Chapter 2 - Environmental, social and governance factors Flashcards
What are six capitals of integrated reporting?
- Natural capital
- Human capital
- Social capital
- Intellectual capital
- Manufactured capital
- Financial capital
What is Social capital?
Relationships, partnerships and cooperation, for example with suppliers.
What is Financial capital?
- Funds available to enable the business to operate.
- Reflects the value generated from the other types of capital.
What are Contingent costs?
Include future compliance costs (such as clear up costs) or remediation costs when a site is decommissioned
What is Manufactured capital
– Buildings, equipment and infrastructure used by the business.
What are five arguments against ESG?
- 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
Are GRI standards mandatory?
No
What is human capital?
Health, skills, motivation of employees.
What is Intellectual capital?
Patents, brand value and tacit knowledge
What is Mendelows matrix?
The matrix that splits stakeholders into the four quadrants below:
- Minimal effort
- Keep satified
- Keep informed
- Key players
What is business ethics?
The application of ethical values to business behaviour.
What is Corporate governance? (2 things)
- 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.
What is Triple bottom line (TBL) accounting?
Expanding the traditional company reporting framework to take into account;
- Environmental performance
- Social performance
- Economic performance.
What are four arguments for ESG?
- 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
What are the four categories of environmental cost?
- Conventional costs
- Contingent costs
- Relationship costs
- Reputational costs
What are four key EMA techniques?
- Activity- based costing (ABC)
- Lifecycle costing
- Input-output analysis
- Flow cost accounting
What are Relationship costs?
Image costs such as the cost of producing environmental information for public reporting (including integrated reporting or sustainability reports)
What is corporate social responsibility (CSR)?
The idea that a company should be sensitive to the needs of all stakeholders in its business operations and not just shareholders.
What are the Global Reporting Initiative (GRI) standards?
Standards that provide a common language for reporting on sustainability in a credible and consistent way.
What is Environmental, social and (corporate) governance (ESG)?
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.
The Integrated Reporting (IR) framework recognises the importance of looking at financial and sustainability performance in an integrated way: (2 things)
- Identifying the relationship between ‘six capitals’
- encouraging a focus on business sustainability and an organisation’s long-term success.
What are ethics? (2 things)
- 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.
What is natural capital?
- Natural renewable and non-renewable resources and processes used by a business in delivering its products/services.
- Considers, for example, waste, recycling and emissions.
What are Conventional costs?
Costs having an environmental impact such as raw material and energy costs
What is a stakeholder?
A group or individual who has an interest in what the organisation does, or an expectation of the organisation.
What are Reputational costs?
Costs associated with failing to address environmental issues, for example, lost sales due to brand damage
What is sustainable development?
Development that meets the need of the present without compromising the ability of future generations to meet their own needs.
Sustainability is a need for companies to focus on:…
1 - Economic prosperity
2 - Environmental quality
3 - Social justice
