Unit-8 Sustainability and corporate

sustainability reporting framework

Sustainability and Corporate Sustainability Reporting
Framework
Unit-8
Can a corporation have social responsibilities?

Milton Friedman’s classic article is “The social responsibility of business is to

increase its profits” (1970)
Friedman vigorously argued against the notion of social responsibilities for
corporations based on three main arguments:
Only human beings have a moral responsibility for their actions
It is managers’ responsibility to act solely in the interests of shareholders
Social issues and problems are the proper province of the state rather than
corporate managers
Can a corporation be morally responsible for its actions?

Evidence to suggest that legal designation of a corporation makes it unable to be

anything but self-interested (Bakan 2004)
Long, complex debate but generally support from literature for some degree of
responsibility accredited to corporations. Argument based on:
Every organisation has a corporate internal decision structure which directs
decisions in line with predetermined goals (French 1979)
All organisations manifest a set of beliefs and values that lay out what is generally
regarded as right or wrong in the corporation – organizational culture (Moore 1999)
Corporate Social Responsibility
Why do corporations have social responsibilities?

Business reasons (‘enlightened self-interest’)

Extra and/or more satisfied customers
Employees may be more attracted/committed
Forestall legislation
Long-term investment which benefits corporation
Moral reasons:
Corporations cause social problems
Corporations should use their power responsibly
All corporate activities have some social impacts
Corporations rely on the contribution of a wide set of stakeholders in society, not
just shareholders
What is the nature of corporate social responsibilities?

Corporate social responsibility includes the economic, legal, ethical, and

philanthropic expectations placed on organizations by society at a given point in
time
(Carroll and Buchholtz 2009:44)
Carroll’s four-part model of corporate social responsibility

Desired by society
Philanthropic
Responsibilities
Expected by society
Ethical
Responsibilities

Required by society
Legal
Responsibilities
Required by society
Economic
Responsibilities
Source: Carroll (1991)
CSR in an international context

CSR strong in US. Influence elsewhere is more recent. This is partly

explained by explicit vs. implicit CSR
Regional differences exist with respect to all CSR levels:
Economic responsibility
Focus in USA on shareholders; France has extensive responsibility for employees; India has
tradition of investment in the local community
Legal responsibility
State seen in Europe as key enforcer of rules; elsewhere government seen with more
scepticism (e.g. corrupt, interfering with liberty)
Ethical responsibility
Wide range of local ethical values & preferences: expectations vary
Philanthropic responsibility
Europe tends to compel giving via legal framework; elsewhere (e.g., USA, India, China),
companies are expected to share their wealth.
CSR and strategy: corporate social responsiveness

Corporate social responsiveness refers to the capacity of a corporation to respond to

social pressures (Frederick 1994)
4 ‘philosophies’ or strategies of social responsiveness (Carroll 1979)
Reaction
Defence
Accommodation
Proaction
+
What is the GRI?

The Global Reporting Initiative (GRI) is a non-profit

organization that promotes economic sustainability. It produces
one of the world's most prevalent standards for sustainability
reporting.
A sustainability
report is an organizational report that gives
information about economic, environmental, social and
governance performance.
+
A Brief History

1997 The GRI was formed by the United States based non-
profits Ceres (formerly the Coalition for Environmentally
Responsible Economies) and Tellus Institute, with the
support of the United Nations Environment Program
(UNEP)
1999 The “exposure draft” version of the Sustainability Reporting
Guidelines
2000 The first full version
2002 The second version was released at the World Summit for
Sustainable Development in Johannesburg where the
organization and the Guidelines were also referred to in the Plan
of Implementation signed by all attending member states
+
On the Surface…

 Includes:
 Adherence level A+, A, … ,C # Organizations
 Self assessed or externally Reporting
assured
2008 460
 Developed through a
process that is: 2009 1265
 Multi-stakeholder 2010 1467
 Consensus-based
2013 (March 6) 4983
organizations
 Includes both: 12715 reports
 How sustainability issues are
managed Current 6434
 Performance indicators organizations
19297 reports
+
How & What to Report

Reporting Principles and Guidance

 Principles to define report content: materiality, stakeholder
inclusiveness, sustainability context, and completeness.
 Principles to define report quality: balance, comparability,
accuracy, timeliness, reliability, and clarity.
 Guidance on how to set the report boundary.
Standard Disclosures
 Strategy and Profile
 Management Approach
 Performance Indicators
+
Reporting Indicators

Biodiversity

Emission
Materials
s

Energy ABC Inc Effluent

Water Waste

Complianc
Products Transport
e
+
Should the GRI be Mandatory?

 The GRI, while good in theory, has its limitations.

 Companies always self-report
 Reporting organizations can choose to:
 Have a third part offer an opinion on the self-declaration
 Request that the GRI check the self-declaration
 The GRI is based on the report and not necessarily the company’s
actual activities

At present, we do not believe the GRI should be

mandatory.
+
Westpac Banking Australia

 Voted the world’s most sustainable company in 2014

(Corporate Knights)

 GRI Reporting: A+, GRI checked

+
Rio Tinto Mining

 GRI Reporting: A+, GRI checked

+
Alternatives to GRI
 Sustainalytics

 Corporate Knights
INTRODUCTION – FUNDAMENTAL PRINCIPLE

1 Mandate and process

2 Applicability

3
Content and Structure
PRINCIPLE AND CORE
ELEMENTS
Principle 1: Businesses should conduct and govern themselves with
Ethics, Transparency and Accountability.

 Develop governance structures

 Communicate transparently

 Not engage in mal practices

 Mandatory disclosures
Principle 2: Businesses should provide goods and services that are safe and
contribute to sustainability throughout their life cycle

 Safety and optimisation throughout the life

cycle

 Consumers awareness

 Recognise & respect the rights of people

Principle 3: Businesses should promote the wellbeing of all employees

 Equal opportunities

 Right to freedom

 Non usage of child labour

 Provide facilities

 Workplace environment

 Harassment free workplace

Principle 4: Businesses should respect the interests of, and be responsive
towards all stakeholders

 Acknowledge responsibility, transparent

 Special attention

 Resolve differences
Principle 5: Businesses should respect and promote human rights

 Understand & appreciate human rights

 Respect for human rights

 Influence, Promote & Realization of human

rights

 Complicit with human rights

Principle 6: Business should respect, protect, and make efforts to restore

the environment

 Utilization of natural and manmade

resources

 Pollution & environmental damage

 Improve their environmental performance

 Environment Management Systems (EMS)

Principle 7: Businesses, when engaged in influencing public and regulatory policy,
should do so in a responsible manner

 Policy advocacy

 Utilize the trade & industry chambers

& associations
Principle 8: Businesses should support inclusive growth and equitable development

 Impact on social and economic

development

 Innovation

 Development priorities
Principle 9: Businesses should engage with and provide value to their customers
and consumers in a responsible manner

 Well-being of the customers

 Freedom of choice & free competition

 Disclose all information

 Adequate grievance handling mechanisms

 No misleading
Guidelines on Implementation of
Principles And Core
Elements

Reportin Leadershi
g p

Engageme Integration
nt
 INDICATORS
 Commitment of Top Management and supportive Governance
structure

 Policy deployment and Process Management

 Sensitization and Training

 Stakeholder Engagement

 Monitoring and Evaluation

 Analysis and Improvement

 Continuous Innovation

 Disclosure
Dow Jones Sustainability Indices

Discussed in Unit-9
Principles for Responsible Investment (PRI)

The United Nations-supported Principles for Responsible Investment (PRI) is

an international network of investors working together to put the six principles
into practice. Its goal is to understand the implications of sustainability for
investors and support signatories to incorporate these issues into their
investment decision-making and ownership practices. In implementing the
Principles, signatories contribute to the development of a more sustainable 
global financial system.
The Principles offer a menu of possible actions for incorporating
environmental, social and corporate governance issues into investment
practices across asset classes. Responsible investment is a process that must
be tailored to fit each organisation's investment strategy, approach and
resources
Principles:

1. We will incorporate ESG issues into investment analysis and decision-making

processes.
2. We will be active owners and incorporate ESG issues into our ownership policies and
practices.
3. We will seek appropriate disclosure on ESG issues by the entities in which we invest.
4. We will promote acceptance and implementation of the Principles within the
investment industry.
5. We will work together to enhance our effectiveness in implementing the Principles.
6. We will each report on our activities and progress towards implementing the
Principles.
Sustainability Reporting

A sustainability report is an organizational report that gives information about

economic, environmental, social and governance performance.
Sustainability reporting is not just report generation from collected data; instead it is a
method to internalize and improve an organization’s commitment to 
sustainable development in a way that can be demonstrated to both internal and
external stakeholders.