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Postgraduate & mid – career Development Unit Faculty of Management & Finance University of Colombo

Social Responsibility
refers to the obligation of a firm, beyond that required by law or economics, to pursue long-term goals that are beneficial to the society The definitions of CSR are many. Definitions may refer to ethical behavior, sustainable development, the environment, and to philanthropic ideas. Social responsibility is a synonym for good citizenship. It is important that organizations are committed to fulfilling expectations and moral obligations at the level of society. This means that right conduct takes into account the welfare of the larger society.

Voluntary Reporting
Programme Course : MBA / MBA in HRM / MBA in Marketing (2009 - 2011) : MBA 539- Financial Reporting and Management Control Systems : Mr. R M R B Rajapakse, Senior Lecturer in Accounting


Drivers for CSR
At the beginning it was a voluntary Latter legislative requirements (in some European countries) Stakeholders pressures Now guidelines have been developed.

Accountability and CSR Reporting
What is accountability and why it is? Why corporate entities are socially accountable?



1996). 1996). managing and minimizing those impacts (Tromans. products and by products 5 6 Objective of ER The objective of ER is to assess ongoing performance in terms of identifying. it is concerned with signalling to stakeholders how the company’s activities relate to the environmental through: its consumption of energy and raw materials its business activities and operations its wastes.Global trends Stakeholders demand for CSR information has been increased and they may accommodate those information to their decisions. ER is the practice of an organization’s publicly disclosing the impact of its activities on the environment and its performance in managing those impacts (Hofman. Specially. controlling. Environmental reporting include the organizations environmental policies the environmental management system that is in place capital expenditure that is related to environmental initiatives declaration of fines and legal proceedings for breaches of environmental regulations the existence and results of external environmental audits the identity of the director with overall responsibility for environmental issues 7 8 . Significant growth of CSR reporting Increase mandatory requirements Environmental Reporting In broad terms.

related measures of environmental performance the extent of compliance with regulations and any industry guidelines risks not required to be disclosed as contingent liabilities. if practicable. Motives for CSR activities. social and environmental impact of corporate activities to society at large.. information on action taken. To enhance business reputation To improve ability to attract and retain highquality recruits For greater employee health and productivity To improve risk management To increase profitability 9 10 Why companies report CSR activities To inform stakeholders To provide a more rounded picture of the company To meet best practice in company reporting To derive CSR’s positive public relations benefits To satisfy disclosure requirements of major shareholders To ensure that employees are aligned to the company’s targets To demonstrate an open management style To reflect the importance attached to CSR by the company To demonstrate to stakeholders that non-financial issues are also important 11 Sustainability Reporting sustainability reporting as. Reporting of economic. including detail of the nature and amount of expenditure incurred in pursuit of the identified environmental objectives the key impacts of the business on the environment and.Environmental reporting include …. 12 . “The disclosure of those costs and benefits that may or may not be quantifiable in money terms arising from economic activities and substantially borne by the community at large or other stakeholders”.

It is a voluntary initiative intended to be a valuable tool for all levels of decision-makers in a company-from senior management to operational level and for internal and external stakeholders. The intent is to have a globally applicable framework for company-level sustainability reporting that links all three aspects of sustainability. GRI The GRI guidelines have been developed and revised through an open process involving various stakeholders. 15 Guidelines for……. 2000). economic and social. CEO Statement iii. total waste and suppliers’ performance 16 . Sustainability Related Polices vii. Governance ii.. They list almost 100 possible indicators for companies to use. total water use. Performance and Compliance Guidelines for Sustainable Reporting Global Reporting Initiative (GRI) The GRI was established in 1997 by the coalition for environmentally responsible economics (CERES). the GRI guidelines suggest the use of indicators to measure an organization’s performance in environmental. iv.. Stakeholders Engagement x. Scope v. Organizational Profile. Key Impacts vi.Sustainability Reporting Practices Compliance Based Reporting Toxic Release Inventory Based Reporting Performance Based Reporting Product Focused Reporting Environmental and Social Reporting Sustainability Reporting 13 Components of a Sustainability Report i. Management System and Procedures viii. The second draft of the guidelines was issued in June 2000 (GRI. social and economic areas. Targets and Achievements xi. environmental. greenhouse gas emission in tons of Co2 equivalent. Independent Verification Statement 14 ix. both generally applicable environmental indicators include total energy use. As part of the standard sustainability report.

Human Resources Accounting Need for HRA : Two reasons To measure and report : as it believes HR are the most important assets. the process of identifying and measuring data about HR and communicating them to internal parties. yet the value of HR does not appear in financial reports To provide information: to provide reliable and complete information which can be used in improving and evaluating the management of HR 17 What is HRA As AAA defined HRA is. 18 Objectives of HRA to get the values of HR to improve quality and quantity of the out put (Improvement of HR may help to improve quality and quantity of the out put) to facilitate the effective and efficient management of HR 19 Significance of HRA It is a management tool It provides information to uses of financial statements 20 .

* how should HR be amortized? * what are the tax implications? * what are the implication of HRA on internal and external auditing 23 24 ..……. return per employee. .Direct recruitment vs.Retrenchment vs. closing down existing units. Measurement of HR Two basic issues . .Transfers vs.impact of budgetary control on human relations and organizational behavior . return on human resources employed i. such as. development overseas subsidiaries etc 21 22 External purposes Provide information to make long term investment decisions. Promotion . Retention Internal purposes cont.e. Retention .e. For ex.decisions on relocation of plants.Internal purposes It provides information in making meaningful choices between various types of human investment and investment in other assets.How HR assets should be valued? .The implications of capitalized HR i.

placing and development are capitalized.cost or .…… How to assign monetary values .economic value Measurement of HR cont. Cost approach calculated costs are capitalized and amortized over the useful life Three approaches the Historical cost approach the replacement cost approach the opportunity cost approach 25 26 The Historical cost approach Actual cost of recruiting. selecting. placing and developing new employees to reach the level of competence of the existing employees. Amortized over the expected useful life of the asset concerned. hiring training.Measurement of HR cont. If asset has no longer life than estimated revisions are made in the amortization schedule The replacement cost approach The costs of replacing firm’s existing human resources are capitalized. hiring training. selecting.. This cost includes recruiting. 27 28 .….

The Opportunity cost approach HR values are measured through a competitive bidding process with in the firm. based on the concept of opportunity cost Economic value approaches Lev and Schwartz present value of future earnings model Hermanson’s adjusted discounted future wages model Stochastic rewards valuation model 29 30 .