To What Extent the Social Reporting Is Now Essential for Businesses: Banco Real, Chevron, and Wal-Mart - Case Study Example

Topic: Lecturer: Presentation: To What Extent Do You Think the Social Reporting is now essential for businesses? Todays organisations face a lot of pressure especially in the globalised world where competition is very high. The greatest challenge is that on one hand, the ever expanding series of stakeholders is increasingly putting pressure on businesses to be socially responsible and also demanding greater transparency. On the other hand, organisations are reflecting on what they consider as strategic drivers. To respond to this challenge, integrated reporting has been introduced recently and involves encompassing sustainability and profitability in a single process. Integrated reporting is “a process that results in communicating-through an annual integrated report-how organisations create value over time and their impact from an economic, social and environmental point of view” ( Busco, Frigo, Quattrone & Riccaboni, 2013, 4). It covers all areas of business such as organisation strategy, governance, and performance in a way that reflcets commercial, social and environmental context within which it operates. Integrated reporting also shows how organisation creates and sustains value. Previously, corporate reporting was compliance oriented hence did not offer information on strategy, performance and risk but only financial peeformance thus was useful only for accounting experts. Nowadays, stakeholders need to be informed about values embraced and also values created hence the need for integrated reporting. Social reporting is also a marketing tool for organisations to gain competitive advantage especially through corporate social responsibility (CSR) advertising. This enables the organisation to legitimise its ethical postition as well as in gaining legitimacy from society in which it operates. This is evident in companies such as Banco Real in Brazil and Chevron in UK, Wal-Mart a global retailer. This essay will discuss the extent to which social reporting is now essential for businesses using examples from the three different companies: Banco Real, Chevron and Wal-Mart. Companies use CSR to achieve corporate aims and objectives. For example, the approach to CSR taken by Wal-Mart is reduction of green house gas emissions and these are indicated in its Global Responsibility Report each year. This is in line with its cost reduction corporate strategy and its mission of helping customers “to save money so that they can live better” (Walmart.com, 2015). Wal-Mart is the world’s number one retailer with 11,000 stores with 71 banners in 27 countries and e-commerce in 10 countries. It employs 2.2 million associates worldwide and in the fiscal year 2014, it had sales amounting to $473 billion. The secret to its sustained competitive edge in the market against other large retailers such as Tesco, Morrisons, and IKEA is its innovative strategies of cost reduction in its stores as well as those of its suppliers. For example, it produces clean energy using renewable resources such as solar energy, wind power, and green power from sugar mills. It had started 335 renewable energy projects globally by the end of 2013 and through the use of refrigerants, it cuts Green House Gas emissions by more than 8% annually (Walmart, 2015). Wal-Mart in this sense also cuts its costs by reducing energy bills and operating efficiently. It then ensures reporting on its environmental performance after conducting environmental audits to gain credibility and repute from major stakeholders such as customers, government, communities, shareholders, and suppliers. This corresponds with the argument that disclosure of information leads to transparency and increased reputation (Kurucz, 2008). The danger in these reports comes in when companies report high improvements in their ethical standards and reduction of effetcs on environmental but only as a means to build corporate image and not apply such measures in the actual practice. While Wal-Mart boasts of offering affordable prices and reducing costs in every way possible, this results in unethical practices such as hiring child labor in supplier factories and also cheap labor. Social reporting is also used as a marketing tool by businesses to gain sustained competitive advantage and minimise the effects of their unethical practices. Study (Farache & Perk, 2010) reveals that most companies use social reporting to divert attention away from the main problem facing the company especially byy focusing on unrelated positive activity. Such reporting is often meant to change stakeholder perceptions and expectations without necessarily changing corporate behaviour so as to gain legitimacy and build company image. Chevron is an energy company. Its approach to CSR is “commitment to operating safely, protecting our workforce and the environment, and dealing responsibly and ethically with our stockholders, employees, local businesses, governments, communities and key stakeholders” (Chevron.com, 2015).This includes building relationships with communities in which it operates for example, by offering quality education; respect for human rights; workforce diversity; health and safety (training employees on health and safety). Its vision is to be the global energy company most admired for its people, patnership and performance. A look at its CSR advertising showed that it is meant to appeal to people’s emotions and also gives details of their CSR activities and how these help the society in their adverts (Farache & Perk, 2010, 244). This is meant to gain letgitimacy. It incurs a lot of costs in environmental protection but it is worth it for the business to realise sales growth. Environmental spending in 2014 was projected to be aproximately $2.6 bilion (Chevron, 2015). Bank Real is a banking or financial institution that utilises CSR advertising to gain legitimacy. However, its advertising differs from Chevron in that it is a banking company while Chevron is an energy company hence under more pressure to act ethically especially after accidental oil spil. Its advertisement is on the cheque leaf which indicates the values the compan cherishes such as working wih communities, individuals and families (Farache & Perk, 2010, 244). However, it does not indicate how these values will be achieved or what it is doing to ensure social responsibility unlike Chevron which gives details of what CSR activties they are engaged in. In all the companies, CSR is given much importance compared to other corporate objectives since they form the basis of all actions in the organisation. For example, at Wal-Mart, profitability is achieved through cost reduction and this is made possible by reducing environmental impact (reducing greenhouse gas emissions). To protect its image from attack of unethical practices from different stakeholders, the company has a code of ethics and also conducts independent monitoring of its activities by compnaies like Price Waterhouse Coopers (PwC) (Wal-Mart, 2015). This code is also enforced on suppliers to ensure compliance with ethical standards. Failure to observe these codes could lead to unethical behaviour and consequently ruin reputation or brand image of the company. This is also the case with other transnational companies like IKEA, Nike, Adidas and others. Losing reputaion is the greatest risk for a business according to a recent study (Sarbutt, 2003). If not well managed, companies risk losing all what they have worked for. Various stakeholders have a degree of influence in determining which responsibilies are accepted by business and which are not. This may depend on the nature of business the compnay is engaged in. For example, Wal-Mart which deals in retail products and a lot of consumers is faced with a lot of pressure from consumer groups to act responsibly through boycotts and such other means. However, in a banking industry like Real, customers have little say on ethical responsibilities. Rather, CSR decisions are communicated fom the top downwards (Farache & Perk, 2010). Chevron on the other hand, is lkely to be influenced by customers. However, reports indicate that in actual sense, it is the shareholders who have the greatest influence on CSR approach taken (Sarbutt, 2003). The government also has a bit of control as some organisations engaged in CSR activties just for compliance. The government is crucial stakeholder as it sets standards and requires companies to comply with such standards and also engage in social reporting so as to show the progress (Kurucz & Wheeler, 2008). Failure to comply may lead to costly litigations for the companies. Those companies which voluntarily engage in CSR and make social reporting part of their business thus minimise costs and also avoid monitoring by the government as they are seen to be socially responsible even though it may only be in the books and not in actual corporate behaviour. One company with tendency of avoiding litigations is Wal-Mart which with advanced communication technology is able to detect danger before it comes hence severes its ties with any supplier suspected of not behaving in responsible manner. Others like Chevron and Real Bank divert attention of stakeholders from the main threat by engaging in positive activities like improving the life of communities through education (Farache & Perk, 2010). Conclusion Organisations are increasingly facing demands from stakeholders to have greater transparency. This can be achieved through social reporting of companies of their CSR activities and their impact on the business bottom line. Social reporting is crucial for organisations as it leads to reduced costs in terms of minimised risk of litigation and constant monitoring by government. It also helps build company image and reputation thus attracting talent and investors. It also a tool for the business to gain legitimacy from the society in which it operates and also gaining sustainable competitive edge. References Busco, C., Frigo, M.L., Riccaboni, A & Quattrone, P (eds), (2013), Integrated reporting: concepts, and cases that redefine corporate accountability, New York: Springer. Farche, F & Perks, K.J (2010), CSR advertisements: a legitimacy tool? Corporate Communications: An International Journal, 15 (3), 235-248. Kurucz, E., Colbert, B. and Wheeler, D. (2008). The business case for corporate social responsibility. IN: A. Crane., A. McWilliams., D. Matten., J.Moon and Siegel, D (eds). The Oxford Handbook of Corporate Social Responsibility. Oxford: Oxford University Press. Sarbutts, N (2003), Can SMEs ‘do’ CSR?: a practitioners view of the ways small-and medium-sized enterprises are able to manage reputation through corporate social responsibility, Journal of Communication Management, 7(4),340-347. Walmart.com(2015). 2014 Global responsibility report. Corporate.Walmart.com. Available at: [Accessed May 3, 2015] www.chevron.com/corporateresponsbility/approach/ Read More