Social & Environmental Reporting In Australia
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Part A
Using examples from SER research literature, explain the potential motivational factors behind such reporting.
The reporting requirements of organisations in the past were limited to only disclosing its financial performance and position to its stakeholders. However these objectives have been altered with an increasing number of entitys realising that there is a need to be socially and environmentally conscientious. This new responsibility has led to the need for social responsibility reporting. (Deegan, 2005, p.1100)
Social responsibility reporting is the disclosure of information regarding the performance of organisations dealings with its physical and social environment. Social responsibility reporting is required by organisations in order to provide disclosure to its stakeholders, communities, clients, governments and employees. The main purpose of social responsibility reporting is in order to highlight the social and environmental impacts that are the result of an organisations operations and practices. (Deegan 2005, p.1100)
Only a minimal level of disclosure in regards to social and environmental impacts of an organisations operations is required by Australian accounting standards and corporations law. Therefore, any SER provided to stakeholders would exceed the legal requirements for the organisation. Therefore, with this in mind, why would companies wish to disclose SER at an additional unnecessary cost? In determining the answer, an examination of SER motivational factors is required. (Deegan 2005, p.1110)
Social environmental reporting literature suggests motivational factors as to why organisations may voluntarily disclose information about their social and environmental performance.
One reason why an organisation may decide on SER is due to the concept of legitimacy theory. Legitimacy theory provides that an organisation must comply with societys expectations if it is to continue to operate successfully. Society is becoming increasingly socially and environmentally mindful, and a failure to disclose such information may result in a company being unable to attract sufficient resources to continue its operations. (Garg 2006, p.497)
Another reason may be due to the concept of Economic interest theory. SER is important for an organisation as Economic interest theory determines that the managers are focus is on increasing personal wealth. The assumption which is made in regards to economic interest theory is that entities will voluntarily disclose social and environmental reports if it leads to maximisation of managers personal wealth.. (Garg 2006, p.502)
Managing a particular class or group of shareholders may be another possible motivation for organisations to SER. The stakeholder theory provides that an organisation needs to satisfy its most powerful stakeholders, such as governments or banks. A failure to satisfy the powerful stakeholders may result in a bad publicity, fines or loss of capital. (Garg 2006, p.501)
Part B : Review of Social and Environmental Reporting of Companies
Retail industry company: Coles Myer Limited
Coles Myer Ltd is one of Australias largest retailers with more than 2,600 stores throughout Australia and New Zealand.
Due to Coles Myer being such a power house organisation in the retail sector of Australia, it is vital that they maintain an untainted reputation and a friendly public image. Social and Environmental Reporting allows Coles Myer to demonstrate the positive attributes of the organisation.
Through SER, Coles Myer Ltd is able to continue to portray a good public image, and therefore encouraging new customers, and the return of existing customers. An increased number of customers may increase profitability, financial position and shareholders wealth by increasing share prices.
Along with the disclosures which are required by the accounting standards and corporations law, Coles Myer produces a social and environmental report known as the Corporate Social Responsibility Report. The report details Coles Myers obligation to safety, support of communities, the sourcing of products and the environment.
The report also establishes goals in relation to minimising impact on society and the preservation of the environment during operations. Examples of how these goals have been achieved are also detailed. (Coles Myer 2005)
After a review of the operating of Coles Myer Ltd, there is no evidence to suggest that the company practices contradict their social and environmental policies. Evidence in the social and environmental reporting disclosures of Coles Myer support this claim. For example, Coles Myer has also successfully implemented their environmental policy specifically aimed at reducing wastage, which has been achieved by a 50% reduction in use of plastic bags. (Coles Myer 2005).
ASX best practice recommendation 10.1 requires a code of conduct to be established and disclosed for areas of interest to shareholders, Coles Myer has complied with relevant recommendations. Coles Myer has established and disclosed a code of conduct in regards to its social and environmental commitments in the Corporate Social Responsibility Report. In addition, information on how their goals and objectives were achieved is disclosed for the interest of stakeholders.
Telecommunications industry company: Telstra Corporation Limited
Telstra is an Australian company which is listed on the ASX primary in the business of retailing telecommunications to both corporate and individual consumers.
Due to Telstras dominance of the telecommunications sector in Australia, the company is the victim of on-going criticism and constant media scrutiny. Therefore in order to divert this criticism, Telstra constantly attempts to direct consideration towards all aspects of its operations, including social and environmental, in order to avoid criticism.
Telstra also aim to conduct their operations in a values-based approach, which involves implementing a certain level of corporate social responsibility.
In addition to the disclosure of ASX announcements, share price details, annual reports, dividend