Corporate Social Responsibility (Theory)

What is Sustainability?

It contains three key concepts The concept of 'needs' Incorporates the concept of 'time' Concept of 'limitations' imposed by the state of technology and social organisation on the environment's ability to meet present and future needs Eco Justice - inter and intra-generational equity, and Eco Efficiency - efficient use of resources to minimise impact on the environment

Global Reporting Initiative economic (financial) themes

economic performance, market presence, indirect economic impacts

stakeholder examples

environmentalists, consumer advocates, media, governments, competitors, shareholders, customers, suppliers Stakeholder importance derives from the power to control critical resources

Global Reporting Initiative

https://www.globalreporting.org Netherlands based but international membership Aim: Provide a reasonable and balanced presentation of performance over a fixed period of time Goal: To make sustainability reporting as routine and comparable as Financial Reporting

Motivations for CSR reporting - corporate legitimacy

3. Corporate legitimacy Legitimacy theory suggests: The relationship between a company and society is subject to a "social contract" The implied social contract provides that: As long as the company's activities are consistent with society's values, the company's legitimacy and survival are assured The legitimacy of a company is called into question when: Society's expectations do not match corporate behaviour

stakeholder

A "stakeholder" is any identifiable group or individual who can affect, or is affected by the achievement of an organisation's objectives (Freeman & Reed, 1983)

Sustainability Reporting

A sustainability report refers to a report that not only presents information about the economic value of an entity, but provides information upon which stakeholders can also judge the environmental and social value of an entity. Useful not only for reporting purposes but also performance measurement, accounting, auditing and reporting.

Mandatory Sustainability Reporting Requirements

Australia The Corporations Act 2001 requires directors to outline the company's performance in relation to environmental regulations. The National Greenhouse and Energy Reporting Act 2007 (NGER Act) introduced a national framework for reporting and dissemination of information about greenhouse gas (GHG) emissions and energy use by certain corporations. (very few)

Practice Questions

Chapter 28 of Henderson (15th edition in QUT Readings) Questions 1 and 8 Do you think that the disclosure of social and environmental information by Australian companies should be regulated?

Corporate legitimacy strategies

Corporate legitimacy strategies to close a legitimacy gap and avoid sanctions by society include: Changing corporate performance and activities to conform to legitimacy standards and communicating change to stakeholders Attempting to change external expectations about corporate performance through communication Using communication to direct attention from the legitimacy gap or to reinforce the community's perception of management's responsiveness E.g. Coca Cola Corporate Social Responsibility

Dow Jones Sustainability World Index

DJSI launched in 1999 as the first global sustainability benchmark. The DJSI family is offered cooperatively by RobecoSAM Indices and S&P Dow Jones Indices. Tracks the stock performance of the world's leading companies in terms of economic, environmental and social criteria. Serves as benchmarks for investors who integrate sustainability considerations into their portfolios, and provide an effective engagement platform for companies who want to adopt sustainable best practices.

Global Reporting Initiative - social themes

Employment, labour management/relations, health and safety, training and education, diversity and equal opportunity, investment and procurement practices, non-discrimination, freedom of association, child labour, forced and compulsory labour, security practices, indigenous rights, community, corruption, public policy, anti-competitive behaviour, compliance, customer health and safety, products and services labelling, marketing communications, customer privacy and compliance

CSR reporting motivations - Enlightened self-interest

Enlightened self-interest Costs that appear to be motivated by a desire to promote society's best interest: But which are also incurred in the hope of generating benefits for the company that exceed those costs No guarantee that corporate philanthropy achieves the desired benefits for the organisation involved Philanthropy may still be justified if: The perceived benefits exceed the costs

Sustainability Management

Environmental management: a purposeful activity with the goal to maintain and improve the state of an environmental resource affected by human activities Not the management of the environment as such, but the management of the interaction and impact of human societies on the environment.

Ethical Investment

Ethical investment and ethical investment funds are increasingly taking an interest in corporate sustainability performance and reporting (i.e. investment funds divesting of fossil fuel, tobacco and other 'industries considered 'unethical'). More broadly many institutional investors are concerned about the economic, financial and regulatory risks of global warming.

Disclosure, Market Incentives and CSR Reporting

Firms tend to voluntarily disclose if the perceived benefits are superior its costs (Verrecchia, 2001): Firms compete on capital markets where future expected profits depend also on the overall riskiness linked to possible environmental misbehaviours or lack of social acceptance. Attract a different clientele. These are purely economic incentives, and under this perspective, CSR is a means towards an end (increase profit and market attractiveness)

global reporting initiative framework

Framework Content principles Materiality, stakeholder inclusiveness, completeness, sustainability context

Global reporting initiative indicators and themes

Indicators Environmental Themes Materials, energy, water, biodiversity, emissions, effluents and waste, products and services, compliance, transport, other

Why Do Firms Disclose CSR Information?

It contrasts the short-termism of financial measures and the attention towards (shareholders') value creation Stakeholders require firms to be held accountable and transparent in terms of: Environmental impact Social resources deployed Politicians are pointing out 'Some choices taken by companies may potentially harm the environment (pollution)' Reduce the impact on taxpayers Financial reporting is not the only 'dimension' that matters - in assessing future profitability. Firms are required to convey information about environment, social performance etc. CSR is voluntary in nature, there is no standard and it is quite flexible It allows managers to disclose information that will otherwise remain obscure (dynamic of intangible assets, social capital or human resources)

Global Trends

Narrative Director's Report Mandatory Governance Disclosure UK Business Review Legislation Carbon Emissions Disclosures Voluntary Sustainability Reporting Regulation in Specific Areas - Water Accounting - Australia leading the way

global reporting initiative - quality principles

Quality principles Balance, reliability, accuracy, comparability, clarity, timeliness

Motivations for CSR reporting - Stakeholder management

Stakeholder theory: An organisation is part of a broader environment with complex and dynamic relationships with its many stakeholders Major role of management is to assess the importance of meeting stakeholder demands to achieve the organisation's strategic objectives Corporate social responsibility disclosures are viewed as: Part of a strategy to negotiate stakeholder relationships

Critical views on sustainability reporting

Sustainability is often portrayed by corporations as a 'journey' or a transition. But where was the starting point and where is the destination? What are the aims of this movement to sustainability? The metaphor of the 'journey' gives the impression of deep and meaningful engagement but often may be masking a 'business as usual' attitude (see Gray 2010, and Cho et al 2015, for example)

The Practical Challenges of Sustainability Reporting

Sustainability reporting should include: Consistency and comparability of disclosures across businesses nationally and internationally Qualifications and experience for Auditors Difficulty associated with drawing information for disparate data sets dispersed throughout an enterprise Integrated reporting and analysis systems are critical

Corporate Social Responsibility (CSR)

The push towards additional, non-financial information encompassing social and environmental issues has its roots into Corporate Social Responsibility (CSR).

Sustainability Reporting

Usefulness Benchmarking Performance and/or compliance with respect to laws, norms, codes, performance standards, voluntary initiatives Demonstrating How the organisation influences or influenced by expectations about sustainable development Comparing Performance within/between organisation(s) over time Become mainstream