Corporate Sustainability Reporting - Report Example

Corporate Sustainability Reporting Name Institution Date Question1 Abstract Sustainability refers the process of satisfying one’s needs in the present without putting the ability of the future generation to satisfy their needs in danger. It is the responsible use of resources today so that tomorrow’s generation will also be able to use the same resources to meet their needs and desires. Corporate sustainability or corporate social responsibility refers to the approach businesses and organizations take to ensure that there is a long term value for the employees as well as for the customers by developing and implementing strategies that will enhance environmental conservation also known as green initiatives as well as strategies that will ensure the business or organization relates well with the social, cultural and the economic aspects of the environment. Corporate responsibility or corporate social responsibility is concerned with the ethical practices of a business and organization towards the internal and external environment such as the customers, employees, the environment, the economy, cultures and the environment among others. Corporate Sustainability Reporting According to Macnn (2013), corporate sustainability reporting is a report developed by a corporation or organization conveying their opinions and findings of their operations in relation to the economy, the environment, the society as well as internal governance and performance. In the recent years corporate sustainability reporting has become mandatory for every company or corporation with ratings from various auditing and rating firms such as standard and poor’s and aaa among others. Sustainability reporting of firms has over the years proven to help companies and organizations improve their sustainability performance as well as achieve a positive impact on the society they live and operate in. Guidelines have been created and implemented for companies and organizations to use to improve their sustainability reporting such as the guidelines of the global reporting initiatives also known as GRI. The global reporting initiative allows companies and organizations to make assessments of their reports as well as make disclosures as they would their financial reports every end of a fiscal year (Global Reporting Initiative, 2000-2011). Global Reporting Initiative Sustainability Reporting Framework The global reporting initiative sustainability reporting framework was established to create a uniform standard when writing reports on the company or organization’s economic, social as well as environmental performance. The global reporting initiative sustainability reporting framework can be used by any business, company or organization regardless of the size, geographical location or sector. The global reporting initiative sustainability reporting framework is made up of principles that define the content of the report as well as the quality of information of the report (Global Reporting Initiative, 2000-2011). The global reporting initiative sustainability reporting framework also consists of standard disclosures that are made up of indicators such as performance indicators, guidance on disclosing technical issues in the reports as well as other disclosure guidelines. These include; the indicator protocols which give definitions of technical terms, guidance on compiling information and content as well as other guidelines on reporting techniques. The global reporting initiative sustainability reporting framework also has sector supplements that provide interpretations, performance indicatorsas well as guidance on how to implement the given guidelines in the various sectors (Global Reporting Initiative, 2000-2011). The global reporting initiative sustainability reporting framework also has technical protocols that guide the report preparers on technical issues such as report boundaries. The technical protocols are meant to be used alongside the guidelines and sector supplements to help overcome issues that many businesses and organizations face when preparing reports (Global Reporting Initiative, 2000-2011). Purpose of Corporate Sustainability Reporting according to the Global Reporting Initiative Sustainability Reporting Framework Corporate sustainability reporting involves the measurement, disclosure and accountability of the performance of the business or organization as the organization or business strives to achieve sustainable development. The report should include both positive and negative contributions to the economy, environment as well as the society it belongs to during the given reporting period. The main purposes of corporate sustainability reporting include; Benchmarking; corporate sustainability reporting allows the business or organization to assess its sustainability performance with regards to the laws, norms, performance standards, codes as well as voluntary initiatives. Corporate sustainability reporting demonstrates the degree of influence the business or organization has on sustainable development and also the level of expectations it has on sustainable development. Corporate sustainability reporting also enables a business or organization to compare its performance against other organizations in the same sector as well as different sectors over a given period of time (Global Reporting Initiative, 2000-2011). Question 2 Systems Oriented Theories in Corporate Voluntary Sustainability Reporting Practice According to Craig Deegan (2014) two theories were used to explain the motivation behind corporate voluntary sustainability reporting and these were the legitimacy theory and the stakeholder theory. Legitimacy Theory The legitimacy theory is concerned about how the organization should ensure that they handle their operations in the confinements of the norms and boundaries of the societies they operate in.therefore one can deduce that the legitimacy theory is a social contract between the business or the organization and the society that it handles its operations in. this means that there is a certain level of expectations from the society of the organization and how it runs its operations. Outside parties should be able to see that the operations of the organization or the business are legit (Deegan, 2009). According to the legitimacy theory these norms and boundaries are not fixed instead they change with time. The norms and boundaries are forced to change with changes in the environment they operate, therefore they respond to any changes in the economic, social and cultural environment. These norms and boundaries as well as expectations that the business or organization operates in can either be expressed or implied. Some of the expectations by the societyin which it runs its operations include; the business or organization should be able to give desirable social benefits to the society such as building of schools and hospitals among others. The other expectation is that the organization or business should be able to distribute or share social, economic, environmental as well as political benefits they get with the society which is the main source of its power and success (Deegan, 2009). The business will continue to exist and operate peacefully in the society as long as it meets the society’s implicit or explicit expectations otherwise the society is capable of imposing sanctions on the business such as legal restrictions on the operations of the business or organization or even a reduction in the demand for the business or organization’s products or services. The legitimacy theory therefore puts the interests of the society at the same level of importance as the interests of the shareholders. The motivation of the legitimacy theory therefore is the needs and expectations of the society of the business or organization from the members of the society (Deegan, 2009). Critiques of the Legitimacy Theory Some scholars feel that the legitimacy theory does not offer real insights to the voluntary disclosures of the businesses or organizations. Scholars are also concerned that the theory does not put into consideration recent developments in accounting management and ethics in organizations and also they say that there are contributions in the legitimacy theory that have already been made by accounting researchers which have not yet been acknowledged in the theory. Stakeholder’s Theory The stakeholder’s theory is almost similar to the legitimacy theory this is because it is concerned with the management and ethics of the organization that is the stakeholder’s theory looks at the morals and values of an organization and its management. The main differences between the stakeholder’s theory and the legitimacy theory include; the legitimacy theory looks at how the organization or business attempts to meet the expectations of the society in which it operates whereas the stakeholder’s theory looks at how the stakeholders or managements operates the organization. The other difference is that the legitimacy theory treats the needs of the society with an equal importance as the needs of the stakeholders or investors whereas the stakeholder’s theory looks at the needs of the stakeholders which include the customers, employees, investors or financiers, the community, suppliers, competitors, trade associations an unionsas well as politicalassociations among others (Friedman, and Miles, 2002). The main motivations of the stakeholder’s theory with regards to corporate voluntary social responsibility are the various stakeholders regardless of their level or contribution. They consider any party that has the potential to affect the firm and its operations as a stakeholder (Friedman,and Miles, 2002). Critiques of the Stakeholder’s Theory The stakeholder’s theory suggests that any party that can affect its operations is a stakeholder a fact that has been debated by many scholars on the extent of being a stakeholder. The theory also purports that it can and should treat the interests of the various stakeholders equally a fact vehemently opposed by Charles Blattberg. Other scholars have argued that the principle of social contract in corporate social responsibility has undermined and still undermines the principles of a market economy whose priority is making profit and not fulfilling the expectations of the society or stakeholders. Question 3 Comparisons of Annual Sustainability Reports of Ford and Amazon We are going to compare the economic, social and environmental reporting in the sustainability reporting of Ford and the Amazon companies for the financial year 2012. Ford Ford’s main environmental objective is to provide its customers with a wide range of products of very high quality. The company intends to provide a wide array of vehicles of different sizes and models (utility cars, trucks, small cars, medium cars as well as large vehicles). The vehicles are meant to be safe for its users; they are also fuel efficient with creative design meant to meet the needs of its customers and help conserve the environment (Ford Motor Company, 2012). Economic objectives of Ford are to create a strong business portfolio by ensuring a balance between the products developed and its presence in the global market. Therefore the company intends to achieve international economic standards(Ford Motor Company, 2012). Socially Ford strives to participate in making the world a better place through a sustainable strategy. The sustainable strategy involves developing and implementing ways of creating value that is in alignment with the long terms of preservation and development of the environment, the society as well as the economy(Ford Motor Company, 2012). Apple Apple is taking great measures to promote international relations by ensuring that their suppliers provide them with materials that are free of conflict minerals that is they inspect the metals they are supplied with to ensure that they do not have conflict minerals that is minerals that are illegally being transported them for production (Macnn, 1997-2013). The main concern of the company is the stakeholders especially the employees and the suppliers; the other area of concern of the company’s sustainability report is the environmental concern. The company has come to learn of the grievances of its employees such as paying exorbitant amounts of money to job recruiters thus driving them to start their employment in debt a situation they have chosen to refer to as involuntary debt. The company has taken measures to ensure such practices are abolished from the company by demanding that the job recruiters reimburse their monies they took by overcharging them and has also taken extra by informing the government as well as other companies of such practices so as to increase awareness to such unethical practices(Macnn, 1997-2013). Due to the nature of work involved in the company such as the assembling of computer and computer accessories parts, some of its branches across the world are hiring underage employees to conduct the assembling job which is an illegal practice. The report states that such practices have been identified and the company is putting strategies to ensure that such practices are eradicated from the company. The current sustainability states that the number of underage employees has been reducing drastically over the years and they are still working to ensure that it is completely eradicated. This has been achieved through use of age verification facilities and teaching the factory managers on the appropriate age of hiring employees. It has also opted to use a third party to hire its employees(Macnn, 1997-2013). Another stakeholder that Apple that has been attentive to is the supplier, the company has had instances of being supplied metals with restricted minerals from troubled countries.These problems among others facing the company from its suppliers have been taken care of by the supplier code of conduct which it has enforced. The company has also enforced worker’s right and laid up platforms to ensure that its employees can communicate with its management(Macnn, 1997-2013). Application of the Legitimacy Theory on the Sustainability Reports of Apple and Ford The legitimacy theory has been established to be concerned mainly with the concerns of the society and ensuring that the company fulfills both implicit and explicit expectations of the company. Looking at the sustainability report of both companies the legitimacy theory has been used extensively especially in the Ford company. The written and implied social contract between the company and the society they operate in. The organization and in this case Ford and Apple, their sustainable reports are clear statements that they want the society to see them as they are operating a legitimate business and their operations are legitimate as well. The companies are ensuring that their outcomes as well as their output are within the confinements of the norms and boundaries of the society they operate in. Through the sustainable reports the companies are informing the society and the public at large about their operations as well as the activities and the changes made in the organization. The sustainability reports also show that the companies are attempting to shape the perception the society and the public has of them. They have achieved this by diverting the attention of the society from the problems they are facing to other issues that bring an appeal to their emotions. The companies that are Ford and Apple are definitely making attempts to change the external expectations that the society has of its economic, social as well as environmental performance. Through the sustainability reporting the society can be assured of the company’s efforts to meet their expectations within the confinements of the norms and boundaries laid down by the society they operate in. Through the act of preparing their sustainability reports and making them public the companies are building standards of expectations the society should have of them. Therefore the sustainability reporting of the two companies have clearly demonstrated how the legitimacy theory can be managed. Conclusion Sustainability reporting is a trend that started almost twenty years ago and it has grown to become a mandatory reporting for all companies regardless of their size, their locationas wellas regardless of their area of specialty. Sustainability reporting like financial reporting of businesses or organizations has standards that need to be universal to ensure that people reading through the reports can understand them as well as use them for the purposes of comparisons with different reporting of other companies. For the purpose of establishing standards in sustainability reporting two theories were established by various scholars among them Craig Deegan and these were the legitimacy theory and the stakeholder’s theory which tell us of the main area of focus when preparing such reports. The legitimacy theory is concerned with the perceptions the society has of them and they show the society that they are striving to ensure that they meet their expectations and will share any economic, social as well as environmental benefits with them. The stakeholder’s theory purports that the interests of the various stakeholders are equal and that they are striving to achieve a balance between them. These theories have also come under sharp criticisms from other scholars. However, sustainability is a trend that is still evolving and therefore changes with time. References Global Reporting Initiative, (2000-2011). Sustainability Reporting Guidelines. Retrieved on 26th, April, 2014 from Global 500 Companies (2013). Retrieved on 26th, April, 2014 from
 Deegan, C. (2009). Financial Accounting Theory, 3rd Ed, London: McGraw Hill. Macnn, (2013). Apple Issues 2011 Sustainability Report.Retrieved on 26th, April, 2014 fromhttp://m.macnn.com/articles/11/02/14/focuses.on.worker.treatment.environment.issues/ Ford Motor Company, (2012). Sustainability Report Summary. Pp. 1-8. Tilling, M, V., (2004).Refinements to Legitimacy Theory in Social and Environmental Accounting.Communication at the Edge: Voluntary Social and Environmental Reporting in the Annual Report of a Legitimacy Threatened Corporation. Pp. 1-11. Friedman, A, L. and Miles, S., (2002). Developing Stakeholder Theory, Journal of Management Studies, vol. 39, no. 1, pp. 1-21 Mathews, M. R. (1993).Socially Responsible Accounting, UK: Chapman and Hall. Deegan, C., Rankin M. and Tobin J. (2002) An Examination of the Corporate Social and Environmental Disclosures of BHP from 1983-1997: A Test of Legitimacy Theory, Accounting, Auditing and Accountability Journal, Vol. 15, No. 3, pp. 312 - 343. Freeman, R, E., (1984). Strategic Management: A Stakeholder’s Approach. Boston: Pitman. Read More