on the ‘newly’ established formats adopted in IER by Chinese top
stock exchanges of Shanghai and listed companies. However, as a prelimi-
Shenzhen. Given the maximization of nary study it does not intend to analyze
shareholders value being the ultimate specifically the details of the contents of
objective, many corporations began to disclosures on the Internet and their rele-
actively engage with investors and con- vance and consequence.
sidered the disclosure of information as
an inseparable part of investor relations. Based on the sample of 20 companies
In China many corporations (in particu- within the top 50 listed firms over the
lar the top listed companies) are influ- period from 2002 to 2006 this study ex-
enced by the state as the state is one of amines the usage of the Internet as a re-
the major stockholders in these corpora- porting media by Chinese listed compa-
tions. Yet, China maintains its own char- nies. This study reveals that IER is in-
acteristics of the socialist system. The creasingly used by Chinese listed com-
influence of the Communist party and its panies to disclose corporate social and
nationwide network rooted in the corpo- environmental activity and policy. Com-
rate world has been widely witnessed, panies are growingly using the phrases
which could drive China’s CER some- of ‘sustainability’ and ‘corporate social
what in line with the Communist’s responsibility’ in their IER. Website-
agenda. Therefore, the study of China’s specific reporting concerning social and
IER will enhance our understanding of environmental issues, performance and
CER in a different social and economic activities has gradually been adopted as
environment. This has motivated the the main approach to IER. Both the
current study. quantity of disclosure and the areas of
coverage have steadily increased. While
China has an Internet user population of IER in China is developing, there re-
173 millions (CNNIC, 2007). However, mains a considerable discrepancy in
there is little known on the level of use terms of reporting practices and the lev-
of internets to report corporate social els of social and environmental informa-
and environmental information by tion disclosed across the sampled firms.
China’s listed companies. As the second There are no generally accepted stan-
largest internet population in the world, dards and guidelines for IER in China,
an understanding of Chinese corporate and the data/information disclosed are
behavior towards the adoption of the largely incomparable. External auditing
Internet as an environmental reporting of IER remains a problem.
means clearly contributes to the knowl-
edge of IER. This preliminary study at- The paper proceeds as follows: The next
tempts to make a contribution by reveal- section presents a literature review con-

4. 94 T. Zhang, S. S. Gao, J. J. Zhang / Issues in Social and Environmental Accounting 1 (2007) 91-108
cerning CER, followed by a general re- attacks from pressure groups, enhancing
view of IER in Section 3. Section 4 is corporate reputation, providing opportu-
concerned with the research method and nities to lead debates, to secure endorse-
results. The final section concludes the ments, demonstrate strong management
study. principles and demonstrate social re-
sponsibilities” (p. 351). The ACCA
(1997) stated that companies publishing
II. Corporate Environmental Re- reports frequently seek to achieve a
porting (CER) number of objectives via their environ-
mental reports, including:
While the literature has given a consid-
erable attention to internet financial re- • Corporate commitment – To comply
porting over the last few years (e.g., De- with a corporate commitment to re-
breceny et al., 2002; Oyelere et al., port on environmental performance,
2003; Marston & Polei, 2004; Xiao et such as the requirement placed on
al., 2004), a limited number of studies signatories to the International
have emerged to explain and predict cor- Chamber of Commerce Business
porate behavior relating to CER on Charter for Sustainable Develop-
Websites. At an international level, a ment.
few studies have examined the state-of- • Competitive advantage - To gain
the-art of CER in the hard copy format market advantage, linked to corpo-
(e.g., Gamble et al, 1995; Wiseman, rate or product reputation.
1982). Using a media such as the Inter- • Corporate positioning – To state a
net allows a greater flexibility, capability position on environmental issues,
and availability for disclosure of envi- whereby the report represents a pol-
ronmental information. Indeed, this has icy document as well as the outlining
been demonstrated in a number of stud- performance.
ies, such as the United Nations Environ- • Demonstrate progress – To demon-
ment Program (and Sustainability) strate progress against targets and
(1999) and the Environmental Resources performance, going beyond compli-
Management (2000). ance.
The literature has suggested that the re- Yuen & Yip (2002) consider environ-
search of environmental reporting mental reporting as a management tool
should focus on 1) the reasons of report- to keep track of environmental perform-
ing, 2) issues that are facing the report- ance, a vehicle for continuous improve-
ing organizations and 3) what distin- ment, and a means of recognition of per-
guishes the environmental reports from formance. Spencer-Cooke (1994) be-
the other reports (Schaltegger et al., lieves that environmental reporting can
1996). The reasons of a company engag- help a business to boost its reputation,
ing in environmental reporting can be attract the best employees and differenti-
explained with the likely benefits that ate itself from less proactive competi-
environmental reporting brings to the tors. It can be used to display commit-
corporation. Salancik & Meindl (1984) ment and responsibility, good relation
identified the benefits of disclosing envi- and partnership with stakeholders, align-
ronmental information as “pre-empting ment with international best practice and

5. T. Zhang, S.S. Gao, J. J. Zhang / Issues in Social and Environmental Accounting 1 (2007) 91-108 95
external recognition. Jenkins and information was quite often part of the
Yakovleva (2006) document that envi- financial annual reports. Gray & Beb-
ronmental reporting has several roles bington (2001), Line et al. (2002) and
including assessing the social and envi- the Accounting Advisory Forum (1995)
ronmental impacts of the corporate ac- found that environmental disclosure in
tivities, measuring the effectiveness of the annual report tends to be fairly su-
corporate social and environmental pro- perficial and a very few companies give
grams, reporting on corporate social and intense, brief summaries of the back-
environmental responsibilities, and ex- ground and data relating to their envi-
ternal and internal information systems ronmental performance. Gray & Milne
allowing the comprehensive assessment (2004), therefore, criticize that voluntary
of all corporate resources and sustain- environmental reporting (as part of the
ability impacts. Despite the benefits, the annual reports) will not work.
level of environmental reporting in
many countries, particularly developing Today, environmental reporting com-
countries, is very low and the reporting prises the communication of environ-
itself is rather general and descriptive in mentally induced financial impacts and
nature (Xiao et al., 2005; Gao et al., environmental impact added
2005). (Schaltegger et al., 1996; Deegan, 2002).
Most of the environmental reports no
In the literature, legitimacy theory, longer include product-oriented informa-
stakeholder theory and accountability tion, but focus on the sites as well as on
theory have been proposed to explain the the businesses and firms, in particular on
corporate behavior of environmental issues which powerful stakeholders at-
reporting. For example, Gray & Beb- tempt to influence (Schaltegger et al.,
bington (2001) note that corporations 1996; Schaltegger & Burritt, 2000).
use environmental reporting to develop Fleischman & Schuele (2006) and Gray
corporate image, to legitimize the cur- & Bebbington (2001) document that to-
rent activity, to distract attention from day, external reporting as to environ-
other areas, to discharge accountability mental performance typically occurs
and to forestall legislation. The first primarily through stand-alone corporate
companies to issue environmental re- reports, traditional annual reports, and
ports were from the chemical and oil the internet. Fleischman & Schuele
industries which were among the first to (2006), Gray & Bebbington (2001) and
experience heavy pressure from the ex- Scott & Jackson (2002) find that only a
ternal stakeholders (Schaltegger et al., few countries (such as Denmark, Swe-
1996). Presently, environmental report- den and the Netherlands) currently have
ing has been widely considered part of regulations in place requiring companies
the corporate communications and in- to issue a company-wide, stand-alone
vestors relations (Campbell & Beck, report on environmental performance at
2004). the site level. Simms (2002) sums up
three potential problems of the environ-
Indeed, a good report is essentially a mental reporting. First, many of the
reflection of the strength of an organiza- companies do not clearly understand
tion’s environmental strategy (Line et what the environmental reporting is.
al., 2002). In the past, environmental Second, activities of many environ-

6. 96 T. Zhang, S. S. Gao, J. J. Zhang / Issues in Social and Environmental Accounting 1 (2007) 91-108
mental reporting are largely defensive. formance and to offer an unlimited
Third, many of the reports themselves quantity of information, allowing the
are not independently audited. Overall, user to download as much of the pub-
the disclosures have been largely acci- lished material as they want” (Scott &
dental, un-audited and expressive, with Jackson, 2002, p.195). The Internet can
very little potential for comparability. be used to transmit as much or as little
environmental information as there is
At the beginning of 21 century, a pri- available (Line et al., 2002). Also, IER
mary focal point in environmental re- can enable on-line feedback concerning
porting development was the desire to the environmental report (Scott & Jack-
publish the report online (Shepherd et son, 2002) and make possible for com-
al., 2001; Scott & Jackson, 2002; Line et panies to reach more stakeholders (Yuen
al., 2002; Adams & Frost, 2004). This is & Yip, 2002).
because the Internet facilitates rapid
communication of information at very The format of internet reporting gener-
low cost (Gowthorpe, 2004), and there- ally depends on the expected use of the
fore it becomes an important tool used report (Shepherd et al., 2001). Currently,
by companies to engage with their stake- there are two file formats typically used
holders. for IER (Scott & Jackson, 2002; Shep-
herd et al., 2001). One is Adobe Portable
Document Format (PDF). PDF can be
III. Environmental Reporting opened, viewed and printed with the free
Though the Internet Adobe Acrobat Reader. It retains the
layout and appearance of a hard-copy
Corporate use of the Internet for a vari- publication and can also incorporate
ety of business purposes is now com- most of the interactive and design fea-
monplace (Scott & Jackson, 2002; tures of a Web page (Scott & Jackson,
Coupland, 2006; Jenkins & Yakovleva, 2002). The PDF version is hence recom-
2006). Owning and occupying Internet mended only for the documents that us-
space is almost essential for publicly ers are likely to print (Scott & Jackson,
traded companies, either as a place to do 2002; Shepherd et al., 2001). Another is
business or as a place to exchange infor- Hyper Text Mark-up Language
mation about business. The Internet also (HTML). HTML is the most common
provides a global meeting ground for file format used on the Web, whereby
those interested in environmental infor- the content appears on linked pages
mation (Jenkins & Yahovleva, 2006). (Scott & Jackson, 2002). IER incorpo-
The attractions of such internet reporting rates most of the basic elements found in
of environmental data are obvious in the company websites (Scott & Jackson,
terms of the cost savings and the ease of 2002). These basic elements include
access for an increasing number (Gray & Navigation (to allow users to “drill
Bebbington, 2001). Not only can IER down” through several levels of infor-
reduce the costs of companies (e.g., re- mation with varying levels of detail),
duced use of resources such as paper, Menus, Search Facilities, Sit maps (to
printing and postage), but also IER of- provide a diagrammatic summary of site
fers the potentiality “to improve public contents), Location, and Hyperlinks (to
access to information on company per- take the reader elsewhere).

7. T. Zhang, S.S. Gao, J. J. Zhang / Issues in Social and Environmental Accounting 1 (2007) 91-108 97
While IER is adopted rapidly by compa- & Lee, 2007). Some companies also
nies in developed countries, contents of highlight particular areas of their busi-
reports vary according to sector, geo- ness that have a specific environmental
graphical boundaries and company pri- or social relevance, such as Exxon Mo-
orities (Jose & Lee, 2007). Line et al. bil reports on safety (Line et al., 2002).
(2002) find that a noteworthy number of
companies now include social reporting Moreover, an increasing number of com-
in their environmental report; some pro- panies publish stand-alone Internet Envi-
duce a fully integrated corporate sustain- ronmental Reports (Davis-Walling &
ability reporting (e.g., the Shell Report). Batterman, 1997). This is because some
Many companies describe their reports companies prefer to keep financial re-
as environment health and safety reports porting and environmental reporting
(e.g., Lucent and Exxon Mobil). Mostly separate in order to give financial ana-
companies have their own style of IER. lysts easy access to the bare financial
Some design their reports according to data and meanwhile to make available to
different stakeholders; others disclose other interested stakeholders environ-
according to sections of their business, mental information through a separate
or environmental and social issues. environmental report (Line et al., 2002).
Some companies just follow externally Companies often include health and
developed guidelines, such as the Global safety in their stand-alone IER, which
Reporting Initiative (GRI) guidelines gave rise to Health, Safety and Environ-
(e.g., Ford, General Motors) and the mental Reports. Also, it becomes a trend
Public Environmental Reporting Initia- that various sustainability issues were
tive (PERI) Guidelines (e.g., IBM, Tex- integrated into one report (Jenkins &
aco). Yahovleva, 2006; Jose & Lee, 2007).
Besides, a number of companies post
IER can be in the form of Online Annual their environmental reports as website-
Reports, Stand-alone Internet Environ- specific reports, and updated news relat-
mental Reports, and Website-specific ing to the environmental, social, em-
Reports (Jenkins & Yahovleva, 2006; ployee and community matters (Jenkins
Line et al., 2002). Online annual reports & Yahovleva, 2006).
are the most publicized and visible docu-
ments produced by companies (Santema Although the Internet is an attractive
& Rijt, 2001). Over the years, the level mechanism for disseminating environ-
of IER has raised as companies increas- mental information, there are also disad-
ingly include social and environmental vantages in connection with IER
information in their online annual re- (Jenkins & Yahovleva, 2006). First, us-
ports (Jose & Lee, 2007). Typically ability is a fundamental challenge for
companies use online annual reports to IER (Shepherd et al., 2001). If the audi-
highlight specific aspects of their corpo- ence cannot “use” IER effectively, the
rate social responsibility programs, and proposed benefits of the communication
to describe environmental activities will not be realized. Secondly, compa-
(e.g., certification of the environmental nies which are using IER may have in-
management standard ISO 14001), envi- ability to target a specific audience be-
ronmental and social policies, or spon- cause companies could not be guaran-
sorship programs (Line et al., 2002; Jose teed that all of a targeted audience was

8. 98 T. Zhang, S. S. Gao, J. J. Zhang / Issues in Social and Environmental Accounting 1 (2007) 91-108
reached (Adams & Frost, 2004; Scott & net users, it would expect Chinese com-
Jackson, 2002). This leads to the case panies to use the Internet to report on its
where stakeholders are in ‘remote loca- financial and social and environmental
tions’ (including technical difficulty, information. However, studies related to
language and inconveniency) or their IER in China are very limited. This pre-
environmental information needs could liminary study attempts to make a con-
not be satisfied with the general infor- tribution by revealing the current status
mation (Adams & Frost, 2004). Third, of IER by large Chinese listed compa-
the credibility for the content of IER is nies with a view to understanding Chi-
questionable, given most IER lacks of nese corporate behavior towards envi-
external verification (Jose & Lee, 2007). ronmental reporting via the Internet.
Jenkins & Yakovleva (2006) argued that
only annual reports hold a certain degree
of credibility in comparison with other IV. Research Method and Results
types of reports because they go through
the same auditing process as a com- Research Method and Sample
pany’s financial information. There are a
number of concerns about IER. For in- The overall objective of this research is
stance, published data may be unreliable to examine the use of the internet as a
and many companies are selective about reporting media by large Chinese listed
the material they include in their reports. companies from 2002 to 2006 for report-
Data are not comparable either within in ing corporate environmental information
a report, between reports of different to their stakeholders. This study looks
years, or between reports from different into the nature, contents, type and style
companies even within the same sector. of IER that have been adopted by Chi-
Scott & Jackson (2002) summarize the nese listed companies.
main advantages and disadvantages of
using the internet for environmental re- Questionnaire survey and content analy-
porting as shown in Table 1. sis methods were frequently used in
prior studies of CER. While the former
While limited research on internet finan- has been widely used in examining the
cial reporting in China (e.g., Xiao et al., attitude and perception of disclosers
2004) has highlighted some characteris- (e.g., Tilt, 1997), the latter is the most
tics of the use of the internet by Chinese commonly used research method to as-
listed companies as a reporting medium, sess organization’s social and environ-
no research on IER in China can be mental disclosures (Milne & Adler,
found in the literature. China has re- 1999) and it is a research technique for
markably built up its IT and telecommu- making replicable and valid inferences
nications infrastructure since its eco- from data to their context (Krippendorff,
nomic reform in the 1980s. The popula- 1980). Although in content analysis,
tion of Internet users has increased sig- counts of sentences, lines, and pages are
nificantly in China with over 137 mil- the most simple and convenient ways,
lions in 2007 as shown in Figure 1 and the three types of counts have limitations
there was estimated to be more than 140 for this particular research. For example,
million at the end of 2008 (CNNIC, it is difficult to make a comparison be-
2007). Given the large number of inter- tween two internet reports if layouts

9. T. Zhang, S.S. Gao, J. J. Zhang / Issues in Social and Environmental Accounting 1 (2007) 91-108 99
Table 1 Major implication of using the web for reporting
Report Advantages Disadvantages
aspect
Visibility and Web-based reports are accessible Without active promotion, websites
accessibility through an Internet connection can be invisible off-line. Some stake-
anytime, any place. holder groups, such as employees and
Their “visibility” can also be in- local residents, may not have Internet
creased through hyperlinks from access.
other organizations Reports are often hard to find from a
company’s home page.
Timeliness of It takes much less time to upload a Users may not be convinced that Web
data website than it does to publish a pages and data verifications are up to
hard-cope report. date (thereby detracting from their
Reported data is more current and credibility) without extensive “date
therefore relevant as new informa- stamping” or separate update reports
tion can be added to websites as
soon as it is available
Ease of use Interactive and can be fun to use, Most users like to read off-screen Web
particularly if using cutting-edge reports are hard to “shelve” and often
Web technology. require long downloading and printing
Multiple language – easier to offer times.
multi-lingual versions A Web-only format will not meet the
needs of all stakeholders.
Additional Websites can offer users the ability A Web report is not the “business
aspects of to tailor a report to their needs. card” a paper report can be. Some us-
reporting By making feedback easier web- ers will be more inclined to leaf
sites can achieve high response through a hard-copy report arriving in
rates. the post, then to search for a Web
page.
Environ- Reduced energy, pulp and ink-use Reporting-company can manage the
mental im- from e-publishing. impacts of its printing operations, but
pacts of pub- Avoid wastage from company has no control over the impacts of
lishing printing excess hard-copies. readers printing off personal copies.
Quantity of Avoids size restriction of paper Navigation through many pages is
reported data reports. Larger quantities of infor- often difficult, so careful design is
mation available needed to help the user.
Source: Scott & Jackson (2002)
(e.g., fonts, page margins) and compo- basis of disclosure or non-disclosure; the
nents (pictures and graphs) differ. Also, method was previously used by Wise-
one sentence, line or page may contain man (1982) and Lynn (1992). The dis-
more than one category of information closure themes were initially based on
and the researcher may have difficulty in the headings of reports on the corporate
deciding which category the sentence/ webs when the research began in August
line/page belongs to (Xiao et al., 2005). 2002. One author read the web-based
Given the problems in the above content reports and noted down the headings,
analysis, this research as a preliminary and the second author repeated the same
study measures IER on a dichotomous process and at the end both authors

10. 100 T. Zhang, S. S. Gao, J. J. Zhang / Issues in Social and Environmental Accounting 1 (2007) 91-108
Figure 1 Statistical survey on the Internet development in China
Source: CNNIC, 2007 http:/www.cnnic.net [Access 17 May 2007].
agreed the disclosed themes, which were from the China’s Securities Regulatory
considered as the main themes for the Commission (www.csrc.org.cn) includ-
following year, but new headings found ing the firms listed on both Shanghai
in subsequent reports were added into and Shenzhen Stock Exchanges. Over
the existing themes. The same process the years, the positions of these compa-
carried out over the remaining years of nies changed as some companies were
this study and at least two authors ana- no longer in the top 50 due to mergers
lyzed and categorized the information and acquisitions and the change of mar-
each year. The data was collected over ket capitalizations as shown in Table 2.
the years of 2002 and 2006, and in order Only 20 listed companies remained over
to make sure the data are comparable the the period as of August 2006 in the
researchers got access to the websites of range of top 50. Ultimately, the informa-
these companies at the end of August of tion of these 20 firms was chosen as the
each year. The annual reports listed on basis for this study with a view to ensur-
the web by the firms are the previous ing that data are comparable. The selec-
year reports. tion of top listed companies is because
these companies act as leaders and guid-
Originally, when the research began in ers in their own industry and their ac-
August 2002 top 50 listed companies tions toward IER can have the signifi-
were included in the sample measured cant impacts to the rest companies in
by the market capitalization which was a China. As noted previously, these larger
commonly used selection criteria in corporations are much influenced by the
prior studies (Tilt & Symes, 1999). The state as the state holds a substantial
data sources of listed companies were amount of stakes in these forms. Most of

11. T. Zhang, S.S. Gao, J. J. Zhang / Issues in Social and Environmental Accounting 1 (2007) 91-108 101
Table 2 The sample firms in the top 50 over the period
The number of the Firms no longer in top The number of firms
sample firms in top 50 50 due to merger and dropped from the top
acquisitions in a year 50
August 2002 50 2 5
August 2003 43 1 6
August 2004 36 1 7
August 2005 28 2 6
August 2006 20
these firms were previously state-owned the end of August 2002, only five out of
enterprises prior to their listing. the 20 companies (including one com-
pany whose website was inaccessible)
Content analysis with the dichotomous produced accessible online annual re-
approach is used to analyze the Annual ports or site-specific reports containing
Reports, stand-alone Social and Envi- environmental information. However, by
ronmental Reports and other formats of the end of August 2006, 18 out of the 20
IER by the 20 top listed companies in firms published online annual reports
China in order to examine the types and containing some environmental informa-
the nature of environmental information tion or site-specific reports relating to
being disclosed. The analysis focuses on environmental information. Over the
methods of reporting, policy disclosed, period of five years, the number of com-
reporting types and assessment of inter- panies producing IER has increased sig-
net for reporting. nificantly from 25 per cent in 2002 to 90
per cent in 2006. In 2002 only two com-
Results of Dichotomous Analysis panies had their IER externally audited;
the number increased to five in 2006.
Table 3 lists the number of the top listed
companies in China producing IER. At The home-page is where most of the
Table 3 IER by 20 Chinese top listed companies from 2002 to 2006
2002 2003 2004 2005 2006
Working effectively 5 6 12 12 18
Both English and 5 5 7 9 16
Chinese Version
Only in Chinese 0 1 5 3 2
Both PDF and HTML 3 5 6 9 13
Only HTML 0 0 5 2 0
Only PDF 2 1 1 1 5
External Audited 2 2 4 4 6
(40%) (33%) (33%) (12%) (33%)

12. 102 T. Zhang, S. S. Gao, J. J. Zhang / Issues in Social and Environmental Accounting 1 (2007) 91-108
visitors will enter to the website. For this specific environmental reports. In 2002
reason, it is important for companies to only three companies were disclosing
use different languages to fulfill the lan- environmental information as part of the
guage requirements of the internet users. online 2001 Annual Reports and two
English is considered the global business companies produced site-specific Envi-
language. Therefore, most of the top ronmental Reports. No company pro-
listed companies in China produced both duced stand-alone Environmental Re-
Chinese and English version of IER and ports by the time when the data was
only two companies in 2006 merely pro- firstly collected in August 2002. How-
duced the Chinese version as shown in ever, in 2006 the figures increased to 8
Table 3. Table 3 also shows the formats and 14 respectively and eight companies
of the IER. An increasing number of the disclosed environmental information
companies used both PDF and HTML both in the online annual reports and
formats. site-specific reports. Both Tables 3 and 4
show an increasing trend of the Chinese
Table 4 presents the number of compa- companies using the Internet to report
nies disclosing environmental informa- environmental information.
tion in the online annual reports or site-
Table 4 Number of companies disclosing environmental information in online
annual reports and corporate websites (2002–2006)
Online Annual Report Site-Specific Report
Sample: 20 Sample: 20
2002 2003 2004 2005 2006 2002 2003 2004 2005 2006
No. of 3 4 7 7 8 2 4 12 12 18
company
Percentage 15% 20% 35% 35% 35% 10% 40% 60% 60% 90%
During the period from 2002 to 2006, mitment were used by the firms as dis-
the titles of the environmental informa- closure titles for IER. Over the years the
tion of a company’s annual reports amounts of information disclosed have
changed from a simple titles such as increased for most of the firms. For in-
‘Social Contribution’ (e.g., Hair) to stance, China National Petroleum Cor-
slightly longer titles such as ‘Health, poration, which did not disclose any en-
Safety, Environment and Corporate So- vironmental information in 2002, had
cial Responsibility’ (e.g., China National two pages in 2003 and four in 2004. In
Petroleum Corporation), indicating the 2005, it began to disclose CSR which
progression nature of such reports. In contains more than five pages. In 2006,
2006 various headings, such as Health & such a report became relatively sophisti-
Safety, the Environmental Protection, cated covering a wide range of areas.
Public Welfare Contribution, Corporate Table 5 presents the key subjects dis-
Social Responsibility (CSR), Social Re- closed by the top listed companies. As
sponsibility and the Public-interest Com- indicated from the figures, most compa-

13. T. Zhang, S.S. Gao, J. J. Zhang / Issues in Social and Environmental Accounting 1 (2007) 91-108 103
nies only provide information on events schools’, sponsoring poor university stu-
relating to social and environmental ac- dents with scholarships, Beijing Olym-
tivities. Many of these events are to pic 2008, and promoting social har-
some extent associated with key political mony.
agenda, such as supporting ‘hope
Table 5 Information subjects disclosed by the top listed companies of
China
2002 2003 2004 2005 2006
Health, Safety & Environment 1 2 2 2 2 8.3%
Protection
Health, Safety, Environment 1 1 1 1 3 12.5%
Protection and Community/
Society
Corporate Social Responsibility 0 1 1 2 3 12.5%
(CSR)
Corporate Social Responsibility 0 1 1 1 4 16.7%
(CSR) and Community
Events 1 2 3 4 6 25.0%
Sustainability 0 0 1 2 4 16.7%
Environmental 1 1 1 1 2 8.3%
Regulatory
Total 4 8 10 13 24 100%
Many Chinese companies use the Web Among these top listed companies in
to provide company policy with regard China only one company was reporting
to major social and environmental is- in accordance with its own set of safety
sues. Table 6 reveals the policy issues and environmental regulations. The rest
that the top 20 listed Chinese companies of the companies did not follow specific
reported in their IER, covering from sets of guideline. In 2006, most of the
health and safety, environmental protec- companies within the top 20 produced
tion, and employee well-being, commu- site-specific reports. However, site-
nity relations to CSR. The most recent specific reports just preset updated news
subject additions are ethics and sustain- relating to environmental, social, em-
ability. Several companies have begun to ployee and community matters on the
disclose the sustainability and CSR poli- websites of companies. They did not
cies. There is no evidence that a particu- follow any guideline and there was no
lar area had attracted special attention evidence that external auditors were
across the years, although environment, brought in to audit the site-specific IER.
health and safety, social community re- These reports also tend to make more
lations and CSR were disclosed more in reference to ‘CSR’ and ‘Community’
comparison with other subjects. than the sustainable development.

14. 104 T. Zhang, S. S. Gao, J. J. Zhang / Issues in Social and Environmental Accounting 1 (2007) 91-108
Table 6 Policy issues disclosed by the top listed companies over the Internet
Policy issues 2002 2003 2004 2005 2006
Environment 2 3 4 5 4
Social and Community Relations 0 3 4 3 4
Health and Safety 1 3 3 3 2
Employee well-being 0 1 1 2 5
CSR 1 2 2 5 6
Ethics 0 0 1 2 3
Sustainability 0 0 1 2 6
Environmental Regulatory 1 1 1 2 4
V. Conclusion have steadily increased; suggest-
ing that IER is ‘growing up’ in
This study aims to investigate the recent China.
trends and practice of internet environ- 4. External auditing of IER remains
mental reporting (IER) in China. Based trivial.
on the sample of 20 top listed companies
over the period from 2002 to 2006, this Overall, the above result might cau-
study has tentatively found: tiously suggest that more Chinese larger
companies began to disclose their envi-
1. IER is increasingly used by Chi- ronmental information and policy
nese listed companies to disclose through the Web because of the in-
the events of social and environ- creased pressure. Recently an increasing
mental activities, and company number of people have paid attention to
policy relating to social and envi- environmental issues in China and vari-
ronmental concerns. Many of ous stakeholders have put pressure on
these events are linked with key Chinese companies concerning their
political and social programs of policies towards these issues (Ma & Or-
the government. tolano, 2000). In the meantime Chinese
2. Companied are increasingly using listed companies are increasingly aware
the phrases of ‘sustainability’ and of the need to engage with a variety of
‘CSR’ in their IER. Website- stakeholders and hold a social ‘license to
specific reporting as regards so- operate’ to ease potentially-sensitive
cial and environmental issues, issues, such as health & safety and envi-
performance and activities, in- ronmental protection (Guo, 2005). While
stead of being part of annual re- IER in China is developing, there re-
ports, has been adopted increas- mains a considerable discrepancy in
ingly by Chinese listed companies terms of reporting practices and the cov-
as the main approach to IER. erage of the social and environmental
3. Both the quantity of disclosure information disclosed. There are no gen-
and the coverage of areas of social erally accepted standards and guidelines
and environmental information for IER in China, and the data/

15. T. Zhang, S.S. Gao, J. J. Zhang / Issues in Social and Environmental Accounting 1 (2007) 91-108 105
information disclosed are largely incom- pean Review, Vol. 13, No. 2-3, pp.
parable even within a firm across the 100–116.
five-year period. CNNIC (China Internet Network Infor-
mation Center) (2007) Statistical
The limitations of this study should be Survey Report on the Internet De-
borne in mind in interpreting the above velopment in China. Available
ad hoc findings. The results would be from: http://www.cnnic.net
more conclusive if a longer time period [Access 17 May 2007].
was studied and more companies Cormier, D & Gordon, I.M. (2001) “An
(including SMEs) were included in the Examination of Social and Envi-
sample. Clearly, a further research is ronmental Reporting Strategies”,
needed to investigate the factors that Accounting, Auditing & Account-
cause corporate behaviors of Chinese ability Journal, Vol. 14, No. 5, pp.
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