A critical analysis of Corporate Reporting on matters of Environmental and Social

Responsibility

Name: Saoirse Walshe

Student ID: 17462852

Signature:
 Explains what is meant by environmental and social responsibility and considers the
extent to which management are, or should be, accountable for the environmental or
societal impact of their company’s operations
Corporate social responsibility refers to businesses having an obligation to take responsibility for
the impact that their business has on society. Corporate responsibility co-aligns with the idea of
“shared value”. The idea of shared value is that businesses should aim to increase the value of
their business whilst also creating value for society (Kasturi Rangan et al., 2015). Lohr 2019
explains the idea of shared value as ‘companies can do well by doing good’. Environmental
responsibility is only one aspect of a corporation's social responsibility. Corporate social
responsibility refers to businesses acting in a way that benefits society including the economic,
social and environmental aspects of society. Corporate social responsibility is extremely
important as it attempts to improve the society we live in, but it can also be of significant help to
the business also. Corporate social responsibility can help a business strengthen the relationship
between the employees and the business and can improve the employees trust in the business. It
can also help increase customer loyalty as it can reassure customers that their purchase was
morally and ethically correct. In order to successfully adopt a socially responsible approach
businesses must develop a clear CSR strategy.
Environmental responsibility and environmental issues have gained a huge amount of attention
in recent years. This can be attributed to environmental activists such as the seventeen-year-old
Swedish activist, Greta Thunberg, who has gained a huge number of supporters. She led the
largest global climate demonstration in History in September along with four million supporters
across 161 countries (Woodward,2020). This increase of attention on environmental issues and
the increase in supporters of environmental movements has had and is continuing to have huge
impacts on businesses in all industries. Zeng, Qin and Zeng (2019, p. 1) define environmental
responsibility as ‘an enterprise’s active reduction of environmentally adverse behaviors and
participation in environmentally beneficial activities in its daily business activities’. More simply
put environmental responsibility refers to business's obligation to operate in a manner that
protects the environment. This increase in people being more environmentally aware and
thinking about environmental responsibility has put a magnifying glass on businesses and the
environmental implications of the businesses and how they operate. Consumers have become
more selective of businesses in terms of how environmentally friendly they are. This in turn has
influenced businesses to introduce environmentally friendly products and services and operate in
a more environmentally way.
There is a disagreement between if corporations should be liable and made accountable for the
implications of their business on the environment and society or is it a choice to be socially
responsible. Corporations are structured in a way that allows them to often evade responsibility
for matters concerning social and environmental issues. The corporation was invented in order to
allow shareholders to be able to invest their money in a business without having to take on any
financial liabilities if the business was to fail. In short this means that shareholders would only
lose the money they invested in the business and could not owe anything more. This caused
corporations to establish their own personality in which the corporation itself would take liability
and responsibility. Bakan 2004, compared this personality of businesses to characteristics of a
psychopath. Like psychopaths' corporations act in ways that are of benefit to themselves and do
not have regard for the feelings or interests of others.
In my opinion I feel that businesses ought to be accountable for any damaging effect they have
on society. In the same way I feel that companies that are benefiting the society are ought to be
encouraged and praised. However, because of the structure of limited liability companies this
allows them to evade liability and responsibility for these things. I believe that regulations and
policies need to be made that make corporations responsible for their environmental and social
implications and does not allow them to do sufficient harm to them. Voluntary organizations
have helped to shame corporations for the harm they are causing to both the society and the
environment. Greenpeace is a famous environmental organization. On the Greenpeace
international website, they define their goal as a ‘green and peaceful future’. Greenpeace has
organized campaigns against companies attempting to force these companies to be accountable
for their damaging behavior towards the environment. Their goal is to shame and highlight the
misbehavior of corporations in the hope to force them to change their behavior to becoming less
damaging to the society. They have had a huge impact on businesses and the environment
through these campaigns. One of their most famous campaigns was that towards Coca-Cola, in
which they drew attention to Coco-colas use of plastic bottles and the impact this is having on
the environment.
Describes the criticism of companies’ voluntary reporting, often on the grounds that they
are very selective in what they measure and report, in order to show the company in a good
light.
Mandatory reporting is the financial and economic information that a business is required to
disclose. Voluntary reporting is any additional information that the company chooses to make
public. A frequent question regarding voluntary reporting is why is it done? For many it may
seem as though it is an expense to the business that is not required. In reality, voluntary reporting
is used as a tool by the business to make them look better. The increase in voluntary reporting is
the response to the limitations of mandatory reporting.
Voluntary reporting is often criticized for being selective and bias. Because voluntary reporting
is any additional information that the company wants to disclose about the company, the
company is going to disclose information that makes their company look more favorable and will
not disclose any information that will make the company look less favorable. In many ways
voluntary reporting is like a resume, in a resume you are going to show your best qualities and
the qualifications you have etc. You are not going to show the qualities you lack or the things
you are not able to do. This is very similar to the voluntary reporting of a company.
Voluntary disclosure is a way that managers can report important information that they have to
outside investors (Healey and Palepu 1993). However, managers can be selective in the
information they choose to share with these outside shareholders in order to make themselves
look better. Corporate Control Contest Hypothesis outlines how managers may use voluntarily
disclosure to attempt to avoid undervaluation of the company or to make the company look like
it is doing better than it for them to look good. It also used to explain the reasons that the
company may be performing poorly and to decrease the risk of undervaluation (Shehata,2014).
This is because managers are often fired when the company plummets on the stock exchange
(Bagherpour Velashani & Arabsalehi, 2008).
Voluntary reporting is most commonly used to make the economic state of the company look
better. However voluntary reporting can also be used to make a company look better in terms of
its environmental impacts. This is known as social disclosure and refers to the reporting of
information about a company’s societal and environmental impact (Bagherpour Velashani &
Arabsalehi, 2008). Companies will often use this type of reporting in order to make them look
like a more ethical company and to try attracting more ethical investors. Therefore, this social
disclosure can help improve their economic interests. There has also been evidence that there is a
positive correlation between a company's social performance and the value of the shares in the
company (Spicer, 1978). This has resulted in increased interest in social disclosure in order to
improve the company's image and economic interests.
The assumption that companies will always disclose information that will increase the company's
stock price and withhold information that will decrease the company’s stock price however is not
correct. Voluntary reporting wants to show the business in a way that is beneficial to the business
and sometimes increasing the company's stock price is not beneficial for them. An example of
this is managers may disclose information that results in the decrease of the company's stock
price and withhold information that would increase the company's stock price in the hope to
reduce the exercise price of the options given (Aboody & Kaznic, 1999).
Analyses the challenges of measuring CSR and outlines the relative merits of any two
reporting frameworks that have been put forward to address ESR reporting (for example,
the Global Reporting Index (GRI); The Integrated Reporting Framework; ISO 26000 etc).
As corporate social responsibility has gained much attention in recent years so has the means in
which to measure it. It seems obvious that the increasing popularity of adopting socially
responsible strategies would lead to the need for ways to effectively measure the effectiveness of
these strategies and the corporation as a whole. However, corporate responsibility as an activity
is quite difficult to measure and there has been much disagreement in the different methods of
measuring it. There are many different aspects to corporate social responsibility which makes
measuring it as whole quite difficult. There is not one widely accepted and predominately used
method of measuring CSR and there is no agreement regarding the criteria that should be
measured. This has resulted in many challenges in measuring CSR.
One of the challenges in measuring CSR is having a methodology that considers the best
interests of all the different stakeholders. Businesses acting in the best interests for all their
stakeholders is one of the essential elements of CSR. This can be difficult as different
stakeholders can have completely differing interests and, in some cases, they can have opposing
interests. It can be extremely difficult for a business to be able to measure all the different social
interests of their shareholders. For example, Giannarakis, 2016, notes how “many methodologies
do not pay the required attention to suppliers”. Furthermore
Another major challenge in measuring CSR is the ability of firms to measure the impact that
their CSR strategy has had. Many methodologies put emphasis on the money spent on CSR
practices or the hours put in. However, this doesn’t effectively evaluate the effect their efforts
have had on their desired outcome. The difficulty lies in quantifying the effect their investment
has had on society.
The International Organization for Standardization (2018, p.6-7) outlines in their guidance on
social responsibility brochure that the ISO 26000 ‘is intended to assist organizations in
contributing to sustainable development. It encourages them to go beyond legal compliance,
recognizing that compliance with the law is a fundamental duty of any organization and an
essential part of their social responsibility programme’. The ISO 26000 does not offer
certification to businesses instead it is intended as a set of recommendations and guiding
principles for businesses to follow (International Organization for Standardization, 2018). The
ISO 26000 encourages businesses to be proactive in developing a corporate social responsibility
strategy and act in an ethical way. It also encourages business to identify possible ways they can
contribute to improving societal issues. The ISO 26000 recommends businesses to identify all
the issues that are relevant to the stakeholders of that business. This allows the business to define
their priorities regarding the best interests of all their stakeholders and then translate this into
realistic objectives. The ISO 26000 framework has also been developed so that it can be used by
all sized businesses.
Issues regarding the ISO 26000 framework are that it is not a certified CSR reporting framework
and therefore companies are often required to adopt another framework that is certified in order
to be seen to be legitimately investing in measuring CSR. Another issue for this framework is it
fails to implement clear standardized mechanisms in which to compare.
.
Evaluates the economic and social responsibility reports of a public-interest company of
your choice. You should access the report they issue in relation to ESR (which may be
included in the Annual Report or they may issue a separate report) and critically evaluate
the choices they have made in relation the framework they adopt and types of information
they have chosen to include.
The public-interest company I have chosen to evaluate is Bank of Ireland group plc (BOI) and I
will be evaluating their 2019 Strategic Report. In November of 2019 BOI was recertified to the
Business Working Responsibly Mark (Bank of Ireland, 2019). The Business Working
Responsibly Mark is the only standard that is audited independently for sustainability and CSR
in Ireland (Business in the community Ireland, no date). It is based on the ISO 26000 and is
designed to help businesses assess their responsible and sustainable practices. In order to achieve
certification, the organization must complete a questionnaire that assesses their responsible
practices and then a verification audit is done by the National Standards Authority of Ireland. If
they pass both the questionnaire and the audit, then they can achieve the mark which comes with
a cost of €10,000. In BOI strategy report they have informed that one of their future goals is to
improve their social responsibility and increase their sustainability so that they can become a
signatory to the UN Principles for responsible banking (Bank of Ireland, 2019)
The Business Working Responsibly Mark assesses the businesses in relation to five key areas:
CR/Sustainability Governance section, Workplace section, Marketplace section Environment
section and Community section. The Business Working Responsibly Mark highlights in the CR/
Sustainability Governance Section the importance of a commitment to adopting practices that are
responsible and sustainable and the importance of appointing leadership that will oversee and
assess the improvement of these practices. In accordance to the mark BOI set up a committee of
the board that is tasked in overseeing the groups Corporate Responsibility Programme. They
have outlined how their approach to RSB is to integrate into the overall strategy of the business.
It is this commitment to integrating their sustainability and responsibility into their overall
strategy that will be key to their success. In order to be a sustainable and responsible business,
the business must start from the top and ensure that the leaders of the business can lead the
business to becoming responsible and sustainable. BOI have done this through the setup of many
committees at senior level to oversee their strategy (Bank of Ireland, 2019)
The environment section of the Business Working Responsibly Mark regards the businesses
impact on the environment with specific relation to; climate change, the use of unstainable
resources, pollution of air, water and ground, usage of hazardous chemicals, loss of biodiversity,
generation of waste and hazardous waste. BOI has included many of these topics in their 2019
strategy report. One key element that they have highlighted in their report is their investment in
funding renewable energy in the attempt to lower the usage of fossil fuels in Ireland. To date
they have provided finance to Irish wind farms that have been able to provide the equivalent of
468,000 homes with renewable energy. They also disclose that they are monitoring other forms
of sustainable energy that they could support in the future. This investment in renewable energy
shows that BOI have made sustainable energy a priority and their will to cut down on the use of
fossil fuels. Their monitoring of other sustainable energy shows their commitment to continually
improving their approach to sustainable energy. They have adopting many practices in the
attempt to combat climate change. They have integrated climate risk into their risk frameworks
and policies this shows the organization commitment to operating in a way that is more friendly
to the environment. And one of their most impressive goals was achieving a 40% reduction in
carbon emissions intensity. This coincides with the marks requirements that the organization is
committed to their awareness of the impact their carbon footprint has on the environment and
being committed to reducing their carbon footprint.
References

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