Motivation for Corporate Social and Environmental Reporting - Essay Example

Motivation for Corporate Social and Environmental Reporting Introduction Giannarakis et al. d that the major motivation for corporate social and environmental reporting is to enhance the corporate image and the credibility with the shareholders. This statement is true because disclosing the corporate social and environmental information about the organizations show that they are responsible for their actions and are willing be accountable for the risks caused by their operations. According to Dilling (2009), corporate social responsibility is a self-regulatory method that businesses use to monitor and ensure their active compliance with the ethical standards, international norms and the law. Those businesses that are responsible for their operations and other actions are at the heart of the community. The Organizations that understand their various links with society members they work with and their effects on the environment are likely to flourish in the end. Gilbert et al. (2011) noted that reporting on the environmental performance of the business benefits them in many ways such as motivating internal and external citizens to invest in the business. This essay is going to discuss the main motivation for corporate social and environmental reporting. The essay will begin by briefly explaining corporate social report, corporate image, corporate credibility, and the stakeholder theory that will enable us to understand the reasons why corporate social and environmental reporting is important. Corporate social report Delmas and Toffel (2011) defined corporate social responsibility (CSR) as a process whereby enterprises take initiative to evaluate and accept responsibilities for the business consequences on the surrounding environment and the results on the social welfare of the citizens in their locality. Corporate social reporting may incur short-term costs that may not provide financial profits to the business immediately but rather enhances a positive environmental and social change for the organization. Dilling (2009) observed that many large enterprises have devoted their money and real time to social welfare initiatives, environmental sustainability programs, and alternative energy sources in order to benefit and motivate more customers, employees and the society. Corporate image Delmas and Montes-Sancho (2011) defined corporate image as the overall representation of a firm in the diverse minds of the public such as investors, customers and the employees. The mental picture comes up when the business name is mentioned because of certain activities they do in their Company. Deegan (2002) noted corporate image is a complex psychological impression that changes regularly depending with the business incidents, performance, pronouncements, and media coverage among others. The image of an organization can change from negative to positive to neutral in a short while since it is the public perception of the enterprise other than the reflection of its actual position. Deegan (2002) observed that large organizations involve corporate advertisement techniques in their operations to improve their image hence promoting their desirability as employers, customers, borrowers, and suppliers among others. Corporate credibility Mc Williams and Siegel (2000) defined corporate credibility as the degree to which the various recipients believe in communication. Business credibility is the amount of trustworthiness that an enterprise portrays in the eyes of its customers, clients, financial resources, and its business partners. According to Gilbert et al. (2011), credibility is a combination of the business reputation and its credit profile hence when one or the other is lacking, then the enterprise is said to have poor credibility. All businesses eventually require the right to financial resources from banks, investors and other lending institutions. The enterprise chances of approval by the lending institutions depend entirely on their organisation’s credit rating among other important factors. Investors and banks determine the following factors before providing financial assistance to the businesses: If the Company pays the existing loans timely If the Company has financial assets to repay its loans and other debts The period the Company has been in business If the organization can provide collateral when necessary Delmas and Toffel (2011) observed that the ability of a business to maximize their satisfaction level to their consumers while in the process balancing their budget to make timely payments and getting profits in turn makes the business have a solid corporate credibility. Stakeholder theory Freeman and Hasnaoui (2011) defined the stakeholder theory as a conceptual framework of organizational management and business ethics that addresses ethical and moral values in management of businesses. Stakeholders are individuals or groups who are affected by the various achievements of the business goals and objectives. Edward Freeman the father of the stakeholder theory explains how good management of a business can satisfy and motivate the interests of the shareholders in the organization. The theory suggests that the main purpose of a business enterprise is to generate as much worth as possible for the shareholders. The theory suggests that in order to be sustainable and succeed over time, the management must ensure that they keep the interests of the suppliers ,employees ,customers ,communities, and the stakeholders aligned and heading in the same direction. The innovation used to keep the interests of the investors aligned is more valuable than the simple strategy of trading off the interests of the shareholders against each other. Freeman and Hasnaoui (2011) observed that by managing for the shareholders, the senior managers would create more value for the investors and the other financiers. Motivation for social and environmental reporting As Deegan and Unerman (2006) stated, the main motivation for corporate social and environmental reporting is to improve the image of the organization and credibility with the stockholders hence generating more profits for the business and ensuring continuity. Social responsibility disclosure include revealing information about the business interactions with the social and physical environment including information that relates to community involvement, human resources ,natural environment ,product safety, and energy. Reporting corporate social and environmental matters enables the businesses to have a positive image in the society and hence gaining public acceptance. This practice facilitates good performance in the organization, as there would minimal probabilities of product boycotts, strikes, and the beginning of legislations that are detrimental to the business. CSR increases accountability in the business as all information about their operations is revealed to the public. This act motivates the stakeholders as they can easily access relevant information about the Company’s activities on social and environmental issues (Delmas and Montes-Sancho, 2011). Freeman and Hasnaoui (2011) noticed that in Canada, they are known to be diverse, multicultural, and progressive where by the local and central government policies comprise of progressive taxation, health care funded by the public, the struggle against poverty, and the prohibition of capital punishment. These Canadian cultural values influence strongly the inclination of the Canadian businesses to CSR. The CSR in Canada covers the enterprise’s considerations of its accountability to the wide range of their shareholders, including their ethical liabilities to the community, the legal and discretionary responsibilities to the society are vital in the institutional framework in Canada. Freeman and Hasnaoui (2011) support the significance of CSR as they view the interactions between the stockholders and the business as important because of including investment in the society outreach, environmental stewardship, employee relations, financial performance, maintenance, and creation of employment within their comprehending of the CSR. Deegan and Unerman (2006) observed that Canadian business are motivated to issue the CSR reports as a public relations schema, in reaction to the pressure to relay communication to their stockholder in regards to their CSR practices and policies. The reports convince the investors that the organization is doing what is right in spite of if their real performance follows. Deegan and Unerman (2006) stated that CSR is significant as it ensures continuity of firms to contribute to economic development and behave ethically hence promoting the quality of life of the employees, families, stakeholders and the society. Motivations for businesses to take on CSR reporting are influenced by the diversified concerns of the traditional stakeholders other than the diversified types of the stakeholders. The sensitive industries in the supply chain employ the CSR reports to defend the potential risks involved in the management of associations with multi-stakeholders. In ethical sensitive industries, more valuable factors consider integrating sustainability to be of assistance to the firm that signify taking good care of the various traditional stakeholders. According to the stakeholder perspective, organizations publish CSR reports to minimize the external costs and pressures that are enforced by regulators and external stakeholders (Freeman and Hasnaoui, 2011). CSR emphasizes maintaining a healthy environment for the society by ensuring that no poisonous gases are released to the atmosphere. The environmental performance is significant as it provides the firm with information that enables them to exploit their cost savings and gives them the opportunity to set out what they trust is significant to attract more investors. Conclusion Corporate social responsibility is the act of communicating the environmental and social effects of the business actions within the society. Corporate image is how individuals view the business that depending on their daily activities. Corporate credibility is the amount of expertise that a business has to their business partners and customers. The main motivation for corporate social and environmental reporting is to improve the image and credibility with their customers, financial institutions and their stakeholders. The stakeholder theory is a framework that is used to look at the various relationships between the business and its external and internal environment. Reporting corporate social and environmental information to the public improves the reputation of the firms and brand management, increases access to capital and shareholder value, enhances transparency, and generally improves relationships with the customers, clients, the government, and the society. References Deegan, C. (2002), “The legitimising effect of social and environmental disclosures. A theoretical foundation”, Accounting, Auditing & Accountability Journal, Vol. 15 No. 3, pp. 282-311. Deegan, C. M., and Unerman, J. (2006). Financial accounting theory. Berkshire, McGraw Hill Education. Delmas, M.A. and Montes-Sancho, M.J. (2011), “An institutional perspective on the diffusion of international management system standards: the case of the environmental management standard ISO 14001”, Business Ethics Quarterly, Vol. 21 No. 1, pp. 103-132. Delmas, M.A. and Toffel, M.W. (2011), “Institutional pressures and organizational characteristics: implications for environmental strategy”, in Bansal, P. and Hoffman, A.J. (Eds), The Oxford Handbook of Business and the Natural Environment, Oxford University Press, Oxford, pp. 231-247. Dilling, P.F.A. (2009), “Sustainability reporting in a global context: what are the characteristics of corporations that provide high quality sustainability reports. An empirical analysis”,International Business and Economics Research Journal, Vol. 9 No. 1, pp. 19-30. Freeman, I. and Hasnaoui, A. (2011), “The meaning of corporate social responsibility: the Vision of four nations”, Journal of Business Ethics, Vol. 100 No. 3, pp. 419-443. Giannarakis, G., Sariannidis, N. and Garefalakis, A.E. (2011), “The content of corporate social responsibility information: the case of Greek telecommunication sector”, International Business Research, Vol. 4 No. 3, pp. 33-43. Gilbert, D.U., Rasche, A. andWaddock, S. (2011), “Accountability in a global economy: the emergence of international accountability standards”, Business Ethics Quarterly, Vol. 21 No. 1, pp. 23-44. McWilliams, A. and Siegel, D. (2000), “Corporate social responsibility and financial performance: correlation or misspecification?”, Strategic Management Journal, Vol. 21 No. 5, pp. 603-609. Read More