Sustainability and Integrated Reporting - Essay Example

? Sustainability and Integrated Reporting Table of contents Executive Summary 3 The meaning of sustainability 3 Corporate stakeholders of Woolworths and Woolworth’s engagement about sustainability issues 4 The main drivers 5 Integrated reporting 6 The current position of Woolworths regarding integrated reporting 7 Integrated reporting and initial focus on large companies 8 Bibliography 9 Executive Summary Sustainability is a managerial approach that attempts to achieve long-term shareholder value by taking opportunities and managing risks emanating from economic, social and environmental aspects, at the same time mitigating sustainability risks and reducing costs. In this paper, a look at how Woolworth has embedded sustainability into its day to day business practices, the main drivers and the targeted stakeholders is analysed in details. Integrated reporting is the current reporting standard where the sustainability strategy and activities are connected to financial reporting. The benefits and challenges of this reporting is looked into and the need to adopt in corporations. Woolworth, a categorical large corporation is analysed in regards to the extent it has adopted integrated accounting. Guidelines for integrated reporting are set out globally through various bodies like the International integration reporting committee amongst others. The meaning of sustainability In the business context, sustainability can be defined as an approach that attempts to achieve long-term shareholder value by taking opportunities and managing risks emanating from economic, social and environmental development, but at the same time cutting back sustainability costs and risks (Michalski et al, 2002, 6). To achieve sustainability the business presents itself an opportunity to grow economically while attaining social fairness and environmental protection for its stakeholders. Apparently Woolworth considers sustainability in its business operations. The success of sustainability is high returns to the business and benefits to the community at large. Woolworth is presented with an opportunity to do good to the various stakeholders in turn earn returns on investments made towards sustainability. Woolworth’s policy on the Destination Zero clearly depicts a responsible employer in safety measures. This indicates no harm to people, property and the community. Reduction of potential harm is a social responsibility to Woolworth and thus maintaining the lead in retailing. People and Culture are the two main aspects which give Woolworth a competitive edge. To maintain this, the Retailer has to extend the benefits of social welfare by spending $63 million for staff focused initiatives. This is the key to sustainability in order to maintain satisfied employees to undertake the economic business responsibility. This is the central resource to be mobilized as the driver of sustainability. Corporate stakeholders of Woolworths and Woolworth’s engagement about sustainability issues Community and the customers Plastic bags, GM foods, Responsible sale of alcohol are among the cited examples that Woolworth has had in its target. Recycling of plastic bags was improved through the elimination of the blue plastic bags that were used for bananas. New display methods have allowed them and their supplies to save on costs. This overall helps in creating a safe environment for the community. Responsible food retailer has had its way through educating the community on key issues on genetically modified foods, Foodbank, fresh food kids program etc. Government Compliance with government regulations is seen in aspects of selling alcohol responsibly and responsible serving of gaming. To attain liquor licenses, it had to acquire pubs that engaged in gaming activities. Woolworth has had the responsibility in producing the alcohol range expected before sale. It has encouraged honesty in gambling among its staff. Woolworth has also been working with suppliers in compliance with organisations ethical supply policies. It has also engaged in animal welfare through monitoring consumer behaviour and taking necessary actions e.g. poultry farming through free range instead of caged birds. Employees The most important driver of implementing sustainability is engagement of employees. These are the enhancers of business practices, innovations and even brand value. Woolworth has managed to keep employees engaged through various packages that come with working for the retailer. Woolworth has set aside $63 million for capacity building, recruiting procedures, paid parental leave and other staff focused activities. Through a range of training and development, the staff gets opportunities on developing to future leaders through promotions. Suppliers Woolworth is engaged in compliance ethical issues in regards to supplies. It has had campaigns on reducing the need for palm oil hence reducing deforestation to save the environment; reducing the need for timber and paper goods with the aim of improving use of renewable and certified wood products. It has also advocated for the proper sale of fish amongst the fish suppliers – key issues being proper harvesting time, right size and maturity of the fish. The main drivers Woolworths’ strategy to implement sustainability and sustainability reporting using the public and private interest theories – Recommended approach Sustainability Executive Committee (SEC) – The setting up of the SEC is the key driver of sustainability strategy. It comprises of the CEO, CFO, Group manager Sustainability and general managers from trading to support divisions. The committee ensures the sustainability agenda is meet on a timely and cost effective manner. It approves business case and monitors progress. Corporate Responsibility Panel of external experts in sustainability - this panel of expert was set up to provide advice to the CEO and leadership team on international trends and good practices, and the current progress of Woolworth. This panel enhances good business decisions since the organisation is able to tackle and report on the tough sustainability issues it faces. It is able to depict the gap the organisation has in sustainability in relation to other organisation and advice accordingly. Strong Leadership - New CEO, Michael Luscombe is a key element in sustainability through empowerment of his team. He advocated for integrating corporate responsibility and sustainability into the day-to-day business practices as an issue of high priority. He states the need to align the business’s focus to addressing sustainability needs, building both loyalty from customers, and effort from employees. There is needed to have targets set out and a materiality assessment carried out to identify areas of significance. A strong leader also steers the move to achieving the set targets. Strategic drive – Woolworth’s group sustainability leader puts across the fact that the retailer is not a charity but a business being run to earn profits, create value for its market share, save on costs or use resources more efficiently. Such an understanding has enabled Woolworth to clearly set out the areas of materiality and the impact they will have for the business. Sustainability involves use of funds and as such there have to be a return on investment realized. In the long run it is important to measure the impact of this strategy if adopted in any organisation. The strategic goal set is to become environmental friendly and doing social welfare at the same time attaining business objectives. This is through embedding sustainability in every business activity. Financial drive - To achieve their strategic drive, Woolworth put in funds to invest in sustainability that was aimed at delivering ongoing and long term savings of the costs of the business. Some cited costs savings approaches this far is improvement in recycling of plastic bags by eliminating blue bags and adopting other methods of displaying products. Engagement of employees: – Employees enhance sustainable business practices, brand value and innovation. Woolworth has achieved this is through training of staff and encouraging behavioral change in order to implement sustainability into business decisions. There is need for every employee to be responsible for his/her actions while undertaking business activities. It is therefore important to regard every level of staff to work as a team. Woolworth thus gives a range of benefits to its employees e.g. promotions benefits, paid leaves, training and development hence gaining skills etc. eco-ambassadors are engaged here that enhances communication in all locations and sharing of ideas. They steer forth the sustainability strategy in different Woolworth locations. I recommend a similar approach to Woolworth’s since it has had positive impact on the business. It is important to set current issues in our organisation, measure materiality and significance then move forward to implement sustainability. Integrated reporting Integrated reporting involves connecting sustainable activities and financial reports (Lamoreaux, 2010, pp.1). It is a reporting framework that set out the principles and guidelines that should be used in reporting for nonfinancial information i.e. social and environmental aspects in relation to the standard accounting reports. The need for such a new approach of reporting The aim of this type of reporting is to help the organisation and its stakeholders in making better resource allocation decisions. As stated by the International Integrated Reporting Committee, integrated reporting on itself cannot ensure sustainability but it is a powerful tool to help everyone in making good decisions regarding the resources consumed and the lives we lead (Lamoreaux, 2010, pp.1). The Global Reporting Initiative works hand in hand with Accounting for Sustainability Project (A4S) to integrate the manner of reporting in regards to strategy, governance, risk, financial performance and sustainability. It sets out a sustainability reporting framework that spells out the principles and indicators that organisations can adopt to assess and report their economic, social and environmental performance. According to Schaltegger et al (2006, 14), reporting for sustainability presents challenges in the manner of integrating environment and social aspects into the core business management processes and systems. There are no set IAS or IFRS in relation to Integrated accounting. Nonetheless IFRS board and IAS board are part of the IIRC that is designing the framework. However, it is very beneficial as it aims in providing information in regards to the business or corporations’ endevours in social and environmental issues into the accounting and reporting aspects (Bennett et al, 1999, 468). The reporting framework should then support information needs of long-term investors, reflect on the relationship of environmental, social, governance and financial aspects in decision making, and it should provide a guideline in which all these aspects should be systematically taken into account and reported. It therefore brings reporting nearer to the information used by management in running day to day business practices (Eccles et al, 2010, 23). ISO26000 gives guidance on social reporting from the IIRB. Cited benefits from organisations that have adopted integrated reporting are credible reputation, strong team work, improved internal management; feedback can be gotten from stakeholders, management of corporate reputation and drives change towards reasonable competitiveness amongst others (Eccles et al, 2010, 14). The current position of Woolworths regarding integrated reporting Woolworth 2009 and 2010 corporate responsibility report summaries the retailer’s performance against the original targets set and further gives explanations of variances. The reporting however is quite qualitative in many areas. Woolworth is not yet at a position to integrate the core financial report with sustainability report. This is because the sustainability strategy is only halfway through. Woolworth is ahead of very many retailers in reporting in Australia. It has only begun to become compliant with GRI sustainability report but European retailers are way ahead with more comprehensive GRI reports. The move to full integrated reporting can only be adopted once a framework has been developed and consistently applied definitions for retail sector KPIs are determined. The sustainability awards to Woolworth have enabled it to build on a credible reputation let alone the financial benefits obtained. Integrated reporting and initial focus on large companies I do agree that the initial focus of integrated reporting should be on larger companies such as Woolworths Ltd and on the needs of their investors. This is because the large companies are well established and can make ample investments in social and environmental aspects. The reporting therefore encompasses the measure of performance they get from a direct allay of methods of increasing their business practices. Small corporations should follow suit by observing the trends of large companies. Massive reporting structures and decision making processes need to be brought closer to every stakeholder. This enhances reputation and credibility of any organisation in the market. Eventually the reporting framework will open up room for competition to take place as well as observing social and environmental aspects. Bibliography Bennett, M. et al, (1999), Sustainable Measures: Evaluation and Reporting of Environmental and Social Performance, London: Greenleaf Publishing. Eccles, R. et al, (2010), The land of Integrated Reporting retrieved from http://hbswk.hbs.edu/pdf/ on 4/13/2012 Integrated reporting retrieved from http://integratedreporting.org/ on 3/14/2012 Integrating Sustainability into business practices: a case study approach retrieved from http:/www.charteredaccountants.com.au on 4/13/2012 Lamoreaux, M., (2010), Accounting groups Back Integrating Sustainability, Financial report, Journal of Accountancy 31(65). Michalski, A. et al, (2011), Integrated Sustainability and Its Impact on Accounting and Finance: Like in Chess - A Sustainable Corporate Strategy is the Key to Winning, Germany: GRIN Verlag. Schaltegger, S. et al, (2006), Sustainability Accounting and Reporting, London: Springer. Stakeholder engagement retrieved from http://woolworthscrr09.reportonline.com.au/stakeholder_engagement.php on 4/13/2012 Read More