Lesson 7 - CSR, Stakeholder Reporting On Non finacial Issues Flashcards
CSR definition
The commitment by business to behave ethically
and contribute to economic development
While improving quality of life of the workforce as well as the community and society
Reporting on non financial issues
Corporate citizenship
Belief that companies should act in the same way as citizens
Meeting the countries legal, social, ethical and economic responsibilities expected of its citizens
But companies are not citizens and have a wider role to play
Sustainability
How a company carries out its operations
Develops its strategy
And manages risk
To have a positive impact or to lessen the negative impact on the environment
ESG and investors
Integrating ESG issues / concerns into capital markets
Fund managers and institutional investors have bought these 3 areas together and their benchmarking /scoring companies on these factors
CSR benefits - business case
CRISIS-
Capital
Relevant
Innovation
Sustainability
Investors (attract)
1-sustainability of company
2-reduce reputation risk
3-attract capital
4-necessary for innovation (ideas treatment of workforce WFH)
5-obtain competitive advantage
6-stay relevant and competitive
How CSR measured
Considerations when developing measures or targets
1- focus on outcomes
2- measure the outcome from a qualitative and quantitative perspective
3- engage and listen to stakeholders
4- do not undervalue stories - very powerful (changing lives through donations)
5- learn from others
6-identify and measure risks
7-measure, refine, modify and measure again (continually re examine measures)
Drivers for CSR
laws and regulations
OECD guidelines
World bank guidance
Investors are using ESG to evaluate companies and their values (record on human rights, impact on environment)
Also referred to as socially responsible investment
Greenwashing
making unsubstantiated or misleading claim about the environmental benefits of a product or service
Types of CSR activity
Philanthropy
high benefit to society
low benefit to organization
e.g. Patagonia donate profits
Pet projects
benefit to society low and
low benefit to organization
e.g. sponsor opera
Partnerships
High benefit to society
High benefit to organization
Eg football youth partnership
Propaganda
sponsoring an event
High benefit to org
Low benefit to society
E.g. virgin media sponsoring London marathon
Approaches to CSR
(area of impact)
ENVIRONMENTAL APPROACH - using paper straws as opposed to plastic
COMMUNITY APPROACH - companies sponsoring volunteer days or events to give back to the community
EMPLOYEE APPROACH - employee wellbeing focus - yoga, meditation
ETHICS APPROACH - ensure ethics of suppliers aligned to your own
SUPPLIER APPROACH
Creating CSR partnerships- benefits
CSR initiatives
UN Sustainability goals 17 goals - eliminate poverty, hunger, focus quality education, clean water, etc
UN Global compact - 10 principles cover human rights, Labour, environment.
Sigma project guidelines - sustainability reporting framework
Equator Principles- risk management framework to determine,assess and manage environmental and social risks
OECD guidelines - encourage positive contributions to environment, social progress
Benchmarking CSR
Dow Jones Sustainability Index
*FTSE 4 GOOD indexes**
Business in Community responsible Business Tracker - BITC
But there is no requirement or legislation for companies to report on CSR
But companies only talk about what they are doing well
This is on the horizon though
CoSec Role in CSR
Develop KPIs
Annual review at board
Advise of directors duties section 172 promote long term success of company
Communicate views of stakeholder and what are other companies doing
Engagement with stakeholders
Board should understand views of key stakeholders and
Describe in Annual report how their interests are considered
Ways to engage stakeholders
Reactively - defensive approach
Proactively - understand concerns
Interactively - ongoing relationship management - permanent discussions
Ways to engage with workforce
Director appointed from workforce
workforce advisory panel
Designated NED to take on workforce issues
Wates principles - same stakeholder engagement
Companies Act 2006 amendment
Miscellaneous Reporting Regulation 2018
Large companies
Must include a statement in Strategic report
how directors handled matters set out in section 172
CA 2006 - Section 172 promote the success of the company
Factors to consider
Consequence of decision in long term
Interests of employees
Foster relationships with suppliers, customers
Impact of ops on community and environment
Reputation - desirability to maintain high standards of conduct
Act fairly
CoSec Role in stakeholder engagement
Develop - ID stakeholders, develop KPIs, develop and approve ESG policy, discuss risks and impact. Integrate stakeholder issues in AGM, Covent stakeholder forum
Advise board on reporting
Non financial reporting - integrated reporting
Traditional corporate reporting only covers the financial position
Intangibles such as brand recognition, good reputation, environmental reports are excluded
Financial reports are yesterdays story
Non financial costs-such as environmental costs (use of natural resources) are excluded
Too much info not understood by average reader
Section 172 Companies Act 2006
Companies Regulation (Misc Reporting) 2018
Narrative reporting
As part of strategic report
Large companies required to report
Companies >250 staff
Summarize how directors engage with employees, how the foster business relationships with suppliers, customers, others
Strategic report is forward looking
Strategy
Objectives
Business model
Trends and factors affecting the company
Risks and uncertainties
Companies only report what they want
Required to report on gender balance
Integrated reporting
Different to narrative reporting
Integrating reporting pulls all different aspects of reporting into a single metric
How to bring all reports together into single integrated report
Integrated thinking - u6 types of capital
1-finance capital
2-human capital
3-manufacturing capital
4-intellectual capital
5-natural capital
6-social capital
Benefits of integrated reporting
Provides greater clarity
Better decisions
Become aware of interests of different stakeholders
Reduce reputational risk
Triple bottom reporting
John Elkington 1994
Effort to align integrated reporting
Link profit, people and planet
problem it is very difficult to quantify social and environmental elements
No widely accepted set of standards for reporting
No requirement to independently audit social and environmental measures - no audit process - therefore open to interpretation
This type of reporting can’t be trusted
IIRC developed integrated reporting framework
Goal to improve quality of info
Promote cohesive and efficient approach to reporting
Support integrated thinking
Global reporting initiative
Trying to standardize sustainable reporting
Sustainability reporting - non financial reporting
CSR companies act 2006 requirement to report on greenhouse gas initiatives
Environmental P&L accounts
Created by puma in 2011
Linked environment impact across the supply chain
Allows companies to measure costs and benefits if t generates for environment and therefore make more sustainable decision making
Stella McCartney 2015 began using EP&L
Problem how do you aufdit this and where do you draw the line
Eg use of mobile phone - and calculating the cost / use of that mobile phone
Companies Act Section 172
Directors Duty
172 PROMOTE THe SUCCESS OF THE COMPANY
Factors to consider
long term consequences of any decision
interests of employees
stakeholders relationships
impact on the community
reputation / high standards
act fairly
Role of CoSec in Stakeholder Engagement
Identify stakeholders
Develop strategy for engagement
Discuss /approve KPIs
Discuss risks + impact
Convene stakeholder forum
Document concerns
