Land Rover Sustainability Analysis - Essay Example

? Land Rover Sustainability Accounting and Accountability Analysis   Table of content Similarity between Land Rover Sustainability Accounting Report and GRI’s Sustainability guidelines G3 (GRI 2006) 3 Guidelines for Sustainability Reporting 4 Sustainability report of Land Rover 6 Comparison between sustainability report and academic literature 7 The level of assurance of the sustainability report and the extent to which it agrees with Gray’s (2010) statement 9 References 14 Similarity between Land Rover Sustainability Accounting Report and GRI’s Sustainability guidelines G3 (GRI 2006) Sustainability report is a record of the impact that a company has on its surroundings. The performance of the company affects the economy, society and the environment which is surrounding it. The performance of the company also has its bearing on the stakeholders of the company. So the sustainability report of a company should give a balanced and a logical representation of the performance of the company and extensive details of the factors which play a part in the sustainability of the company. Sustainable development aims to fulfill the present needs without harming the possibility of not fulfilling the future ones. In today’s era, where companies give sole importance to economic growth the concept of sustainable growth becomes all the more important. As globalization continues to spread there is a steep rise in the ways through which companies and individuals can increase their profits. But the newly created opportunities are not evenly spread over the social strata. So there is always a dynamic instability which is making the environment volatile to some extent. Increase in technical knowledge has attributed to financial development, but it also has the ability to reduce the risks which threatens to harm the social and environmental sustainability .So sustainable development’s key feature encapsulates its promotion of out of the box thinking and selection of innovative choices. There is a need for transparency regarding a company’s economic, social and environmental impact and gradually this aspect has become an integral part of its relations with its stakeholders. Stakeholders expect a company to communicate to them the true picture of the company’s sustainability. This naturally led to the requirement of a globally recognized framework of rules, concepts and regulations. As a result the Global Reporting Initiative created the Guidelines for Sustainability Reporting. With the formation of the guidelines a transparency was achieved in the reports involving the sustainability of the company. These reports generated a lot of interest amongst the motley crew of stakeholders (Global Reporting, 2011). Sustainability reports disclose results that have happened in the reporting period. These reports are mainly used for: 1. Assessment of the sustainability performance of the company in accordance with the laws, performance standards and norms. 2. The extent to which the company influences and gets influenced by its surroundings. 3. To perform an intra and intercompany comparison over a period. Guidelines for Sustainability Reporting The reporting framework developed by GRI can be used by any company irrespective of its location, sector and size. The reporting guidelines ensure that the reports produced by the companies are up to the mark. These guidelines include: 1. Reporting Principles 2. Guidance 3. Standard disclosures. All the three elements are given equal weight age and importance. Reporting principles explain the results a report should able to convey, the selection and methods of reporting, along with the indicators and topics which will be included in the report. Each principle consists of definitions and a number of tests which help the company to decide the principles which it intends to use. The reporting guidance explains the actions that a company can take during the decision making process, and also helps in selecting the topics that will be included in the sustainability report. The report should give a balance presentation and a reasonable idea about the performance of the company. The related topics and indicators should be identified. The law of Materiality, inclusiveness of stakeholders, the context of sustainability and guidance should be used in choosing the materials which are to be included in the report. The law of Materiality states that the information included in the sustainability report should cover the issues and key factors which play a significant role in the sustainability of the company. A company needs to identify its stakeholders’ wishes and interests, and is required to mention in the report how it has acted to fulfill those wishes. The organization is required to report in the broader aspect of sustainability. The report should be complete in nature and should reflect the holistic impact the company has on the economy, environment and society (Adams & Gonzalez, 2007). A sustainability report should also be balanced and accurate and easily understood by the stakeholders. It should be prepared within the stipulated time limit and reliable in nature. Sustainability report of Land Rover The sustainability report of Land Rover begins with the company’s outlook towards the concept of sustainability. The company expresses the importance of sustainable growth to maintain their reputation and trust with its stakeholders and to achieve the desired economic growth. Land Rover has created a Board that deals with the issue of sustainability. This board is headed by Dr. Ralf Speth. In the report, the company in accordance with the GSI guidelines, has clearly identified and mentioned its material issues, which include climate change, resource management, waste reduction and employee engagement. An important feature of any sustainability report is to portray the impact that the company has on the environment. In the report of Land Rover the management has clearly explained the strategies it has undertaken for environmental innovation. The company is working extensively to produce eco-friendly cars which will reduce the carbon emission by a great deal. A program have been introduced which will closely monitor and manage the carbon footprint. The next segment of Land Rover’s sustainability report presents the activities that the company undertakes to engage its stakeholders in its business activities. The company is able to convey adequate levels of transparency towards its stakeholders, as it clearly states its business ethics and policies in the sustainability report. The report highlights the new environment friendly policies and products of the company, along with the progressive growth rate at which the company is moving forward. It also gives a clear idea about corporate social responsibilities of the Land Rover organization and the impact these projects have on the society (Land Rover, 2013). The Sustainability Accounting Report of Land Rover truly follows the GRI’s Sustainability Reporting Guidelines G3. The report is quiet adequate in describing the impact that the Land Rover organization has on the economy, society and environment. It clearly explains to the stakeholders about the company’s plan to achieve the sustainable growth and has all the attributes as mentioned in the GRI’s guidelines for a comprehensive sustainability report. According to Gray, most of the sustainability statements of companies do not actually talk about the sustainability programs undertaken by those companies. The statements are more of an eye wash, and fail to give a clear idea to the stake holders. But Land Rover’s sustainability statement perfectly follows the GRI’s sustainability reporting guidelines G3, and gives a clear idea about the company’s overall sustainable growth (Anti Essays, 2013). Comparison between sustainability report and academic literature From a theoretical point of view, an ideal sustainability report should contain the long term goals and plans of the company and the impact it has on the economic, social and environmental fields. The sustainability report actually should explain how efficiently a company is performing its duties toward the society and environment. With the onset of globalization, capitalism has become the reigning governance model for most countries, which has resulted in earning profits becoming the main motive for most of the companies. With the improvement of technical skills and machineries, rate of production has increased in leaps and bounds and along with it the scope for generating voluminous profits. But the growth in profit margins has led to an inequality in the society where the rich get richer and the poor get poorer. This has disrupted the social equilibrium. In this scenario, the companies have an important role to play in the sustainable growth of the society along with itself. In most of the literatures and articles regarding sustainable compatibility the authors have raised the question whether the companies can truly propagate the concept of sustainable growth and still record profits in their balance sheets. In 1996, Bebbington and Thompson conducted an interview on 45 accountants and environmental managers to highlight the problems faced by the company pursuing the ideology of sustainability. From the results they induced that the companies who were trying to achieve a sustainable growth were not sure and definite about the concept of sustainability themselves (Bebbington, J. 2002). In 2004, Gray and Milne proposed that financial profit and sustainable growth along with corporate social responsibility activities were two opposite ends of the spectrums, and companies would not be able to pursue the respective goals simultaneously. To solve this dilemma Grey and Milne suggested that there should be some definite rules and regulations that would help the companies to achieve sustainable growth to some extent. (Science Direct, 2013). In the present situation a company cannot survive in the long run if it does not aim for sustainable growth. Companies that target sustainable growth and publish sustainable accounting reports perform better than their competitors. An ideal sustainability report of the company expresses the long term goals, how it intends to engage its stakeholders in its business activities, its initiatives towards the improvement of society and environment. Sustainable report helps to develop the relation between the company and its stakeholders. Through an adequate sustainability report the company can clearly understand the needs of its clients. A sustainability report also gives a sound idea about the strengths, opportunities, threats and weaknesses of the company. So, in the modern era most of the leading companies are producing well documented sustainability reports based on the GRI’s Sustainability guidelines (Kpcindia, 2012). Most of the academic literatures, if not all, raise doubts about the credibility of the concept of sustainable growth and accounting, and question the intentions of the companies who are trying to achieve this goal. But in reality the companies who have incorporated the concept of sustainability growth have performed way better than the companies who are sticking with old concepts of economical growth. The superior performances of the companies publishing sustainability accounting report serves to validate this concept (Sgx, 2012). The level of assurance of the sustainability report and the extent to which it agrees with Gray’s (2010) statement The assurance of sustainability reports follow a certain set of internationally recognized auditing principles. These principles detail the information that is mandatory to disclose for proper assurance auditing. Some of these information include the report’s title, the nature of the subject matter, a statement which clearly mentions the stakeholders, the criteria under which the sustainability accounting have been conducted and the date of issue of the report. (Icai, 2013) The sustainability report of Land Rover follows the GRI’s guidelines for sustainability accounting. It clear explains the long term goals and the holistic approach that the company has undertaken under its policy of sustainable accounting. A company cannot act as an isolated organization or a body as, like human beings, it is also a part of the social set up. Its actions and business processes have an impact on its surroundings especially the society and environment. The effect of the functioning of the company’s businesses is felt at all layers of the society. So the company has to be very careful in the ways it tends to conduct it operations. Companies that aim to continue their growth in the long run will embrace the concept of sustainability accounting with open arms. Sustainable accounting greatly enhances the relationship between the company and its stakeholders. These reports clearly explain the company’s policies to its stakeholders. It also encourages all the stakeholders to become a part of the functioning of a company, and thus develops the feeling of ownership among the stakeholders. A company acquires its resources like raw materials, machinery and man power from the society itself. Man power of a company is one of the most important resources to run its operations successfully. So the concept of Employee reporting is very important. A company needs to provide its employees with basic facilities like housing and medical aids. Many companies build residential colonies, schools and amusement parks for the betterment of their employees. Nowadays, companies have implemented safety policies in its offices and workshops to ensure the safety of its employees. Land Rover, being no exception, has introduced new safety and health policies to maintain the safety of its employees. It also provides its employees with health insurances. In the year 2010 Land Rover won the award for the best safety and health achievement in the manufacturing sector (Land Rover, 2013a). The next significant topic under sustainability accounting report is social reporting. As a company uses the resources from the society, it has a natural obligation to do something in return which will improve the society. Corporate Social Responsibility is a part of this segment. Looking from this perspective, Land Rover has done a great deal for the betterment of the society. It has developed teaching and strategic research links with many universities in the United Kingdom. It provides apprenticeships to young and under privileged students. Also it has launched the annual car designing competitions in schools which has become a huge success. In 2010, it donated a total of 1.4 million pounds to charities all across the United Kingdom. In the war stricken countries of Africa, it also works in collaboration with the Red Cross. Even the employees of Land Rover have worked for extensive hours in various CSR projects that are conducted by the company (Land Rover, 2013b). Land Rover’s sustainability report also includes the initiatives that the company has taken to improve the environment. It has started to build lighter vehicles with a smaller carbon footprint. It targets to reduce its total carbon footprint by 25% and has planned to reduce its water usage by 10%. The R&D department is trying their best to achieve low carbon dioxide levels keeping the same level of performance. It extensively proposes the use of renewable energy sources and recycled materials. It is also conducting a program at its headquarters in Gaydon which will produce energy from waste food. The Corporate Social Responsibility board of Land Rover has undertaken an extensive program of planting trees all over the United Kingdom (Land Rover, 2013c). The sustainability report of Land Rover gives a great deal of assurance to its stakeholders. It is prepared based on the GRI’s guidelines for sustainability accounting. It gives a clear idea to the stakeholders about what the company plans to do in the near future. The report is able to engage the stakeholders in the processes of the company. The financials of the year 2011 shows that with incorporation of the sustainability concept the performance of the company increased a great deal. In 2011, there was a 51% increase in the total revenue, EBITDA jumped up by almost 10% and PAT increased by a whooping margin of 10.1%. The improved financials are proof to the fact that the stakeholders including the creditors, government and other financial institutions have trusted the company a great deal and the sustainability accounting report has played a significant role in developing this goodwill. The performances of its employees have also enhanced as they are clearly aware what the company expects from them and they can also see the benefits that the company is ready to provide to them and families. The sustainability accounting report also has enhanced the image of the company in the eyes of the customers. General public can see how much the company is doing to improve the society and the environment, and hence get attracted to buy its products, which are reflected with the rise of net sales (Jaguar Land Rover, 2011). Gray, in its article, raised the doubt whether the sustainability reports of the companies really bring out the true picture of the sustainability approach that the companies want to undertake. Many companies publish vague sustainability accounting reports and use it as a mode of publicity gimmick. Gray also questioned the concept of sustainability growth and corporate social responsibility, and whether business organizations, who’s main aim are to make profits, are really concerned about the sustainable growth concept. But the sustainability accounting report of Land Rover has cleared all the doubts that were raised by Gray. It is clear from the sustainability report of Land Rover that it has successfully incorporated the idea of sustainability accounting reporting. This report has been able to clearly build a strong bond between the company and its stakeholders. The report has sent a transparent message across to the stakeholders about the company’s future plans and programs. The company is keen to engage its stakeholders in its operations and plans to build new eco-friendly products. The improved financials also opposes the notion raised by Gray. Land Rover is has been able to record a steady economic growth while incorporating the concept of sustainable accounting. However, Gray’s notion about sustainability accounting is not totally incorrect, as there are many companies who falsely use the concept of sustainability to mislead its stakeholders. Those companies try to hide their singular motive of financial profit under the name of sustainable growth. These companies produce false or faulty sustainable reports. As publication of sustainability accounting reports are not mandatory for companies it is very difficult for the authorities to take action against these false reports (Schaltegger, S. & Burritt, R.L, 2006). But GRI has introduced new guidelines for sustainability accounting and most of the leading companies follow these guidelines to prepare their sustainability report. Companies that are planning to survive for a long time are slowly adopting the concept of sustainable accounting reporting. This is a relatively new concept and most of the experts like Gray have raised their doubts over the authenticity of this concept. Companies like Land Rover have shown that this concept can be successfully implemented to achieve greater goods which will benefit all the spheres of the society and the company itself. But it is solely dependent on the companies whether they will use the concept of sustainability accounting, to make themselves better organizations or will they use it as a mask to hide their short sightedness and perish in the long run (Unerman, J. Bebbington, J. & O’Dwyer, B, 2007). References Adams, C.A & Gonzalez, C.L. 2007. 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Available at: http://www.sciencedirect.com/science/article/pii/S1045235400904507. [Accessed on 07 January, 2013] Sgx 2012. Guide to Sustainability Reporting for Listed Companies. [pdf]. Available at: http://rulebook.sgx.com/net_file_store/new_rulebooks/s/g/SGX_Sustainability_Reporting_Guide_and_Policy_Statement_2011.pdf. [Accessed on 07 January, 2013] Unerman, J. Bebbington, J. & O’Dwyer, B. 2007. Sustainability Accounting and Accountability. [online]. Available at http://books.google.co.in. [Accessed on 07 January, 2013]. Read More