Research Based Sustainability and Integrated Reporting - Case Study Example

Research Based Sustainability and Integrated Reporting The objective of any business venture is to ensure profitability through its transactions with its external stakeholders, and the contributions of its internal stakeholders. However, there are other factors to be considered beyond transactions, one of them being the long-term sustainability of the firm’s activities. In order to sustain its competitive edge through interactions with its stakeholders, every firm must come up with strategies for balancing profiteering motives with the welfare of stakeholders. For instance, an organisation must be able to satisfy more than the basic needs of employees, and be of service to consumers and the community beyond doing business (Hopwood, Unerman and Fries 2010, p. 44). This is where corporate social responsibility comes in, whereby a business strives to present a favourable image of self while doing something beneficial for the community, environment, customers, employees and other stakeholders. CSR is a marketing strategy for responsible firms; however, in order for efforts in CSR to bear fruits, the firm must report its progress in its business ventures in relation to its CSR efforts; this is achieved by sustainability and integration reporting (Godemann and Michelsen 2011, p. 156). The aim of this report is to analyse the implementation of sustainability strategies and integrated reporting by Woolworths, and analyses the effectiveness of adopting these approaches for other companies. Sustainability For the long-term success of a business venture, the business practices should have effects that can endure for as long as the firm exists, such that a firm's activities do not have destructive effects on the environment, society, individuals and other aspects of the internal and external business environments. Relevance of Sustainability to Woolworths The management at Woolworths believes that the success of their business model significantly depends on its having a positive effect on the environment. For instance, the firm engages in the responsible use of the environment by practising environmental conservation and reducing levels of waste disposal (Zeng and Eastin 2011, p. 154). For the firm, this symbolises that Woolworths is a firm with which people can relate, especially since it has a positive cause. In any case, this shows a sense of responsibility as the firm can work with likeminded organisations and the government in pursuit for sustainable use of the environment. CSR used in this way attracts both customers and suppliers to the firm, both of whom accelerate achievement of return for investment by Woolworths. Woolworths' management views this as a business venture, and as the CEO said, the firm is not a charity organisation but a responsible business oriented firm. Records show that this approach to CSR bears fruits for the firm; the firm’s management is planning to expand the scheme to include other aspects of environmental responsibility too. Stakeholder Involvement Woolworths involves its stakeholders in its sustainability plan in different ways, which involves aligning the needs and expectations of the stakeholders to its business strategic plan. Some of the stakeholders involved in this plan include the government and other regulatory bodies, the community, customers, suppliers and employees. First, the firm's management familiarised with the regulatory requirements and legislation in order to ensure that its activities are in alignment with expectations of the government, its agencies and independent regulatory bodies. Secondly, the firm consulted its customers in surveys and other approaches to identify their expectations in terms of product quality in relation to sustainability; results from these studies were used in the decision-making process. Thirdly, the firm involved suppliers in its environment by saving the suppliers’ money; a feat achieved by changing the packaging requirements to uniform ones that were more economical for the suppliers (Chartered Accountants 2010, p. 6). Fourthly, the firm involved employees in the process by recognising them and rewarding their efforts towards sustainable practise. Finally, the firm participated in existing community projects and initiated new ones, which ensured that the people in those communities participated in its CSR projects as they were the primary beneficiaries of the projects. In so doing, Woolworths ensured that its strategic plan fits into the objectives of the government, community, suppliers, customers and employees (Banhegyi 200, p. 164). These and other efforts to satisfy both its internal and external stakeholders had to have returns that could be quantified in financial terms. In return for adhering to legislation and expectations of regulatory bodies, the firm expected the government to provide a peaceful and fair business environment. Secondly, the firm expected and achieved customer loyalty after adapting its systems to meet their needs, which resulted in increased profitability due to quality service delivery to customers. Thirdly, the firm’s recycling efforts became more effective, resulting in financial savings and a rise in company ratings for environmental conservation (Chartered Accountants 2010, p. 6). Fourthly, by recognising and satisfying other needs of its employees, the company managed to make them work harder to achieve company objectives. Finally, the community, which holds potential customers, suppliers, shareholders and employees, had to interact productively with the firm due to the relationships developed during CSR projects. These interactions with stakeholders are responsible for the outstanding success, financial and environmental sustainability of Woolworths. Strategy Analysis Woolworths is a business venture; therefore, there can be no other driver towards environmental conservation and community activities but profitability (Unerman and Bebbington 2007, p. 82). The firm had to ensure that its profiteering motives were in alignment with the needs and expectations of its stakeholders. The principal approaches to increasing profitability include maximising revenue, minimising variable costs, or both. For Woolworths, reducing costs was out of question, at least not in the short-term, especially due to its ambitious plans, all of which required sizeable initial investments. Woolworths had little option but to figure out how to convert environmental conservation and community social services into financially sustainable ventures in a subtle way. The strategy included involving stakeholders in their various capacities to this strategy, mainly by motivating them to do their duty by increasing the utility value of doing so. Moreover, Woolworths’ approach to sustainability reporting is effective and should be adopted by any firm that intends to succeed in sustainability management. The firm’s management familiarised with regulatory standards in order to enable its activities to conform to the required levels; however, doing so had its strengths and weaknesses. The same case applies to the firm’s efforts at improving its public image through environmental conservation and community activities. Moreover, the firm took measures to maximise employee output by use of sound human resource practices. All aspects of Woolworths approach to sustainability had some things in common including the fact that the firm’s management did not want to do them, they did so because they had to; it is the only way to establish a sustainable competitive edge for the firm. This approach to responsible business practices is not encouraged for any firm; businesses that have been successful in CSR and environmental conservation took these approaches because they were part of the business culture and values (Unerman and Bebbington 88). Moreover, it is advisable for a firm to engage in activities that reflect its values; in any case, no firm can satisfy all its stakeholders at once, but if it does satisfy the needs of one stakeholder group, then the needs of others will be met in the long-term. For instance, instead of adhering to the quality expectations of regulatory bodies, the firm should have established a quality culture that supersedes the expectations of quality assurance bodies. The firm in question should adopt sustainability practices that are not centred on itself like those of Woolworths, but those that revolve around the most relevant and valued stakeholders. Depending on the industry, market status and market values, employees could be the most valuable of all stakeholders, mainly because they act as the first line of interaction between a company and its customers. The interaction between customers and employees brings revenue and increased profitability of the firm’s business, which in turn satisfy the management and shareholders. The efficiency by which employees interact with customers and potential customers determines if a firm will attract new customers or retain existing ones. Therefore, the firm should adopt human resource practices that enable them to attract, train, develop and retain the best employee talent. According to Ehnert (2009, p. 28), these HR practices include training and development, recruitment and selection and performance management among others. Integrated Reporting Relevance Integrated reporting involves representation of a company’s financial and non-financial results as indicators of the company’s performance. The financial component works to inform interested stakeholders, especially shareholders about the state of their investment, and works to inculcate the culture of accountability, integrity and transparency into a firm. Non-financial results are beneficial since they include a company’s activities that do not result in financial implications, at least not directly. These activities include sustainability efforts like CSR and performance management among others, all of which result in increased revenue for the firm in an indirect manner (Eccles and Krzus 2010). For instance, responsible CSR practise improves a company’s reputation, which in turn attracts investors and customers. Therefore, integrated reporting has played a central role in adoption of sustainability as a component of the decision-making process by the management of many firms. The firm in question needs to adopt integrative reporting, mainly due to the obvious benefits derived from the practice. For instance, the firm needs to report to various stakeholders on matters that may be of interest to them including informing the community on the level of the firm’s involvement in community activities, and informing investors of the benefits they derive from investing in sustainability practices (Loska 2011). However, the firm should not follow the generic approach to sustainability as given in literature, but should modify the approach to suit its unique needs and circumstances. Woolworths Position on Integrated Reporting In the business culture of Woolworths, profitability and sustainability are interdependent, and the firm strives do both correctly in order to maximise on each. The company has comprehensive sustainability management and reporting framework that enables it to acquire and sustain a competitive edge in the face of increasing competition and changes in the retail market. So far, it is one of the few Australian firms that have such elaborate measures in place, and only a few European retailers can match its sustainability strategy. However, the firm has not yet adopted integrated reporting, which is more extensive and demanding than the sustainability reporting in terms of time, finances and transparency among others. According to the firm’s management, integrated reporting is the next project, and the firm is in the process of laying down frameworks for its implementation (Chartered Accountants 2010, p. 8). Woolworths’ understanding of the importance of integrated reporting to its stakeholders is likely to accelerate the firm’s adoption of an integrated framework, especially since its development is at an advanced stage, and all variables have been identified. Opinion on Focus of Integrated Reporting It is a general assumption that the focus of integrated reporting should be on large companies and the needs of their investors before extending to other sectors of the market, whereby firms adopt integrated reporting because they want to attract a larger customer base by improving their reputation in the hope that this translates to higher revenue. However, this should not be the case, mainly because large companies have less impact on people compared to smaller businesses. Since small business enterprises make the bulk of the retailers, wholesalers and other agents of commerce, integrative reporting and sustainability reporting would have had a better impact on the global or local markets if these important components of the market were involved directly. For instance, the government and other stakeholders should offer incentives to entrepreneurs for adopting sustainability and integrated reporting. Conclusion Sustainability and integrative reporting are a sure way of maintaining a competitive edge, which is achieved by aligning a company’s goals and objectives to the needs and expectations of its stakeholders. However, companies are heterogeneous, and each of them should take an approach that fits in with its business values, culture and structure. References Banhegyi, S 2007, Management: fresh perspectives, Pearson South Africa. Chartered Accountants 2010, Woolworths, Integrating sustainability into business practices: a case study approach, The Institute of Chartered Accountants in Australia, viewed 19 April 2012, . Eccles, RG & Krzus, MP 2010, One report: integrated reporting for a sustainable strategy, John Wiley & Sons. Ehnert, I 2009, Sustainable Human Resource Management: A Conceptual and Exploratory Analysis from a Paradox Perspective, Springer. Godemann, J & Michelsen G 2011, Sustainability communication: interdisciplinary perspectives and theoretical foundation, Springer. Hopwood, A Unerman, J & Fries J 2010, Accounting for sustainability: practical insights, Earthscan. Loska, T 2011, Integrated reporting: towards a framework for a sustainable international corporate reporting, GRIN Verlag. Unerman, J & Bebbington, J 2007, Sustainability accounting and accountability, Taylor & Francis. Zeng, K & Eastin, J 2011, Greening China: the benefits of trade and foreign direct investment, University of Michigan Press. Read More