How labour unions shape the quality of CSR reporting

A new lens on union influence

Historically, organised labour has been perceived as a challenge to corporate transparency – especially in financial disclosures. Firms often withhold financial information or manage earnings to gain an edge in labour negotiations. But what about non-financial disclosures, such as CSR reporting?

The authors of this study investigate this question using data from over 6,000 US firm-year observations between 2002 and 2017. They explore whether firms facing stronger union presence – measured through both firm-specific labour intensity and industry-wide unionisation rates – are more likely to invest in higher-quality CSR reporting.

Stronger unions, better CSR reporting

The study finds that firms with organised labour produce higher-quality CSR reports. These reports are more likely to follow global frameworks (such as GRI or OECD), cover global operations, and be independently audited – characteristics that collectively indicate greater transparency and credibility.

Interestingly, this trend runs counter to how firms typically behave with financial information in a unionised environment. While firms often reduce financial disclosure quality to limit bargaining leverage, CSR appears to serve a different function – one of relationship-building and trust with employees.

Why firms lean into CSR disclosure

The study suggests that companies use CSR reporting strategically to strengthen labour relations, especially during times when unions are more likely to push for better terms – such as periods of strong financial performance or high liquidity. In these situations, high-quality CSR disclosure helps firms maintain goodwill with employees and pre-empt more aggressive bargaining.

Moreover, the study finds that this isn’t just surface-level signalling. Firms with strongerunions and higher CSR reporting scores also show better actual CSR outcomes, such as more inclusive workplace policies and lower employee injury rates. This diminishes concerns of greenwashing and supports the idea that these reports reflect genuine organisational efforts.

What happens when union power declines?

To ensure these results weren’t driven by other firm characteristics, the researchers looked at the staggered introduction of right-to-work (RTW) laws in US states – regulations that weaken union power by making union membership optional. They found that CSR reporting quality declined after RTW laws were passed, reinforcing the connection between union strength and CSR disclosure efforts.

Implications for managers, investors and regulators

This research reframes how we understand the interaction between labour relations and corporate transparency. Managers appear to view CSR reporting not as a bargaining liability but as a tool for collaboration with workers. For investors and regulators, it highlights the potential of CSR reports to serve as credible indicators of labour engagement – particularly in settings where unions are active.

With CSR reporting becoming a global norm and mandatory in some jurisdictions, understanding these dynamics is vital. Voluntary, high-quality CSR disclosure may not just reflect social commitment – it may also be a strategic move in managing internal stakeholder relationships.