Financial Accounting of Fanatarra Dairy Company - Case Study Example

Research Report on Fanatarra Dairy Company Name: Institution: Introduction Environmental and social concerns have made industries bear corporate responsibilities. Industries are now moving towards CSR (corporate social responsibility) due to environmental and social responsibilities (Eugénio, Lourenço & Morais, 2010). Companies are now having shifted to using social and environmental accounts since they need to allocate funds for such areas. The companies do not have to wait for governments to impose regulations that force them to file their annual reports. This paper reviews the annual report that Fantara Company released that cites their social and environment initiatives that strive to achieve sustainability (Fontera Co-operative Group Ltd, 2013). This company depends on the locals that were once strike by drought. To attract more shareholders, industries are increasingly using social and environmental accountants for the efficient management and control of the company funds (Spence, 2007). Companies are now channelling most of their funds to community development projects as a means of ensuring social and environmental sustainability. In summary, these reports are a means of attracting shareholders because many industries have cropped up ad are competing in the global market. Fantara Company, for instance is a dairy company that depends on its customers. 1.0 Origins of social and environmental reporting The social and environmental reporting finds its basis from the previous governmental regulations (Spence, 2007). Various governments did realise the need for corporate responsibilities so as to address the current global issues. One of the significant issues is the global climate change. This has forced big companies like Fantara to start environmentally sustainable activities. The company has taken the lead in the region of supporting and encouraging farmers to engage in sustainable farming. For instance, it has encouraged the farmers to upgrade its farming systems through riparian planting and fencing. In addition, it funds farmers to build bridges and culverts or the protection of waterways The origins of social and environmental reporting may as well be the motivations behind these activities. Companies always have extra-business interests pressures emanating from the financial markets put on them (Spence, 2007). On the other hand, risk management issues also force companies to engage in the SER. Fantara Company had to come to the rescue of its farmers due to long droughts. This good will to the farmers shows how companies are engaging in extra business activities to show acts of philanthropy. Moreover, ethical concerns are also the reasons behind SER (Spence, 2007). Companies have an obligation to ensure that their activities are not affecting the surrounding community. Fantarra Company is now availing its financial report to show how the community benefits from the project because they are also the shareholders. Finally, the company itself can influence the SER process. While presenting its report, the chairman of Fantarra presents a letter to the stakeholders. This shows that it takes the dedication the company management to initiative the social and environmental reporting. 2. 0 Social performance reporting issues in the Fantarra report The company has undertaken food production as a social responsibility (Fonterra Co-operative Group Ltd, 2013). Through its well trained chefs, it has been able to produce a variety of dairy products to the community. The other social issue that arises is the need for sustainable leadership. The company wishes to become one of the many firms with reputable leadership as the CEO suggests. Furthermore, the company has made efforts to ensure food safety to its consumers. This is one of the pillars of CSR that aims at protecting the customers (Eugénio, Lourenço & Morais, 2010). For instance, the company’s auditing found out that there were no botulinum bacterium species in the dairy products. This shows that all these products do not pose health risks to consumers. Concisely, the company embraces corporate governance in ensuring effective implementation to the society. One of the guidelines is the promotion of ethical as well as accountable decision making. The company has the Way We Work slogan that gives guidelines on how the management applies Fantarra values while working with shareholders, customers, the community and the suppliers (Fontera Co-operative Group Ltd, 2013). Fantarra also advocates for safety of the community and their health (Fonterra Co-operative Group Ltd, 2013). The company understands that people are the foundation of their operation. The management has dedicated itself to care for suppliers, public, contractors and other shareholders. In the 2013 financial year, the company promised to include three safety and health measures that include zero accidents, total recordable injury frequency rate (TRIFR) and auditing scores that show processes and systems implementation and team engagement. As a way of giving back to the community, Fantarra has the responsibility of nourishing, caring and protecting its people. For example, there is Fonterra Milk for School that helps in building future generation’s health. Furthermore, the company forecasts a national roll out by the year 2014. Other social initiatives include child fund partnership, kick start breakfast for school children and conservation partnerships. 3.0 Environmental issues in the performance report The environmental issues that arise from the report are majorly sustainability oriented. For example, the company has put initiatives of helping dairy farmers to engage in responsible farming activities (Fonterra Co-operative Group Ltd, 2013). Fantarra supports and funds all the efforts that farmers and community put to protect and conserve the environment. Fantarra Company has been working with the New Zealand government to ensure that farmers have effluent management systems that last for 365 days. Fonterra obliges all farmers to exclude all of their stocks from the waterways which it has clearly marked. Moreover, Fanatarra has also ensured nitrogen management program that will reduce surface- nutrient loss. This helps farmers in environmental conservation and the reducing nutrient leaching into the ground water. Most significant, Fantarra has been the first company to provide a comprehensive carbon footprint in New Zealand for the country’s original productions (Fonterra Co-operative Group Ltd, 2013). This initiative measures the quantity of greenhouse gases relative to the life cycle of dairy production. The company was also the vital in developing a methodology that accounts for the dairy green house emissions Other environmental issue in this annual report is sustainable manufacturing (Fonterra Co-operative Group Ltd, 2013). The report claims that sustainability is the foundation of the company’s success. Fantarra organisation is committed to reducing emissions and wastes as well as ensuring water and energy efficiency. The company also promises to improve these areas each year. With regard to the energy emission, the company reduced with 2%. However, the drought affected emissions since the company mostly used coal while processing milk in the Southern New Zealand (Fonterra Co-operative Group Ltd, 2013). In this financial year, the company reports a decrease in the energy consumption from 8.49 GJ/tonne in 2012 to 8.38 GJ/tonne in 2013. Finally, the company has a marvellous eco-efficiency programme. In 2013 alone, the report shows that New Zealand recycled and reused 94% of the wastes against its anticipated 90% reduction. Atmospheric carbon has been a serious global that Fonterra has been able to regulate (Ascui & Lovell, 2011) 4.0 Why the Fonterra discloses social and environmental performance Fantarra is not the only company that produces dairy products. By disclosing its performance, it attracts stakeholders and support from relevant authorities (Milne, Tregidga & Walton, 2009). Though social and environment report overshadows this report, the company aims at attracting more financial investment. Disclosing these performances depicts Fantarra as a responsible company. This is because the management directs this report to all the stakeholders ranging from investors to the government. The New Zealand government through have standards that companies must follow. If Fantarra has a good social and environmental performance, it may receive the government support in its sustainability initiatives (Milne, Tregidga & Walton, 2009). 5.0 How the management discloses the social environmental information The management discloses the information in an informative manner. When it mentions how Fantarra helped the drought stricken farmers, it informs the relevant authorities of the effects of global climate change on farming (Fonterra Co-operative Group Ltd, 2013). On the other hand, the drought contributed to greenhouse emissions thus the relevant authorities must know how to deal with it. Nonetheless, the management discloses this information with accuracy. The report gives all the details of how Fantarra has ensured social and environmental betterment of the New Zealand community. In addition, the management discloses these performances with concern. The primary concerns include the need for energy conservation, waste management and efficient water use (Fonterra Co-operative Group Ltd, 2013). Conclusion In summary, the move towards social and environmental responsibility in financial accounting has become an integral part of company operations. Current global issues like climate change and the need for sustainability are the reasons behind social and corporate responsibility awareness. Fantarra Company is one of the few companies in New Zealand to publish their social and environmental performances. It is evident from the report that companies are now moving towards social and environmental responsibility. Nonetheless, social issues that companies focus on include health and safety of the community, children welfare and community life improvement. Environmental issues that arise from company performance reports include carbon sequestration, energy conservation, waste management and water conservation. Moreover, companies are willingly engaging in these activities because they have responsible leaders who think at the global context. Finally, companies disclose social and environmental performance so as to attract investments and gain the trust and loyalty of the public. References Ascui, F. & Lovell, H. (2011) .As frames collide: making sense of carbon accounting, Accounting, Auditing & Accountability Journal, 24(8), 978 – 999. Eugénio, T., Lourenço, I. C. & Morais, A. I. (2010). Recent developments in social and environmental accounting research, Social Responsibility Journal, 6(2), 286 – 305. Fontera Co-perative Group Ltd, (2013). Fonterra annual review 2013. Milne, M. J., Tregidga, H. & Walton, S. (2009). Words not actions! The ideological role of sustainable development reporting, Accounting, Auditing & Accountability Journal, 22(8), 1211- 1257. Spence, C. (2007). Social and environmental reporting and hegemonic discourse. Accounting, Auditing & Accountability Journal, 20(6), 855 – 882. Read More