The Differences between Corporate and Social Responsibilities - Research Proposal Example

Social Environmental Sustainability vs. Financial/ Corporate Sustainability in the Metrics of Reporting and Operations Executive Summary There has been an abstract loyalty conflict on whether to pursue social/ environmental sustainability at the primary level then financial/ corporate at a secondary level or the other way round. Businesses find themselves in juxtaposition on the loyalty crises. For that reason, scholars have delved research to determine what matters more to the organization, and why. As well, research has delved to establish whether the two concepts can be applied inside the organization without sabotaging stakeholders’ expectations. Likewise, research has investigated whether the two concepts are interrelated. The incoming report will be comparing the two concepts and most especially their impact on investments and public concern. The report will prove that businesses can still achieve sustainability if the appropriate and strategic measures are being pursued. The report is defragmented into four main sections and a secondary section. The main sections will assess the differences between the two concepts. The section will further investigate the implications of the two concepts to current and future business. The report will as well integrate several companies key amongst them being Virgin Atlantic and Apple. Inc. This will give the reader a vivid analysis of stakeholder theory. The commencing secondary section is a background of the scholarly report. This section will also explore theories related to sustainability. Background Economic systems are built on a continuous basis, which can be seen as a broader understanding of the going concern principle. Without the assumption that a company could theoretically act sustainable, it is evident that the definition of corporate sustainability should meet the needs of the present and future stakeholders. Sustainable business is an establishment that has minimal global or local effect to the local, social, community or economy. Reflectively, without being sustainable in the sense of the normative idea, businesses engage the right time horizon for its business that would comprise future generations. One would help differentiate social and environmental from financial sustainability using theories. The theories are listed and discussed below. The Triple Bottom Line Theory The theory considers the triple bottom line, which has become one of the key advocates for businesses trying to address sustainability. The triple bottom line approach combines economic value the environmental and social value. This assesses companies’ progress in sustainable development. Henriques (2004, p. 42) further ascertains that the theory encourages the basis of the construct for creating sustainable value in businesses. Corporate Social Responsibility (CSR) Corporate social responsibility concept is a deeply entrenched theory on corporate cultures. The theory is heavily practiced in most developed countries. Within organizations, there are ethical and social principles that are institutionalized in diverse ways. The goal is to ensure that social responsibility concern is treated in the same routine manner in which legal, marketing, and financial concerns are addressed. We, therefore, investigate two extra theories. This includes classical economic theory and stakeholder theories. Classical economic theory The Classical economic theory states that business executives are said to be directly responsible to the shareholder of the corporate, and their role is to expand the economic performance of the firm. Managers are said to be responsible for the shareholder demand. The key demand of shareholder is maximized economic performance. According to the classical economic theory, Managers should agree to perform their corporate functions according to the laws. This help to avoid corporate fraud and deception. Stakeholder theory The theory considers the wider group of constituents rather than focusing on shareholders. As such, the theory ensures that shareholder that maintenance or enhancement of shareholder value is paramount. The wider group comprises of or employees, providers, credit, customers, suppliers, government and the local community. According to, Phillips (2011, p. 54) the traditional stakeholder theory argues that the manager of a firm should take account of the interests of all stakeholders in the firm. This is in line with the Classical economic theory previously established in this research. In an attempt to differentiate between social/ environment sustainability from financial sustainability, one would differentiate stakeholders group to define measurable objectives, which then leaves managers unaccountable for their actions. The differences between social and environmental sustainability against financial sustainability Although sustainability has been treated as a broader concept, which incorporates the social, environmental and economic spheres, there are differences between social and environmental sustainability against financial sustainability. Nam (2009, p. 340) notes that the actual implementation of sustainability risks is limited by the vagueness and the ubiquity. In other words, it is advisable to differentiate sustainability. However, Fleurbaey (2015, p. 43) argues that social and environmental issues are reported upon to the organization long-term financial viability and success. On one hand, there is materiality of social and environmental issues reporting upon the organization’s long-term financial viability and success. As well, there is little integration and analysis of these issues within the annual report and operations. Supported by the triple bottom line theory, there is an explicit connection in the reporting of financial sustainability with social and environmental sustainability, or in the materiality of the impacts arising from sustainability issues covered in different reports. From the above brief justification, it is clear that there is a difference between social and financial sustainability. Gordon (2008, p. 231) contends that are there are issues explicitly connected, it is difficult for both external and internal users of sustainability and financial reports to understand the dynamics interactions between an organization’s environmental, social and financial sustainability as well as, their significance. This is incognito with the triple bottom line and CSR theories established in this research. Likewise, there is an explicit connection, which is connected to the reporting within the annual report and accounts. For the purpose of reporting, Geels (2013, p. 79) argues that without connection within an organization’s reporting between financial and wider economic face, the organization social and environmental impacts are much present. This includes an indication of the materiality of these impacts, as well as the company’s ability to convey a false sense of meaningful action on sustainability. These can be nullified from the CSR theory previously investigated in this research. For that reason, the information available to report on its social, environmental and economic performance in an integrated and connected manner, which reflects on governance of these issues and how they relate to results achieved, now and the future. However, Linnenluecke (2009, p. 434) believes that organizations should serious about sustainability will invest their resources necessary to develop internal and external sustainability accounting and systems. This can be explained by the triple bottom line theory which nullifies stakeholder involvement. Such systems will complement one another, connect financial with social and environmental sustainability information as well as, embed sustainability consideration within strategic decision-making, with day-to-day actions throughout the organization. The above justification encourages the adoption of a reporting principle. The principle has results that assets are conventionally carried at current or historical costs rather than at liquidation values. In fact, liabilities for environmental costs, for instance, land remediation will be recognized in the financial statements under the going concern concept. Extensively, the longer-term environmental impacts and prospective environmental legislation can be very important for the financial statements, which may seem appropriate to the environmental reporting standards when developed. Supportively, Poveda and Lipsett (2014) contends that when potential environmental liabilities are significant, the environmental report should provide a clear indication of whether the enterprise is capable of funding necessary remediation/ clean-up procedures. For instance, Apple has already begun powering some of its facilities using green energy, a smart move by former C.E.O Steve Jobs (Jobs, 2011). This can be handled through the conventional insurance framework, which has long-term liabilities for some form of environmental bonding. The prevailing concern differentiates social, environmental against financial sustainability. This helps to shift the idea of embracing financial sustainability predominantly at the expense of social and environmental sustainability. This is in line with the CSR theory previously established in this research. Relatively, Jobs began pursuing environmental sustainability as independent course by establishing an independent department. Convincingly, corporate sustainability requires a long-term business development process. This differs from the social and environmental sustainability, which is needed immediately. As well, financial sustainability corporation follows the rule to live on the income from capital, not the capital itself. This regards the financial assets that have a broader interpretation of the term capital. From then above justification, financial sustainability means to add value to social aspects to the set of common business objectives. This requires overcoming conflicts of goals between economic, environmental, and social issues in the end operations of the firm. Supportively, according to the CSR theory established earlier, such an approach helps to combine economic success with conserving biophysical environmental and socially responsible actions. Implications of these factors Justifiably, businesses are left with the concern of either making profits or reaching out to the society expectations. For instance, a manufacturing plant, which produces nitrates and carbon monoxides gas, might be helpless if it attempts to please the society. A further close example is Virgin CEO $3BN climate pledge (Virgin Atlantic, 2014). However, the company is challenged since it relies on aircrafts which uses fossils fuels, and it has no means to manufacture its own green energy planes. On one hand, the shareholders are pressing the company to make profits. On the other hand, the stakeholders are pressing the plant to consider the implications of its activities on the environments. Such differences affect the ways at which they report their activities. According to the triple bottom line theory, sustainability issues became fully integrated into the cause-and-effect relationship as well as, hierarchically oriented towards the financial perspectives supporting the business case for sustainability. Firstly, we analyze how the environmental and social sustainability contribute to economic sustainability. This is understood as the business case for sustainability. It is important to improve shareholders value through eco-efficiency and social efficiency strategies. Eco-efficiency and social efficiency strategies mean producing more goods, services, and aggregate value, with fewer resources, waste and pollution. Another component is the business case, where there are considerate socio-efficiency concerns. The firm can be described as the relation between a firm’s value added and its social impact that is positive and negative ones. Draper (2014, p. 1) argues that from an environmental point of view, the concept of eco-effectiveness and sufficiency are considered. There are different ways that businesses report their activities. From a social point of view, social effectiveness and ecological equity are relevant to the social case, for corporate sustainability. These are some of the factors that Branson (Virgin Atlantic) has realized with time. In attempting to achieve social and economic sustainability, the company will not enjoy the levels of consumption, utility, welfare, and consumption as they were enjoying. Social sustainability interferes with economics through the social, ecological consequences of the economic activity of the sustainability process. On the other hand, financial sustainability might accelerate the risks in the environment. As noted there are implications in attempting to harmonize the sustainability process. However, despite the complexity of the entire process, Moller and Schaltegger (2006, p. 79) suggest that when eco-efficiency indicators, which are embedded within a sustainability balanced Scorecard (SBSC), become an important starting point and an instrumental for estimating and controlling key measures. Reconciling these Issues From the above justification, the company has to preserve both social and economic value by maintaining sustainability from a financial perspective while simultaneously serving a socially oriented mission. Research has dealt with tension focusing predominantly on social implication and policy concerns. Different scholars have been analyzing the role of Non Profit Organizations (NPOs) from a strategic perspective, by considering the strategic perspectives of business globally. As well, scholars such as Fernando (2012, p. 580) has continued investigating the role of accounting and accountabilities when dealing with NPOs. Most skeptical concerning the adoption of traditional accounting principles and frameworks for NPOs derives from the fact that there are some attempts to adapt the business concept for the non-profit context in the past. In this case, there are social value-oriented, they cannot be simply be measured by traditional financial indicators or by market share. Brown and Barber (2012, p. 101) believes that economic and financial indicators fail to offer a comprehensive evaluation of organization performance. In fact, for profits organizations, to summarize, their economic and financial performance in the financial statement, shareholders consider profit to be part of the company’s mission. Arguably, there is no automatic relationship between increments of achievement in the organization’s mission and financial performance. In the analysis, accountability is not an absolute concept but a relational one. In fact, accountability is better viewed as a system of multi-directional and contingent relations than a collection of independent binary links. In accordance with stakeholder theory, Zvezdov (2012, p. 7) reflects accountability as an abstract concept which involves ensuring that the various expectations of stakeholders are met in developing and implementing the mission and strategy. This is in line with stakeholder theory previously discussed in this research. Supportively, Gray (2011) suggests that in NPOs, social accounting might be developed to justify their pursuit of social and environmental goals in economic terms. Justifiably, the development of social accounting practices for NPOs might be attributed to the closeness of the same. However, obstacles might face the process. Scholtens and Kang (2013, p. 110) analyze barriers, which surfaces once operations and governance change strategies to develop and implement these stages. To overcome obstacles, the organization feedback and learning mechanism must be altered so that the skills and understanding employees and stakeholders continually expand. Although it is advocated that the manufacture of products and delivery of goods and services will be environmentally and socially sound, profits and schemes of achieving them became a key consideration. For example, Apple’s launch of iPhone 6 as a green phone was a senior attempt to the engage stakeholder comprehensively. We need to ask whether the investors are willing to commit their resources in such an environment. The main obstacles to corporate progress are linked towards sustainable development. This includes market, governmental or systemic failures. Market failures stem above all. Herzberg and Smeet (2015, p. 544) contends that prices for resources as well as, other inputs might exclude externalities. Prices reflect the full environment-related costs and benefits to society of various activities, and market forces which are brought into play where they do not now exist. For instance, Apple release of iPhone 6 has been challenged by the presence of Samsung galaxy s6, which is relatively cheaper and has better features. Zatzman (2012, p. 89) advises that in order to improve pricing mechanism to achieve sustainable development, it is necessary to have an efficient policy mix, which include microeconomic reforms as well as, eco-labels, certifications schemes and voluntary agreements. Additionally, market failures reflect on asymmetries of information and other incentives. Lack of information about sustainability strategies and tactics, best practices, techniques sustainable use of natural resources and cleaner product, as well environmental impact of products and practices of sustainability management tools remain to be a primary cause for management inaction. This can better be explained by the Classical economic theory established by this research. Implications for the future of the Businesses The future of corporate sustainability, in context with reporting and operations, will change over time. According to Imrie and Lees (2014, p. 119), supported by the triple bottom line theory, sustainability should be seen as a capacity to present generations to pass to future generations the stock of all accumulated resources. The authors use the terms stocks, wealth, and capital interchangeably. From them, it is clear that sustainability should be separated by simply measuring the well-being of present generations, which should be perceived as a process of assessing the predicting the future (Scholz and Zentes, 2014). In terms of operations and reporting, sustainability will be seen as a process of transferring sufficient amounts of wealth to all available assets and resources. The list of stocks is only an inclusive to an open-ended to future input. Additionally, to the transfer of the stock of exhaustible resources of sustainability accounts for assets that are defined by the way to maintain the quality and quality of all other renewable natural resources that are necessary for life (Stiglitz, 2010, p. 44.) As well, in the future sustainability will reflect on the quality of social institutions that current generations build today and ensure the good quality of life tomorrow. Such understanding of sustainability will envision all these stock of resources as in the process, which highlights both their evolution and unpredictability of future periods. In the future, Levine (2012, p. 43) believes that businesses will be required to qualitatively transform to the future which is built on the conditions of economic, ecological and social well-being. However, the businesses will face main obstacles based on the inability of today to predict and identify the dimensions of sustainability of tomorrow. In terms of operations, a future business might face subsequent market prices changes. In this case of changes in market prices, there are nonexistence for a quite a large number of the assets, which matter for the future well-being. Concerning that, Smith and Mbow (2014, p. 134) are under the view that future business will face challenges while attempting to predict future interactions between the economy and the environment. Such an approach to positive investments captures the upward change of rate with which different global resources matters. As well, there are natural, physical human and social stocks which are evolving with time. At a global, macroeconomic level, the level of positive investment is to ensure that countries do not overcome their economic wealth, but they are in a position to support a sufficient rate of accumulation and renewal of produced capital (Deegan and Unerman, 2011). This form of sustainability is in the form of positive investments champions’ high sustainability, high savings, and high investment in education as well as sufficient reinvestment of green energy. A similar strategy being employed by Apple (Ritchie, 2014) In summary, the idea of positive investment will go beyond the corrective efforts of sustainability, which is more overcoming to the deficits of overconsumption or underinvestment in resources. As well, if sustainability is thought as a series of positive investment in terms of an increase in economic activity and financial prosperity, then it should be perceived as a means of improving and enhancing the quality of life in social and environmental terms (Myers, 2013). Ngai et al., (2014) are under the view that through investments in technological innovations and changes, future generations will be able to restore environmental degradation and create opportunities for preventing future pollution by investing in eco-friendly business solutions lifestyles (Smith et al., 2011, p. 43). Through a series of positive investments, current generations will help to alleviate poverty and overcome economic inequality concurrently. Conclusion As noted, businesses can still attain sustainability if the appropriate principles are applied in governing the differences between corporate and social responsibilities. The terminated research has assessed the nature of sustainability is specifically giving respect to the nature of the business environment. The research has further provided the nature of future expectations. As illustrated, businesses can only attain sustainability if they, firstly accept the responsibility to the shareholders and society equally, and secondly if they committed the research and development department to investigate the nature of sustainability. That is in accordance with the CSR and stakeholder theory previously established in this research. The research has been mentored largely by Deegan and Unerman book Financial Accounting Theory, supported by other theories in proving that current approaches to sustainability need a thorough change. Reflectively, research should continue providing business with information on what to do and how to do it. Bibliography Bitetto, M., & Chymis, A. (2015). 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