Corporate social responsibility and corporate disclosure

Date updated: 10 October 2007

Position

The uptake of sustainability reporting as a basis of stakeholder engagement, risk management and continuous improvement should be actively promoted because it is a key element in the evolving understanding of corporate social responsibility.

The development of such non-financial reporting should be achieved through principles based guidance rather than by way of regulatory direction.

Action

• CPA Australia, in conjunction with the University of Sydney, is progressing a major government funded research project to investigate the role of Accountants and Accounting in Improved Sustainability Management and Reporting. The aim is to document and provide guidance on how the accounting profession can contribute to the management and reporting of sustainability information, particularly by extending and adapting accounting systems to accommodate environmental and social data. Detailed results and findings will become available in 2008.
• In 2006 CPA Australia became an organisational stakeholder member of the Global Reporting Initiative (GRI). The GRI is the leading international framework and set of metrics for the reporting of business sustainability performance. A strong relationship with the GRI is consistent with CPA Australia’s corporate social responsibility initiatives and strong interest in disclosure. Scoping documentation is presently being prepared, and internal workshops conducted to address the practicalities and resource implications of CPA Australia producing a GRI compliant sustainability report for 2008 or earlier.
• CPA Australia is seeking a closer strategic relationship with the GRI through possible collaborative initiatives: (a) participation in a research project addressing materiality guidance, and (b) participation in a GRI awareness raising project in a S-E Asian jurisdiction.
• CPA Australia will commission a major piece of research to examine the differences between financial and non-financial reporting. The research will seek to identify matters such as differing conceptual bases, information utility and their manner and effectiveness in describing respective categories of performance. Conclusions will be valuable to the development of future regulatory policy.

Rationale

• Both accountants and accounting practice need to remain familiar with changing understanding of business practice. Some of the more significant demands arise from changing expectations as to the role of business in effecting positive environmental and social change, and how this in turn presents opportunity for identifying and pursuing competitive advantage. The emergence of sustainability reporting requires the development of new skills and extension of existing skills into non-traditional areas of involvement.
• Two government inquiries, the Parliamentary Joint Committee on Corporations and Financial Services (PJCCFS) and the Corporations and Markets Advisory Committee (CAMAC) have comprehensively investigated the scope and role of corporate law in enabling company directors to engage in sustainability based decision making. Both inquiries concluded that such decision making was reconcilable with the long term interests of the company. Also, these inquiries highlighted the significance of disclosure of environmental and social performance as vital parts of both stakeholder engagement and management of risk.
• In August 2007 the ASX Corporate Governance Council (ASX CGC) concluded that it would not provide separate guidance on sustainability / corporate responsibility issues on an ‘if not, why not?’ basis as part of its corporate governance principles and recommendations. However, the ASX CGC did endorse the need for the council, business and government to work collaboratively to promote disclosure and reporting on sustainability / corporate responsibility issues. CPA Australia will promote this type of outcome through its advocacy initiatives, own practices, and through increasing awareness amongst members.