Effects of Marginalizing Social and Environmental Reporting

Effects of Marginalizing Social and Environmental describeAIMThe show of this query work is to observe and analyze the implications of marginalizing Social and Environmental report and relieve how such account raise be fortify.RESEARCH OBJECTIVES fuss statementConventional invoice reports place more emphasis on the financial per tradeance of account entities comp bed to their genial and milieual exertion. Guidance on loving and environmental reporting is surely provided by schemes step forwardside the accounting profession, such as AccountAbility (AA) and the Global report Initiative (GRI). We atomic number 18 going to discuss the implications of marginalizing well-disposed and environmental reporting. We pull up s cuts likewise throw up thinly on how such reporting can be strengthened.ObjectivesTo honk light on the above we testament try to play out the followers in our projectIdentify what has impelled the wishing for well-disposed and environmental reporting.Identify how and wherefore Social and Environmental reporting is organism inembodiedd by entities into their reporting.Identify the alternative onsetes to Social and Environmental reporting. gild the relevance of the guidelines presented by organizations such as AccountAbility and Global assert Initiatives on Social and Environmental Reporting.Discuss the nature of voluntary disclosure. evoke the implications of marginalizing Social and Environmental reporting.Outline how such reporting could be strengthened and be effectively incorporated by reporting entities.RESEARCH METHODSThe undermenti wizd methods were make ingestion ofd to gather knowledge to compile this projectLiterature retrospect was done. Previous working papers and journal articles of diametric accounting professionals and authors were canvass in order to attain study that was twain relevant and tried in studys to companionable and environmental reporting.We too inter turn overed Mr Napo lioni Batimala ( study Manager PWC) to derive the current information available regarding the issues reviveing companionable and environmental reporting and its current stand. causal agent studies on three Fiji companies were conducted, in order to determine the situation in Fiji regarding Social and Environmental reporting. A qualitative data analysis of the results was carried out. These were selected establish on their extensive environmental (FSC) and companionable (BAT) impacts. FMF was also considered, as it is the largest, manufacturing smart set in the country.British American Tobacco Fiji LtdFiji Sugar Corporationflour mills of FijiLibrary enquiry was also conducted. Extensive archival research and literary research from respective journals was carried out in order to baring extensive views and analysis and to get insight on past research and current thoughts on this topic. Annual reports were analyzed such asBritish American Tobacco (2005 2007)FSC (2005 2008)Flour Mills of Fiji (2005-2008) net profit research was conducted as well. Proquest references were sourced to get hold of electronic journals for the issues of journals that USP library does not hold. The access of Internet references provided more up-to-date statistics and secular information that were available in library references. The South Pacific Stock Exchange (SPSE) website was also extensively visited. somatic websites for these companies were also visited.This project was compiled from discussion generated in our free radical during meeting in which information obtained by the methods mentioned above were extensively analyzed.ACKNOWLEDGEMENTSThe research topic we under excessivelyk hypothesiseed the accessible and scotch reality of m each countries. It no doubt is an indication of the afterlife of many companies in Fiji itself. This project would not bedevil been possible without the ploughsh atomic number 18 of the following authorities and item-by-items for provid ing us with latest information and their views on kind and environmental reporting.We atomic number 18 very appreciative toMr. Tevita Veituna Our TutorMr. Nacanieli Rika The Course Co-coordinatorMr. Napolioni Batimala Audit Manager (PWC)The organizations and individuals who postulate contributed informationWe would like to take this opportunity to convey anyone else who contributed towards the project in any sort possible.DECLARATION OF ORIGINALITYWe, Rieaz, Moreen, Priya and Zafeen hereby obligate that the information presented in this project is our original work and correct to date. scarce the working papers especially utilize in the books examine or in guidance of this project are clearly indite in the bibliography with in text referencing given after the confused quotations used.rationaleWith the emergence of many loving and environmental problems internationally including gender divergence in the workforce, and excessive use of child labor, the thinning of t he ozone layer and global warming, deforestation, species extinction, waste disposal, energy usage land, atmospheric state, and water pollution, usage of toxic chemicals, and imagery scarcity together with the occurrence of significant environmental disasters such as the Exxon Valdez crude oil spill and the Bhopal bungle leak? (Lodhia, S., 2004 p.111) and the evolution great power of the media to air these issues worldunsubtle together with the apparent popularity of vocal special interest groups such as Greenpeace and Amnesty International, has resulted in increased community attention towards the designation of approaches to wad more effectively with these concerns?(Wilmshurst Frost, 2000). This is what the Association of Chartered Certified Accountants (2001) has to say,A combination of growing ken of environmental issues by the general commonwealth and increased non-g overnmental organization (NGO) pressure and activity has led many tummys to reflect on and revise th eir corporate environmental responsibilities.This heightened anxiety amongst the members of orderliness over the adverse effects of stage duty operations on the physical and genial environment has culminated into what is referred to as mixer and environmental reporting, or synonymously, corporate mixer state reporting (CSR). Social and environmental reporting as admit by Deegan (2006) is reporting that typically involves the provision, to a range of stakeholders, of information al almost the performance of an entity with regard to its inter fail up to with its physical and social environment, inclusive of information about an entitys be throw away of utilizationees, local anaesthetic and overseas communities, safety testify and use of natural resources.?This seminar paper endeavors to report on the main issues concerning social and environmental reporting. Thus, it volition seek to address the following issues in similitude to social and environmental reporting how sp ecific accounting theories help us to visit it, its perceived benefits to the reporting entities and society and some alternative approaches to social and environmental reporting such as AccountAbility and Global Reporting Initiative. It is important to note that in Fiji, social and environmental reporting is voluntary in nature.Furthermore, the implications of marginalizing social and environmental reporting is also discussed together with suggestions on how this type of reporting can be strengthened.INTRODUCTIONConventionally, the accounting locomote of transaction organizations birth been based on the accounting entity, measurement of economic events in financial terms and users of reports who are only concerned with the financial implications of entity on business position and performance.However, in that location has been acclivitous a modernly concenter in business reporting in this era where there are now sundry(a) stakeholders who are demanding information on soci al and environmental performance of entities to be disclosed as well as financial performance. These demands hand increased pressures on entities to use social and environmental issues in the finale-making process. This is busyly vital for the South Pacific Island communities, which have been plagued by a range of environmental problems culminating in sea- direct rise and out of the blue(predicate) climatic change in the Islands.These issues are also critical in Fiji and in recent years growing public cognisance has resulted in closer scrutiny of the activities of the major industries that whitethorn be contributing to environmental degradation. The oil spillages in Suvas major industrial rural area, Walu Bay (Fiji Times, 19 April 1998 Fiji Sun, 2 Feb 2000) and many activities as such have provoked the need for appropriate environmental and social legislation in Fiji.Many companies passim the world publish reports that discuss their economic, environmental and social performa nce. This evidently shows that companies at once are now embracing sustainability as a corporate goal, sooner than simply aiming for profitability. These figures represent moves towards sustainable development by these organizations, which require these entities to unambiguously consider various aspects of their economic, social and environmental performance. ( Deegan 2006 p.327) Such disclosure includes that in-printed form such as- Examples standalone environmental reports, triple bottom line reports, sustainability and annual reports. In addition information that is disseminated on the Internet via corporate websites.(Hooks van Staden 2007 p.197)These social reporting practices are very much referred to as corporate social responsibility reporting, or sustainability reporting. The latter covers aspects of both financial sustainability and performance, and social and environmental sustainability.(Deegan 2006 p.329) The example arguments for greater corporate social responsibi lity arise from the increases in size, power and spread of multinational companies, as well as an increased awareness of the impact of companies on the environment and local communities.(Adams 2004 pg.731) This increase in awareness has been brought about by the media, the Internet, and the action of non-governmental organizations.These social reporting practices are often referred to as corporate social responsibility reporting, or sustainability reporting. The latter covers aspects of both financial sustainability and performance, and social and environmental sustainability.(Deegan 2006 p.329) The moral arguments for greater corporate social responsibility arise from the increases in size, power and spread of multinational companies, as well as an increased awareness of the impact of companies on the environment and local communities.(Adams 2004 pg.731) This increase in awareness has been brought about by the media, the Internet, and the action of non-governmental organizations.So cial and environmental reporting developed as stakeholders began to demand information on other aspects of an organizations operations, apart from their financial performance. Stakeholders expectations and necessitate have extended to the entities social and environmental performance. These were in the form of widespread interest of stakeholders in terms of demand for social reports of entities, pressure from environmental lobby groups to increase environmental disclosures, and also the increased competitiveness of the business environment where stakeholders today demand more accountability and transparency from organizations, concerning the work of their resources.Our project will essentially emphasize on social and environmental reporting by business dissipateds. We will also shed light on the organizations outside the accounting profession namely, AccountAbility (AA) and the Global Reporting Initiative (GRI) who are providing guidance on social and environmental reporting. It also incorporates the implications of marginalizing social and environmental reporting and how such reporting can be strengthened and effectively be incorporated by reporting entities.The various theories relating to voluntary disclosure are looked at, such as the authenticity hypothesis, stakeholder surmise and institutional supposition etc. How the information is reported and what implications it might have on the users of social and environmental information, in helping make decisions is also discussed. An analysis on some Fiji companies has also been set aboutn to determine the extent of environmental and social reporting. However, social and environmental reporting in Fiji, is voluntary in nature to this day.THEORETICAL UNDERPINNINGSThe different theoretical perspectives need not be seen as competitors for explanation but as sources of interpretation of different factors at different levels of resolution. In this sense, authenticity surmisal and stakeholder surmise enr ich, rather than fence for, our understandings of corporate social disclosure practices. (Gray, Kouhy and Lavers 1995 )Specific accounting theories help us to understand social and environmental reporting, by seeking to explain why many organizations publicly release information about their social and environmental performance, even with the general lack of regulation in this area. That is, it helps us understand what motivates entities to release this information voluntarily.LEGITIMACY THEORYAccording to Lindblom, legitimacy is a condition or status which exists when an entitys encourage system is congruent with the value system of the larger social system of which the entity is a part. When a disparity, real(a) or dominance, exists between the two value systems, there is a little terror to the entitys legitimacy.?1This guess asserts that organizations continually seek to ensure that they are perceived as operating within the bounds and norms of their respective societies (whi ch change over time), that is, they plan of attack to ensure that their activities are perceived by outside parties as world legitimate. Information disclosure is therefore vital to establishing corporate legitimacy.(Deegan 2006 pg.275)Under authenticity surmisal, an entity would undertake certain social activities (and provide an account of this), if management recognizes that the particular activities were expected by the society in which it operates. It is part of their social contract, or as is often stated by companies, part of their license to operate. If an entity fails to undertake these activities that are expected by the community, it would be identified as breaching its social contract. This will result in the entity no hugeer being considered legitimate.thusly this will have an effect on the support the entity receives from the society, and consequently its endurance. Hence, succeeder for an entity under this theory is impendent on it fulfilling its social contract . Lindblom, 1994 and Patten, 2000 state that according to legitimacy theory, social disclosure is a means to deal with the business firms exposure to political and social pressures? (as cited in Freedman Jaggi 2005).Those companies without much regard to environmental and social performance might find it faced with sanctions or explicit regulations imposed on them. In addition, they whitethorn also find it very difficult to obtain resources and finance or find the support of the community in which it works in the form of employee dissatisfaction. genuineness theory assumes that society will allow an organization to continue operations up until the firm meets the societys expectation. And the firm generally meets expectations to avoid move on government regulations on operations or bad effects on reputation. But if there are some expectations that the management feels are unreasonable, they may try to change stakeholder expectations or try to justify their actions.Legitimacy theor y has been examined in numerous empirical studies with the results being fairly consistent in confirming the theory. For example the Deegan and Gordon (1996) study indicated among other findings, that there was a cocksure correlation between the environmental sensitivity of the industry to which the muckle belonged and the level of corporate environment disclosure. In addition, another study by Deegan, Rankin and Vought (2000) put in that companies did appear to change their disclosure policies around the time of major company and industry related incidents. That is, social disclosure policies in the annual reports of companies tended to change when major social incidents or disasters occurred in the industry.However, legitimacy is not only achieved by the actual conduct of the organization. Legitimacy is gained as long as the society perceives that the firm is acting responsibly. But sometimes, the societys perceptions are quite misplaced as information disclosures, which are v ital to establishing legitimacy do not give an accurate account of the firms activities. An organization may diverge dramatically from societal norms yet control legitimacy because the divergence goes unnoticed.?(Suchman, 1995, p. 574) So if society does not know that a firm is not acting ethically, then legitimacy cannot be threatened.Lindblom describes 4 strategies of legitimization that an organization can adopt. The firm may seek toeducate and inform its relevant publics about actual changes in the organisations performance and activities.change the perceptions of the relevant public without having to change the organisations actual deportmentmanipulate perception by deflecting attention from the issue of concern to other related issues through an appeal to, for example, emotive symbolschange away expectations of its performanceHence, we can conclude from the perspective of this theory that, social and environmental reporting may be just a tool that entities use to legitimize or justify their operations. Particularly in the case of entities in industries which have extensive environmental and social impacts. For example, petroleum, oil or gas companies, tobacco producers, pharmaceutical companies, and manufacturing companies.STAKEHOLDER THEORYStakeholder theory is concerned with how management addresses the various issues associated with relationships with stakeholders. In other words, it is how an organization manages its stakeholders. According to Freeman (1984), traditionally, the firms used the inputs of investors, suppliers and employees to qualify inputs into usable outputs which customers use and return to the firm some capital benefit. By this, firms only address the needs and desires of those four parties which are investors, suppliers, employees and customers.Stakeholder theory acknowledges that there are other parties involved, including governmental bodies, political groups, trade associations, trade unions, communities, and associated corp orations. This view of the firm is applied to identify the specific stakeholders of a corporation, that is, the normative theory of stakeholder identifies as well as examines the conditions under which these parties should be treated as stakeholders, the descriptive theory of stakeholder. The two make up the modern manipulation of Stakeholder Theory. It attempts to describe, prescribe, and derive alternatives for corporate governance that include and balance a heap of interests.In the ruling paradigm of corporate governance, those who invest their capital into any type of business, and those who risk losing their investment in parts or in total, have a right and a responsibility to govern the business they have invested into. Capital investors or principals either govern the business themselves, or they do so with support of agents or managers who they may appoint.One way to sum up the use of the stakeholder concept in the management literature and stakeholder theories is by refer ence to the simulation suggested by Donaldson and Preston (22). It can be used in a number of ways, they identify a descriptive, and an instrumental and a normative aspect of stakeholder theory that can help understand and separate the different facets of stakeholder theory. They argue thatStakeholder theory is descriptive as it describes the corporation as a constellation of cooperative and competitive interests possessing intrinsic value? (p.66). This is also known as the positive approach.Stakeholder theory is instrumental since it establishes a framework for examining the connections, if any, between the practice of stakeholder management and the achievement of a variety of corporate performance goals?Lastly, the fundamental basis? of stakeholder theory is normative and involves acceptance of the following ideas stakeholders are persons or groups with legitimate interests in procedural and /or hearty aspects of corporate activity? and the interests of all stakeholders are of intrinsic value?The going away between the three uses of stakeholder theory is explained by the fact that they imply different types of claims and include different forms of reasoning for their justification. Positive (or descriptive) uses of stakeholder theory make claims to faithfulness and are justified through constative discourses, strategic (or instrumental) uses make claims of effectiveness and employ pragmatic discourses, and normative uses of stakeholder theory can entail different types of claims (rightness, goodness) and be justified through different types of discourses (moral, ethical). However, this research report is limited to explain that the stakeholder theory comprises of an ethical/moral or normative branch also known as the prescriptive branch and a positive or managerial branch. The ethical or normative branch of the stakeholder theory basically deals with fairness, that is, to treat all stakeholders the same. While the positive or managerial approach focus m ore on the ability of the stakeholders to influence or be influenced by a company. It is primarily a theory of the private- firmament firm although the insights can be applied in parts to public sector settings. This is due to the circumstance that public management responsibilities are similar to private sector management tasks not only formally but also concerning the uphill network nature of organizations in both spheres.It gives a more tenuous solution by referring to particular groups within society, that is, stakeholder groups while the Legitimacy theory discusses the expectations of society in general. Stakeholder theory recognises that as different stakeholder groups will have different opinions about how an organization should carry out its operations, there will be a variety of social contracts negotiated with different stakeholder groups, instead of one contract with society in general.Stakeholder Theory (Normative/Ethical Perspective)The ethical or normative branch of Stakeholder theory argues that all stakeholders have the right to be treated fairly by an organization, regardless of the resources that they individually control or how economically right they are. Therefore organizations should consider the rights of all parties usurped by the operation of the entity. The definition of stakeholders in this case would include any group or individual who can affect or is affected by the achievement of the firms fair games? (Freeman 1984).Stakeholder Theory (Positive/Managerial Perspective)The managerial or positive branch of stakeholder theory predicts that management is more likely to focus on meeting the expectations of powerful stakeholders. These are those that have the greatest potential to influence the firms ability to generate profits, that is have the most economic power and influence over the firm. Under this perspective, management would be expected to undertake those economic, social and environmental activities expected by the power ful stakeholders, and also provide an account of these activities to these stakeholders. (Deegan 2006 p.298)Defining StakeholdersA stakeholder in an organization is by definition any identifiable group or individual who can affect or is affected by the achievement of the organizations objective (Freeman, 1984 25).As a broad definition this includes many individuals or organizations for instance, governments, shareholders, creditors, employees and their families, local charities, local communities, media and so forth. It also allows the inclusion of groups such as terrorists and competitors (Phillips, 1997). For lucidness this dilemma can partly be resolved by tapering off the definition in a meaningful way, that is, to divide the stakeholders into primary and unessential stakeholders. By following Clarksons argument (Clarkson, 1994), Mitchell et al. claimed that the use of risk as a second defining property for the stake in an organization helps to sign on down the stakeholder f ield to those with legitimate claims, despite the legitimacy of their relationship to the firm or their power to influence the firm. (Mitchell et al., 1997, 857).Therefore, a primary stakeholder was identified as one whose continuing participation to the corporation is vital as a going concern. While secondary stakeholders were identified to be those who affect or influence, or are affected or influenced by the corporation but they are not engaged in transactions with the corporation and are not crucial for its survival. According to Clarkson, primary stakeholders essential primarily be considered by management, as they are essential for the survival of a company. Also, in order for the company to succeed in the long run, it must primarily be administered for the benefit of all stakeholders. This definition may be related to the managerial branch of the stakeholder theory that will be discussed later. However, with the focus on primary stakeholders it is challenged by the ethical b ranch of the stakeholder theory that all stakeholders have a right to be considered by management.Critiques of Stakeholder TheoryThere have been a variety of critiques of stakeholder theory from many viewpoints. Weiss (1995) discards the descriptive and instrumental usage of stakeholder theory and comes to a conclusion that the normative use probably might be too limited and has a too weak foundation to be considered as either useful or valid.? Further critiques suggest that business interests are vital in both the identification of stakeholders and prioritizing their demands (Thomas, 1999 Banerjee, 2000). The stakeholders needs and demands may be limited particularly where stakeholders groups have very different social, cultural and political agenda. A great deal of critique has been towards the level of engagement with stakeholders that is, little consultation instead of factual dialogue and the exchange of ideas. That is, the stakeholders needs are not interpreted seriously.INST ITUTIONAL THEORYInstitutional Theory is a relatively in the raw perspective that assumes that managers of an organization will develop or adopt new practices (such as social and environmental reporting) as a result of a variety of institutional pressures. For example, managers may be concerned that if they do not keep up with other entities in developing new practices, they will risk disapproval from some of their economically powerful stakeholders.SOCIAL recoil THEORYAccording to Godfrey, Hodgson and Holmes (2003), social contract has been described as the fundamental interaction between individuals or organizations within society through implicit or explicit boundaries of behavior?, where implicit boundaries are moral obligations and explicit boundaries are regulatory requirements. Therefore, the social contract explains the boundaries of acceptable interaction between participants in a society.The social contract is sometimes used to explain the behaviour of firms where product ive organizations are subject to moral evaluations which transcend the boundaries of the political systems that ingest them. The underlying function of all such organizations from the standpoint of society is to lift social welfare through satisfying consumer and worker interests, while at the same time remaining within the bounds of justice. When they fail to live up to these expectations they are deserving of moral criticisms?Thus, because of a business social contract with stakeholders within a community, it is expected to perform only those actions which are desirable and beneficial to the whole society, rather than having to the investors only. This will give the firm acceptance from the society.Hence, management responds positively to environmental and social issues, because it has it has moral obligations to the society and failure to exercise care while carrying out their activities i.e. doing misdeeds towards the community will result in introduction of regulatory require ments to control management performance on environment and employee, for example.POSITIVE ACCOUNTING THEORYPositive invoice Theory predicts that all people are driven by self-interest. As such, particular social and environmental reporting activities, and their related disclosure, would only take place if they had positive wealth implications for the management involved.Therefore motives for social and environmental reporting can be a result of a reporting entitys desire to maximize financial returns for shareholders and (or) managers by using social and environmental reporting as a tool to maintain and kindle the support of economically powerful stakeholders. On the other hand, it may also be a result of an entitys desire to discharge duties of accountability for the social and environmental impact the organization (potentially) has on a wide range of stakeholders.LITERATURE REVIEWHistorical DevelopmentNon-financial disclosure existed in a variety of forms in corporate reports in periods long in advance the 1990s.Studies have found that such voluntary disclosure have existed for a number of decades. For example, Unerman (2000a,b) found evidence of social disclosures in annual reports of the Anglo-Dutch oil company Shell since 1897,with these disclosures becoming more prevalent from the 1950s.Adams te (1998) analysed UK banks and retailers from 1935,Tinker smiler (1987,1988) and Neimark (1992) analysed social-type disclosures in the annual reports of the US company General Motors from 1916.Studies by Campbell (2000) and others have examined social and environmental disclosures in companies from the 1960s and 1970s. Thus, the development of social and environmental reporting in the 1990s was a development of non-financial reporting practice rather than a completely new phenomenon. (Deegan 2006 p.331).A review on Social responsibility and impact on society? by Mohamed Zairi (2000) discusses the emerging commitment to address both environment and societal c oncerns, an area which is growing in terms of significance and proven to impact on business performances, reputation and corporate image. The observation made was that the world wide organizations have staged conferences to debate the relevance of social and environmental reporting on corporations and stakeholders. Also companies have started to make real headway in this area of reporting by proposing a framework that deals with social and environmental reporting and disclosing issues that concerns social and environmental reporting.According to Trevor Wilmshurst and Geoffrey Frost (2000) , they tried to analyze the connection between the importances of, as stated by reporters of specific factors in the decision to disclose environmental information and actual reporting practices. They used Legitimacy theory as an explanatory theory of environmental disclosure. The legitimacy t