CSR accounting and accountability

  1. Managing business ethics
    • Mission or values statement
    • Codes of ethics
    • Reporting advice channels
    • Ethics managers, officers and committees
    • Ethics consultants
    • Ethics education and training
    • Auditing, accountability and reporting responsible for assessing ethical/socially responsible performances
  2. CSR accounting and externalities
    • Externalities: the consequences of economic activity which are not reflected in the costs borne by individuals or organisations enjoying the benefits of such activities. 
    • CSR accounting and reporting: at a minimum is an attempt to provide additional accounts which will capture some of the externalities.
  3. CSR accounting as part of corporate social responsibility
    • How do firms communicate with their stakeholders about CSR and CSR related activities?
    • Firms are required to communicate formally to shareholder about their financial performance
    • How should firms communicate to a broader range of stakeholders about a broader range of activities?
    • There has been a rise in reporting non financial activities regarding social and environmental activities.
  4. Measuring and evaluating CSR performance
    Why assess and evaluate CSR performance?

    What is CSR performance?

    How can it be measured?

    What criteria can we use to assess good and bad CSR performance?

    What level of CSR performance is expected or acceptable?
  5. The rise of CSR reporting
    • Most recent KPMG international survey of corporate responsibility reporting 2015:
    • 92% of the 250 largest companies in the world (G250) now report on their CR activities.
    • Almost 80% of China's largest company (up from 60% in 2011)
    • India: largest companies jumped from 20% in 2011 to nearly 100% in 2015 following change in reporting requirement by the securities exchange board 2012/13
  6. What is CSR accounting?
    • Social (CSR) accounting: a generic term to cover all forms of accounts which go beyond the economic- social responsibility accounting, social audits, corporate social reporting, employee and employment reporting, stakeholder dialogue reporting.
    • The voluntary process concerned with assessing and communicating organisational activities and impact on social, ethical and environmental issues relevant to stakeholder.
    • A social (CSR) report is a formal account, prepared and communicated by an organisation, about social and environmental aspects of the organisation's activities and communicated to the internal and external 'participants' of the organisation.
  7. features of CSR accounting
    • Internally produced (not always exclusively)
    • Communicated to shareholders and (internal and external) stakeholders
    • Formal rather than informal account
    • About social and environmental areas of organisational activity eg.
    • The natural environment
    • Employees
    • Consumers and products
    • Local and international communities
    • Externally verified
  8. Coca-cola enterprises
    • CR reporting Awards winner 2012
    • 6th report
    • Explain how they ask leading stakeholders for advice
    • 40 pages not too long, not too short
    • Well-informed non-specialist audience
    • Externally verified
    • Lots of explanation, charts, data tables
    • Almost free of generic images of the smiling employees, cheerful kids variety
  9. How does CSR accounting differ from financial accounting?
    • Similarities: objectivity and accuracy as the ultimate achievable goals
    • Distinctive features of CSR accounting:
    • Voluntary rather than mandatory
    • No single set of widely agreed standards (GRI dominates)
    • Content has a social rather than economic orientation
    • Different techniques and measures employed
    • Identified audience/principal is stakeholders, not only shareholders
  10. Is CSR accounting more like financial accounting or social science?
    • Measures social phenomena
    • Hard to quantify: use of proxies (eg. carbon emissions as a proxy for environmental damage)
    • Use of hard and soft metrics:
    • hard metrics are measurable but may not be real (eg. absenteeism as a measure of work morale)
    • Soft metric: may be real but not exact (eg. 3 on a 5 point scale perceived level of job satisfaction)
    • Who is qualified to undertake such accounting?
    • Accountants, social scientists, managers, PR department
  11. Reasons for undertaking CSR
    • Reputation or brand
    • Ethical considerations
    • Employee motivation
    • Innovation and learning
    • Risk management or risk reduction
    • Access to capital or increase in shareholder value
    • Economic considerations
    • Strengthened supplier relationships
    • Market position (share) improvement
    • Improved relationships with government
    • Cost savings
  12. Two approaches to CSR reporting
    Business case and stakeholder accountability
  13. Business case
    • Purpose: CSR viewed as an extension of management's existing toolkit for enhancing shareholder value.
    • CSR should result in win/wins, if (and only if) reputation, social marketing, good employee relations, etc provide additional wealth, CSR will proceed.
    • Key assumptions: The primacy of shareholder interests is assumed above all other stakeholders.
    • Focus on stakeholder management rather than stakeholder accountability
  14. Stakeholder accountability
    • Purpose: CSR should increase the accountability and transparency of organisations.
    • This may involve additional costs to them.
    • Accountability and transparency are central elements in a democratic society.
    • Various stakeholder have information rights which must be acknowledged for decision-making purposes and to protect against potential abuses of corporate power.
    • Shareholder primacy is not assumed.
  15. Business case fits with a narrow or shareholder approach
    • "Managing stakeholders"
    • CSR reporting as a management tool
    • Assumes shareholder primacy
    • Market-driven rationale
    • Benefits such as creating shareholder value, risk awareness and avoidance, improved reputation, motivating and aligning staff.
    • Strong preference for no to low regulation
  16. Stakeholder accountability fits with broad or stakeholder approach
    • "Stakeholder accountability"
    • CSR reporting as a method of accountability and transparency
    • Assumes stakeholders interests are important and (potentially) different to the organisation
    • Stakeholders have a right to know and are thereby given information on which to act.
    • Form of plural accountabiltiy
    • Part of a 'democratic evolution'
    • Regulation is need to avoid 'greenwash'
  17. Problems with reporting
    • Are the reports accurate?
    • Is the data reported reliable and accurate?
    • Issues of reliability (trustworthiness)
    • Are the reports real?
    • Do the reports actually report what they say they are reporting? (validity)
    • Issues of validity (credibility)
    • Importance of standards and assurance (soft regulation)
  18. International reporting standards- Global Reporting Initiative (GRI)
    • GRI reporting framework is the most widely accepted framework for reporting
    • Developed as a multi-stakeholder initiative
    • Provides guidance on not just what to report but how to report
  19. Judging criteria for social reporting
    • Completeness: A report should allow the reader to be able to develop a complete picture of the organisation. What it does, the extent to its operations and the scope of the report in conjunction with its entire activities.
    • Credibility: evidence that there are organisational structures, processes and controls in place to enable the organisation to accurately present information on its impacts.
    • Communication: Communication is the extent to which the report communicates to the declared target audiences.
  20. Judge CSR reporting: Completeness
    • Scope and meaning of report: 
    • Is the coverage and content of the report what the stakeholders want/need?
    • Materiality (key impacts +ve and -ve) across all organisational areas and the rationale for the choice of impacts
    • Stakeholder inclusion (identification of audience and stakeholders as well as processes followed)
    • Strategy (the level of integration of the reporting process and outcomes in the organisation)
    • Organisational context (general information and context)
  21. Judge CSR reporting: Credibility
    • Does the report accurately provide information on the organisation's impacts?
    • Reporting and management process (the way social reporting is managed)
    • Stakeholder inclusion (how feedback is used and how it influences organisation functioning)
    • Governance (senior management involvement and commitment)
    • Performance (absolute and normalised data with trends over time and within sector)
    • Assurance (Both internal process and external statement)
  22. Judge CSR reporting: communication
    • Communication of information to stakeholders: has the report been well communicated to stakeholders?
    • Presentation (readability and appropriate use of graphs, illustration)
    • Stakeholder inclusion (accessibility and feedback mechanisms)
    • Structure (use of summaries, navigation tools and internet)
  23. Recent trends- integrated reporting
    • Latest trend is to integrate social reporting back with financial reporting
    • International integrated reporting council (IIRC): mission is to establish integrated reporting and thinking within mainstream business practice as the norm int he public and private sectors.
    • KPMG measures whether reports state that they are integrated
    • and that the 'strategic use of non-financial indicators in their annual reports'
  24. In summary
    • CSR accounting is one way companies can manage their business ethics
    • CSR accounting is one way stakeholders can measure and evaluate socially responsible (social) performance
    • CSR accounting is both similar and different to financial accounting
    • The purpose of CSR accounting is linked to the purpose of the company (linked to shareholder and stakeholder theories)
    • Just producing a CSR account is not enough- it has to have reliability and validty
    • CSR accounting is (mainly) voluntary but is subject to international principles and standards, and increasingly legislation
    • CSR reporting ≠ CSR performance
Author
kirstenp
ID
340810
Card Set
CSR accounting and accountability
Description
CSR accounting and accountability
Updated