Elearning - Lspr.edu: Master of Arts in Communication: Corporate Communication Studies

Course : Corporate Social Responsibility (1509CSR06)
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Master of Arts in Communication : Corporate Communication Studies
LSPR eLearning Program
Session Topic : Sustainability Reporting

Course: Corporate Social Responsibility
By Ida M. Bayuni, M.M.
Content
Part 1
Background & SER
Part 2
Sustainability Reporting
Part 3
Current Landscape
Part 4
Drivers & Benefits
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S. 3
Part1: Background & SER
Sustainability: Topics
Topics
I. Background, Social & Environmental Reports
II. Sustainability Reporting
III. Global Reporting Initiative
IV. Current Landscape
V. Drivers & Benefits
VI. Summary & Conclusion
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Sustainability: Background
I. Background & SER

Background
1. Popularization of sustainable development concept in
last years of the 20th century was,
the starting point for adopting policies aimed at
a. Improving social welfare or environment preservation,
b. Aspects partly ignored by political,
c. Institutional & business community.
2. But, the greatest impact of sustainable development
has been felt by business organizations.
3. As a result, the Neo-classical Theory driving business,
the almost sole objective to maximize shareholder
value (Friedman, 1962; Friedman 1970),
had been widely questioned in current literature
(Freeman, 2008; Wood, 2008)
-1509CSR06-
Milton Friedman
Winner, Nobel Prize
in Economics (1976)
R. Edward Freeman
Prof. Business Admin.,
Univ. of Virginia
(2010-present)
S. 6
Sustainability: Background (Cont.)
4.
5.
Companies modified their strategic management from,

attending only to the financial dimension to
considering factors related to different stakeholders.
Stakeholders, originally introduced by Freeman (1984), have a legitimate
interest, directly or indirectly.
6. One of the main effects of the new managerial approach is on,
company discloses its annual reports do not provide an adequate description
of actions taken by
companies in the social & environmental fields.
7. Aspects such as social & environmental externalities require different
reporting systems & disclosure methods,
generally with greater flexibility,
in order to enable the understanding of how companies behave in these
areas.
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S. 7
Sustainability: Principle
Principle of Accountability
1.
2.
3.
4.
The principle of accountability identifies the responsibility &

shows societys right to know about some aspects that may affect it,
such as: environmental violations,
or social injustice in which companies are involved.
This right to know becomes real with the stakeholders,
who represent the interests of society from many perspectives.
The principle of accountability involves a wide range of social agents,
who not only claim the right to know but
also require that companies take responsibility for their actions.
The accountability concept indicates that
each organization has a responsibility to carry out some actions &
to inform about their implications to the different stakeholders.
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S. 8
Sustainability: Financial
Financial vs. Non-Financial
Just like financial reporting depends on reliable numbers,

a growing demand for non-financial data,
To
a. Be equally competent & measurable &
b. Ensure maximum transparency & ease of comparison.
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Sustainability: SER Beyond Financial Reports
The idea of disclosing Social & Environmental Reports (SER),

in addition to financial reports:
1. One of the first approaches to this concept was called 3P,
in reference to people, planet & profit, &
was included in the first SER disclosed by the Anglo-Dutch petrol company,
Shell, in 2000.
2. By end of 20th century the reporting became systematic in organizations
3. These reports show how companies manage the social & environmental
aspects inherent in any organization by
linking the corporate reporting systems &
sustainable strategic management
4. The sustainability reporting phenomenon has been analyzed from
2 theoretical approaches: The
a. economic approach &
b. socio-political approach
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Sustainability: SER
Social & Environmental Reports (SER)

1. Promoted by UN & ecological organizations:
in the environmental field,
the development of sustainability reporting arose from
concern about the serious ecological problems of the planet.
2. Resulting firms that were more susceptible to environmental incidents:

petrol & chemical companies,
to start disclosing reports on Social & Environmental issues in their
annual reports
3. At later state, environmental management systems (ISO 14001, EMAS),
aimed at reflecting the organizations public commitment on
environmental aspects
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Sustainability: 21st Century
SER Towards 21st Century

1. The growth of sustainability reporting was the driving force in the elaboration
of SER towards the end of the 20th century.
2. The main objective of the SER is
to communicate an organizations commitment to sustainable development as
well as
describing the results of its actions in the economic, social & environmental
dimensions:
a. Sustainability reporting might also contribute to other objectives of the
company.
The most important: introduction of innovative management systems,
focused on the sustainability of activities,
which may provide competitive advantages in the mid-long term (Porter &
Kramer, 2006)
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S. 12
Sustainability: 21st Century & Fact
b. Improvement of organizations image by

communicating its CSR practices to their stakeholders:
Local community, NGOs.
Michael Eugene Porter
Bishop William Lawrence
Univ. Prof. Harvard Business
School
Mark Kramer
Managing Director & Co-Founder,
Foundation Strategy Group LLC
Boston (2000)
SER Factors
Factors to manage when elaborating SER in order to differentiate them from
other types of corporate reporting:
1. Organization to implement measures to control social & environmental
impacts arising from the companys activities
2. Adopt a generally accepted format, choose a standard to compare with
3. Accountability to focused on the strength of the impact on stakeholders.
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Sustainability: Strategies
SER Strategies
Based on the 3 factors, disclosing SER may help the company to achieve several
internal & external objectives.
1. Evaluating the organizations performance on sustainable development in
relation to established regulations & voluntary initiatives.
2. Highlighting the relationship & influence on each other among organizations,
& expectations created around the sustainable development.
3. Comparing the performance of an organization with other companies, as well
as analyzing its evolution over time.
Reducing
4. risk level in managing the social & environmental aspects that affect
corporations.
5. costs through improving management mechanisms & increasing profits by
accessing socially or environmentally-oriented markets.
6. Increasing its stock market capitalization due to the growing ethical
investment.
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Sustainability: Ethical & Indexes
Ethical & Sustainability Indexes

Currently,
mechanisms for pushing companies to implement & formally notify
socially responsible behavior have been introduced
for quoted companies, 2 most important areas:
1. Ethical, or socially responsible matters.
As sustainability reporting analysis is one of the main tools in
selecting the companies to be included in ethical investment funds
2. Sustainability stock exchange indexes bring together leading
companies in terms of sustainability or CSR practices,
e.g.:
a. Dow Jones Sustainability Group Indexes &
b. FTSE4GOOD Indexes
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SER: Economic Approach
Economic approach,
explains sustainability reporting according to the Neo-classical
Economic Theory,
that can be sub-divided into, 2 theoretical approaches:
The
1. theory of usefulness for investor decision-making.
For ethical reasoning for investors decision-making,
where investors take position in the market depending on
perception of the socially responsible behavior of organization
2. agency theory or positive accounting theory.
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SER: Socio-Political Approach
Socio-political approach,
to sustainability reporting criticizes the reductionist character of the economic
approach,
arguing SER disclosure must be interwoven with political & institutional
processes, sub-divided into 3 theoretical approaches:
1. Economic Theory (ET)
2. Legitimacy Theory (LT),
making a more significant contribution to understanding the sustainability
reporting phenomenon, aimed at being accepted by society.
3. Stakeholder Theory (ST),
making a more significant contribution to understanding the sustainability
reporting phenomenon
Sustainability Reporting. Defn:
A corporate communication mechanism to influence stakeholders image of the
company & focused on the accountability of organizations.
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Part2: Sustainability Reporting
Sustainability: Introduction
II. Sustainability Reporting

Introduction to Sustainability Reporting
1. Is the critical first step in implementing a strategy that
can help an organization understand the impact on its stakeholders &
ways in which it might mitigate a negative impact on
the economy, society & the environment.
2. Standardized reporting makes it easy to compare,
where performance indicators on sustainability issues will become as
important for business as financial performance.
3. High quality & comparable data on
sustainability performance & impacts will be an essential requirement
as the concept of integrated reporting develops & increases in popularity.
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Sustainability: Mechanisms for Sustainability Reporting
Annual Report
Mandatory Information
(financial statements)
Voluntary
Information
1. Assets,
2. Costs,
Financial 3. Environmental provisions &
reporting 4. Contingencies on the balance sheet,
5. Profit & loss account &
6. Annual Report
Description of
a. Costs,
b. Investments,
c. Environmental
provisions &
d. Contingencies
Separate Report
1. Ecological balance
sheet
2. Full ecological
costs accounting
Source: Adapted from Larrinaga et al. (2002)

Carlos Larrinaga
Dean, Faculty of Economics & Business,
Univ. of Burgos (2014-present)
Professor, Financial Economics &
Accounting, Univ. of Burgos (2009present)
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Sustainability: Mechanisms for Sustainability Reporting (Cont.)

Annual Report
Mandatory
Information
(Financial Statements)
Nonfinancial
reporting
Voluntary Information
Separate Report
1. Physical
a. Physical quantification
quantification of the
of the companys
environmental impact
environmental impact,
Quan2. Number of
supported by
titative
employees
graphs, tables.
b. Quantification of
accidents at work
1. Environmental report
2. Ecological balance
sheet
Social
3. balance sheet
4. & environmental
reports
Description of
1. environmental
impact
Quali- or environment
tative
initiatives.
2. social risk control
mechanisms
1. Technical description
of impacts &
2. proactive
programmes
Social
3. balance sheet
4. & environmental
reports
Description of
a. environmental
impact &
proactive initiatives
b. the work
atmosphere
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Sustainability: Evolution of Sustainability Reporting
Period
1970s
1980s
1990s
Data Disclosed
Characteristics
Social Audit
Financial report on environmental impact
Social Balance Sheet
Information on aspects of interest for

representatives of the organization
Social & Environmental

Data
Data supplied in company financial

statements
Environmental Reports
Reports arising from implementing

Environmental Management Systems
Financial Environmental Accounting rules applied to environmental

Reports
aspects
2000- Social & Environmental

2010 Reports
Reports that include the economic, social &

environmental dimensions of organizations
Source: Adapted from Moneva (2002)

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GRI: About
III. Global Reporting Initiative (GRI)

a. 1997: As an initiative Coalition for Environmentally Responsible Economies
(CERES) & the United Nations Environmental Programme (UNEP)
the need for Global Reporting Initiative (GRI).

b. GRI aimed at creating a common global framework for
voluntary reporting on the economic, social & environmental impact of
corporations & other organisations (White, 1999).
c. It evolved rapidly, with large changes, into an independent institution.
Dr. Allen L. White
Vice President & Senior
Fellow, Tellus Inst., Boston,
USA
Co-Founder & CEO, GRI
(2002)
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S. 23
GRI: Features & Principles
3 main features for improving

standardization process:
1. Globalization of corporate
activities,
to demonstrate the need to
develop innovative instruments for
accountability:
economic & a social &
environmental perspective.
2. Shortcomings of eco-efficiency as
an environmentally-friendly
production system,
within new perspective of
sustainable development,
in that it does not consider future
generations.
3. Need for comparability &

reliability in sustainability
reporting,
so stakeholders may improve
their decisions.
GRI framework as a guide in
elaborating SER based on
5 principles:
1. Inclusion of stakeholders
2. Balanced global process
3. Full use of communication
technologies
4. Transparency
5. Efficiency
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S. 24
Part3: Current Landscape
Sustainability: Landscape
IV. Current Sustainability Landscape

1. Transparency & disclosure of sustainability information is high on the
agenda.
2. An increasing demand for sustainability reports to be
a. Credible,
b. Reliable,
c. Relevant &
d. Strategic
3. Organizations to embed sustainability strategy into the business &
show it can provide value to both the organization & wider society.
4. Political leadership is vital with the increasing reporting requirements,
to impact on sustainability landscape.
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Sustainability: Objectives
Business Objectives
1. Key reasons organizations implement a sustainability strategy,
for companies to
a. add value,
b. identify &
c. mitigate
...risks.
2. Sustainability reporting is moving into the mainstream.
3. If a value were placed on sustainability,

it would push the issue into the boardroom & the mainstream.
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Sustainability: Effect
Industry Effect
Companies
1. carrying out activities with potential risk to the
environment,
that have been most involved in disclosing Social
& Environmental Reports (Moneva & Llena, 2000).
2. disclose Social & Environmental Reports,
in order to show stakeholders they operate
according to their claims,
ensuring the survival of the corporations (Lindblom,
1994).
Jos M. Moneva
Dean, Faculty of
Economics & Business
Admin., Univ. of Zaragoza
3. Motivation in disclosing SER,
to legitimize any of the companys activities,

which may have a negative effect on sustainability.
Fernando Llena
Professor, Dept. of
Finance & Accounting,
Univ. of Zaragoza.
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Sustainability: Business
Sustainability in Business
Demands measurement of the different elements,
1 Reporting that are critical to effective sustainable business
operations.
2 Strategy
Helps build on sustainability reporting as

a tool to understand internal & external impact on
the business,
using data to help address challenges of 21st century
business &
create a competitive edge in a world increasingly
shaped by effects of...
resource scarcity & climate change
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S. 29
Sustainability: Business as Usual, Mainstream & Strategy
Sustainability: The New Business

as Usual
1. Policy shift of sustainability
2. Sustainability report an integrated
reporting
3. Reporting through supply chain
4. Business: the main driver of
sustainability action
Sustainability Practices More
Mainstream
1. Sustainability frameworks &
indicators
2. Growth of mandatory reporting
3. Harmonizing of sustainability data
in business agenda
Most Influential on Sustainability

Strategy
1. Clients and/or consumers
2. Employees
3. Board of Directors (in charged
with governance)
4. Investors
5. Regulators
6. Communities
7. Civil society groups
8. Competitors
9. Supply chain/clients
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Part4: Drivers & Benefits
Sustainability: Drivers & Benefits
V. Drivers & Benefits

1. Range of stakeholders
2. Decision is moving to the
board
3. Aligning with the strategic or
executive function
4. Valuation: a breakthrough
for sustainability ?
5. Improving operational
performance
Key Drivers of Sustainable

Strategy
Key stakeholders,
(especially
consumers/customers)
demand organization to be
responsible & ethical.
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Sustainability: Summary & Conclusion
VI. Summary & Conclusion

Overall Responsibility for
Sustainability Strategy
Chief
1. executive officer
2. sustainability officer
3. financial officer
4. Regulators
5. Sustainability team
Principal Objectives to
Sustainability Strategy
To
a. Add value.
b. Identify & mitigate risks
c. Obtain a competitive
advantage
d. Attract customers and/or
investors
e. Be responsive to shareholders
request
f. Attract & retain staff
g. Comply with regulations
h. Identify cost savings
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S. 33
Concluding Remarks
1. An increase number of SER disclosed according to GRI standards is

appreciated since 2006,
sustainability reporting is relevant throughout the world
mainstreaming of sustainability & sustainability reporting is necessary.

2. Disclosing SER when establishing business strategic policies
is growing,
hence omitting them may cause a loss in competitiveness in comparison with
other firms in the same industry (Porter & Kramer, 2006)
3. SER aspect is of great interest for management at the highest level in
organizations because
the results show that more aspects relating to sustainable management are
being taken into account with greater frequency
when making investment decisions.
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Concluding Remarks (Cont.)
Denis Cormier
Professor
Rochester Inst. of
Technology (2009present)
North Carolina State
Univ. (1995-2009)
4. By enhancing transparency,
a companys social &
environmental reporting increases
its credibility &
potentially reduces an investors
risk apprehensions
(Cormier & Magnan, 2007)
5. Regulatory pressure is growing
convergence of frameworks,
with Global Reporting Initiatives
(GRI) Guidelines demonstrating
how harmonization can be
successful.
Michel Magnan
Professor & Stephen A.
Jarislowsky Chair in
Corporate Governance,
School of Mgt. John
Molson, Concordia Univ.
(2013-present)
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Course : Corporate Social Responsibility (1509CSR06)
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Course : Corporate Social Responsibility (1509CSR06)

LSPR eLearning Program

Session Topic : Sustainability Reporting

By Ida M. Bayuni, M.M.

Background & SER

Drivers & Benefits

Part1: Background & SER

I. Background & SER

Sustainability: Background (Cont.)

Companies modified their strategic management from,

The principle of accountability identifies the responsibility &

Financial vs. Non-Financial

Just like financial reporting depends on reliable numbers,

Sustainability: SER Beyond Financial Reports

The idea of disclosing Social & Environmental Reports (SER),

Social & Environmental Reports (SER)

2. Resulting firms that were more susceptible to environmental incidents:

Sustainability: 21st Century

SER Towards 21st Century

Sustainability: 21st Century & Fact

b. Improvement of organizations image by

Sustainability: Ethical & Indexes

Ethical & Sustainability Indexes

SER: Economic Approach

SER: Socio-Political Approach

Part2: Sustainability Reporting

II. Sustainability Reporting

Sustainability: Mechanisms for Sustainability Reporting

Source: Adapted from Larrinaga et al. (2002)

Sustainability: Mechanisms for Sustainability Reporting (Cont.)

Sustainability: Evolution of Sustainability Reporting

Financial report on environmental impact

Social Balance Sheet

Information on aspects of interest for

Social & Environmental

Data supplied in company financial

Reports arising from implementing

Financial Environmental Accounting rules applied to environmental

2000- Social & Environmental

Reports that include the economic, social &

Source: Adapted from Moneva (2002)

III. Global Reporting Initiative (GRI)

the need for Global Reporting Initiative (GRI).

GRI: Features & Principles

3 main features for improving

3. Need for comparability &

Part3: Current Landscape

IV. Current Sustainability Landscape

3. If a value were placed on sustainability,

3. Motivation in disclosing SER,

to legitimize any of the companys activities,

Helps build on sustainability reporting as

Sustainability: Business as Usual, Mainstream & Strategy

Sustainability: The New Business

Most Influential on Sustainability

Part4: Drivers & Benefits

Sustainability: Drivers & Benefits