Corporate Social Responsibility Reporting Practices in Australia - Case Study Example

Corporate Social Responsibility Reporting Practices in Australia Name Institution Course Professor Date TABLE OF CONTENTS EXECUTIVE SUMMARY 1 INTRODUCTION 2 Australian Leading Mining Companies 3 External Reporting Documents 3 Format and Structure of Environmental Reporting 4 Factors that Motivate Social and Environmental Disclosure in the Mining Industry 6 Theoretical perspective 7 Account for Job Losses 8 Effects of Reduction in Oil Prices in the Mining Sector 9 CONCLUSION 9 REFERENCES 10 EXECUTIVE SUMMARY In the past years, there have been major concerns about the critical issue of sustainability and the Corporate Social Responsibility (CSR). These concerns are just not in Australia but also global phenomena, especially in the mining sector. There is an increasing need for the individual mining companies to justify why they exist through disclosing their performance as well as the social and environmental details. This paper will explore in details about the recent trends in reporting of the above impacts in the mining sector. The paper will explore the mining industry development of the avenue for environmental and social disclosure basing on the case of Australia's A-list companies. The paper will also make a comparison of the two cases of the A list Mining Companies basing on the structure and format of their social, environmental reporting. The Comparison will also be based on how well these companies comply with the guidelines set by the Global Reporting Initiative (GRI). Given the above the paper will also provide the information on the motivation factors behind the company’s disclosure of the social and environmental reporting. The report highlights on the effectiveness of strong leadership in the cooperation and abilities of businesses to comply with the GRI. Besides, this report explains how the leading Mining Companies account for the loss of jobs and how the same companies are affected by the Reduction in the global oil prices. In conclusion, the report will explore how well the leading Australian companies are sustained socially, economically, financially and environmentally. These are crucial aspects of the Corporate Social Responsibilities for the leading mining companies in Australia. INTRODUCTION Corporate social responsibility is defined as an organization commitment to maintaining a balance of its financial performance while concurrently contributing to their employees’ quality life and the entire community as a whole (CASE, 2008, p.15; Yon, Jin, Suh, 2016, p.24). In the present world that is epitomised by globalization, it is critical for organizations to manage and consider the impacts of their social and environmental business decisions and think outside the financial returns walls (CASE, 2008, p.21; Yon, Jin, Suh, 2016, p.36). CSR entails a broad range of activities and practices that an organization engages in. Examples include cause-related branding, charities and the various business strategies that explicitly address the community and the various environmental issues (Caulier-Grice & Mulgan, 2009, p.45). There are huge variations in how organizations demonstrate the corporate social responsibility. The variations are concerning the industry, location or sector of the business operation. Corporate social responsibility (CSR) is an increasingly significant component in the Australian mining Industry and other Businesses around the world (CCSE, 2001, p.13). There have been extensive investigations on whether mining companies understand what the CSR means and entails (Yakovleva, 2005, p.27). The investigations have also been based on the various opportunities companies gain from their CSR reporting. Such opportunities are mainly geared towards the achievement of marketing mileage since most of these companies are mostly profit generating. However, despite the extensive research, little attention has been paid to understanding the process of CSR reporting (Hamann, 2003, p.58). This study will be a significant addition to the literature gap in that sector by framing Corporate Social Responsibility as an emerging industry rather than a mere concept for defining the debate or acquiring the marketing advantage as it currently stands out. The CSR industry will incorporate all the mining companies’ product and services providers that make it possible for the organizations to implement their CSR policies. The providers may include the assurance department, in-house Government and corporate departments, the various centres that provide consultancy services As the main step towards the managing and reporting of the emerging CSR industry in Australia’s mining Industry this study presents and endorses Products, services and practices in a document analysis. Australian Leading Mining Companies The top ten mining companies in Australia are measured from their market capitalization. In the last few year, the number of companies producing their CSR reports has been on the rise (AUX, 2016, p.69). Their CSR reporting varied from company to company, however, majority of them combined CSR and sustainability as part of their CSR reporting. With time, the top ten mining companies have adopted a detailed disclosing their CSR information. Most of the Companies do their reports according to the Guidelines. The top ten mining companies in Australia are listed as: i. BHP Billiton ii. Rio Tinto iii. Anglo American iv. CVRD v. Newmont vi. Barrick Gold vii. MMC Norilsk viii. Anglo Platinum ix. Anglo Gold x. Xstrata External Reporting Documents For credibility and reporting purposes, many documents are presented to external examiners to verify the Corporate Social Responsibility reports released by these mining companies (Du, Bhattacharya & Sen, 2010, p.71). The auditing, accounting, and the available reporting sources provide a foundation for the external examiners to verify the credibility of reports released to the public about these companies. The examination is outside the internal verification procedures by the company's quality assurance department. Apart from the accounting and auditing documents others include the Companies official website, the various press releases, Environmental reports, Health and safety reports, Employee portfolio reports, sustainability reports and the Companies annual reports. Other key reporting documents are the various CCD reports, the supplements to the annual reports as well as the available videotapes. While releasing their reports, it was established that some companies comply with the GRI reporting guidelines while others did not. The GRI provides for the requirement of incorporating social and environmental accounting, corporate social responsibility, non-financial accounting and the social, environmental reporting. Initially, many companies ignored one item or the other in releasing their reports. However, with the increase, public scrutiny of this reports, the majority of the top ten mining industries comply with the GRI guidelines. However, because of the size and complexities of these top ten mining companies, there is the need of providing of judgement basing on the extent to which they can present their reports in compliance with the GRI indicator (Du, Bhattacharya, & Sen, 2010, p.81). Format and Structure of Environmental Reporting Australian mining companies are at a crucial stage of developing their styles of CSR reporting that would distinguish an individual company from the other (Chapple & Moon 2005, p.33). There exist three main formats that are used by the top ten companies. These are the economy, deluxe and the standard formats. That is indicators of the flexible approach companies are adopting to produce efficient and credible reports. Surprisingly t, the mining companies that are using the deluxe format, which is considered the most economical, are the wealthy companies with diverse operations with the presence in many Geographical locations (Chapple & Moon 2005, p.41). The newer mining companies with fewer branches are adopting the Economy format. Comparisons between two companies concerning their reporting formats reveal the difference between the available formats. For instance, BHP uses the deluxe format while CVRD uses the Economy format to present the CSR reports (Angus-Leppan, Metcalf, & Benn, 2010, p.93). Unlike CVRD, BHP report covers health and safety as well as the community issues. Likewise, the provision of the sustainability reports which is common in CVRDs Economy format is not applicable to the BHPs Deluxe format. The deluxe format embraced by BHP is suitable for large organizations with sophisticated systems that require expertise and previous experience in environmental and social reporting (Angus-Leppan, Metcalf & Benn, 2010, p.80). The reason most organization prefer the deluxe format is when they merge with other mining companies Chapple, & Moon, 2007, p.95). For instance, when BHP and Billiton merged in 2000, it had to change its format of reporting from Economy to the Deluxe. Contrary to CVRD that produces a combined Environmental and community report, BHL provides a combined safety, health, community and environmental reports However, all the formats are in compliance with the Global Initiative Standards (GRI) and are intended at upholding transparency in the company's Corporate Social Responsibilities (Chapple & Moon, 2007, p.101). Factors that Motivate Social and Environmental Disclosure in the Mining Industry The rapid shift towards the tackling of challenges caused by the sustainable development of the mining industry is contributed by several factors both within and outside the business (Jenkins, 2004). According to Jenkins (2004, p.68), mining industries do not exist in isolation; they exist side by side with people. With the global opposition to mining due to its effects on the lives of Humanity, Australian mining companies are left with no option rather than disclosing their CSR policies. The need for the mining companies to engage with the local communities and involve them in the decision-making process has become both a political and reputation requirement for the mining industries. The Non- Governmental Organizations have been at the forefront in ensuring that the mining companies have the capacities to protect the indigenous communities against the harmful effects of the extraction. Besides, Jenkins (2004, p.75) informs that the Australian mining industry has had structural changes combined with the liberalization of the mining sector that have led to the discovery of new mining regions. That has rapidly increased the possibility of having a conflict with the various stakeholders. To prevent the occurrence of such conflicts mining companies have no option but comply with the set CSR policies as well as disclose their social and environmental performance. Additionally, Hamann and Kapelus (2004, p.21) claim that the increase in the pressure from the Government has been a motivating factor towards the mining companies disclosure of their environmental and social responsibilities. The Government agencies have focused on partnering with private mining companies in Australia so as to address the sustainable issues and attain compliance with the Global standards in the mining Industry. Such measures include the UN Global Compact, the Global mining initiative and the Global Reporting Initiative (GRI). The above bodies have brought together some of the world’s leading mining companies in working collaboratively to achieve sustainable development in the mining industry and also meet the required standards for their behaviour in the global market. The need to have a good reputation has also been instrumental for the Australian mining companies to disclose their social responsibility reporting. According to Newell (2004, p.30), the reputation and the legitimacy of any mining company is determined by its corporate behaviour. The corporate behaviours are gauged how well the company is responsible to its employees, the outside community, and the entire environment. That can only be attained through CSR reporting. In this perspective, the legitimacy and reputation of a mining company are defined by how well it is responsible to both the local and the global communities. The public opinion has also been instrumental in motivating the Australian Mining companies to release their CSR reports for scrutiny. The enterprises that receive the negative opinion on the misuse of natural resources get poor market performance and are outclassed by the competitors providing the same minerals. The public opinion on an organization is majorly influenced by how well the company performs in the environmental and social perspective more than in the pricing, safety, and quality of its products (Newell, 2004, p.112). Australian mining companies are well aware of this and would not risk having a bad image in the minds of the population who are supposed to be their primary market. Nonetheless, Hamann & Kapelus (2004, p.89) assert that the Australian financial sector is increasingly focussing on the mining sector from the social responsibility perspective as well as their risk management perspective. That is an instant motivation toward social responsibility reporting. Theoretical perspective Analyses of the same from a theoretical framework indicate that CSR is a conceptual framework for analysing the mining company’s attitudes towards its stakeholders. In the mining sector, it is about how the company balances the diverse demands of the communities it operates with, the need to protect the environment and the desire to make profits (Yakovleva & Vazquez-Brust, 2012, p.132). The CSR demands that the mining company to not only respond to its shareholders but also to its stakeholders like its customers, employees and the general public on issues such as employees welfare, human rights, and climate change. In the mining sector, it is critical for the various mining companies to justify their existence through the disclosing of their social and environmental performance. That is motivation enough for businesses to disclose this crucial information (Hamann, 2003, p.16). Account for Job Losses Over the last few months, both the BHP and the CVRD have cut a significant number of their employees due to unavoidable circumstances. The same has been happening in other mining companies laying off an estimated 50,000 jobs in Australian mining industry. Last month, both BHP and CVRD announced that they intended to cut more jobs. They attributed the move to the fall in the commodity prices. The reduction in the prices of commodities is an additional pain to both BHL and CRVD who are still struggling with the changes in the regulatory framework, escalating power costs, unreliable supply of electricity. That has increased the company's operating costs thus affecting these mining companies’ profits. That leaves them with no option than to cut off some of the employees to reduce the high operating expenses (Jones, Comfort & Hillier, 2006, p.72). Recently, CVRD CEO regretted the job losses and announced mitigation mechanism to deal with the same. The CEO announced that the company would do everything possible to reduce further job cuts and control the current situation. BHP attributed the laying off of employees to the companies move to sell some of its assets due to hard economic conditions. The mining giant sold off some of its mines and exited some joint ventures rendering some of its employees jobless. However, the Company CEO expressed optimism that the situation will normalize in the coming days. Effects of Reduction in Oil Prices in the Mining Sector Oil is a significant part of the expenses paid by mining companies (Cologni & Manera, 2008, p.55). Every mining company uses energy for production; the power comes from crude oil. High oil prices will mean that the operating costs of the mining companies remain high. A reduction in the oil prices will significantly reduce the company's operating expenses. According to Cologni, and Manera (2008, p.44), when oil prices reduce the prices of commodities will go down hence lowering the inflation rates. Lower inflation rates are a healthy environment for the success of any business in the Economy. However, Cologni and Manera (2008, p.128), caution against the further lowering of the fuel prices as it will affect the prices of commodities negatively. CONCLUSION While there is a considerable variance in corporate social responsibility reporting in mining companies in Australia, the disclosure is critical in evaluating the existence of these companies. The disclosure will assess the impact these companies have on the employees, the community, and the general environment. This paper established that CSR reporting is still evolving even among the top ten mining companies in Australia. There exist sophistication in certain elements of social media reporting. Some of the areas that are ; likely to cause controversy and difficulties for mining companies in their reporting are the development of integrated systems and policies, producing CSR reports as well as sustainable development reports, compliance with the GRI guidelines procedures and the need for internal data verification. 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