Valuation of Corporate Social Responsibility Report - Article Example

Valuation of Corporate Social Responsibility Report The main topics from the course discussed in the article Valuation of Corporate Social Responsibility Report are ethics and social responsibility (Dagiliene & Gokiene). Due to the competitive nature of the marketplace public corporations must report both financial and non-financial information. The CSR report is considered one of the most important non-financial reports that companies issue once a year. In general in the business industry there is a lack of qualitative and quantitative valuation of social information. The main goal of the article was to investigate the valuation variables of corporate social responsibility and to analyze the social responsibility reports of Lithuanian companies. One of the first findings of the investigation in regards to how Lithuanian companies report social responsibility was that there is a great variation in the content, volume, and indicators disclose by different companies. This can be a problematic issue because investors are not able to compare the information from different companies in a consistent matter. One of the greatest attributes of the financial statements used in the United States by public firms is that they are all prepared in the same manner. Another issue with the practices of Lithuanian companies in regards to social responsibility reports is that very few companies share the information with their shareholders. The culture in this country does not value the importance of social and environmental factors. Most scientists analyze the content of a CSR reports separate from reports that illustrate financial information. I believe that this practice might be flawed because the use of a sound corporate social responsibility strategy can greatly impact the behavior of the customers of the company. For instance Starbucks Café is selected by many coffee drinkers over the competition due to its support of green practices such as its use of Fair Trade Coffee. The four main issues included in the CSR report are human rights and human resources, product design and development, environmental protection, and community. The lack of generally accepted principles makes CSR not easily measurable. The firm’s reputation is closely connected to its social responsibility practices. Companies that undermine CSR aspects such as the community can have devastating public relation problems. Back in the late 1990’s Nike Corporation’s reputation hit an all time low after the revelation of the sweetshops scandal. Many companies use CSR disclosure as an instrument for advertising purposes. On many occasions CSR information is fragmented in the annual reports, websites, and other company reports. There is a lack of investigations related to valuation methodologies of social information. The GRI framework is an effective methodology used by many Spanish companies to report social information. The GRI is a long-term multi-stakeholder, international process whose mission is to develop and disseminate globally applicable sustainability reporting guidelines. Non financial reporting provides information regarding ethical, environmental and social aspects. The essential aim of social reporting is to create a social transparency system for responsible decision making. Other names used for CSR disclosure documents are social progress reports, social responsibility reports, social reports, and sustainability reports. CSR philosophies should be integrated into all company activities in order to increase the efficiency of the firm. Some elements that help companies achieve better CSR results are: good stakeholder management and leadership, prioritizing CSR needs, coordination with governmental agencies, and regulations. Empirical studies showed that in Italy firm stock prices are not affected by the release of CSR reports even if firms pay close attention to social responsibility practices because the Italian financial market is not efficient and transparent. In the United States CSR reports have greater impact in investor decisions and ultimately in the prices of common stocks traded in stock exchanges such as NYSE and NASDAQ. Employee responsibility is valued by five measures: health and safety, training and development, equal opportunity policies, job creating and security, and employee relations. Corporations should use enhanced web-technology as it is positively associated with the user perception of corporate social and environmental responsibility. Research shows that the economic indicators most reported are those associated with customers. In regards to environmental indicators those associated with energy are used the most. As far as human resources are concerned some hot issues include non-discrimination, freedom of association, child labor, and compulsory labor. A country that has been frequently cited for the existence of slave labor in their business environment is Brazil. One of the variables for CSR is application of different certificated quality management systems, environmental protection management systems, and employee safety and health service management. The use of total quality management practices adds value to the CSR efforts of a company. SA8000 is a global social accounting standard based on the Universal Declaration of Human Rights, Convention on the Rights of the Child, and various International Labor Organization conventions. Some of the social accountability fields contained is SA8000 are child labor, forced labor, health and safety, freedom of association, right to collective bargaining agreement, discrimination, compensation, and discipline. In Lithuania only 16 companies have implemented the SA8000 standard. A good methodology to follow for CSR valuation is: Value company’s CSR polity at strategic level Value the company’s variables of social information content at the analytical level Measure human resource activity based on the view to human rights used by the Universal Declaration of Human Rights Use environmental goals based on metrics that measure materials, energy, water, biodiversity, emissions, waste, transport, and compliance Community activity should focus on the goals of the community, participation on special programs and projects, and bribery and corruption Product and service activities that measure product design and development in accordance to health and safety standards The article was a very information document that helped me understand better the importance of ethics and social responsibility. I did not realize that people from different countries view social responsibility in a different manner. High ethical standards are imperative towards the success of a company. I thought the article should have entered into more details on how to deal with CSR problems such as preventing child labor from occurring at the subsidiaries of multinational companies. The fact that Lithuanian companies do not emphasize the use CSR is a cultural barrier that exists in this country. The article clearly demonstrated that culture affects the way companies view corporate social responsibility. Firms located in industrialized countries are more aware of the importance of corporate social responsibility than companies doing business in developing and underdeveloped countries. Work Cited Page Dagiliene, Lina, and Ruta Shefter. “Valuation of Corporate Social Responsibility Report” Economics and Management, 6 (2011): 21-27. Read More