BUSS4 CSR Research Bullet 5

How useful is social reporting for stakeholders in CSR? These notes provide some ideas for students revising research bullet 5:

The fifth research bullet asks students to consider the: value and limitations to businesses and stakeholders of social reporting

Definitions
Social reporting / accounting: accounting for, and formally reporting the social & environmental impacts of a firms actions to all relevant stakeholders
Social audit: a systematic analysis of the impact a business has on the surrounding community, environment and economy, as well as upon individual people
Greenwashing: reporting a false or misleading picture of environmental friendliness used to conceal or obscure damaging activities

Key Theory
Accounting for sustainability: recognising the social costs of a firms activities (e.g. water usage, carbon emissions)
Integrated reporting: the representation of a company’s performance in terms of both financial and non-financial results.
Socially-responsible investing: also known as ethical investing; shareholders pursuing investment strategies which seeks to maximize both financial return and social good.

Value of social reporting
Financial accounts do not go far enough - they are primarily meant for shareholders
Increasing number of firms producing dedicated CSR reports suggests that shareholders and stakeholders value info
Provides a way for stakeholders to see how a firm is performing compared with its CSR aims & objectives (helps them make informed decisions)
Encourages a process of social auditing + supply chain audits
Assists ethical investing - e.g. pension funds looking to invest in CSR-friendly firms
Focuses firms on risks - reducing potential costs of CSR failure
In-depth social reporting (e.g. M&S Plan A) provides greater assurance and transparency about the business

Limitations of social reporting
Social reporting varies widely in terms of relevance and quality, largely because there is no global standard for measuring and reporting on CSR performance
Tendency for greenwashing: CSR claims & statements that are either inaccurate or deliberately misleading
Medium-sized and smaller firms - no requirement to publish relevant business information
Many CSR reports are produced by the marketing or investor relations depts - exercises in “spin” and PR?
Costs of monitoring, compliance and reporting = extra overheads for business
Risk that firms set themselves soft CSR targets to make their social reporting appear more successful

Examples / Evidence
Many attempts to encourage firms to adopt social reporting: e.g.
- Accounting for Sustainability (Prince of Wales)
- Global Reporting Initiative (aiming for greater consistence between sustainability reports)
There has been an increase in the number of quoted firms producing CSR reports: up from 840 in 2001 to 4,500 in 2010 (but still 15,000 firms producing no report). Progress - but still not widespread.
Rise of ethical investing: according to the Ethical Investment Research Service (EIRIS) £6.7 billion is invested in ethical and environmental investment funds in the UK (and rising)
ISO 26000 sustainability standard for CSR (voluntary for firms to adopt) sets out the 7 core standards for social reporting & CSR performance: Human rights; consumer issues; fair operating practices; environment; community; labour practices; organisation

“Depends on” Factors
Value of social reporting will depend on:
- Ability to measure performance against relevant KPIs
- Extent to which stakeholders place emphasis on data

Limitations of social reporting will depend on:
- If reporting standards for CSR remain absent (ISO 26000 cannot be certified = less value = less pressure to achieve)
- Extent of competitive pressure to comply

Possible Evaluation Arguments
Systems of accounting for CSR performance are still evolving - this is a fast-changing area of accounting
Firms that have a particularly strong story to tell on their CSR activities tend to take social reporting seriously - they are honest & transparent about net benefits & costs
Still a strong suspicion amongst many stakeholders that social reporint remains too influenced by marketing