Accounting report on: Report analysis on Corporate Sustainability
The following report includes the discussion about the purpose of the corporate sustainability reporting with reference to the global initiative sustainability reporting framework. The report also includes the critical analysis of the Stakeholder Theory and Legitimacy Theory. This has been done using extensive literature. The report also includes the factors that motivate the corporate to voluntarily do the sustainability reporting practices. The report also includes the identification of the two multinational organizations from among the global 500 companies in 2012 and analyzes and compares their reporting on the economic, social and environmental aspects in their annual reports and also sustainability reports in the year 2011.the company selected for this purpose from the global 500 companies are Royal Dutch Shell and Exxon Mobil. The report also includes how the legitimacy is managed through reporting by these two companies. Finally a conclusion has been drawn from the overall analysis.
Purpose of Corporate Sustainability Reporting
The main aim behind the sustainability development is to meet the needs and demands of the present period without losing the ability to meet the needs of the future generation. Being having to play the active role in the development of the society each organization plays a vital role in the attainment of such goal. The term sustainability reporting can be said to be as the practice and factor of measuring, disclosing or reporting and also being liable towards the shareholders whether internal or external for the organizational performance towards the objectives and goals for sustainable development. Sustainability reporting is sometimes used as synonymous with certain terms like environmental, economic and social impacts of the organization to society (Sustainability Reporting Guidelines 2011).
A sustainable report specifically is prepared in order to present the balanced and reasonable presentation of the sustainability performance of the organizations which includes both the negative and positive contributions of the organizations towards the society. The sustainability reporting based on the Global Reporting Initiative’s Sustainability Reporting Framework mainly discloses the results and outcomes that have been occurred during the reporting period with respect to the organizational performances and commitments, management, strategy and approaches used by the organization. The main purpose of the Global Reporting Initiative’s Sustainability Reporting Framework mainly includes: Demonstration of how the organizations will be influenced and will influence the expectation of the stakeholders about the factors related to sustainable development within the organizations. The purpose also includes the assessment and benchmarking of the sustainability performance with respect to the norms, laws, performance standards, codes and voluntary initiatives. The purpose also includes the comparison of the performance in between the organizations and also within the organization about the factors related to sustainability.
Global Reporting Initiative’s Sustainability Reporting Framework is intended to serve for the stakeholders and organizations as a generally accepted framework for the reporting of the organization environmental, economic and social performance. Its main purpose is to report the development of the organization and to be used by any organization irrespective of its size, location and sector. This reporting takes into consideration the practical aspects that are faced by several organizations from small organizations to extensive large and dispersed organizations. The Global Reporting Initiative’s Sustainability Reporting Framework also contains the sector specific content that has been finalized by a large range of stakeholders from all around the world that can be normally or generally applicable for the reporting of the organization and its sustainable performances. The purpose of this reporting frameworks also done in order to ensure the quality of the information reported and includes the standards performance measures and indicators that discloses items as well as the guidance for the specific technical and reporting topics and actions. Global Reporting Initiative’s Sustainability Reporting Framework also has the purpose of reporting of the information’s related to the performances of the organization in the areas of the social, environmental and economic front which aids and stakeholders and has been verified by them which aids them to help the society and nation in many ways (Sustainability Reporting Guidelines 2011).
As per the literature Stakeholders theory can be said to be as the theory related to the management of the organizations and related to ethics in the business activities that are associated with the values and moral in the management of the organizational activities. As per the literature legitimacy theory can be said to be as the generalized assumption or the perception related to the actions of the entity that are proper or desirable and appropriate within some socially and economically constructed system of beliefs, norms, values and identifications etc. this theory as per the literature is one of the most cited theories within the environmental and social accounting period or era (Freeman 2012). This theory addresses several factors and issues related to the deep skepticism about the insights about its voluntary disclosures of the corporations. As per the literature there are several contributions to the theory by several accounting researchers but those factors are really needs to be recognized. As per the literature the stakeholder’s theory and the legitimacy theory offers a powerful for the understanding of the voluntary environmental and social disclosures to be made by the organizations and these disclosures would provide an understanding and vehicle to the public debate (Donaldson and Preston 1995).
As per the literature the stakeholders theory is a descriptive theory which presents a model of describing what exactly the organization or corporation is. It describes the organizations as the gathering of the competitive and cooperative interests having a fundamental value. As per the author in the literature as per the stakeholder’s theory all the managers within the organization make decisions related to the business activities which must account in the interest of the stakeholders of the firm. This must also take decisions related to the stakeholders who include the employees, customers, governments, communities and society etc. The stakeholder’s theory advocates that it is difficult to make the tradeoffs among the interests competing on the managers as this makes difficult for the managers to take purposeful decisions. The stakeholder’s theory makes the managers accountable for their decisions taken (Jensen 2001).
From the literature it has also been analyzed that there are certain layers to the Legitimacy Theory which mainly includes government, society, religion and capitalism. This levels reporting by the organization helps them in motivating the organizations in doing sustainability reporting practices. It has also been mentioned by the author in the literature that the stakeholders and legitimacy theory are vital for the organization in this competing world as they need to keep a watch o their actions and the results related to which the stakeholders were connected. There are several stakeholders who are associated with the activities of the organizations this mainly includes the society, government, customers employees, the company must keep a watch on its actions in order to provide a sustainable development to the community and stakeholders and maintain the sustainable reporting practice. Thus from the above literature analyzed from different sources it can be said that the Stakeholder Theory and Legitimacy Theory are the motivators for corporate voluntary sustainability reporting practice in long run and for organizations working in different industries (Tilling 2012).
Two multinational companies from the Global 500 in 2012
The two multinational corporations that have been selected from the global 500 companies list in order to compare their reporting on the economic, social and environmental aspects in their annual reports and sustainability reports are Royal Dutch Shell and Exxon Mobil. Analyzing the annual report of Royal Dutch Shell it has been analyzed that the company is a global group dealing in petrochemicals and energy employing 90000 people in more than 80 nations. The company main aim is to aid and help the society in meeting their energy needs in manner or by adopting practices which are highly responsible towards society, environment and are economically responsible. From the analysis of the company annual report it has been analyzed that the company is highly motivated towards building sustainable energy future (SUSTAINABILITY REPORT 2012).
The company has analyzed that with the increasing level of population all around the world it has become difficult for the organization to supply the vital energy to the fullest. So it is vital as per the organization to use the sustainable methods of extraction of the energy resources which makes the use of these factors for longer term and making their use which is environmentally, socially and economically reasonable. From the analysis of the company sustainability repot it has also been analyzed that the company is highly motivated towards reporting of the sustainability factors worked by the organization. The company does the proper reporting of all the factors of the production and the factors by which the total sustainability results can be interpreted by the stakeholders.
From the analysis of the annual report of Exxon Mobil for 2011 it has been analyzed that it is one of the leading natural gas and Petroleum Company. The company takes the environmental issues very positively. The company is highly dedicated towards the sustainability issues and has been doing several programs which is aimed towards the sustainability development measures. The company reports on several issues individually in its annual reports and sustainable reports. It has also been analyzed from the company annual report that the company is highly responsible towards the environmental performance from its activities and tries to make the society and benefitted to the fullest. It has also been seen that the company has reported all the factors related to the reporting of the environmental, social and economic aspects in its annual reports. Analyzing the company sustainability report it can be said that the company is highly responsible in handling the issues related to the sustainable factors which are associated with the society and related to reducing the emissions of volatile organic compounds from its operations throughout the world. The company is also highly responsible in reporting about the hazardous and nonhazardous waste and about their disposable. The company tries to handle the activities and actions which has harm to the environment and society and tries to minimize them to the fullest (Safety & environment 2012).
Legitimacy is managed through reporting by the two companies
From the analysis of the company annual reports it has been analyzed that the company effectively manages its legitimacy. The organizations manages its reporting of the sustainability factors in an appropriate manner keeping in mind all the legitimacy matters related to the reporting requirements. Both the companies report all the issues related to the environment sustainability and issues separate reports related to the sustainability factors they perform and face.
From the analysis of the annual report of the Royal Dutch Shell it has been analyzed that the company initiated the sustainable reporting in the year 1997. The company main aim towards reporting of the sustainable issues keeping in mind the legitimate factors the company focuses on the social and environmental challenges that may have affected the performance of the business and which may impact the stakeholders the most. The company keeps in mind the nongovernmental organizations, investors, stakeholders, media, customers, partners, employees and so on. The company uses the through process to do the reporting activity. The keeps in mind all the legal matters which are required while reporting by the company. The company reports in accordance with the global reporting initiative and also in line with the gas and oil industry issues guidelines which are developed by the petroleum industry environmental conversation association. The reporting of the company in its sustainability report is confirmed by the GRI information requirement (SUSTAINABILITY REPORT 2012).
Looking at the sustainability and annual report of 2011 for Exxon Mobil it has been analyzed that the company is highly efficient in taking care of the legitimate factors and fulfilling the issues and the reporting requirements in its annual reports and sustainability reports. It can also be said that the company is highly effective in reporting of each and every aspect of the issue in accordance with the reporting requirements. It can also be said that the company has mentioned several issues related to the conservation of the environment, society and as per the economic terms the value of the natural resources. From the report it has also been evaluated that the company is majorly into the exploration of the natural resources and adopts methods which makes least harm to the environment and keep the resources sustainable for longer period (Safety & environment 2012). It has also been analyzed that the company main strength is the development of the technology and techniques that will maximize the value of the company by increasing safety of the operations, environmental performances and efficiency of operations. The company keeps integrity in its operations and keep legacy in the management of the works in all its branches around the world. The company also keeps a watch on its reporting requirements as the company tries to keep conversant with all the vital issues to be discussed in the sustainable and annual reports and their reporting.
From the above analysis it can be concluded that the main purpose of the preparation of the sustainable reporting is to represent the balanced presentation of the sustainable performance of the organizations towards the community, environment and economic sector in both terms the negative and the positive. It can also be concluded that the main aim behind this reporting it to analyze the actions taken by the company towards the sustainable performance of the natural resources and the effectiveness of the company performances and actions towards the society. It can also be concluded that the organizations must keep a watch on their sustainable report and make them processes complying with the stakeholder theory and legitimacy theory. As per the stakeholders theory the organization is responsible towards several external and internal stake holders by the way of its actions and activities. The organization is responsible for managing the reporting requirements by following the global reporting initiative’s sustainability reporting framework. The organizations taken into consideration from the global 500 companies list follows these reporting requirements and also performs actions as per the sustainability requirement. It can also be concluded from the analysis of the report that both the company sustainable reports are as per the reporting requirements and include the measures towards the society, environment and economic factors for the economy. It can also be concluded that organizations taken into consideration are highly following the sustainable issues and having a proper reporting system of all the issues and factors related to the factors that are vital for the stakeholders related to the organizations.
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