Bullet Point 5 Essay Plan

As discussed in lesson on 18 May 2011 (D Group)

Question: "The value and limitations to businesses and stakeholders of social reporting."

What are the arguments for having social reporting?  What are the arguments against?  How do we weigh these things up?

Start with some possible definitions:
Corporate Social Responsibility: The responsibility of a business or organisation to its primary stakeholders (shareholders) and also stakeholders that are affected by indirect and direct activities of the organisation (e.g. suppliers, customers, local community, environment)
Social Reporting/Accounting: Documenting how a business is meeting its social responsibilities.  Formally reporting the social and environmental impacts of a firm's actions to all relevant stakeholders.

Argument for:
Improved public relations.  Argument is that if a firm reports on its social committments, people will trust it more.  Because it helps stakeholders make informed decisions.
e.g.:

• In-depth social reporting provides greater assurance and transparency about the business.  e.g. Marks and Specner plan A.  See link: http://plana.marksandspencer.com/

More transparent for investors.
e.g.

• One dollar out of every nine is invested in CSR businesses in the USA.  (see Justine for source)
• The more reporting you do, the better your PR is going to be.

More transparent for customers.
e.g.

• Mori poll showed that 74% of the UK's population said that more information on a company's social and ethical behaviour would influence their purchasing decision. (APT revision guide)

More transparent to employees.
e.g.

• Possible employees can see what the firm is up to, as it's more transparent, which will hopefully mean they can find more high quality employees and reduce labour turnover.
• Example: British Airways as a negative example: an example of a business which is not meeting its committment to its shareholders.
• Possible: John Lewis.  Employs people and looks to employ them for the long run.  The employees are retained because they have such a large stake in the business.

Setting clear and tranpsparent goals for what the company expects in terms of its employees and managers, and suppliers.

Forces companies to report on non-financial indicators.
e.g.

• Regulations require that:
• Small companies not required to review
• Medium companies required to produce business review but not on Non-financial Key Performance Indicators.
• Large companies are requried to include non-financial Key Performance Indicators.

Arguments againsts:

Companies can use the reports as Greenwash.  Reporting a false or misleading picture of environmental friendliness used to conceal or obscure damaging activities.
e.g.

• Does Nike produce Greenwash?
• Evidence (www.corporatecrimereporter.com/ballinger052407.htm) is that Nike pays a certain amount of money to produce a report ($12million) where if they were simply responsible themselves it would cost more like $210 million per year.

Lack of standardisation.  Some businesses report on certain aspects, some on others.  There is no standard.  There is no comparison between like-for-like data.
e.g.

• (APT Guide) "M and S has reduced storage usage from 67.9 KwHhs/Sq to 54.8 KwHhs/Sq in 2009.  What does this mean?  How is it comparable?
• (APT guide) Only a fraction of companies surveyed provided statistical figures for climate change, energy use, etc.

They cost a lot to produce.  (Link with Bullet Point 1: Friedman argument about how business should only exist to make a profit).
e.g.

• Cost Nike $12 million per year to produce the report.

When reporting positive information about your business, you are bound to have some things which are not going to be positive.
e.g.

• The carbon trust charges businesses £1000 for small businesses to certify their emissions.
• For large businesses this may be significantly more.
• Puts the business in an awkward situation where it either has to report on the bad stuff or make the bad stuff sound as good as possible.

Conclusion:

Depends on:

• Ability to measure performance.
• The ability to write a report well and honestly.
• Reporting standards- will there ever be reporting standards (ISO 26000)
• Systems of accounting are still evolving.
• Those companies that are already responsible are the ones that take their reporting the most seriously.
• The suspicion of stakeholders that it's all just for marketing and 'greenwash.'