Performance Measurement in Organisations - Case Study Example

Performance Measurement in Organisations a) Explain what you understand by corporate social accounting and social reporting and how the three documents referred to in the above paragraph could be described as social reporting (30%). 750 Introduction Firms cannot operate without the constant interaction with the society. They exist because of the society and they work for serving the society within which they operate. The constituents of such a society include public, stakeholders, community, employees and the organizations. Social accounting is the non financial part of accounting that acts as a process of conveying the environmental and the social consequences of the economic activities undertaken by the companies to the society at large (Balachandran and Chandrasekaran, n.d.). Thus social accounting focuses on the ideology of CSR or corporate social responsibility. Corporate Social Accounting Social accounting involves a process by which social objectives are identified and ethical values are assessed which in turn tries to define the organizational activities. The group of stakeholders include those key groups of people who are interested in the functioning of the organization and in turn have the power to influence or get affected by the activities of the concern. The activity of collection and organization of such subjective and objective data is referred to as the social accounting process. The audit of such records is then published as the social responsibility report. Development of a social accounting process within a company requires commitment on the part of companies and development of some sort of management information system that is based on the indicators reflecting the impact felt in the society (Balachandran and Chandrasekaran, n.d.) Social accounting is said to assess the impact of all activities of firms on the society as a whole. The organization is expected to state its ethical and social goals and the measure by which it has been successful in attainment of such goals is a reflection of the level of success achieved in social accounting. Corporate Social Reporting Social reporting is a process where businesses try to appreciate the relationship between society’s expectations from the company and the relationship their business activities have with such expectations (Rao, 2001). There are four major steps to the process of social reporting. The first is presentation of an equilibrated and a rational environmental, economic and social accounting. The second is social reporting ease that examines the business performance over the time period. Social reporting encourages comparison between companies. Lastly, the stakeholders concern for credibility of stakeholders is to be assessed and addressed. Such a process involves auditing, accounting and reporting of the social objectives of an organization. The process also involves integration of social objectives within the strategic planning process. The indicators of social impact are to be put into consideration when assessing an organization for social reporting (Moir, 2001). Such social reporting also engages the social audit process. This process allows the organisation to evaluate and exhibit their environmental, economic and social benefits as well as limitations. Social audit acts as a complement to the financial audit conducted annually by way of providing a clear record. Such results are incorporated within the planning and review of strategic decision making process of the company so as to improve the overall impact of social initiatives and performances. Such attempts also tend to increase the stakeholder accountability and improve upon the democratic processes of the company. Such social auditing can also be used for marketing and promotion purposes (Apple, 2012). Apple and corporate social accounting and reporting Apple has been publicly criticised for its unsatisfactory work conditions among the Chinese suppliers. It has come under the fire for long working hours, presence of toxic chemicals, overcrowded dorms and hazardous explosions. This represents a socially responsible behaviour that cannot be accepted well by the society. Although Apple is not wholly responsible for such work conditions and neither are the consumers of Apple for the situation in Chinese factories, yet this has invited boycott of Apple products and has affected the business for Apple. Apple has found violation of supplier code of conduct and has asked suppliers to improve upon the working conditions in China (Kannel, 2012). Apple certainly has a huge share of controversies pertaining to human rights and this invites key liabilities to retain its sparkling brand image and corporate reputation. However, Chinese labour conditions issue is spread across the industry. Apple has received such huge attention owing to its position as a market leader. Hence is becomes all the more essential for Apple to look into these issues so as to take and maintain its advantageous position in the highly competitive market (Schmundt and Zand, 2013). Conclusion Corporate social accounting and the social reporting activity has been gaining increasing attention and is of very high importance when it comes to explanation of relationships between the business activity and its interactions with the society. Such explanations are difficult yet work towards increasing the credibility of organizations when achieved. b) Using the three documents referred to in the above paragraph, discuss the ethical issues which are raised and make an assessment of how Apple and its suppliers appear to be performing in social matters Introduction The Chinese law states that an employee must not work more than 36 hours of overtime within a month, with Apple, employees work for over 96 hours in a month. An employee is also expected to sign an anti suicide contract where he pledges not to commit suicide at workplace. In addition, the employees can take only a single day off in two week. The wage rate is also extremely low lying between $17 and $22 per day. Apple has placed dormitories within the workplace to ensure employee availability as and when required. These dormitories have about 24 people in one room and only 24 washrooms for about a 100 people. Such events in Southern China have been depressing and upsetting. The company actions have to be analysed on four principle ethical theories (Chinese Labour Watch, 2013). Ethical issues The actions taken by Apple can be analysed on 4 basic theories of ethics. The Individualism theory postulates that the management of the company has to do everything that is within their scope in order to satisfy their shareholders. Apple has largely satisfied this criterion by making exception profits and brand equity. On the social front, Apple might appear to be insensitive but on the financial forefront, the company is minimising its costs and maximising on revenues and profits. As per the Utilitarian view, the company is expected to maximise happiness for self and the others. Apple workers are often found depressed and work in unhealthy conditions. The story of Chinese suppliers for Apple has come under deep scrutiny and has hampered the company image to a certain extent. This has also made some concerned buyers and stakeholders to shift to other brands because of exploitation of employees by the company. This also reduces revenues for the company. Hence Apple has made its owners as well as most employees unhappy (Salazar, 2011). Kantian Theory states that all decision and action must be rational and taken in mutual respect for people. The company was thought to be doing just the right things until the truth of worker conditions was revealed for Apple in China. They make lives of employees difficult. The workers are expected to work late night s and any shift of the day as per company requirements. Apple plants operate only for company gains. The Virtue theory states that each company decision should be virtuous and should abide by honesty, courage, justice and temperance. Apple reflected a lack of courage and justice by not resolving the workplace and working conditions in China. Expectations from employees in terms of work were also too high in terms of amount of work violating temperance. Apple is yet to seek any apology and corrective measure for the Chinese labour issue. Apple and supplier performance on social matters Apple might have drastically disappointed its investors on matters relating to the social responsibility issue. Apple has been accused on maintaining inhumane working conditions in China. The suppliers for Apple in China have hazardous work environment, long working hours, overcrowded dormitories for workers and presence of toxic chemicals at the workplace. Apple has found a violation of its Supplier Code of Conduct in case of suppliers in China. It is argued that requesting a change in supplier working conditions in China shall not be as effective as changing the suppliers completely. Apple has been accused of having a highly concentrated belt of suppliers. Apple does not release its employee composition statistics which makes it difficult to define the degree of workplace diversity within the company. Apple has what is known as the supplier diversity program, however, it involves women and minority diversity largely. Conclusion Whether or not Apple has been making socially responsible investments is an issue that is controversial. When compared to its competitors, Apple has higher number of social issues to deal with that its competitors. However, Apple has demonstrated a faster pace of responding to such issues against its competitors. Apple is doing extremely well financially. In such a scenario, the company has to handle its social responsibility with more rigour and interest. It has a corporate reputation that can come under immense fire on the slightest of the issues. To maintain its sound corporate image, the company needs to be responsive to such critical issues. c) It could be argued that major companies such as Apple report on environmental responsibility for business-case reasons and that much of the reporting is no more than “Greenwash” – critically discuss the business case reasons for reporting on environmental matters and explain what you understand by the term ”Greenwash” (40%). 1000 Introduction The environmental report for Apple Inc has a lot of information regarding the attempts for environmental concern undertaken by the company. Apple has received continued attention owing to its market position and it has continually come under the scanner of Greenpeace, an environmental organization that has campaigned against Apple for toxin removal, use of recyclable components and implementation of a comprehensive take-back plan for Apple phones. Apple has also been the pioneer in removing the use of chemical in laptop manufacturing. Ever since the company has risen to an incredible visibility and incomparable growth, Apple has paid increased attention to its environmental impacts and health consequences of its products. Apple has provided with a detailed account of its carbon footprint and has also discussed its plans in attempting to reduce it. Apple has also included use by consumers within its carbon footprint accounting which sets its environmental reporting apart. In order to reduce 30% of its emissions, Apple plans to increase product efficiency to the level of carbon emissions made by a 13 watt light bulb. As a part of the recycling program, the company gives gift cards to those who responsibly return Apple products after use in a condition that the company can put to some use. Apple however, does not allow for external verification on the emissions, set up of greenhouse gas targeted reduction or taking advocacy for reducing emission. Apple had also recently pulled out from the Electronic Product Environmental Assessment Tool registration which makes matters on environmental compliance, more questionable. The reason was the Macbook could not be completely disassembled as per the EPEAT requirements on recycle of products. The company later responded to public outrage by renewing its registration a month later showing a more environmentally concerned approach. Greenwashing Greenwashing can be explained as an act by the company of falsifying reports and issuing misleading information on environmental and social reporting. As per the legitimacy theory, companies want to paint a favourable image for themselves for their attempts towards socially responsible behaviour in society and their environmental concern. It is argued that companies engage in CSR reporting primarily and mostly because they want to their engagement in corporate social responsibility has a positive impact on the greenwashing effect and is viewed positively by its stakeholders as well as the society. Such positive image has a constructive impact on company revenues and profits due to the greenwashing effect (Mahoney et al., 2013). It has been argued that companies try to portray and paint a socially responsible image for themselves by engaging in such behaviour. In reality what a company wants is to remain in business and to gain legitimate acceptance within the society. Such attempts are made to make shareholders feel happy and to gain their support and run company operations in legitimacy and acceptance by the society (Cho, Lee and Pfeiffer Jr., 2013). It is not doubted that a company operates in a highly competitive environment where the mere existence is subject to the free play of the market forces and the competition prevailing among the major competitors. In such unregulated market behaviour, an attempt to gain market share does come under deep scrutiny of the media and the government who then become aware of their role to act as moral tenets responsible for control of social and environmental consequences of these activities. These people have a high impact on the company and have the capability to put extreme pressure on them to adhere to set social and environmental standards. This has brought forth the importance of CSR initiative by the company. CSR has become an inescapable priority for businesses and research has shown the most directors and managers of companies do not have any other motive for engaging in socially responsible behaviour rather than gaining additional profits for social and environmental acceptance in business functioning. Business case reasons for reporting on environmental matters There are four basic business case reasons for Apple reporting on environmental issues. Absence of a stakeholder engagement strategy: Apple does not engage its shareholders in company activities. Greenpeace was not informed or reported on wrong data obtained on energy consumption. Withdrawal from registration with EPEAT was also not supported by a justified argument (Godelnik, 2012). Company also provides with generic statements when probed over the environmental compliances. These examples make it clear that there is no stakeholder engagement in critical company matters. Hence by reporting extensively on environmental matters, the company can save itself form a lot of trouble (Bernea and Rubin, 2010). Absence of a CSR team: Unless a company has the CEO’s interest in CSR initiatives, there is complete absence of leadership in CSR initiatives. There is also a need of a dedicated team to drive company initiatives and to handle and track diverse and complex issues in CSR. The absence of a dedicated team towards CSR initiatives makes it important to report on environmental issues in company reports (Jo and Harjoto, 2011). Low transparency levels: Apple’s level of transparency is very low. The company did not release sustainability reports until 2012. They did not respond to CPD surveys or disclose their list of suppliers or employee composition. The company refrained from allowing a third party audit on working conditions of their supplier counterparts for a very long time. Such secretive behaviour invited deep scrutiny and could put questions on ethical behaviour of company which is why it was felt necessary to publish company reports (Jensen, 2001). Gaining shareholder acceptance and good company image: Apple wants to appear as an environmentally responsible company by way of CSR initiatives and extensive environmental reporting such that it does not invite many questions on environmental compliance adherence and maintenance. This shall help in gaining necessary shareholder confidence for the company. With w positive and socially responsible brand name, the company is expected to raise revenues through brand switching and brand loyalty and thereby increase company profits (Moir, 2001). Conclusion The company has invited intense CSR issues and still faces questions over environmental adherence and compliance. Although it appears to be reporting extensively on CSR in the recent times, the level of disclosures desired is much higher and in order to retain its present market positions, the company needs to get more transparent in matters related to CSR. Reference List Apple., 2012. Apple Supplier Responsibility. [online] Available at: [Accessed 21 February 2014]. Balachandran and Chandrasekaran, n.d. Corporate Governance and Social Reposibility. NewYork: PHI Learning Pvt. Ltd. Bernea, A., and Rubin, A., 2010. Corporate social responsibility as a conflict between shareholders. Journal of Business Ethics, 97(1), pp. 71–86. Chinese Labour Watch., 2013. Apple’s Unkept Promises: Cheap I-phones come at high costs to companies. [online] Available at: < https://vle.dmu.ac.uk/bbcswebdav/pid-2893697-dt-content-rid-3929981_1/courses/ACFI2208_2014_Y/apple_s_unkept_promises.pdf/> [Accessed 21 February 2014]. Cho, S. Y., Lee, C., and Pfeiffer Jr., R. J., 2013. Corporate Social Responsibility Performance and Information Asymmetry. Journal of Accounting and Public Policy, 32(1), pp. 71-83. Godelnik, R., 2012. 5 Reasons Why Apple’s CSR Strategy Doesn’t Work. [online] Available at: < http://www.triplepundit.com/2012/05/5-reasons-apples-csr-strategy-doesnt-work/> [Accessed 21 February 2014]. Jensen, M. C., 2001. Value maximization, stakeholder theory, and the corporate objective function. Journal of Applied Corporate Finance, 14 (3), pp. 8–21. Jo, H., and Harjoto, M. A., 2011. Corporate Governance and Firm Value: The Impact of Corporate Social Responsibility. Journal of Business Ethics, 103 (3), pp. 351-383. Kannel, C., 2012. Corporate Responsibility Spotlight: Apple. [online] Available at: < http://www.dailyfinance.com/2012/09/14/corporate-responsibility-spotlight-apple/> [Accessed 21 February 2014]. Mahoney, L. S., Thome, L., Cecil, L., and LaGore, W., 2013. A research note on standalone corporate social responsibility reports: Signaling or greenwashing? Critical Perspectives in Accounting, 24(4-5), pp. 350-359. Moir, L., 2001. What do we mean by corporate social responsibility? Corporate Governance, 1(2), pp. 16-22. Rao, P., 2001. Corporate social accounting and reporting. New York: Deep & Deep Publications. Salazar, H., 2011. Apple Inc.: Severe Employee Abuse (2011). [online] Available at: < http://businessethicscases.blogspot.in/2013/04/apple-inc-severe-employee-abuse-2011.html> [Accessed 21 February 2014]. Schmundt, H. and Zand, B., 2013. Undercover Report: Apple Faces Fresh Criticism of Factories. [online] Available at: [Accessed 21 February 2014]. Read More