Bài giảng môn Kế toán, kiểm toán - Chapter 15: International corporate social reporting

Chapter 15:International Corporate Social ReportingChapter TopicsTheories to Explain CSR PracticesDrivers of CSR Practices by CompaniesImplications of Climate Change for CSRRegulating CSR PracticesGlobal Reporting Initiative (GRI)CSR Practices by MNCs15-2Learning ObjectivesExplain the meaning of corporate social reporting (CSR).Identify theories used to explain the CSR practices of companies.Describe the current international trend of external reporting.Describe the steps taken at the international level to regulate CSR practices of companies.Discuss the factors that drive CSR practices of MNCs.Identify the organizations that promote CSR at the international level.Discuss the role played by Global Reporting Initiative (GRI).Explain the diversity in CSR disclosures by companies at the international level, with possible reasons for the current trends in this area15-3Corporate Social Reporting (CSR)--BackgroundAlso known as:Ecological footprint reportingEconomic, social, and governance (ESG) reportingTriple bottom line (TBL) reportingGoal of sustainable development Meet the needs of the present Without compromising the ability of future to meet needs15-4The Meaning of Corporate Social Reporting (CSR)Derived from notion of organizational societal responsibility:Which comes from notion of stewardship—the accountability of management for the resources entrusted to an organizationAccountable to shareholders and other stakeholders (employees, creditors), and society at largeAccountability is proactive—not reactiveExample—morally irresponsible for corporations to profit by depleting natural resources or polluting the environmentRecognize the need to take responsibility for one’s actions15-5Theories to Explain CSR PracticesStakeholder theoryEnvironmental disclosures made in response to stakeholder demand for environmental and social informationMajor problem-- fails to explain different disclosures by similar industries in same geographic areaLegitimacy theoryCSR is means to deal with firm’s exposure to political, economic and social pressuresBehavior motivated by society’s perceived goals to legitimize their performance15-6Theories to Explain CSR PracticesLegitimacy theory (continued)Society’s perceived goals represented by various interest groups such as environmental public interest groups (e.g. motivation for disclosures by other petroleum firms after Exxon Valdez oil spill and expected disclosures from firms other than BP after 2010 Gulf of Mexico oil spill)Has sometimes led to increased skepticism, such as in Ireland who has no demand for CSR, so any attempt at CSR is questionedAustralian managers, on the other hand, consider CSR disclosures useful for maintaining or reestablishing legitimacy15-7Current International Trends and Drivers of External ReportingLargely voluntary in most countriesWide diversity based on different countries’ driversNational culture affects CSR practices:E.g. Spanish culture differ from Anglo-Saxon countries closer to Latin-European and Latin-American countriesRemember Hofstede's four societal cultural dimensions:Individualism vs. collectivismLarge vs. small power distanceStrong vs. weak uncertainty avoidanceMasculinity vs. femininityAlso remember Gray’s relationship between accounting values:Secrecy vs. transparency (e.g. Spain secretive in CSR disclosures)Conservatism vs. optimismUniformity vs. flexibilityStatutory control vs. professionalism15-8Current International Trends of External ReportingInfluenced by organizational culture:Attitude of top management toward its stakeholders“Tone at the top” identified in U.S. Treadway Commission ReportManagers determine relevant audienceForeign subsidiaries may disclose information in line with parent—not local cultureRate of development of CSR internationally is slow due to cultural factors—economic, political, capitalism, lethargy, inertia and resistance to change by accounting profession15-9Regulating CSR PracticesSignificant shortcomings with voluntary CSR practicesBiased and self-laudatory disclosures—minimal disclosure of negative environmental informationCSR practices insufficient and low in credibility—lack independent verification of performance and selectivityDifference between accountability and forced accountability, where spirit of accountability may not exist in the latter 15-10Regulating CSR PracticesProblems of regulation through legislationLobbying in favor of economic over social/environmental interests may undermine regulatory enforcementIf corporate legitimizing activities successful—public pressure for governmental disclosure legislation may be low leaving it up to managers to control details of social reportingNeeds to be stringent enforcement mechanism (e.g. Thailand’s social and environmental legislation hasn’t promoted more management CSR disclosure)Regulatory agencies weak due to dependency on expertise and information of those they are trying to regulate15-11Regulating CSR PracticesRegulation of CSR in the United StatesChicago Climate Exchange is the only cap and trade system for all six greenhouse gases (GHGs) in North AmericaEmitting members—voluntary but legally binding commitments to meet annual GHG reduction targets:If below target—can sell or bank surplus allowancesIf above target—purchase CCX Carbon Financial Instrument contracts—tradable commodities (each contract = 100 metric tons of CO2 equivalent and comprised of exchange allowances and offsets)CCX failed since:Governing agencies issue certificates for a fictional commodity of emissions not emittedCarbon offsets are nearly impossible to verify as to legitimacyCalifornia and nine Eastern Seaboard states have formed Regional Greenhouse Gas Initiative to introduce regulations on GHG emissions15-12Regulating CSR PracticesRegulation of CSR in the United States (continued)SEC has taken steps to introduce greater regulatory scrutiny“Superfund” legislation in the ’80s required corporations to actively remediate past problems (even if not responsible for the contamination)“Superfund” reporting also helped more positive environmental informational financial reporting15-13Regulating CSR PracticesRegulation of CSR in other countries and regionsEnvironmental laws increased dramatically in Australia, New Zealand, U.K., and the European UnionEnvironmental Protection Agency establishes behavioral standards/enforces compliance through punitive measuresThe Asia-Pacific Partnership on Clean Development and Climate signed in mid-2005 to deploy clean energy technology15-14Regulating CSR PracticesInternational Arrangements to Regulate CSRBodies such as World Bank and IFAC and organizations such as Kyoto protocol and GRI promote CSR practicesWorld Bank set up PCF to stimulate development of the emissions trading market and assist investment in carbon creditsIFAC developed Sustainability Framework to influence the way organizations integrate sustainabilitySO 26000: 2010 provides guidance on social responsibilityKyoto Protocol (2005), created under UNFCCC is a combination of country-specific GHG emission reduction targets and emissions trading mechanisms15-15Drivers of CSR Practices of MNCsClimate changeInternational Panel on Climate Change (IPCC) has found concentration of carbon dioxide in the atmosphere has increased by 35% in the past 250 years 1995-2006: rank among warmest years for global surface temperature2007 Stern Report in the United Kingdom on the Economics of Climate Change: our actions resulting in climate change risk major disruption in economic activity (e.g. could cost .5% to 1% of world GDP per annum by mid-century and could approach to economic depression of first half of twentieth century)15-16Drivers of CSR Practices of MNCsClimate change—key conceptsEmissions Trading—tradable carbon credits must be purchased or pay a fine if certain emission limits exceededCarbon Footprints—represents a range of concerns about environmental impacts and degradationCarbon Funds and Emissions Brokerages—funds set up to purchase carbon credits and brokerages mediate between buyers and sellers of the creditsClean Development Mechanism (CDM)—promotes reductions in emissions of developing countriesCarbon Neutral—emissions offset by removal of an equal amount of gas from the atmosphereCarbon Tax—tax on use of fuels causing carbon dioxide and greenhouse gas emissions—based on type and quantity—promotes fuel efficiency15-17Organizations that Promote CSRKyoto ProtocolEffective from early 2005Created under UNFCCCCombination of country-specific GHG emission reduction targets and emission trading mechanismsCompanies ratifying it provide greater pollution disclosuresGlobal Reporting InitiativeFormed by U.S.-based nonprofits Ceres and Tellus Institute with support of UNEPDeveloped world’s most widely used sustainability reporting frameworkAssists reporting organizations in understanding biodiversity issuesLaunched international certified training program in 200715-18Global Reporting Initiative (GRI)Formed by the U.S.-based nonprofits Ceres and Tellus InstituteIndependent, yet remains a collaborating centre of UNEP and works in cooperation with the United Nations Global CompactDeveloped the world’s most widely used sustainability reporting frameworkGRI Sustainability Guidelines have two parts:Part I—provides reporting principles and guidance on content, ensuring quality, and setting boundaryPart II—provides standards for disclosure, specifies base content, and identifies types of disclosure: namely, strategy and profile, management approach, and performance indicatorsG3, third generation of GRI, outlines core content for reporting15-19Global Reporting Initiative (GRI)Biodiversity—A GRI Reporting Resource (2007) assists in understanding biodiversity issues, relationship with organizations, and offers insight to biodiversity reportingOther initiatives:GRI-Certified Training Program- to create worldwide common understanding of the sustainability reporting processSponsored Global Conference on Sustainability and Transparency to discuss issues on reporting and assuranceG4—standardized approach to reporting, encouraging the degree of transparency and consistencyFormation of the International Integrated Reporting Committee (IIRC)—to develop globally acceptable framework that brings together financial, environmental, social, and governance information in a clear, concise, consistent, comparable, and integrated manner15-20Exhibit 15.1— GRI Reporting Framework15-21Diversity in CSR Disclosures by CompaniesUPS 2009 annual report states that it follows GRI guidelines:Shows plans to cut airline carbon emissionsShows how it responds to each of G3 indicatorsGRI research indicates worldwide trend towards sustain-ability:Helps build and maintain brandStrong correlation between high profitability and sustainability in top international businesses (e.g. Coca-Cola, Microsoft, IBM, GE and Nokia)Senior management clearly express commitment to CSRHard to find examples of companies quantifying financial cost or benefit of reducing greenhouse emissions15-22Diversity in CSR Disclosures by CompaniesItems disclosed and methods of CSR disclosure vary in different countriesItems Disclosed:U.S., U.K. and Australia mostly disclose human resources and community involvementThailand mostly discloses employee and environmental informationMethods of Disclosure:U.S. and U.K. use both monetary and nonmonetary disclosureAustralia usually discloses nonmonetary and more favorable to company even around time of negative events:Also haven’t adopted compliance-with-standard style of stakeholder reporting as in EuropeLittle reference to reporting standards or necessity of disclosure15-23Diversity in CSR Disclosures by CompaniesExtent of Environmental Disclosure varies:Canada more extensive than U.S.Firms from countries that ratified Kyoto Protocol seem to have higher disclosure indices related to pollution and greenhouse gas emissionsJapan stands out as a country with high rate of reporting on climate changeExtent of Environmental Disclosure VariesFew companies report on risk of legal action or business disruptions caused by climate issues15-24End of Chapter 1515-25