history and trends of cesr

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HISTORY AND TRENDS OF

CESR

Begisheva Lidiya

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Contents•History of CESR•Sorts of social accounting• Stakeholder model• Trajectories of sustainability reporting• KPMG trends• Main conclusions• Further trends

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Social and environmental reporting

“the process of communicating the social and environmental effects of organisations’ economic actions to particular interest groups within society and to society at large. As such, it involves extending the accountability of organisations (particularly companies) beyond the traditional role of providing a financial account to the owners of capital, in particular shareholders. Such an extension is predicated upon the assumption that companies do have wider responsibilities than simply to make money for their shareholders”

Gray R.H., Owen D.L. and Maunders K.T. (1987) Corporate Social reporting: Accounting and Accountability

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History periods

The late1990-s –beginningof 2000s

Presenttimes

The late1950-s –

late 1960s

The late1960-s –

mid1980s

The mid1980-s –

late 1990s

Antal, A. B.; Dierkes, M.; MacMillan, K. & Marz, L. (2002): "Corporate Social Reporting Revisited", Journal of General Management, 28 (2)

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History periods

1. The late 1950-s – late 1960s Processes that promoted social accounting:

Faith in government’s ability to offer solutions to social problems

Criticism of Standard GDP Pressure for companies to include social aspects in

their decision-making process The emergence of generation of responsible

managers


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History periods

2. The late 1960-s – mid 1980s Social accounting starts occupying an

important place in business The main question “Is It Time to

Legislate?” French law in 1977 required CS reporting


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History periods

3. The mid 1980-s – late 1990s Regression of social reporting and

accounting practices: Resistance of established groups Neo-liberal economic policies

Some approaches and concepts of social reporting became part of everyday business practice


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History periods

4. The late 1990-s – beginning of 2000s Free-market strategies failed to solve social

problems (Enron scandal 2001) Maximizing shareholder value doesn’t mean

maximizing welfare of society New approaches of social accointing (CSR) Launching of Initiatives by international

organizations (GRI in 1997, Global Compact in 1999 and Green Paper in 2001)

The presentation of triple-bottom line concept (social, economic and environmental performance)

Increasing risk if socially irresponsible behaviour


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Strands in social accounting

Social audits

Silent social accounts

New wave of social accounting

Gray, R. (2001): "Thirty years of social accounting, reporting and auditing: what (if anything) have we learnt?" Business Ethics

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Social Audits

Social audits - “those public analyses of accountable entities undertaken by bodies independent of the entity, and typically without the approval of the entity concerned”


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Social Audits

The standard for social audits was set by Social Audit Ltd in 1970s.


The message is if the companies fail to act appropriately and fail to discharge their account to society, the social audit may well appear and do the job for them

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Social audits are founded on: Conflict Power/information

asymmetries Differing interests


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‘Silent’ social accounts

‘Silent’ social accounts – data of officially required disclosures (employees, political & charitable donations & governance) & voluntary disclosed data (environmental issues, consumers, product safety & interactions with the community)


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It has potential

Active employment of the data provides a means to make organizational accountability a more active process


The collation of material to produce separately identified ‘social and environmental reports’ alongside the extant financial report will help o socially reconstruct the organization as more than simply an economic entityThis hypothesis

was right

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The ‘new wave’ of social accounting

Range of organizations (NGOs, valued-based organizations & companies) make significant attempts to produce systematic social accounts

A lack of theoretical rigour and the triumph of optimism and pragmatism over clarity of purpose are leading to a melange of stakeholder dialogue, sustainability reporting & community reporting


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Objectives

The most crucial lesson – clarity of objectives: to discharge accountability to

stakeholders to control stakeholders to move towards sustainability reporting be an exercise in self-justification


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Stakeholder model

Stakeholder – is anyone who can influence or is influenced by the organization

Stakeholder rights to information: law quasi-law (non-legal codes) corporate values and mission statements moral rights (over the environment)


Responsibilities are determined by society, the company and the stakeholders

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Stakeholder model

1. Identify all the broad groups of stakeholders

2. Break this groups down into constituent parts (different categories of employees)

3. Prioritize the stakeholders , explain the process of prioritization


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Stakeholder model

4. For each stakeholder provide the following layers of information:

Essential elements of s/h-organization relationship

Required to discharge responsibilities obtaining through law and quasi-law

Company-preferred information Concerning the preferences and views of

the stakeholders themselvesGray, R. (2001): "Thirty years of social accounting, reporting and auditing: what (if anything) have we learnt?" Business Ethics

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Stakeholder model5. Identify, report & discharge social

accountability

It’s the job of the auditors to pronounce on the qualitative characteristics of a social report

6. AttestationThe auditor should be:

Independent of organization To be in position to exhibit the highest standards of

ethical & professional integrity To have had thorough training in the issues at stake


The most important criteria - COMPLETENESS

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Key Lessons to Learn1. Voluntary initiatives don’t produce widespread, consistent &

systematic practice2. Social & environmental information disclosed by companies

could be made more for accountability purposes3. Voluntary social reporting is a highly valuable exercise4. Voluntary reporting must be in the interests of the

organization undertaking it5. General rule: if the organization doesn’t want to produce the

info it is likely to benefit society6. There are means to develop sensible, meaningful & systematic

social accounts


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Key Lessons to Learn

7. Almost no social account can ever be entirely complete

8. Social accounting changes over time9. Attestation is crucial10. Good social accounts characteristics: clarity of

objectives, systematic approach, quality evidence, completeness, integrity and independence


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Trajectories of sustainability reporting

Surveys published by accounting & consulting firms show best practices & areas for improvement, but don’t aim to map developments and disclosure strategies at the level of the firm

Cross-sectional analysis is dominant.A basic consideration is that firms balance internal and

external pressures from a variety of stakeholders, some more powerful than the others, to whom corporate information can be useful in their decision making & behavior vis-à-vis the firm.

Large firms, as opposed to small firms, are more likely to report

Kolk, A. (forthcoming): “Trajectories of sustainability reporting by MNCs”, Journal of World Business

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Reasons for reporting1. Enhanced ability to track progress against specific targets2. Facilitating the implementation of the environmental strategy 3. Greater awareness of broad environmental issues throughout the

organization4. Ability to clearly convey the corporate message internally and

externally5. Improved all-round credibility from greater transparency6. Ability to communicate efforts & standards7. License to operate and campaign8. Reputational benefits, cost savings, increased efficiency,

enhanced business development opportunities and enhanced staff morale


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Reasons for non-reporting1. Doubts about the advantages it would bring to the

organization2. Competitors are neither publishing reports3. Customers are not interested in it, it won’t increase sales4. The company already has a good reputation for its

environmental performance5. There are many other ways of communicating about

environmental issues6. It’s too expensive7. It’s difficult to gather consistent data8. It could damage the reputation of the company


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Reasons for non-reporting : competition and implementation scored high; reputation was considered less important

1998-2005 – a crucial period in terms of the adoption of sustainability reporting by large MNCs

Industrial, more ‘polluting’ sectors have traditionally been most active in reporting, although the number of banks & insurance firms that publishes a sustainability report is increasing.

The trend in reports toward sustainability reporting.


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Moving from general trends to those at firm-level, various patterns are possible:


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Consistent reporters – firms consistently publishing reports

Late adopters – firms that started laterLaggards – didn’t publish a sustainability report on the

first 2 data points (1999, 2002), but had one in 2005

Inconsistent reporters – firms that don’t follow a clear pattern, publishing intermittently

Consistent non-reporters – firms that consistently don’t publish reports


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Trajectories of sustainability reportingThe consistent reporters are leaders in sustainability reporting.U.S. firms are relatively underrepresented in this group, and European (exc.

France) and Japanese companies are overrepresented. ¾ of Dutch firms fall into this category.

The underrepresentation of banks and insurance firms stands out, as well as the overrepresentation of electronics & computers, chemicals & pharmaceuticals & automotive

In consistent non-reporters there hardly any European firm can be found, and U.S. firms are overrepresented, they account for almost 60% of non-reporters

There is a strong overrepresentation of banks & insurance, and trade & retail, while automotive, chemicals & pharmaceuticals, and electronics and computers are fully absent here.


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Difficulties concerning reportingImplementation can be a clear barrier to start reportingThe long list of possible indicators may also put off smaller firms.The number of choices to be made for reporting has also

increased over the years in view of considerable diversity in types (environmental, social and sustainability reports), formats (stand-alone or part of the financial report; targeted at specific stakeholder groups or generally), means (electronic and /or on paper, one or multiple languages) and external involvement (from stakeholders, verification of data, and if so, by which party/parties).

Particularly verification also brings considerable costs.‘Paradox of information’: the more information firms supply, the

higher the request for new data


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KPMG Survey

KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam

The purpose of this survey was to track reporting trends in the world’slargest companies. The sample of over 2200 companies includes the Global Fortune 250 (G250) and the 100 largest companies by revenue(N100) in 22 countries. The survey presents historical data where possible, drawing from five previous surveys conducted by KPMG firms since 1993.Only information available in the public domain was used for this survey, such as company websites, corporate responsibility reports, and annual reports issued in 2007-2008.

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KPMG Survey


Principal global frameworks:Global Reporting Initiative released the third iteration of

its Sustainability Reporting Guidelines (G3 Guidelines) in 2006.

The International Organization of Standartization is developing ISO 26000 Guidance Standard on Social Responsibility

United Nations Global Compact marked nearly 1000 companies as inactive

Assurance standards continued to evolve (IAASB, ISAE3000)

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KPMG Survey


CSR reporting is building value for companies in many ways:

Differentiating the company in the market place Maintaining a license to operate with the public or

specific stakeholders Attracting favorable financing conditions as

financial markets wake up to ESG issues Encouraging innovation Attracting and retaining workers Enhancing reputation

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KPMG Survey


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KPMG Survey


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KPMG Survey


Companies with stand-alone and integrated CSR reports

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KPMG Survey


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KPMG Survey


Drivers for CSR reporting

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KPMG Survey


Companies with CR strategy, objectives, indicators and data

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KPMG Survey


Companies reporting on business opportunities of CR by country

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KPMG Survey


Management standards and guidelines used by companies

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KPMG Survey


Stated purpose for conducting stakeholder engagement

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KPMG Survey


Means of engaging stakeholders

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KPMG Survey


Reporting standards and guidelines used by companies

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KPMG Survey


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KPMG Survey


Reporting format

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KPMG Survey


Carbon footprint disclosure by country

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KPMG Survey


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KPMG Survey


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KPMG Survey


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KPMG Survey


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KPMG Survey


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Main Conclusions1. CSR reporting has gone mainstream – nearly 80% of

the largest 250 companies worldwide issued reports, and an additional 4% integrated CR information into their annual reports

2. Integration of corporate responsibility information into annual reports is on the rise in France, Norway, Switzerland, Brazil, and South Africa

3. Ethical considerations and innovation increased as the most common reasons for reporting, while risk management fell


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Main Conclusions4. ¾ of G250 companies have a CR strategy that includes

defined objectives5. More than half of G250 publicly disclose new business

growth opportunities and/or the financial value of CR6. 63% of G250 use a structured approach to

stakeholder dialogue, up from 33% in 20057. More than ¾ of G250 apply the GRI guidelines for

their reporting8. 60% of all companies surveyed consult with their

stakeholders for determining the content of their reports


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Main Conclusions9. Although 92% of G250 disclose a code of conduct or

ethics, only 59% report on non-compliance with the code

10. 68% of G250 have a corporate governance section in their reports, up from 61% in 2005

11. Over 90% of G250 have a supply chain code of conduct but only half disclose details of how it is implemented and monitored

12. Formal assurance increased from 30% to 40% in G250


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Main Conclusions

13. Major accountancy organizations are still leading the corporate responsibility reporting assurance field

14. Consistency and quality of assurance approach is demonstrated by an increase in the use of standards


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Further trends1. Reporting will become more common at the national level and

in smaller companies in the near future2. Reporting is more likely to occur within the context of an

overarching strategy and management system3. Quantifying the business case for CSR will spread through

countries and sectors to the smaller players4. Combining comments from parties such as stakeholder panels

with a systematic assurance process could provide the desired level of assurance about both the report quality and content.

5. Since more than 80% of the G250 now report on CR, this trend can be expected to roll out rapidly at the country and sector levels in the coming years


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Further trends6. In the next several years reporting by companies in the U.S.,

Spain, The Netherlands, Italy, Canada, Sweden and Brazil can be expected toward a 100% mark

7. A greater demand and aptitude for environmental and social data by traditional financial report readers, such as the investor community

8. The trend is moving toward a maturing of management systems for corporate responsibility

9. More companies will disclose information on the corporate responsibility supplier audits

10. China released first reports with a third party assurance, so the development of this trend is to come


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Questions1. With the growing percentage of companies releasing

sustainability reports, do you think it is necessary to make the process of that reporting mandatory? Why?

2. The majority of companies select accountancy organizations for assurance. What is your attitude towards mandating GRI guidelines and creating a “uniform” system of report checking?


history and trends of cesr

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