history and trends of cesr

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  • 1.HISTORY AND TRENDSOF CESR Begisheva Lidiya

2. Contents

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

3. Social and environmental reporting t he 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 4. History periods Antal, A. B.; Dierkes, M.; MacMillan, K. & Marz, L. (2002): "Corporate Social Reporting Revisited", Journal of General Management, 28 (2) 5. History periods

  • The late 1950-s late 1960s
  • Processes that promoted social accounting:
        • Faith in governments 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

Antal, A. B.; Dierkes, M.; MacMillan, K. & Marz, L. (2002): "Corporate Social Reporting Revisited", Journal of General Management, 28 (2) 6. History periods

  • 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

Antal, A. B.; Dierkes, M.; MacMillan, K. & Marz, L. (2002): "Corporate Social Reporting Revisited", Journal of General Management, 28 (2) 7. History periods

  • 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

Antal, A. B.; Dierkes, M.; MacMillan, K. & Marz, L. (2002): "Corporate Social Reporting Revisited", Journal of General Management, 28 (2) 8. History periods

  • The late 1990-s beginning of 2000s
      • Free-market strategies failed to solve social problems (Enron scandal 2001)
      • Maximizing shareholder value doesnt 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

Antal, A. B.; Dierkes, M.; MacMillan, K. & Marz, L. (2002): "Corporate Social Reporting Revisited", Journal of General Management, 28 (2) 9. 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 10. 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 Gray, R. (2001): "Thirty years of social accounting, reporting and auditing: what (if anything) have we learnt?" Business Ethics 11. Social Audits The standard for social audits was set by Social Audit Ltd in 1970s. Gray, R. (2001): "Thirty years of social accounting, reporting and auditing: what (if anything) have we learnt?" Business Ethics 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 12.

  • Social audits are founded on:
  • Conflict
  • Power/information asymmetries
  • Differing interests

Gray, R. (2001): "Thirty years of social accounting, reporting and auditing: what (if anything) have we learnt?" Business Ethics 13. 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)

Gray, R. (2001): "Thirty years of social accounting, reporting and auditing: what (if anything) have we learnt?" Business Ethics 14. It has potential

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

Gray, R. (2001): "Thirty years of social accounting, reporting and auditing: what (if anything) have we learnt?" Business Ethics 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 entity This hypothesis was right 15. 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

Gray, R. (2001): "Thirty years of social accounting, reporting and auditing: what (if anything) have we learnt?" Business Ethics 16. 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

Gray, R. (2001): "Thirty years of social accounting, reporting and auditing: what (if anything) have we learnt?" Business Ethics 17. 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 missionstatements
    • moral rights (over the environment)

Gray, R. (2001): "Thirty years of social accounting, reporting and auditing: what (if anything) have we learnt?" Business Ethics Responsibilities are determined by society, the company and the stakeholders 18. Stakeholder model

  • Identify a ll the broad groups of stakeholders
  • Break this groups down into constituent parts (different categories of employees)
  • Prioritize the stakeholders , explain the process of prioritization

Gray, R. (2001): "Thirty years of social accounting, reporting and auditing: what (if anything) have we learnt?" Business Ethics 19. Stakeholder model

  • For ea ch 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 themselves

Gray, R. (2001): "Thirty years of social accounting, reporting and auditing: what (if anything) have we learnt?" Business Ethics 20. Stakeholder model

  • Identify, report & discharge social accountability
  • Its the job of the auditors to pronounce on the qualitative characteristics of a social report
  • Attestation
  • The 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

Gray, R. (2001): "Thirty years of social accounting, reporting and auditing: what (if anything) have we learnt?" Business Ethics The most important criteria -COMPLETENESS 21. Key Lessons to Learn

  • Voluntary initiatives dont produce widespread, consistent & systematic practice
  • Social & environmental information disclosed by companiescould be made more for accountability purposes
  • Voluntary social reporting is a highly valuable exercise
  • Voluntary reporting must be in the interests of the organization undertaking it
  • General rule: if the organization doesnt want to produce the info it is likely to benefit society
  • There are means to develop sensible, meaningful & systematic social accounts

Gray, R. (2001): "Thirty years of social accounting, reporting and auditing: what (if anything) have we learnt?" Business Ethics 22. Key Lessons to Learn

  • Almost no social account can ever be entirely complete
  • Social accounting changes over time
  • Attestation is crucial
  • Good social accountscharacteristics: clarity of objectives, systematic approach, quality evidence, completeness, integrity and independence

Gray, R. (2001): "Thirty years of social accounting, reporting and auditing: what (if anything) have we learnt?" Business Ethics 23. Trajectories of sustainability reporting

  • Surveys published by accounting & consulting firms show best practices & areas for improvement, but dont 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--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 24. Reasons for reporting

  • Enhanced ability to track progress against specific targets
  • Facilitating the implementation of the environmental strategy
  • Greater awareness of broad environmental issues throughout the organization
  • Ability to clearly convey the corporate message internally and externally
  • Improved all-round credibility from greater transparency
  • Ability to communicate efforts & standards
  • License to operate and campaign
  • Reputational benefits, cost savings, increased efficiency, enhanced business development opportunities and enhanced staff morale

Kolk, A. (forthcoming): Trajectories of sustainability reporting by MNCs, Journal of World Business 25. Reasons for non-reporting

  • Doubts about the advantages it would bring to the organization
  • Competitors are neither publishing reports
  • Customers are not interested in it, it wont increase sales
  • The company already has a good reputation for its environmental performance
  • There are many other ways of communicating about environmental issues
  • Its too expensive
  • Its difficult to gather consistent data
  • It could damage the reputation of the company

Kolk, A. (forthcoming): Trajectories of sustainability reporting by MNCs, Journal of World Business 26. Trajectories of sustainability reporting

  • 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 .

Kolk, A. (forthcoming): Trajectories of sustainability reporting by MNCs, Journal of World Business 27. Trajectories of sustainability reporting

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

Kolk, A. (forthcoming): Trajectories of sustainability reporting by MNCs, Journal of World Business 28. Trajectories of sustainability reporting

  • Consistent reporters firms consistently publishing reports
  • Late adopters firms that started later
  • Laggards didnt publish a sustainability report on the first 2 data points (1999, 2002), but had one in 2005
  • Inconsistent reporters firms that dont follow a clear pattern, publishing intermittently
  • Consistent non-reporters firms that consistently dont publish reports

Kolk, A. (forthcoming): Trajectories of sustainability reporting by MNCs, Journal of World Business 29. Trajectories of sustainability reporting

  • Theconsistent reportersare leaders in sustainability reporting.
  • U.S. firms are relatively underrepresented in this group, and European (exc. France) and Japanese companies are overrepresented. 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
  • Inconsistent non-reportersthere 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.

Kolk, A. (forthcoming): Trajectories of sustainability reporting by MNCs, Journal of World Business 30. Trajectories of sustainability reporting Kolk, A. (forthcoming): Trajectories of sustainability reporting by MNCs, Journal of World Business 31. Difficulties concerning reporting

  • Implementation can be a clear barrier to start reporting
  • The 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

Kolk, A. (forthcoming): Trajectories of sustainability reporting by MNCs, Journal of World Business 32. KPMG Survey

  • The purpose of this survey was to track reporting trends in the worldslargest 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.

KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam 33. 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)

KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam 34. 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

KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam 35. KPMG Survey KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam 36. KPMG Survey KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam 37. KPMG Survey KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, AmsterdamCompanies with stand-alone and integrated CSR reports 38. KPMG Survey KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam 39. KPMG Survey KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam Drivers for CSR reporting 40. KPMG Survey KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam Companies with CR strategy, objectives, indicators and data 41. KPMG Survey KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam Companies reporting on business opportunities of CR by country 42. KPMG Survey KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam Management standards and guidelines used by companies 43. KPMG Survey KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam Stated purpose for conducting stakeholder engagement 44. KPMG Survey KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam Means of engaging stakeholders 45. KPMG Survey KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam Reporting standards and guidelines used by companies 46. KPMG Survey KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam 47. KPMG Survey KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam Reporting format 48. KPMG Survey KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam Carbon footprint disclosure by country 49. KPMG Survey KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam 50. KPMG Survey KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam 51. KPMG Survey KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam 52. KPMG Survey Kolk, A. (forthcoming): Trajectories of sustainability reporting by MNCs, Journal of World Business 53. KPMG Survey Kolk, A. (forthcoming): Trajectories of sustainability reporting by MNCs, Journal of World Business 54. Main Conclusions

  • 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
  • Integration of corporate responsibility information into annual reports is on the rise in France, Norway, Switzerland, Brazil, and South Africa
  • Ethical considerations and innovation increased as the most common reasons for reporting, while risk management fell

Kolk, A. (forthcoming): Trajectories of sustainability reporting by MNCs, Journal of World Business 55. Main Conclusions

  • of G250 companies have a CR strategy that includes defined objectives
  • More than half of G250 publicly disclose new business growth opportunities and/or the financial value of CR
  • 63% of G250 use a structured approach to stakeholder dialogue, up from 33% in 2005
  • More than of G250 apply the GRI guidelines for their reporting
  • 60% of all companies surveyed consult with their stakeholders for determining the content of their reports

Kolk, A. (forthcoming): Trajectories of sustainability reporting by MNCs, Journal of World Business 56. Main Conclusions

  • Although 92% of G250 disclose a code of conduct or ethics, only 59% report on non-compliance with the code
  • 68% of G250 have a corporate governance section in their reports, up from 61% in 2005
  • Over 90% of G250 have a supply chain code of conduct but only half disclose details of how it is implemented and monitored
  • Formal assurance increased from 30% to 40% in G250

Kolk, A. (forthcoming): Trajectories of sustainability reporting by MNCs, Journal of World Business 57. Main Conclusions

  • Major accountancy organizations are still leading the corporate responsibility reporting assurance field
  • Consistency and quality of assurance approach is demonstrated by an increase in the use of standards

Kolk, A. (forthcoming): Trajectories of sustainability reporting by MNCs, Journal of World Business 58. Further trends

  • Reporting will become more common at the national level and in smaller companies in the near future
  • Reporting is more likely to occur within the context of an overarching strategy and management system
  • Quantifying the business case for CSR will spread through countries and sectors to the smaller players
  • 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.
  • 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

KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam 59. Further trends

  • 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
  • A greater demand and aptitude for environmental and social data by traditional financial report readers, such as the investor community
  • The trend is moving toward a maturing of management systems for corporate responsibility
  • More companies will disclose information on the corporate responsibility supplier audits
  • China released first reports with a third party assurance, so the development of this trend is to come

KPMG (2008): KPMG International Survey of Corporate Responsibility Reporting 2008. KPMG, Amsterdam 60. Questions

  • With the growing percentage of companies releasing sustainability reports, do you think it is necessary to make the process of that reporting mandatory? Why?
  • 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?

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