Magazine article The CPA Journal

Corporate Social Responsibility Reporting: The Growing Need for Input from the Accounting Profession

Magazine article The CPA Journal

Corporate Social Responsibility Reporting: The Growing Need for Input from the Accounting Profession

Article excerpt

The primary attention of most business owners, accountants, and auditors has been directed to the bottom line - net income or earnings per share (EPS). In recent years, however, business stakeholders have sharpened their focus and heightened their expectations with a new interest in voluntary reporting about an entity's "triple bottom line" - its economic, environmental, and societal accomplishments. No longer is it just GAAP and GAAS- there is now CSR and GRI, and with these reporting methods come responsibilities and opportunities for accountants and auditors. The purpose of this article is to introduce the what, who, and why of corporate social responsibility (CSR) reporting and the Global Reporting Initiative (GRI), along with some practical guidance for an accounting practice.

What Is CSR and Who Does It?

CSR activities have been described as the actions a company initiates to further some social good beyond its own interests, going beyond compliance and exceeding legal obligations.. As discussed below, there are several theories used to explain why companies issue CSR reports. Although in practice many CSR actions potentially benefit a company, they do so in ways that tend to be long-term and difficult to quantify. CSR activities consist of the practices that businesses use to respond to stakeholder expectations. This includes minimizing harm that the company's operations might have on society or the environment, while creating a positive impact on the community, the environment, employees, customers, and vendors. CSR activities include practices such as initiatives to mitigate harmful environmental impacts, reclaiming packaging material, support for local suppliers, and infrastructure investments for the public benefit. There is a close relationship between CSR and the concept of sustainability - defined by the World Council on Economic Development (WCED) as "meeting the needs of current generations without compromising the ability of future generations to meet their needs and aspirations."

Not surprisingly, CSR activities have been largely conducted by large multinational companies. According to a recent study by KPMG, 80% of the global Fortune 250 (G250) companies issue CSR reports and 45% of the largest 100 companies surveyed in 22 countries issue CSR reports. Nevertheless, the concept is just as valid for small and medium-sized entities (SME). SMEs may not refer to CSR activities as such, but they too practice CSR by: providing excellent goods and services; being great employers; engaging with their employees and other stakeholders; and being alert to health and safety issues in the workplace and for customers. They may also attempt to operate sustainably and minimize their use of natural resources. All these activities are examples of socially responsible behavior, even if they are not always labeled as such.

Reporting on CSR activities emerged in the 1960s, gaining momentum with a 1987 United Nations report, "Our Common Future," better known as the Brundtland Report. This report encouraged sustainable development as a concept, balancing environmental and economic issues in a beneficial way. The sustainability philosophy weighs short-term economic benefits against longterm effects on future generations. Initially, reporting on sustainable development focused exclusively on environmental issues. Eventually, this evolved into CSR reporting, with entities now disclosing information about their triple bottom line reporting.

According to the Corporate Register (www.corporateregister.com), a comprehensive directory of CSR reports, more than 3,000 stand-alone reports were prepared in 2009. The prevalence of socially screened investment funds over the past two decades illustrates a market demand for CSR reporting. For example, the Domini Social Equity Fund tracks the Domini 400 Social Index, created in 1990, which includes approximately half of the S&P 500 and 150 other companies screened for their social and environmental performance. …

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