Review of an article titled Creating Value from Corporate responsibility

This article basically focuses on the stakeholders who are looking for the investment grade information on corporate responsibility. This article also talks about the importance of creating trust by providing high quality information. It is also mentioned that companies need to apply the same rigor to their data collection, decision making and disclosures of sustainability related information as they do it for their financial reporting. Article also shows that the number of corporate responsibility and sustainability report issued is increased from 823 in the year 2000 to 4579 in 2010. Article also explains as to why companies are promoting their corporate responsibility efforts, various sustainability challenges, and various sustainability performance goals. Article also talks about recent initiatives taken by various organizations and companies in the United States for e.g. California putting a cap and trade plan for green house gas emission, Wal-Mart announcing their goal to reduce 20 million tons of GHG emission from their global supply chain by end of 2015, etc Then it talks about how important is removing errors as it leaves the valuable information unused. If these fundamentals are overlooked then this could affect managements effective decision making. Author also mentions that if the sustainability data is being published with the annual report, then it is very necessary that it should be error free as investors will expect the data to have same level of quality as the financial data. This article concludes with the outlook of the chief executives and various questions for management to consider achieving a balance between the need to balance discipline necessary to provide reliable information with the need for agility. Question/ Answers Q.1) What are the key points made in the article? A.1) Key points made in the article are as follows: Companies need to provide investment grade information on social responsibility to the stakeholders. Companies need to emphasize on the companys environmental and social performance in addition to financial performance. Increasing shareholders value while mitigating the negative environmental impact on company. Companies need to take more interest and put more emphasis on scrutiny as information may not be of investment grade. Using IT and automating various process of data collection which will reduce chances of human error and inefficiencies.

 Integrating sustainability report with annual report but at the same time report should be of same quality as financial data. Q.2) What are the key concepts discussed in the article? A.2) key concepts are: Sustainability reporting: Sustainability report is the single report which integrates the companys social, economic and environmental results. These days stakeholders are interested in understanding the approach and performance of the companies in managing the sustainability activities which have potential for value creation. Sustainability performance goals: Goals for generating revenue, increasing profitability and gaining competitive advantage in response to the trend related to sustainability challenges e.g. reduction of water use, GHG, etc Creating financial value: This reporting involves collection of data and analysis of the same on resources and material usage aand assessment of business processes. Relationship with financial reporting: publishing an integrated financial and sustainability report is one of the aspect discussed in the article. Need to apply the rigour in collection and analysis of data and provide an error free report to the stakeholders. Embedding sustainability related issues in strategic decision making. Q.3) How is article review relevant to your study? A.3) The article is relevant in the studies as follows: The importance of sustainability vis--vis the financial reporting and how it could aid in value creation for the companies. If a company is sustainable in its practices, how does it increase or decrease the shareholders value. If it increases the shareholders value, then why the companies which are not practicing the same lag behind and in which aspects. How inefficiencies can be eliminated within and outside the companies using various tools including the IT. The importance of corporate social responsibility in creating the firms value. Reliance on outsiders evaluation and stringent measures to ensure proper consistency of data for both internal and external stakeholders of the organization. Q.4) What is your understanding from the article with respect to other areas of importance in finance? A.4) Corporate Social responsibility and social initiatives have a direct impact on the value of the firm and it more or less affects the profitability and top line for the firm. Sustainability reporting cannot be as consistent as financial reporting because of the lack of measures as well as proper norms in those areas.