Social and Environmental Reporting - Assignment Example

Financial Reporting Assignment - Social and Environmental Reporting - Wal-Mart (a). For the purpose of this paper Wal-Mart’s Global Sustainability Report for 2009 will be used. Social and environmental reporting has to be both a faithful representation of facts and neutral in presentation. Wal-Mart, the world’s biggest retail chain with approximately 8,159 retail stores in 15 countries has been faithfully publishing SERs on its operations worldwide. However with a total number of employees approximately estimated at 2.1 million and sales amounting to $401 billion so far in 2009, its SERs’ faithful representation and neutrality have to be understood against the complex backdrop of competition. In fact the company calls itself “a leader in sustainability”, one of the most important aspects in determining an organization’s commitment to Corporate Social Responsibility (CSR) and good social and environmental reporting. Faithful representation is defined as "correspondence or agreement between the accounting measures or descriptions in financial reports and the economic phenomena they purport to represent" (www.goliath.ecnext.com). On the other hand neutrality is defined as “the avoidance of bias in selection and presentation of information and balanced in accounts of performance” (www.plan.aau.dk). Wal-Mart has been questioned by many critics and environmental experts on its CSR policies and initiatives that include its commitment to using only the renewable energy. In fact the critics argue that there are factual errors and inadequacies in these reports published by Wal-Mart. For instance the recent SERs published by the company lack accuracy and the gaps are obviously disturbing in some instances. The degree of faithful representation in Wal-Mart’s SERs needs to be examined against the backdrop of its commitment to sustainability. The concept of environmental sustainability is associated with CSR policies and initiatives of the company. For example Wal-Mart claims to care for its 2.1 million associates, as the employees are called here, on a basis of equanimity and the extended families of these associates are entitled to the same degree of care. The problems that Wal-Mart is faced with in its SERs can be regarded as those directly related to faithful representation and neutrality in preparing those documents. Thousands of retail stores operating under many domains in many countries are naturally prone to making mistakes in gathering data and representing facts. Using the report you have chosen, explain why you think it is important for users that this report presents information neutrally. Despite Wal-Mart’s efforts to integrate the global operations by using a single platform neutrality has become a victim at least to a certain extent. In fact some of its reports have been said to be biased in favor of its own vision of serving the customer to the best of its ability. According to Global Sustainability Report – 2009, Wal-Mart has three overarching environment related goals – depending on energy supplied 100% by renewable sources; designing and implementing plans to achieve the goal of zero waste; and sustaining the environment by using resources in an effective manner. Under Wal-Mart’s social reporting aspect there are four important goals – responsible sourcing of supplies; giving opportunities to employees or associates for meaningful growth; and creating a conducive atmosphere for diversity; and giving for charity (www.walmartstores.com). The above report ought to present facts neutrally because people must have access to unbiased reports. For example Wal-Mart’s commitment to sustain the environment in the long run by depending on renewable sources of energy and sourcing supplies from producers who use organic farming techniques is a good one but critics have questioned the credibility of the latter approach. Organic farm producers both in North America and Europe are increasingly becoming a minority today. (b). During the current year Wal-Mart has been really committed to maintaining its neutral policy of reporting on social and environmental matters concerning the organization. However there is a community of vociferous critics who have questioned credibility of the global sustainability report of 2009 published by Wal-Mart. According to them biases can be noticed in respect of a few claims. For example despite the fact that Wal-Mart is committed to provide the customer value for money, the Report’s claim that social responsibility concept has been paid substantial attention in helping both associates and customers is more than simply biased. In the first place though it is true that Wal-Mart has created a lot of opportunities for associates to advance their skills, and to achieve goals there are shortcoming in the plans. These shortcomings have come in to light while those social and environmental projects were being implemented. For instance Wal-Mart’s North American operations concerning associate welfare have suffered a setback in the face of declining dollar value. Wal-Mart claims that it has effectively hedged against the rapid fall in the dollar exchange rate by diversifying its liquid asset spread in to other major currencies. Critics have a doubt if currency hedging has helped Wal-Mart employees in the way that the top management claims. Counter claims made by researchers on the issue indicate that currency hedging activity by Wal-Mart has helped only to give an assurance to its creditors and suppliers. For example creditors and suppliers as two principal stakeholder groups have been quite happy with the company’s rising profit margins. The concept of neutrality has many nuances. In the first instance it means an unbiased approach or policy in reporting on social and environmental impacts of the organization’s operations. Secondly it means a culture of reporting without bias. Such a culture must be part and parcel of the organization’s overall culture. For example though the Report claims that it has been able to create a development-conducive atmosphere for associates, recent media reports on China’s labor problems show the extent to which Wal-Mart’s Report has been biased. Just before the hectic shopping began for Black Friday, China Labor Watch (CLW), a Chinese Human Rights Group accused Wal-Mart for badly treating workers at many factories in China. In fact these Chinese factories of Wal-Mart produce approximately $18 billion worth goods annually (Gantz, 2009). The Wal-Mart’s Global Sustainability Report for 2009 did not mention that Chinese workers were complaining about degrading work conditions and above all the dubious auditing practices. Workers’ rights at Wal-Mart factories in many countries were questioned even before. However the Chinese example illustrates how Wal-Mart has been systematically violating its own social and environmental reporting obligations. According to critics Chinese suppliers have been highly taken by big orders that Wal-Mart places with them and as a result prices have been depressed. As for workers they have to shoulder the burden of big check pay outs. Finally the reports claim on sustaining the environment by sourcing agricultural produce and farm products from a variety of suppliers, both organic and inorganic, cannot be accepted. In the first place the organization has been accused of misrepresenting facts. For example the organization depends on cheaper sources of supply that naturally tend to be organic producers who use a lot of chemicals to grow and preserve their produce. Thus organic apples and potatoes might contain more chemicals than could be tolerated by the body organs. Wal-Mart has never reported on sourcing supplies from the cheapest sources, despite the fact that green groups and customer organizations have pointed out that low prices at Wal-Mart come at the cost of heath of its customers. (c). The average customer of Wal-Mart might depend on social and environmental reports as the Global Sustainability Report of 2009. While most of the material presented in the Report cannot be denied or questioned, there are some disturbing instances of failure attributed to Wal-Mart’s overall social and environmental reporting. At times the deficiencies in these reports are highly disturbing. The concept of neutrality draws on the organization’s ability to identify and address social and environmental issues with the same degree of urgency and responsibility that it attaches to its corporate goals such as profitability and revenue. Customers heavily depend on the type of unbiased information provided by the organization or an agency on behalf of it. In the light of what has been already discussed in the above two answers, Wal-Mart’s neutral stance in reporting on the probable impact of its activities on the society and employees has been compromised. Similarly the average customer has been denied access to vital information on suppliers of its products and the ways in which such products are sourced. However it must also be pointed out that Wal-Mart has not used highly technical language to present details about its operations to the reader. In fact the Report highlights some of the most important details about its operations. As much as customers need reliable information, the organization is under pressure to balance the presentation of such information in keeping with the reporting norms. In other words the organization might be compelled to reveal only that information which can be authenticated. For example Wal-Mart cannot justifiably be expected to put out a report that makes biased claims about merits and demerits of products such as organic versus inorganic. It’s the degree of neutrality that determines the extent to which the given information is reliable. The Report has been much less neutral in its representation of the information on certain aspects as shown in the above answers though the degree of accuracy of information and fairness in representation cannot be determined with reference to the outcomes alone. For example Wal-Mart’s independent stance in reporting has been compromised in respect of customer’s reliance on the given information on products put on its shelves and the gap between accurate labeling and the nature of contents. Thus the Report’s claim to give the highest value to the customer is questionable. Customers receive a fair amount of attention at retail stores only to be told in no uncertain terms that the products they have purchased are often not what they are assumed to be in quality. This secondary opinion comes from food experts, nutritionists and technical quality experts. The Report of Wal-Mart for 2009 essentially hasn’t been in conformance with the minimum standards. When customers are assured of credible sources of supply the information must serve as a critical element on which the subsequent decision of the customer would be made. In this respect Wal-Mart has not failed to provide some information that is essential for the customer. However it is the operational environment of Wal-Mart that has been questioned by critics. For instance as cited above in the case of Wal-Mart’s operations in China, its culture of procuring supplies from the cheapest sources has affected employees there. However in North America and Europe where labor is more organized and governments are more conscious about the rights of employee such practices might not be possible. Thus customers would be compelled to bear the additional cost. (d). Certainly what a customer would need before he/she makes a purchase is the minimum amount of that critical information to make a well-informed decision. The Report identifies the requirement for responsible sourcing of supplies. Thus customers are informed about the supplier’s credibility. However the neutrality of the Report can be improved by adopting the following two methods. The report must have a separate appendix on providing authenticity. The Report must give information about food labeling and packaging practices adopted by suppliers. A process of certification or authentication of facts which are basically about claims as for quality of products and agricultural methods must be put in place with an appendix so that customers would know that the claims made in the report have substance. The psychological underpinnings of this kind of approach are quite understandable. In fact the most glaring failure of the Report can be traced to the dubious nature of such exalted arguments like the “customer comes first” and “value for money is Wal-Mart’s ultimate goal”. Finally the Report must give information about food labeling and packaging practices of suppliers so that customers would know that Wal-Mart has been neutral in its social and environmental reporting endeavor. As the Global Sustainability Report for 2009 illustrates Wal-Mart still requires some good practices and policies to be put in place to improve neutrality. No. of words – 2025 (approximately) REFERENCES 01. Definition of Faithful Representation, Retrieved from www.goliath.ecnext.com on December 11, 2009. 02. Definition of Neutrality, Retrieved from www.aau.dk on December 11, 2009 03. Gantz, J 2009, Labor Watch Slams Wal-Mart for Chinese Suppliers Abuses, China Daily, Retrieved from www.inthesetimes.com on December 11, 2009. 04. Global Sustainability Report – 2009, Retrieved from www.walmartstores.com on December 11, 2009. Bibliography 01. 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