Corporate Social Reporting and Sustainability in the Modern Business Environment

RemonAs society and businesses become more aware of their impact on people and the environment, organisations have been striving to boost their Corporate Social Reporting (CSR) credentials.

Over the past two decades, we have seen greater emphasis on measurement and reporting, to give tangibility to good intentions. The term ‘Sustainability’ and CSR has become a familiar phrase and an indispensable element of any publicly listed company’s annual report. More organisations, especially in the business services and consumer industry are investing and implementing CSR reporting as part of their reporting framework. Although CSR Reporting can incorporate a wide range of topics, the goal is to demonstrate an organisation’s intention to demonstrate its contribution to human kind and the planet.

But what does sustainability really entail and what does it mean in the context of the modern business environment? If you ask most employees of an organisation to answer that question, you’re most likely to get a vague or ambiguous answer.

In 1987, The Brundtland Commission of the United Nation defined sustainability as, ‘meeting the needs of the present without compromising the ability of future generations to meet their own needs’.

More recently, sustainability’s meaning has evolved to encompass environmental, social and economic demands – known as the “three pillars” or the “triple bottom line” of sustainability. An ideal plan for sustainability would benefit the environment; improve the lives of humans, and make money simultaneously for the organisation, illustrated by the diagram below.

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CSR reporting aims to capture and highlight these three pillars, different from traditional forms of reporting, which are centred on financial and economic results and outcomes. As such, you can define sustainability in the context of the modern business environment as:

“The ability to produce a service or product which can be maintained at a certain rate, whilst avoiding the depletion of natural resources, treating society in an ethical manner and reporting financial statements which reflect a true and accurate view of the organisation”.

As mentioned earlier, the purpose of the CSR report is to demonstrate an organisation’s contribution to society. But more specifically:

• To outline its extended Responsibility to wider society encompassing the environment and its citizens

• To be Accountable for the impact it has on its employees, supply chain, customers and the environment

• To demonstrate Transparency, with a clear Sustainability Policy

• To Communicate to stakeholders; Employees, Suppliers, Customers and Shareholders said Policies

And as with any respectable report, the attributes remain the same. The CSR report should be:

• Timely and Regular, at least once a year in line with the company’s Annual report

• Relevant, underpinning the company’s existing CSR policies keeping with the sector

• Accurate, using actual quantifiable metrics, which can be evidenced as oppose to generic statements

Unfortunately, not all organisations are geared up to develop a strong sustainability policy and CSR reporting framework.
Organisations should seek to bolster their CSR capabilities by up-skilling existing resources and recruiting subject matter exports to enable correct adoption. Alternatively, organisations could partner with the right sustainability Partner to enhance the organisation’s sustainability offering, such as an NGO or sustainability consultancy such as The Sector Inc.

The dilemma faced by organisations is how to strike a balance between generating profit for shareholders and investors, whilst contributing to the well-being of society in the form of job creation, fair treatment of employees’ and avoidance of aggressive tax avoidance schemes. However, the benefits of adopting good CSR standards and policy include; greater regulatory compliance, competitive differentiation and management of shareholder and consumer expectation. Overtime, this leads to enhanced trust, increased loyalty and therefore stronger bottom line.

 

Remon Fahim, Principal, The Sector UK

2 thoughts on “Corporate Social Reporting and Sustainability in the Modern Business Environment”

  1. Bravo Remon Fahim! Credibility of these reports remain a challenge. How would you see this CSR measured in the future? Why wouldn’t we involve NGOs to certify the accuracy of these reports or a kind of rating by any citizen. You know companies position themselves as the protectors of the resource the destroy everyday. Vale is one of the best examples http://www.vale.com/…/relatorio-de-sustentabilidade…

    1. Hi Mourad. Nice to hear from you and thanks for the comment!!… I’ll try my best to answer both your question and apologies for the length!

      1. Credibility of the Report:
      CSR reporting is self-imposed (voluntary) and self-regulating and as such, will often be biased in favour of the report author. The reader has to assume that the author of the report (the company) is actually doing what it says it is doing – a traditional weakness of CSR reporting and a reason for doubt amongst readers of such reports. Even the most rigorous CSR/sustainability report may lack credibility.

      To counter this, organisations use independent auditors or CSR Partners to validate and endorse the report which
      aim to provide some degree of independence and validation. Normally, the benefits result in increased shareholder trust and confidence, protection of brand and reputation and the potential to widen the audience of investors.

      2. How can we measure CSR:
      The key contribution you and I as Accountants can make within CSR reporting is the measurement of
      non-economic impact, such as calculating the carbon footprint, measuring the number of jobs created, as well as supporting/preparing CSR business cases.

      We can support the stakeholder engagement process with readily accessible and reliable information. We have a role in supporting benchmarking by providing relevant and reliable information in an accessible, meaningful and comparable way. We are already involved in monitoring, checking and interpreting information relating to social, environmental and economic impacts so as finance professionals you and I are well placed.

      Our skills cut across many management disciplines, for example;
      planning and forecasting, performance measurement. We are also able to provide an unbiased, neutral and objective view.

      Hope that helps, I will certainly update my blog with your feedback!

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