Voluntary social and environmental accounting and reporting (SEAR) practices are becoming increasingly prevalent among multinational corporations (Gray, 2006). These practices, whereby corporations provide a range of stakeholders with an account of aspects of their so-called corporate social responsibility (CSR) policies, practices and impacts, are often justified by these corporations in terms of the business case (Spence & Gray, 2007) which argues that SEAR and CSR deliver benefits to a range of stakeholders while serving to enhance shareholder value. As such, the dominant business discourse of the business case for SEAR and CSR seeks to demonstrate an alignment of the social and environmental interests of a broad range of a corporation’s stakeholders with the economic interests of a specific group of stakeholders – the shareholders – whereby all parties benefit through SEAR and CSR.

This claimed alignment of interests is used to justify business sector arguments for SEAR and CSR being (and remaining) wholly voluntary practices because, it is argued, as serving the social and environmental interests of stakeholders through SEAR and CSR also delivers shareholder value, corporations focused on maximising shareholder value will always voluntarily develop and adopt the best SEAR and CSR policies and practices. These arguments in favour of voluntary practices and against mandatory regulations are consistent with a dominant business discourse in many other areas, whereby there seems to be an almost constant refrain from business exhorting governments to ‘reduce the regulatory burden on business’. Implicit in many of these calls for deregulation in a wide range of areas, and complaints when there is a prospect of new regulation, is a notion that regulation is generally ‘bad for business’—while reducing the regulations faced by business will somehow free businesses to be more efficient and productive, thereby increasing shareholder value (see, for example, BRC, 2007).

Much academic research has highlighted flaws in this dominant business justification, as contained within the business case, for SEAR and CSR remaining voluntary practices (see, for example, [O’Dwyer, 2002], [O’Dwyer, 2005] and [Spence and Gray, 2007]). Such research has pointed to many areas where the social and environmental interests of many stakeholders are at variance with the short- and medium-term pursuit of shareholder economic value by corporations. It further argues that in instances where the win–win outcomes portrayed by the business case (where both stakeholders and shareholders benefit from SEAR and CSR) become win–lose outcomes (where one party benefits but the other does not), voluntary CSR and SEAR practices driven by the maximisation of short- and medium-term shareholder value will result in SEAR and CSR policies and practices only being adopted where these are likely to result in improved economic performance by the corporation. These flaws, among others, with the dominant business case justification for the continued non-mandatory nature of SEAR and CSR have led to many arguments, within the academic literature, that CSR and SEAR need to be subject to regulation which would seek to protect the social and environmental rights and interests of stakeholders who are potentially negatively affected by the outcomes of business pursuit of delivering maximum shareholder value (see, for example, Owen, Swift, & Hunt, 2001).

The academic literature therefore provides justification for the regulation of CSR and SEAR in terms of protecting the interests and rights of stakeholders where these diverge from the economic rights and interests of shareholders.1 The aim of this essay is to develop an alternative (or supplementary) theoretical justification for the regulation of CSR and SEAR by demonstrating how, contrary to the dominant business discourse, increased regulation designed to protect the social and environmental interests of a range of stakeholders could also be considered to enhance corporate economic performance and shareholder value. The basis of the argument in this essay is that regulations can serve to reduce actual and perceived risks inherent in many business activities, and perceptions of risk are important factors in determining the ongoing support and trust any business enjoys from a variety of its stakeholders, with the trust of a range of stakeholders being essential in delivering shareholder economic value.

This theorised link between greater CSR/SEAR regulation and enhanced shareholder value is therefore different from links between these factors previously proposed, for example, by Porter and van der Linde (1995) who argued that greater regulation will force businesses to become more economically efficient in their operations (reducing costs) and to provide products with ‘environmental attributes’ valued in consumer markets. Rather, the arguments in this essay focus on the interaction between regulation, risk and trust in society. To help develop an understanding of this interaction, this essay draws on aspects of the social theories of (Beck, 1992), (Beck, 1994), (Beck, 1999) and (Beck, 2000) and (Giddens, 1990), (Giddens, 1991) and (Giddens, 1994) in relation to reflexive modernity to provide a perspective on the functioning of risk and trust, and thus to develop a particular theoretical argument about the role of regulation in potentially enhancing shareholder value.

As the aim of this essay is to offer a new theoretical perspective on the potential benefits of independent regulation of CSR and SEAR, it is broadly conceptual—although two practical examples are used to illustrate the theoretical concepts we propose. Our conceptual model might be considered somewhat idealistic. But it is offered in the spirit of provoking debate on aspects of the regulation of CSR and SEAR in a world were corporate voluntarism in relation to these practices has been repeatedly shown to have failed to place the interests of non-owner stakeholders on a par with the pursuit of shareholder economic value (Laufer, 2003), and where corporations show little inclination to submit to any form of regulation they see as threatening shareholder economic value (Chomsky, 1999). As with many theoretical propositions, there could be many obstacles to the practical implementation of our propositions—not least of which would be the power and tendency of the corporate world to capture systems and structures intended to regulate the corporate world (Chomsky, 1999; Lafont & Tirole, 1991; McChesney, 1999). However, we hope that any debate we provoke on the issues raised in this essay may help to identify more effective mandatory regulatory mechanisms—with this effectiveness depending on the greater readiness (and reduction in resistance) of corporations to submit to a mandatory-independent regulatory regime.