Imacs 2016 imecs 2016 Proceedings (Preliminary version) of the 4
CSR AND SUSTAINABILITY REPORTING IN CR
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- 198.2 Communication of companies about CSR and its tools
- 199.3 Non-financial reporting
- 200.Research 4.1 KPMG 2015 Research
- 202.Acknowledgment This paper was written as a part of the project "IGA2 VŠE Sustainable Corporate Responsibility (SCR)" 203.References
CSR AND SUSTAINABILITY REPORTING IN CR196.Vilém Kunz – Štěpánka HronováAbstract Worldwide as well as in the Czech Republic, increasingly more attention is being concentrated on CSR and sustainable business activities. The paper focuses on the communication process of a company with its stakeholders and the society alike about the social and environmental impacts caused by the firm’s economic activity. The main aim of this paper was to uncover the current state of CSR/sustainability reporting by businesses in the Czech Republic through an own research; yet another goal was to identify major developments in this area within Czech business environment. The research was conducted on a sample of fifty most significant Czech companies based on their revenues (Czech Top 100) through an analysis of their non-financial reporting (separate CSR reports, annual reports, corporate websites). A comparison was made with KPMG research outcomes, which depict a number of major current global trends in reporting of business entities’ responsible behaviour. Key words: CSR, non-financial reporting, Czech business environment, sustainability, KPMG research. JEL Code: M14, Q56 Introduction Successful businesses in today's world do not doubt about the need of being socially responsible and they develop a number of very diverse activities that contribute to addressing a range of social problems and to improving society. At the same time, they are also aware of the fact that their activities in the area of responsible conduct should be given a certain long-term order. They are to be managed in compliance with principles of sustainable development at the maximum account of their internal and external environments’ needs. (Visser, 2011) International organizations, some governments but also businesses themselves have been paying growing attention to the issues related to corporate social responsibility (CSR) and sustainable business. (Mullerat, 2010) “Whole industries have recently experienced ‘responsibility waves’, times of swift shift toward more sustainable, responsible, and ethical practices.” (Laasch & Conaway, 2015, p.8) According to some theorists, social responsibility may be considered an important feature of a new economy and also a reflection of the opinion that not only governments but also businesses shall bear their share of responsibility for social welfare, environmental protection, sustainable development and rational use of nonrenewable resources. (Pavlů, 2009) The actual implementation of the CSR principles brings the need to include them into the corporate values, business strategies and processes at all levels of the company. One of the key prerequisites for effective implementation of CSR into corporate practice is to provide comprehensive communication about socially responsible activities to all key corporate stakeholders. Attention of the authors of the paper is drawn to the very communication of CSR business activities. Their research attempts to figure out if and how important Czech firms use separate CSR/sustainability reports for communication about their CSR activities. Furthermore, the research aims to find out how firms communicate about the sustainable activities through their corporate websites. In the paper, a content analysis was used as a qualitative research technique. The research was carried out in sequences of several phases starting with determining directions of the analysis continuing through the choice of analytical techniques and the analysis itself leading to the final interpretation of the researched material. 197.1 CSR ConceptFor several decades, the CSR concept has been developing very dynamically and spontaneously. As early as in the fifties of the 20th century, Bowen (1953) interpreted CSR as a commitment of entrepreneurs to implement such procedures, to make such decisions and to stick to such topics that are desirable in terms of goals and values of our society. Formation of the CSR concept over the decades and its widening application in business practice today are influenced by many factors the most important of which are, for example: increasing globalization, the growing number of MNCs and an increasing pressure on socially responsible behavior by stakeholders. A relatively large width of the CSR concept based on three pillars called triple bottom line (Segal-Horn & Faulkner, 2010) and inability to define the breadth of the definition of CSR activities as well as the constant unrestrained development cause a high terminological disunity and a multiplicity of definitions. Some theorists consider the concept of CSR a process and organizational innovation leading to a change of norms and forms in arrangements within the company, yet others see it as an institutional innovation leading to the change of social rules. (Hlaváček Jiří & Hlaváček Michal, 2008) Having analyzed dozens of definitions, Dahlsrud (2008) defines five basic components which occurred most frequently in the CSR definitions. These are: environmental, social and economic areas, and areas of stakeholders and volunteers. This author believes that although the existing definitions of CSR are verbally different, they are actually harmonized or congruent as his analyses showed that four out of the five above mentioned areas can be found in 80 % of the definitions. One of the often-cited definition of corporate social responsibility can be found in the so-called Green Paper published by the European Commission in 2011: "CSR is the responsibility of enterprises for their impacts on society". (COM 2011) Another important definition can be found in the ISO 26000 standard which defines CSR as the responsibility of an organization for the impacts of its decisions and activities on society and the environment. (ISO 26000)
Companies have a legitimate right to strive for the awareness of their sustainable activities among general public. They shall try to utilize all appropriate ways to communicate with their internal and external stakeholders. Possible ways to spread the information about the corporate CSR activities is via corporate sites, annual reports, packaging, prospects, brochures, leaflets, newsletters and newspapers, intranet, corporate information board, promotion of CSR during the corporate events for employees, customers or business partners. Another major opportunity for businesses to comprehensively inform its stakeholders about these achievements is called CSR/ Sustainability reporting which is often generated in accordance with international reporting standards. (Kašparová & Kunz, 2013) 199.3 Non-financial reportingCSR reporting represents a process of communicating the social and environmental impacts of economic activities on the company's stakeholders. (Douglas, Doris & Johnson, 2004) Lately, the volume of reporting on CSR/sustainability has been on an increase from a variety of reasons: strengthening brand’s reputation, ethical reasons, etc. Besides being a communication tool, CSR reports perform the role of a management tool providing enterprises with a systematic approach to CSR or a resource of management system for socially responsible activities. Firms which decide to publish such reports, may - as soon as in the process of their compilation - point at CSR issues which need closer attention including possible future risks and opportunities. Nevertheless, there still are numbers of reasons why companies do not deal with CSR reporting, for example insufficient knowledge of the issue or expectations of increased costs. (Van Wensen Katelijne, Broer Wijnand, Klein Johanna, & Knopf Jutta, 2011) Major trends to be observed in the CSR reporting in recent years are: CSR reports increasingly verified by an independent third party (auditor); financial evaluation of the benefits of CSR; CSR reports focused on the future; spreading reporting in the supply chain; creating the so called integrated reporting and the utilization of the internet potential. (Pavlík & Bělčík, 2010) Yet there still is a number of reasons (ignorance of the issue, expected cost increases, etc.), why firms do not deal with CSR reporting. (Van Wensen et al., 2011) The most frequently mentioned factors influencing this type of non-financial reporting are: company size, industry, public pressure of relevant stakeholders, cultural influences or striving for differentiation from competitors. (Douglas et al., 2004) Attention of enterprises should finally be paid to the most appropriate forms of processing the CSR/ Sustainability reports and their communication. An effective tool for reporting is the Global Reporting Initiative (GRI) methodology. On their website, Business Leaders Forum in the Czech Republic (CR) defines CSR reporting according to GRI as 0: an internationally recognized regularly updated tool for communicating and defending corporate CSR activities both: inside the company and towards the stakeholders. Following the GRI recommendations, every company may select only what corresponds to its functioning and the budget as there are three levels. A report produced becomes a useful document for the strategic development of CSR and a practical tool in the media presentation of CSR activities of the company. An important factor to consider when making decisions about preparing such a report is the form of the concerned document. The most significant standards complementing the GRI guidelines which either make demands or express recommendations for reporting about certain areas of responsible activities are: the ISO norms 26000 and the 14000 series, SA8000, EMAS, AA1000, UN Global Compact or OECD guidelines. The most recent is the mandatory directive 2014/95/EU on non-financial reporting approved by the European Parliament in 2014. It obliges companies with more than 500 employees a duty to create the CSR report. This legislative action establishes a general flexible framework for non-financial reporting which will affect approximately 6,000 EU’s companies. It shows companies how to integrate social impacts associated with their business activities into their decision-making. Data published in a form of a CSR/ Sustainability report in accordance with the guidelines can provide stakeholders with information about how companies approach managing the impact of their activities on society, employment, local community, environment, etc.
The research has confirmed the global growth rate of reporting on socially responsible activities, even though the actual growth rate slowed between 2013 and 2015. It is equally evident that CSR reporting has become a part of corporate governance especially in large multinational companies. The report points out that almost three-quarters (73 %) of the 4,100 surveyed companies worldwide in 2015 dealt with CSR reporting (large companies in even 92 % of cases). Europe came third in terms of corporate CSR reporting in 2015 being overtaken by Asia and North America which was mainly caused by varying levels of reporting between the former Western (79 %) and Eastern European countries (61 %). In Europe, however, we expect a significant increase in the issuance of non-financial reporting during the year 2017, in connection with the already mentioned newly adopted directive on CSR reporting. CSR reporting used to be, and in most countries still is, a voluntary initiative, but governments and stock exchanges around the world are increasingly imposing firms to report on non-financial matters. The obligation of reporting today can be seen in several countries: for example in the UK, France or Denmark. KPMG published the results of CSR reporting for the Czech Republic in 2015, with 40 % of businesses who have reported. (See Figure 1) Fig. 1: CSR/Sustainability reporting in chosen European countries in 2011, 2013 and 2015 Source: authors based on the KPMG report (KPMG, 2015) The research by KPMG from 2015 indicates that the GRI standards still remain the most widely used voluntary reporting system, far beyond the use of national standards and other guidelines. Almost three quarters (72 %) of the 4,100 surveyed enterprises in 2015 reported using GRI guidelines. Fig. 2: CSR/Sustainability section in annual reports of companies worldwide in % KPMG survey from 2015 also shows that more than half of the surveyed companies incorporate the non-financial information into their annual reports. The graph demonstrates the increasing trend in this area since 2008. (Figure 2) Source: authors based on the KPMG report (KPMG, 2015) Most of the businesses that add CSR information in their annual reports (58 %) do so in a separate chapter rather than in sections on company performance or values. Increasingly higher amount of firms (42 %) begin to associate CSR with a business strategy incorporating CSR information in the Report of the Board. (KPMG, 2015) 4.2 Research 1 in CRThe goal of the first research conducted by the authors in January 2016 was to find out if the chosen companies use their internet sites for communication about their CSR activities. The sample of the population was made by the first 50 entities from the Czech Top 100 in the year 2014. During the research, websites of these 50 companies were examined in terms of their non-financial reporting posted. Fig. 3: Ownership structure of the sample in Research 1 Approximately two thirds of the researched companies were held by foreign owners, 38 % had prevailingly Czech owners and approximately 10 % were owned by the Czech Republic (government, regions, etc.). (Figure 3) Source: authors The authors investigated publicity of the corporate responsibility on websites from the perspective of the business ownership in larger detail where attention was paid to the interrelation of the CSR reporting and the ownership. (See Table 1) It was discovered that out of the total amount of 19 firms with the Czech (majority) owner, the CSR concept was published and the company expressed their commitment to upholding its principles in about 63 % of cases. As far as Czech private companies were concerned, about 65 % publicly reported their CSR activities on their websites. Out of the 5 entities owned (mostly) by the Czech state, 60 % had a CSR section on their www sites. The 31 corporations with a foreign owner offered a section in Czech devoted to sustainable activities on the corporate websites in almost three quarters of cases.
Source: authors Overall, the research revealed that 70 % out of the examined companies had a section devoted to responsible behaviour or sustainable business on their corporate sites. Furthermore, it was revealed that adoption of fundamental CSR principles is taking centre stage for business entities in CR where transparent communication with the stakeholders shall be ensured. In increasing amounts, the companies use their corporate sites including special sections devoted to CSR which are often divided into subsections in accordance with particular topics or types of stakeholders. The research showed that the contents of these sections with non-financial CSR reporting are based on the corporate CSR reports supplemented by more current information from other main areas of CSR. It was revealed that the data presented via the virtual environment is most frequently focused on the economic area of CSR. Comparing at least one aspect of the individual CSR areas mentioned on the web, these were represented in the decreasing number as follows: economic, environmental and social. Foreign-owned firms were more likely to present the CSR concept on their sites compared to the Czech-owned companies.
4.3 Research 2 in CRA task for the second research conducted in December 2015 based on the reports published by companies during 2015 was to reveal the forms of CSR reporting among the sample of 50 best companies from the 2014 Czech Top 100. The main research questions were: 1. Do the companies publish a single CSR/ Sustainability report in Czech or English? 2. Can data about CSR/ sustainable activities be found at least in their annual reports? 3. Are internationally recognized GRI standards used by enterprises when creating their CSR reports? The research indicated that in CR the amount of companies issuing a separate CSR/ Sustainability report is increasing. While in 2010 such a report was published by 27 % of the research sample, in 2012 it raised to 36 % of companies and in 2014 it increased to the level of 50 % of enterprises (broken down into the language mutations - 24 % of the reports were in Czech and 26 % in English). However, the research has also shown that the amount of firms in the Czech Republic that incorporate information about their CSR activities into their annual reports has not changed significantly in the course of time. In the language of numbers, 9 % of companies in 2010, 12 % in 2012 and 10 % in 2014 integrated a section about responsibility in the annual reports. Fig. 4: CSR reporting within a sample of 50 Czech companies in 2010-2014 in % The graph shows the increasing trend of the CSR reporting and at the same time the declining trend of CSR non-reporting. (Figure 4) Source: authors The results indicate slightly higher numbers compared to the 2015 KPMG findings, but the level of reporting by companies in CR is still below the global average. The study reveals that 46 % of the companies that issued separate 2014 Sustainability/CSR Report used the GRI methodology. This was significantly less than the global figure, as demonstrated by the research from KPMG in 2015 where 72 % of the 4,100 researched companies in the world reported in accordance with the GRI standards. 201.ConclusionDue to a variety of reasons, CSR reporting has been enjoying increasing attention worldwide in recent years. Based on the results of studies and predictions of the trend, it can be expected that the volume of CSR reporting will be growing in the future. The importance of CSR/Sustainability reporting in CR is being emphasized only marginally, though. Likewise, the state of reporting in the post-communist countries is dealt with by a relatively low amount of studies. Moreover, some studies are focused mainly on comparing CSR reporting in several countries, which often prevents a deeper investigation. Sometimes, the attention is paid only to some aspects of reporting for example: an environmental research. Our research as well as the 2015 KPMG study results confirmed that CSR reporting is not yet a priority area of interest for companies in the Czech Republic. The firms in CR drop behind the global average. It can be explained by the KPMG findings claiming that major motivators for companies to implement CSR reporting are those of enhanced image and ensuring a positive perception of the relevant public. The authors consider them to be factors of extrinsic motivation. It can yet be expected – not only in connection with the adoption of a new directive regarding CSR reporting in EU countries – that the level of CSR reporting in CR will be gradually increasing in the years to come. 202.AcknowledgmentThis paper was written as a part of the project "IGA2 VŠE Sustainable Corporate Responsibility (SCR)" 203.ReferencesBowen, H. R. (1953). Social responsibilities of the businessman. New York: Harper. Catano, V. M., & Morrow Hines, H. (2016). The influence of corporate social responsibility, psychologically healthy workplaces, and individual values in attracting millennial job applicants. Canadian Journal of Behavioural Science / Revue Canadienne Des Sciences Du Comportement, 48(2), 142–154. http://doi.org/10.1037/cbs0000036 COM 2011: A renewed EU strategy 2011-14 for Corporate Social Responsibility. Retrieved from http://ec.europa.eu/geninfo/query/resultaction.jsp?QueryText=%E2%80%9CCSR+is+the+responsibility+of+enterprises+for+their+impacts+on+society%E2%80%9D+COM+2011&query_source=GROWTH&swlang=en&x=0&y=0 Dahlsrud, A. (2008). How Corporate Social Responsibility is Defined: An Analysis of 37 Definitions. Corporate Social Responsibility and Environmental Management, 15(1), 1–13. Douglas, A., Doris, J., & Johnson, B. (2004). Corporate social reporting in Irish financial institutions. The TQM Magazine, 16(6), 387–395. Hlaváček Jiří, & Hlaváček Michal. Corporate social responsibility (CSR): Proklamace nebo ekonomická nutnost? Politická Ekonomie, 2008(5). Retrieved from http://www.vse.cz/polek/download.php?jnl=polek& pdf=653.pdf ISO 26000: Guidance on Social Responsibility. Retrieved from https://www.tuv.com/media/india/informationcenter_1/systems/Corporate_Social_Responsibility.pdf Kašparová, K., & Kunz, V. (2013). Moderní přístupy ke společenské odpovědnosti firem a CSR reportování. Praha: Grada. KPMG (2015) Currents of change: The KPMG Survey of Corporate Responsibility Reporting. Retrieved from https://assets.kpmg.com/content/dam/kpmg/pdf/2016/02/kpmg-international-survey-of-corporate-responsibility-reporting-2015.pdf Laasch, O., & Conaway, R. N. (2015). Principles of responsible management: glocal sustainability, responsibility, and ethics. Australia ; Stamford, CT: Cengage Learning. Mullerat, R. (2010). International corporate social responsibility: the role of corporations in the economic order of the 21st century. Austin : Alphen aan den Rijn, The Netherlands : Frederick, MD: Wolters Kluwer Law & Business ; Kluwer Law International ; Sold and distributed in North, Central and South America by KLuwer Law International. Pavlík, M., & Bělčík, M. (2010). Společenská odpovědnost organizace: CSR v praxi a jak s ním dál. Praha: Grada Pavlů, D., Univerzita Tomáše Bati, & Fakulta multimediálních komunikací. (2009). Marketingové komunikace a jejich nové formy. Praha: Professional Publishing. Segal-Horn, S., & Faulkner, D. (2010). Understanding global strategy. Andover: Cengage Learning. Van Wensen Katelijne, Broer Wijnand, Klein Johanna, & Knopf Jutta. (2011). The State of Play in Sustainability Reporting in the European Union. Retrieved from ec.europa.eu/social/BlobServlet?docId=6727&langId=en Visser, W. (2011). The Age of Responsibility: CSR 2.0 and the New DNA of Business. Chichester, West Sussex ; Hoboken, NJ: John Wiley & Sons. Contact Vilém Kunz University of Economics, Prague W. Churchill Sq. 1938/4 Vilem.Kunz@seznam.cz
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