Purpose of Corporate Sustainability Reporting - Assignment Example

Running Head: Corporate Sustainability Reporting Name Institution Course Professor Date Question 1. Purpose of Corporate Sustainability Reporting There has been a dramatic rise in the number of companies that provides corporate sustainability reports. Corporations have since seen the need and benefit of providing stand-alone sustainability reports on a regular basis. Sustainability reporting encompasses reporting on social, economic and environmental facets of the company. In the recent years, organizations have realised that their success is not only pegged on its economic sustainability, but environmental and social sustainability also plays a part (Mermod & Idowu 2014, p. 137). Sustainability reporting uses the global reporting initiative framework which discloses results and outcomes that has occurred within the period of reporting in the perspective of commitments, management and strategy of the organization (Global Reporting Initiative 2006). The process of sustainability reporting consists of three elements, that is, inputs, processing, and outputs. Sustainability reporting inputs include source documents, transactions and events that pertain to performance. The element of processing is used in classification of measures, recognition, and reporting activities according to sustainability reporting guidance. The final element outputs are the sustainability reports covering the performance of the corporation. It discloses both financial as well as non-financial key performance indicators (Brockett & Rezaee 2012, Chapter 3). Sustainability reporting is the most integrative and comprehensive way of delivering corporate reports. This form of reporting has gained attention among various industry players including consulting firms, research institutions, non-governmental organisations and government institutions (Godemann & Michelsen 2011, p. 152). Organizations are recognising sustainability as the 21st century crucial business challenge and hence reporting of economic, social, and environmental performance together with its mutual interrelations has led to its increased in worldwide business mainstream. Global reporting initiative provides procedures which are widely accepted in accounting and on reporting social, economic and environmental issues of the organization. Sustainability reporting is defined by the sustainability guidelines as an instrument used in measurement, disclosure, and practice of being accountable to external and internal stakeholders for purposes of organizational performance and towards sustainable development goal (Grunewalder 2009, p.26). The purpose of corporate sustainability reporting is defined by the Global Reporting Initiative (GRI) sustainability reporting framework. GRI Reporting Framework intention is to serve as a general accepted framework used in reporting environmental, economic and social performance of an organization. The framework is designed to be used by organizations in any sector, location or size. According to the Global Reporting Initiative Reporting Framework (2006), sustainability report of an organization should provide a reasonable representation and a balanced view of the organization reporting including negative and positive contributions. Sustainability reports is used for the purposes of benchmarking and in assessing performance of organization sustainability with respect to performance standards, laws, codes, norms, and voluntary initiatives (Brockett & Rezaee 2012, Chapter 3). Outstanding corporation reputation can be beneficial to an organization as it mostly related to increased brand value as well as contributing to increased business success. In particular, corporation reputation can be enhanced through successful engagement in economic, social and environmental projects as these are non-market matters that are not part of the core business activities (Godemann & Michelsen 2011, p. 152). Another purpose of corporate sustainability reporting is comparison of performance within and between different corporations over a period of time. Sustainability reports demonstrate how corporations influence and in turn are influenced by sustainable development expectations. The Global Reporting Initiative Framework has general sector-specific content which has been agreed by various stakeholders all over the world to be applicable for reporting corporation’s sustainability performance. Sustainability reporting is used as an indicator protocols in defining key performance indicators in ensuring there is consistency in sustainability reporting. A corporate sustainable report functions as a way of showing willingness in communicating and dealing with societal issues. Moreover, it may also serve as a way of securing a good continuing relationship with the organization’s stakeholders (Godemann & Michelsen 2011, p. 152). Corporations that provide sustainability reports view their responsibility as extending beyond the basic compliance with local regulations and national law and therefore defining their accountability on a worldwide scale especially in this world of economic globalisation. The GR1 G3.1 Guidelines contain reporting principles that defines the report outcomes that it should be achieved; guiding in making of decisions in the entire reporting process; and it shows the way reporting should be undertaken on the topics and indicators selected in helping achievement of transparency (Conaway & Laasch 2014, p. 468). In conclusion, corporate sustainability reporting should be tailored to reflect both the negative and positive aspects of organization done through disclosure of major strategies, procedures, and policies in achievement of sustainability goals. Question 2. Systems oriented theories Profit was the only item in which a corporation performance was measured by in traditional context. However, expectations of the public have since changed necessitating organisations to address human, social, economic and environmental issues. It is important to note that the perceptions of the community have an ability of influencing organisation’s disclosure policies. Systems-oriented theories focus on the function of disclosure and information in the relationships that occurs between organizations, groups, the state and individuals. One assumption is made about the entity being influenced by the society it operates in, and at the same time having an influence on the same society (Hahn & Kuhnen 2013, p. 7). Systems-oriented theories include stakeholder and legitimacy theories. These two theories are derived from political economy theory. Corporate reports are not considered unbiased and neutral; rather they are a product of the interchanges that occurs between an organization and its environment according to the political economy theory. Stakeholder and legitimacy theory is applied in helping to provide explanatory reasons for corporation’s choice in electing to make some voluntary disclosures. Legitimacy theory was first developed to be applied to environmental reporting. The basic principle behind legitimacy theory is that organizations cease to exist and thrive if their methods and beliefs contradict those of the larger society in which it undertake its operations (Schaltegger 2008, p.251). The implication of this is that there exists some facet of ‘social contract’ occurring between the organization and its society. Therefore, organisations must justify its continued operation or community will revoke its ‘contract’ that enables it to continue its operations. In essence, corporation looses the ‘licence’ to operate. Organization should disclose its pertinent activities in ensuring that society continue to view the organization’s activities as congruent to its own. In legitimacy theory, corporations strive to ensure that its operations are undertaken in a manner which is in line with norms and bounds of the society. The norms and bounds changes across time and organizations continually attempt to make certain that its activities are perceived by society to be legitimate (Monfardini, Baretta, & Ruggiero 2013, p.55). Stakeholder theory includes two branches, that is, ethical and managerial branch. Stakeholders include organisational employees, shareholders, lenders, customers, suppliers and government. These stakeholders can affect the achievement of corporation’s objectives and can also be affected by it. This is the ethical branch of stakeholder theory. The managerial branch of stakeholder theory seeks to predict and explain how a corporation react to various stakeholders demands. The basis of stakeholder theory is that organisations are so large that their effect on society is so pervasive that they should discharge accountability to various sectors of society and not only to its stakeholders alone (Solomon 2007, p.23). In using analytical frameworks, the public in general may be seen as corporate stakeholders because of their nature of being taxpayers hence providing organizations with infrastructure which they can operate on. Stakeholders’ theory has been criticised and one of the criticisms is that it weakens the power and influence of stakeholder groups when all stakeholders are treated equally (Weiss 2009, p.41). For example, labour unions have a chance of being hurt, avoided or eliminated altogether. In addition, organisations can be weakened as they pursue profit while they attempt to serve all stakeholders interests. Corporate voluntary sustainability reporting has become the mainstream issue for all the organizations and more corporations are motivated to provide sustainability reports. While it is increasingly becoming normal for large listed corporations to provide their sustainable reports, privately owned companies still lags behind. There are business legitimacy crises that privately owned companies faces and thus they need to disclose their information on sustainability in preservation of their legitimacy in light of public perceptions (Aras & Crowther 2012, p. 98). Corporations are motivated to provide sustainability reports towards maintenance of the business practices legitimacy. Legitimacy theory explicitly explains the motivations of corporate sustainability reporting. Sustainability reporting is viewed as a method used in legitimising business methods (Mahadeo, Oogarah-Hanuman, & Soobaroyen 2011, p. 164). Stakeholders are many in an organization and they are motivated to provide reports on their sustainability as a way of meeting global expectations. Local governments and employees are among the stakeholders that drive corporations in pushing for high standards and to engage in development of local community (Reimann, Ehrgott, Kaufmann, & Carter 2012, p. 3). In addition, legitimate stakeholders are regarded as important for authority. The claims of different stakeholders may change over a period of time, and thus corporations are forced to respond to these social issues by providing sustainability reports. Question 3. BHP Billiton and Coca-Cola Limited 2012 Sustainability Reports Comparison BHP Billiton and Coca-cola limited is among multi-national companies that provides sustainability reports. In 2013 Global Fortune 500 companies, BHP Billiton was number 115 with revenue of $ 72.2bn and a profit of $ 15.4bn. Coca-cola company was number 208 having $48.0bn revenue and a profit of $9.0bn (CNNMoney 2013). BHP Billiton is a multinational company which engages in diversified resources having its headquarters in Melbourne, Australia. In June 2001, BHP and Billiton merged becoming BHP Billiton Company hence making it largest diversified resources company. It produces coal, copper, aluminium, oil, gas, silver among others. In June 2001, BHP Billiton was listed on both Australian and London Stock Exchanges (BHP Billiton 2012). Coca-Cola Company is a multinational beverage company involved in non-alcoholic beverages and it has its headquarters in Georgia, United States of America. The company is the largest beverage company in the world and is listed in New York Stock Exchange (NYSE). The company brands include Coke, Sprite, Fanta and Powerade (Coca-Cola 2012). Sustainability reporting has become a normal practice for many multi-national companies and both BHP Billiton and Coca-Cola Companies continually prepare and provide their sustainability reports. BHP Billiton is among companies that are part of Global Reporting Initiative registered organisational stakeholders. The standalone sustainability report of 2012 was prepared according to GRI G3 sustainability reporting guidelines. BHP Billiton operates globally depending on access to various natural resources and maintenance of licence to operate. The strategy of the company involves sustainable development by integrating health, safety, economic, social, and environmental factors to their decision-making (BHP Billiton, 2012). The corporation in its 2012 sustainability report provided financial and non-financial facets of their operations. The policy of the company involves operating sustainably so as to reduce pollution, improve energy efficiency, improvement of surrounding communities’ quality of life indicators, and enhancing biodiversity. Sustainable development of BHP Billiton is achieved through effective identification, assessing and managing risks. The company has a diverse workforce as part of their policy. The company has identified attraction, employment and development of talented and motivated individuals sharing its values as critical to their long-term sustainability. In its operations, BHP Billiton seeks to minimise the environmental impacts of their operations while at the same time contribute to lasting environmental benefits. BHP Billiton own and operates diverse business activities in different parts of the world. In its sustainability report of 2012, strategies and actions for preventing fatalities in its operations are provided. In its bid to conserve and minimise environmental pollution and contamination, the company involve itself in identification and assessment of resources and materials risks. It also provided the breakdown of its energy use by source in the 2012 sustainability report. In the year 2012, Coca-Cola Company reported their sustainability performance against the key performance indicators provided by the Global Reporting Initiative. In its 2011/2012 sustainability report, Coca-Cola Company declared for itself a grade of B against Global Reporting Initiative G3.1 Guidelines (Coca-Cola Company 2012). The policy of the company is to strive in complying with all the applicable regulations and laws in places where they undertake their businesses. In an effort to be a sustainable company, Coca-Cola Company seeks to use energy efficiently in its global operations as part of its entire environmental management. Water is readily used by Coca-Cola Company and it concerns itself with water stewardship across the world. In 2011/2012, the corporation described how it discharges its waste-effluents in an aim of being sustainable to the environment it undertake its operations. The policy and programs of Coca-Cola Limited is to have positive, mutual beneficial and collaborative relationships with the surrounding inhabitants which they consider as fundamental to their business success. In doing this, the company engages itself in packaging their products using recyclable bottles. Sustainability reporting involves being socially responsible in undertaking of operations by a company. Coca-Cola Company employs many people and as part of its policy, it adheres to minimum age that is provided by applicable regulations and laws pertaining to child labour. In conclusion, the sustainability reports of BHP Billiton and Coca-Cola companies of 2012 were prepared in accordance with GR1 G3.1 Reporting Guidelines. Question 4. How BHP Billiton and Coca-Cola Companies managed legitimacy through Reporting BHP Billiton identifies its workforce of about 46,370 employees as cornerstone in its operations. In addition, the safety and health of these people together with that of wider communities in places where they conduct their operations are considered as central to their business success (BHP Billiton 2012). Legitimacy is managed by BHP Billiton through identification of its diverse workforce as concrete to its business success. Due to its global business nature, BHP Billiton is required to develop and implement a plan touching on diversity which will help in achievement of gender diversity, ethnicity, skills and experience taking into consideration the legislative requirements. On the other hand, Coca-Cola is of the same predicament as it operates globally across countries with different races, ethnic groups and genders. In order for both companies to legitimise their businesses, they have developed detailed plans on how they can accommodate different diverse groups and stakeholders. Today’s organizations are required to serve diverse groups of stakeholders and they should be sustainable in their operations. Coca-Cola and BHP Billiton companies managed their legitimacy by providing strategies and approaches on how they deal with environmental impacts caused by their operations contained in their 2012 sustainability reports. The surrounding communities are important to both companies and they undertake some projects in helping them and at the same time being socially responsible. For instance, Coca-Cola Company involved itself with eradication of malaria in the surrounding communities’ residents where they operate (Coca-Cola 2012). Coca-Cola and BHP Billiton also recognises that its long-term success depends on their ability to build mutually exclusive relationships as well as working transparently and collaboratively with its stakeholders including governments, business partners, host communities and non-governmental organizations. The level of engagement and how they engaged themselves with its stakeholders are provided in the 2012 sustainability reports which is a way it managed its legitimacy through reporting. References Aras, G & Crowther, D. 2012, Business strategy and sustainability. Bingley, Emerald. BHP Billiton 2012, 2012 BHP Billiton Sustainability Report, accessed 26 May 2014, . Brockett, A. 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