Textbook- CH 9

• After studying Chapter 9, students will be able to:

  • Understand the background to measuring and reporting CSR performance
  • Define corporate reputation and its relationship to corporate social responsibility
  • Identify stakeholders who influence CSR reporting
  • Describe the relationship between CSR and corporate profitability
  • Enumerate and discuss the types of criteria used in social auditing
  • Recognize the criteria used to evaluate Canadian CSR reporting
  • Outline how CSR and sustainability results are communicated to stakeholders
  • Explain the role of business schools in CSR reporting
  • Discuss the future of CSR and CSR reporting
• Social auditing involves:

  • Inventory
  • Program management
  • Process
  • Cost or outlay
  • Social responsibility accounting
  • Social indicators
• Corporations have moved towards more sophisticated social auditing for sustainability reporting, including:

  • Social objective setting
  • Triple bottom line reporting
  • Social reports
  • Sustainable guidelines
  • Externally verified social reports
  • Consultation with stakeholders
• Corporate social responsibility (CSR) reporting documents economic, ethical/social, and environmental responsibilities and initiatives, communicating this information to relevant stakeholders
• Managers and businesspersons must now be familiar with measuring social responsibility and its implications, with trends in Canada and elsewhere shifting towards mandatory reporting requirements and external assurance of reports
• Reporting is increasingly necessary to maintain a corporation's reputation, meet stakeholder demands, and sustain corporate profitability
• Corporate reputation is related to the "character" of the corporation and involves corporate credibility, trust, and responsibility
• A distinction should be made between CSR and corporate reputation: CSR involves the way a corporation interacts with its stakeholders, while corporate reputation focuses on stakeholders' perceptions of the corporation as a result of these interactions
• Drivers of corporate reputation include customer service, ethical conduct, community involvement, employee relations, quality of products and services, innovativeness, and environmental stewardship
• The three greatest reputational risks identified in a Conference Board of Canada report were product and service quality and safety, environmental impact, and mishandling of an incident or crisis
• Corporations manage reputation by preparing for crises, engaging stakeholders, and managing issues; employees play a key role in reputation management
• Corporate reputation builds trust with stakeholders, enables the corporation to command higher prices, attracts qualified people, and minimizes the risk of damage from a crisis
• Researchers have found a relationship between corporate reputation and social responsibility, particularly during crises or events that damage a corporation's image or reputation
• CSR creates a layer of protection, with socially responsible corporations experiencing less decline in stock prices during a crisis
• Consumers expect financially successful corporations to contribute to society, and a corporation's reputation decreases consumer perception of purchase risk and increases consumer loyalty
• Corporate transparency involves two-way communication, seeking feedback and responding to it, to build trust with stakeholders and create shared value
• Increased transparency through social responsibility reporting increases stakeholders' understanding of the need for corporations to make profits
• The relationship between profitability and Corporate Social Responsibility (CSR) has been extensively studied with mixed conclusions:

  • Expenditures on social responsibility initiatives do not contribute to profits.
  • Expenditures on social responsibility initiatives do contribute to profits.
  • Expenditures on social responsibility initiatives might contribute to profits
• A study by Laffer, Coors, and Winegarden found that CSR is not positively correlated with business profitability and some evidence suggests that CSR activities lead to decreased profitability
• Another study found that increased expenditures in social responsibility are associated with higher profits up to a point, but further increases are associated with lower profit levels
• A mega-analysis by Orlitzky et al. confirmed that social responsibility and environmental responsibility have a measurable positive impact on profits
• A study by Margolis and Walsh expressed doubt about the empirical relationship between a corporation’s social initiatives and its financial performance, highlighting methodological difficulties
• The Network for Business Sustainability (NBS) suggests calculating the return on investment of CSR by creating value, with 63% of studies finding a positive relationship between CSR and profitability
• The Global Reporting Initiative (GRI) Standards are the most widely used global standards for sustainability reporting, featuring economic, environmental, and social impacts
• The International Integrated Reporting Council (IIRC) works to integrate financial and sustainability reporting
• The Sustainability Accounting Standards Board (SASB) creates reporting standards for disclosing material environmental, social, and governance impacts
• The OECD Guidelines for Multinational Enterprises provide recommendations for multinational corporations operating in or from adhering countries
• The United Nations Global Compact brings together UN agencies, labor, and civil society to support universal environmental and social principles
• The ISO 26000 CSR Standard by the International Organization for Standardization (ISO) provides guidance for corporate social responsibility relating to CSR reporting
• Corporate social responsibility (CSR) and sustainability reports cover the corporation’s economic, social, and environmental responsibility initiatives as identified in the auditing process
• In Canada, CSR reporting is currently voluntary
• Dozens of codes and standards rank or evaluate corporations on every aspect of CSR, leading to lengthy forms and various compliance practices
• Chatterji and Levine recommend several improvements for the CSR reporting process:

  • Codes or standards should be more transparent
  • Measures should be better explained and the source of weightings justified
  • Efforts should be made to reduce compliance costs by better designed forms and measures
  • Data used should be improved, with less reliance on information supplied by management and more sought from stakeholders
  • Incorporate sophisticated financial performance measurement methodology into the measurement of social indicators
• CSR reports are analyzed by stakeholders who identify best practices for corporations to consider when preparing a CSR report
• GRI (Global Reporting Initiative) is an independent international organization that has pioneered sustainability reporting since 1997
• GRI helps businesses and governments worldwide understand and communicate their impact on critical sustainability issues such as climate change, human rights, governance, and social well-being
• GRI Sustainability Reporting Standards are developed with multi-stakeholder contributions and rooted in the public interest
• GRI 400 Series covers various social standards including employment, labor/management relations, occupational health and safety, training and education, diversity and equal opportunity, and more
• Scotiabank's Corporate Social Responsibility Report includes components like comments for executives, CSR strategy explanation, identification of global mega-trends, stakeholder engagement, and more
• Communication of CSR and sustainability results is crucial for enhancing reputation and should involve various activities to inform employees and stakeholders