The Main Motive behind Corporate Reporting - Essay Example

THE MAIN MOTIVE BEHIND CORPORATE REPORTING By Location The main motive behind corporate reporting Corporate reporting is the availing of information with regard to the management of the economic, social, and environmental aspects of the existence of a business organization. This paper will focus on the social and environmental aspects of corporate reporting. According to Adams the main motive behind corporate reporting is to improve corporate image and credibility with stakeholders. This assertion has some economists agreeing with it while others are in contrast opinions. However, looking at the changes that are evident in the business environment and the fact that corporate reporting is voluntary yet many organizations are opting for it can be easily concluded that Adams’ assertion that the main motivation for corporate [social and environmental] reporting ... is to enhance corporate image and credibility with stakeholders. In the year 2012 Boston College Center for Corporate Citizenship found that corporate reporting has a significant influence on corporate reputation. It was discovered that there was a notable change of stakeholders’ opinion on business organizations after they had gone through their sustainability reports. Many of the business organizations who had used corporate reporting had said that at when they did their corporate reporting they aimed at revealing their sustainability progress to the public (Bebbington, Larringa-Gonzalez& Moneva 2008, p. 345). When asked audiences that they consider while creating their sustainability reports most of the respondents were quick to answer that they did not target anyone in specific but their entire stakeholder (Adams 2002, p. 227). Given the content of corporate reports it can be further asserted that the targeted audience comprise of a business organization’s stakeholder. Another thing that is evident from the content of corporate reports is that they always aim at shaping the opinion of the audience on the sustainability of a company (White 2009, p. 136) Employees being among the stakeholders are a part of the audience that is always targeted when business organizations make their corporate reports. Due to the increase in globalization, there has been an increased need for companies to retain their most skilled and experienced employees. They can only be able to do so if their employees are comfortable and satisfied. When employees are satisfied, they always tend to be loyal to the organizations that they work for (Brennan& Merkl-Davies 2013, p. 111). Employee loyalty is important in an organization because companies are not guaranteed that they will be able to replace the skilled and experienced employees once they loss them. Loyalty is further necessitated by the fact that recruiting activities are often costly and can be avoided by having loyal and satisfied employees (Soyka 2012, p. 221). Corporate reporting is one of the ways through which a company can communicate their dedication to the welfare of their employees by revealing what they have already done and what they will do in the future regarding the welfare of their employees (Deegan& Rankin 1996, p. 56). Pressure has been mounting on business organizations from consumers, employees, investors, and other stakeholder for the adoption of more socially beneficial and environmental friendly practices (Blowfield & Murray 2011, p. 155). This implies that the expectation of stakeholder with regard to social and environmental sustainability is gradually increasing. Taking into consideration the fact that the success of business organizations highly depends on the satisfaction of their stakeholders it can be said that this pressure is what leads to the necessity for corporate reporting (Hooghiemstra R 2000, p. 66). Without the pressure that has been slowly mounting on companies to comply to socially accepted and environmentally friendly practices it is clearly evident that corporate reporting, being voluntary would not have been as popular as it is in the modern business environment. Corporate reporting is one of the very few ways through which business organizations can be able to convince their stakeholders that their practices have minimal or no threat to the wellbeing of the society and the environment (Mahoney,Cecil& LaGore 2013, p. 365). This is because it is through corporate reporting that they reveal the things that they have done to make sure that they are socially and environmentally sustainable. The government usually has high expectations with regard to the accountability and responsibility of business organizations within their territories. Governments usually have the responsibility of making sure that their electorates live in an environment that is sustainable. Therefore, it is in the power of the government to make sure that business organizations within their territories do not involve in activities that endanger the lives of the general population or bring harm to the environment (Merkl-Davies& Brennan2011, p. 420). This implies that the government should protect their electorate from any business activities that might have either present negative effect to the society or environment. This is the main reason why most governments put emphasis on the importance of socially and environmentally sustainable business activities (Moir 2001, p. 19). It is in order for companies to prepare corporate reports to convince the government that they are committed to social and environmental sustainability. For a business organization to operate smoothly, there are other business organizations that they either indirectly or directly depend on. Such business organizations include suppliers, marketers, distributors, and debtors. In a business environment where stakeholders have gotten so keen on the sustainability of companies, many companies are always watchful of the business organizations that they partner with. Most business organizations that are socially and environmentally sustainable usually prefer working with companies with the same qualities (Thorne, Mahoney& Manetti 2014, p. 699). In cases where the best firms in the market insist on working with environmentally and socially sustainable, a company will have to conform to these standards if in any case they would want to work with the best. Some of these stakeholders such as creditors are usually very choosy and it always takes completely sustainable operation if in any case a firm is to get credit from them. This implies that corporate reports always target audience that comprises of suppliers, marketers, distributors, and debtors (Crowther 2002, p. 101). Investors are very important stakeholders to a company. It is from their investments that companies usually get the capital with which they can improve their productions and enhance their productivity. It is of importance for a company to be in a position where it can attract investor (Quaddus & Siddique 2011, p. 199). Furthermore, a business organization should also do all they can to retain the investors that they already have. One notable thing is that there has been a global change in the opinion of stakeholders regarding social and environmental sustainability of companies (Cooper,Davies& Davis 2001, p. 123). Most investors prefer investing in companies that are socially and environmentally sustainable. This is contributed to by the fact that such companies are considered to have stability, which means that they are likely to stand the increase demand for environmental and social sustainability. Therefore, business organizations have no option but to try all they can to convince investors that they are doing all they can to become more sustainable (Everingham & Kana 2008, p. 119). The best way through which they can do this is by communicating to them through corporate reports. The role that consumers play in the operations of business organizations has highly changed in the past decade. Consumers are no longer just in the equation to buy and consumer. Consumers in the modern world are more informed and in most cases try to make consumption decisions on information. Globally, there has been an increase in sensitization on the importance of involving oneself in activities that pose less threat to the environment (Aras & Crowther 2007, p. 121). It is important for business organizations to make sure that they influence the opinion that their customers have regarding their environmental and social sustainability. Failure to do so then they might end up losing their market share to their competitors who have embraced social and environmental sustainability (Crowther & Jatana 2005, p. 189). The best way through which they can be able to do this is by communicating their efforts towards social and environmental sustainability through corporate reporting. As a business organization the opinion of the society is always of importance. The opinion of the society can be importance especially because it can in some cases shape the influence the opinion of consumers (Buhr 2002, p. 25). This is the main reason why many business organizations will always find themselves in situation where they have to do thing that are in accordance to the expectations of the society. This is the main reason why many business organizations have been increasing activities that are deemed as giving back to the society. Failure to give back to the society they might find themselves not being popular with the local communities (Mcgee 2008, p. 210). Companies gain popularity with the local communities through having policies that encourage employment from local communities and offering scholarships. As discussed herein it is clearly evident that the main reason as to why business organizations do corporate reporting is to enhance corporate image and credibility with stakeholders. This is buffered by the fact that the content of corporate reports are usually chosen in a manner that it can be said that they are usually aimed at changing the opinion of the readers on the environmental and social sustainability of a business organization. Given the importance of the opinion of stakeholders on their sustainability, business organizations usually see it important to develop corporate reports. Bibliography Adams, C 2002, “Internal organisational factors influencing corporate social and ethical reporting beyond theorizing” Accounting, Auditing, and Accountability Journal, Vol. 15 No. 2, pp. 223-250. Aras, G & Crowther, D 2007, “Sustainable corporate social responsibility and the value chain” New perspectives on corporate social responsibility, 109-128. Bebbington, J, Larringa-Gonzalez, C & Moneva, J 2008, “Corporate social responsibility reporting and reputation risk management” Accounting, Auditing, and Accountability Journal, Vol. 21 No. 3, pp. 337-361. 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