Chapter 2 - Environmental, social and governance factors

Question 1

What are six capitals of integrated reporting?

Answer 1

• Natural capital
• Human capital
• Social capital
• Intellectual capital
• Manufactured capital
• Financial capital

Question 2

What is Social capital?

Answer 2

Relationships, partnerships and cooperation, for example with suppliers.

Question 3

What is Financial capital?

Answer 3

• Funds available to enable the business to operate.
• Reflects the value generated from the other types of capital.

Question 4

What are Contingent costs?

Answer 4

Include future compliance costs (such as clear up costs) or remediation costs when a site is decommissioned

Question 5

What is Manufactured capital

Answer 5

– Buildings, equipment and infrastructure used by the business.

Question 6

What are five arguments against ESG?

Answer 6

• The primary purpose of a company is to earn a profit
• Focusing on maximising shareholder wealth could be said to be aligned with ESG issues. (I.e increased tax payments)
• Potential increased costs
• Lack of knowledge
• Lack of skills and resources for ESG
• Turn away business from cusrtomers considered to be unethical

Question 7

Are GRI standards mandatory?

Answer 7

No

Question 8

What is human capital?

Answer 8

Health, skills, motivation of employees.

Question 9

What is Intellectual capital?

Answer 9

Patents, brand value and tacit knowledge

Question 10

What is Mendelows matrix?

Answer 10

The matrix that splits stakeholders into the four quadrants below:

• Minimal effort
• Keep satified
• Keep informed
• Key players

Question 11

What is business ethics?

Answer 11

The application of ethical values to business behaviour.

Question 12

What is Corporate governance? (2 things)

Answer 12

• The set of processes and policies by which a company is directed, administered and controlled.
• It includes the appropriate role of the board of directors and the auditors of the company.

Question 13

What is Triple bottom line (TBL) accounting?

Answer 13

Expanding the traditional company reporting framework to take into account;

• Environmental performance
• Social performance
• Economic performance.

Question 14

What are four arguments for ESG?

Answer 14

• Can help attract and retain customers
• Can help attract and retain high calibre staff and access to a wider human resource base
• Can help to reduce costs, fines and lawsuits and potentially offer access to subsidies and government support.
• Fulfils the needs of stakeholders such as environmental groups, who may otherwise join forces with other stakeholders

Question 15

What are the four categories of environmental cost?

Answer 15

• Conventional costs
• Contingent costs
• Relationship costs
• Reputational costs

Question 16

What are four key EMA techniques?

Answer 16

• Activity- based costing (ABC)
• Lifecycle costing
• Input-output analysis
• Flow cost accounting

Question 17

What are Relationship costs?

Answer 17

Image costs such as the cost of producing environmental information for public reporting (including integrated reporting or sustainability reports)

Question 18

What is corporate social responsibility (CSR)?

Answer 18

The idea that a company should be sensitive to the needs of all stakeholders in its business operations and not just shareholders.

Question 19

What are the Global Reporting Initiative (GRI) standards?

Answer 19

Standards that provide a common language for reporting on sustainability in a credible and consistent way.

Question 20

What is Environmental, social and (corporate) governance (ESG)?

Answer 20

The three central factors in measuring

• The sustainability and societal impact of an organisation; and
• That help to determine the long-term performance of an organisation.

Question 21

The Integrated Reporting (IR) framework recognises the importance of looking at financial and sustainability performance in an integrated way: (2 things)

Answer 21

• Identifying the relationship between ‘six capitals’
• encouraging a focus on business sustainability and an organisation’s long-term success.

Question 22

What are ethics? (2 things)

Answer 22

• A set of moral principles that examines the concept of right and wrong.
• It relates to behaviour expected by society, but not codified in law.

Question 23

What is natural capital?

Answer 23

• Natural renewable and non-renewable resources and processes used by a business in delivering its products/services.
• Considers, for example, waste, recycling and emissions.

Question 24

What are Conventional costs?

Answer 24

Costs having an environmental impact such as raw material and energy costs

Question 25

What is a stakeholder?

Answer 25

A group or individual who has an interest in what the organisation does, or an expectation of the organisation.

Question 26

What are Reputational costs?

Answer 26

Costs associated with failing to address environmental issues, for example, lost sales due to brand damage

Question 27

What is sustainable development?

Answer 27

Development that meets the need of the present without compromising the ability of future generations to meet their own needs.

Question 28

Sustainability is a need for companies to focus on:…

Answer 28

1 - Economic prosperity
2 - Environmental quality
3 - Social justice