11. Corporate Social Disclosure

Question 1

Explain the nature of Corporate Social Disclosure (CSD)

Answer 1

• Corporate Social Disclosure is about reporting in some formal way the extent to which the entity has complied with its social, environmental, and ethical obligations to its employees, associates and the general community
• for example, industrial safety, pollution control and resource conservation
• the nature of disclosure can also include details about the company’s sustainability strategy, goals, targets, and progress towards achieving them
• such disclosure is mostly voluntary in Australia although there is a growing community feeling that companies ought to engage in it
• there are no set forms for CSD so a company can generally choose the format and medium that it prefers

Question 2

What are three costs of Corporate Social Disclosure (CSD)?

Answer 2

• Providing community support and initiatives such as donations and sponsorship cost money.
• Implementing and using environmental solutions may come with additional costs to the business.
• More staff may be need to be employed with specialist skills and knowledge.
• May distract from profit centred activities.

Question 3

What are three benefits of Corporate Social Disclosure (CSD)?

Answer 3

• Favourable perception of the business in the community may lead to increased market share.
• Can be a point of difference and increase competitive advantage.
• Favourable perception in the community may attract and retain staff.
• Increase public image may lead to favourable promotional opportunities and improved customer loyalty.

Question 4

Describe three difficulties faced by accountants in producing social and environmental information

Answer 4

1. Accountants may lack the knowledge required to prepare CSD reports and may therefore, need further training.
2. Many of the items likely to be included in CSD reports may not be able to be accurately measured / standardised
3. Accountants may struggle with the complex data collection and measurement methods for CSD reports

Question 5

Examine three ways in how the directors of a company could use their company’s CSD to evaluate their performance.

Answer 5

Stakeholder engagement: Directors can utilise their company’s CSD reports to evaluate their engagement with their community and stakeholders. A business must ensure that their stakeholders are constantly engaged with the company which can be represented through CSD, meaning directors must ensure that this engagement is maintained over time.

Investment decision-making: The directors of a company can use their CSD to evaluate their performance in terms of the viability of their investment decisions. A business must ensure that they are making appropriate amounts of investments for both CSR purposes and wealth creation purposes.

Public relations: By examining their company’s CSD, directors can evaluate their relations with the public in the market where they are located. A business must ensure that their relationship with the public is positively maintained, which can be analysed through CSD by directors.

Question 6

Identify four users of CSD and compare how they might use the information provided by a company

Answer 6

Consumers: consumers can use the information provided from a company’s CSD reports to decide whether they will purchase products/services from that certain company. In the case of a business having positive CSD reports, consumers would be more likely to indulge and vice versa.

Suppliers: suppliers can utilise a company’s CSD reports to decide whether they are willing to supply to that company or not. Suppliers will most likely supply to companies with positive public images, in most cases resulting from ethical and environmentally responsible behaviour.

Investors: investors can use the information provided from a company’s CSD reports to make a decision of whether they will invest in that business or not. These ethical and environmental factors will be considered by investors and if the results are positive, in most cases the investor will be more likely to invest.

Employees: employees can utilise a company’s CSD reports to decide whether they are willing to work for, or continue working for that certain company. If a business does not have positive CSD records, employees will be less inclined to work for that business, especially if they have strict personal ethical morals.