Accounting theory & Accountability essay on stock exchange
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Powerpointslides-SocialandSustainabilityreportingPart2.pptxAccounting Theory
SOCIAL AND SUSTAINABILITY REPORTING, Part 2
Regulation of CSR reporting??
Social and environmental reporting within annual reports remains predominantly voluntary
Accounting standards
contingent liabilities IAS 37/AASB 137
Corporations Act
S299 (1) (f)
Details required of performance in relation to any specific environmental regulation
Other considerations when reporting CSR
Voluntary reporting
Stand-alone Report (The environment report) (70%)
Annual Report Section (22%)
Web-based corporate reporting (8%)
Guidance for voluntary environmental disclosure
international guidelines (GRI)
Australian government guidelines
industry guidelines
Global Reporting Initiative
Launched in 1997 as an initiative to develop a globally accepted reporting framework to enhance the quality of sustainability reporting
A joint initiative of the Coalition of Environmentally Responsible Economies (CERES) and the United Nations Environment Program (UNEP)
The aim is to enhance transparency, comparability and clarity, amongst other principles.
Global Reporting Initiative Cont
Sustainability reports based on the GRI Framework can be used to:
‘demonstrate organizational commitment to sustainable development, to compare organizational performance over time, and to measure organizational performance with respect to laws, norms, standards and voluntary initiatives’
THE GRI includes 55 core indicators and 29 additional indicators across environmental, economic and social performance areas (see Table 11.2).
Mandatory Sustainability Reporting Requirements
Australia
The Corporations Act 2001 requires directors to outline the company’s performance in relation to environmental regulations.
The National Greenhouse and Energy Reporting Act 2007 (NGER Act) introduced a national framework for reporting and dissemination of information about greenhouse gas (GHG) emissions and energy use by certain corporations.
Focuses on information needs of stakeholders with a financial interest
‘Materiality’ precludes reporting of social and environmental information – difficult to quantify costs
Liabilities often discounted to PV, future clean-up costs appear trivial
Issues with control
Limitations of traditional financial accounting
Triple-bottom-line reporting
Provides information about the interdependence of economic, environmental and social performance of an entity
Environmental = impact made through processes, products or services. These may include amount of energy consumed; emissions; effluents and waste management; land use and management of habitats
Social = involvement in shaping local, national and international public policy. This may include equality, health and safety; ratio of wages to cost of living; treatment of minorities
Economic = financial performance, activities relating to shaping demand for products and services, employee compensation, community contributions
No single uniform approach generally adopted by all firms
Reports include combination of financial information, quantified non-financial information and narrative descriptions
ENVIRONMENTAL MANAGEMENT SYSTEMS
An EMS is a system that organisations implement to measure, record and manage their environmental performance.
In addition to providing organisations with an environmental management tool they also facilitate the organisation’s communication to stakeholders.
International standard ISO 14001 Environmental management governs EMSs.
Research evidence
Guthrie and Parker (1990)
Reported corporate social disclosure in Australia relatively low compared with UK and US
No Australian company provided ‘bad news’ about environment
Deegan and Rankin (1996)
20 companies successfully prosecuted for offences under environmental protection laws
Increase in reporting of favourable environmental information in year of EPA prosecution
EPA prosecuted firms provided greater amount of positive environmental disclosure than non-prosecuted firms
Positive environmental information significantly greater than negative information
Research evidence cont’d
Deegan, Rankin and Vought (2002)
Annual reports of Australian oil, mining and chemical companies involved in major environment incident or disaster
Companies provided significantly more total and positive disclosures after the incident than before
Disclosure appeared to be reaction to incident rather than to social or environmental issues generally
Current reporting practices
23% of Australian companies some sort of corporate social responsibility report
80% - Japan
71% - UK
32% - US (KPMG 2005 study)
Triple bottom line reporting
5% of top 500 companies publish reports
“Reports overwhelmingly biased towards positive information with negative information ignored or couched in positive terms” (CPA Australia)
Corporate report card
James Hardie
Underprovision of compensation for victims of its asbestos products
Nike
Exploitation of workers
BHP
OK Tedi Mine dumping 90 millions tons of waste per year into the river. Mine will close in 2012. Expected to take 300 years to clean up waste
BP
2010 Gulf of Mexico oil spill
The End
