lecture 10: good and bad csr – a critical perspective
TRANSCRIPT
FN0449 Lecture 10FN0449 Lecture 10Good and Bad CSR – A Good and Bad CSR – A critical perspective…critical perspective…
Dr Alex Hope
Objectives of the session
Explain basic features of CSR reporting
Understand the main reasons why companies become involved in CSR reporting
Explore the role of CSR reporting in the broader accounting process
Discuss key features of good CSR reporting and auditing
Understand the role of stakeholder dialogue in CSR reporting
Good and Bad aspects of reports…
Annual report (financial) targeted at shareholders CSR report (non-financial) targeted at broad range of stakeholders
Introduction
CSR reporting and auditing: Can help a business prove to its stakeholders that it is ‘doing the right thing’
Rise in non-financial reporting to inform stakeholders of the ‘triple bottom line’
95% of the 250 largest companies in the world report on CSR
All of the 100 largest UK companies have CSR reporting
Introduction
Source: KPMG International Survey of Corporate Responsibility Reporting 2011
Part of social accounting / auditing process
CSR reporting is still voluntary = Heterogeneity of CSR reports
•Wide variety of language / content•Difficult for stakeholders to assess the quality of a company’s CSR•Prevents the reader from comparing different companies
Introduction
• Instrumental / economic: Social and environmental issues might pose a threat to the company’s financial performance (e.g. Nike boycotts).
• Political: Increase in corporate power = greater calls for more transparency and accountability to the public.
Reasons for Engaging in CSR Reporting & Auditing
Integrating stakeholder demands: CSR auditing and reporting helps companies to improve their interaction with stakeholders as part of a broader process of dialogue and engagement.
Ethical reasons (Responding to pressure): CSR reporting is a tool to communicate ethical values and performance.
(Framework from Garriga and Mele - see Chapter 3)
Reasons for Engaging in CSR Reporting & Auditing
Current Trends in CSR Reporting
•Standardization of CSR reporting to enhance credibility:
Standardizing CSR reports: e.g. The ‘Global Reporting Initiative’ (GRI) framework for sustainability reports (published for the first time in 2000).
Assurance: e.g. The ‘AA1000S Assurance Standard,’ launched by AccountAbility in 2002, provides a framework for assessing processes underlying a CSR report.
Current Trends in CSR Reporting
Regulation: The voluntary nature of CSR reporting is starting to be challenged in Denmark, France, Japan, Malaysia, and the UK.
Integrated reporting: e.g. The International Integrated Reporting Committee (IIRC) proposes one integrated report combining the annual and CSR report.
Current Trends in CSR Reporting
How to Do it
• Diversity in practice is related to:Interests on the part of those initiating
the processTypes of organisations ContextsTheoretical and philosophical roots
Growth in Social and Ethical Accounting, Auditing and Reporting (SEAAR)
How to Do it
• Poor practices can be related to:
Insufficient knowledge, skills, experience and/or resources
A deliberate attempt to underspecify the accounts and/or verification process to report in a less than accurate, incomplete manner
Outlay audit: Considers financial cost, not outcome valueConstituency accounting: Examine report in relation to demands of key constituenciesCorporate rating against social / ethical criteria: External ratingsSocial indicators movement: Internal and external involvement
How to Do itMethodological approaches:
http://www.slideshare.net/Bull_UK/corporate-social-responsibility-a-new-business-asset
Understanding Quality
Categorise initiatives through:
Principles of good practice in SEAAR
The elements into which principles can be subdivided to enable detailed analysis
The level and quality of reporting
1.Inclusivity: Reflect views of all principal stakeholders
2.Comparability: Compare performance as a basis for assessment
3.Completeness: All areas of company activity are included
4.Evolution: Repetition to demonstrate continual learning
Understanding QualityThe 8 Principles of Quality:
Understanding QualityThe 8 Principles of Quality:
4.Management policies and systems: Clear internal processes
4.Disclosure: Formality or active means of communication?
5.Externally verified: Validate material professionally & independently
6.Continuous improvement: Assess progress over time
Scoring Quality
Stage 1: Commentary – Report of social mission / aims and ad hoc descriptive elements
Stage 2: Review – Occasional descriptive report covering different stakeholders, including specific policies
Stage 3: Report – Regular report with stakeholder consultation, indicators and financial data, explicit policies, internal systems
Social and ethical disclosure: Assessing progress:
http://www.thevirtuouscircle.co.uk
Stage 4: Statement – Regular externally verified report with two-way stakeholder dialogue, indicators, targets and benchmarks and commitment to comprehensive coverage over time
Stage 5: Sustainability statement – Regular externally verified sustainability statement with linkages to environmental, animal, economic and financial data
Scoring Quality
The Core Role of Stakeholder Engagement and Dialogue
Stage 1: Understanding organizational motives for stakeholder engagement and dialogue
Holistic perspective: Social and environmental reporting and CSR as processes which transform business practices to become socially and environmentally sustainable. Strategic perspective: Social and environmental reporting as a tool to win or retain the support of stakeholders who have the power to influence the achievement of an organization’s goals.
Identifying to whom the organization needs to report if it is to achieve its philosophical objectives
The identification of stakeholders takes place after the philosophical motives for engaging in CSR and social and environmental reporting have been determined
Moving from stakeholder identification to stakeholder engagement and dialogue
The Core Role of Stakeholder Engagement and Dialogue
Stage 2: Linking stakeholder identification to motives for reporting
Key Issues & Difficulties in Stakeholder Engagement & Dialogue
Identifying the range of stakeholders to be considered
Impossibility of direct dialogue and engagement with some stakeholders
Addressing heterogeneous stakeholder views and expectations
Key Issues & Difficulties in Stakeholder Engagement & Dialogue
Prioritizing stakeholder needs on the basis of maximum negative consequences
Negotiating a consensus among mutually exclusive stakeholder views through discourse ethics
What makes a good or bad report?Context: The Company's Role in Society
“Our role in society is an extension of our core purpose: we make what matters better, together.”
http://www.tescoplc.com/files/pdf/responsibility/2014/tesco_and_society_review_2014.pdf
“Banks play an important role in society. By assisting customers with financing, investments, secure payments and asset management, we support economic development and international trade and contribute to financial security”
http://sebgroup.com/about-seb/who-we-are/our-role-in-society
Material Issues
What makes a good or bad report?
http://report.basf.com/2012/en/pics/img/028a_nochart_en.png
Outcomes
What makes a good or bad report?
Look for the outcomes or impacts of the company's Sustainability activities, not just performance.
Look to see if environmental impacts have improved.
Look to see what community outcomes have been achieved
Summary
Explain basic features of CSR reporting
Understand the main reasons why companies become involved in CSR reporting
Explore the role of CSR reporting in the broader accounting process
Discuss key features of good CSR reporting and auditing
Understand the role of stakeholder dialogue in CSR reporting
Good and Bad aspects of reports…