CORPORATE SOCIAL RESPONSIBILITY ASSURANCE

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CHAPTER 2 CORPORATE SOCIAL RESPONSIBILITY REPORTING

Introduction

The combined pressures of increased stakeholder activism; rampant globalisation; a burgeoning global population; alarming levels of global destitution around the world; heightened concerns about climate change, decimation of natural resources and violations of basic human rights; and an enduring global recession require companies not to only improve their operational efficiency, but also to incorporate broader corporate social responsibility (CSR) issues into their business strategies (Gray & Milne, 2002; Manwaring & Spencer, 2009). Despite dissidents still arguing that climate change is a naturally occurring phenomenon and not necessarily anthropogenic 2 (Pascoe, 2007; Revkin, 2008; Sutton, 2009), empirical evidence overwhelmingly points to its recent acceleration being due to post-industrialisation human activity (Johns et al., 2003). CSR is therefore ultimately a strategic issue that cannot be separated from overall corporate strategy Galbreath (2006). To anticipate and adapt to changing stakeholder expectations and regulatory shifts, and to optimally address surplus corporate capacity and environmental concerns, CSR-related issues should be incorporated into corporate strategy (Waddock & Graves, 1997). Increasing globalisation, growing pressure for increased transparency and the need to protect company reputations have seen many companies that were already perceived as successful, critically re-examining their corporate values (ICAEW, 2004). It may therefore be argued that companies are changing their operating paradigm from ‘exploiting resources’ to ‘sustainably utilising resources’. While this may appear to be a matter of semantics, it does represent a fundamental principle that explains the required philosophical shift in corporate morality and accountability. Today’s successful companies are therefore not only those accepting the combined crises of climate change, food and water shortages, volatile energy prices, and economic and ecosystem collapses, but rather those that ‘rigorously exploit’ the emerging opportunities (Berliant, 2009). Illustrating its inherent unsustainability, ‘exploitation’ may be defined as being the point at which resources are overexploited, causing their collapse or extinction (Ludwig, Hilborn & Walters,1993). However, appropriate levels for sustainable utilisation may only be determined through trial and error, resulting in any initial overexploitation only becoming detectable after it has become severe or irreversible.Globally, concerns are growing about what companies can and should do to ensure that future generations are not burdened with the residual fallout of unethical, amoral or unsustainable business practices. While Mervyn King (2008) may argue that humankind are only ‘transient caretakers’ of the planet, with an implied duty to make the world a better place for subsequent generations, on the other hand CSR may simply be considered a business opportunity (Hart, 1997).When companies define their environmental and social strategies, opportunities for new products and services emerge. Corporate responses to stakeholder pressure for improved CSR may therefore simply be an extension of the conventional raison d’être of profit maximisation (Reuvid, 2007).Companies participate in societal governance by assisting to administer the individual rights of citizens, both within the company and more broadly within the context of external economic corporate relations (Moon, Crane & Matten, 2003). Moreover, companies are beginning to engage in activities that could be regarded as being the domain of government (Scherer & Palazzo, 2011); and are increasingly assisting in the administration of the citizenship rights of their employees. Companies may for example, engage in activities related to public health, AIDS, malnutrition, homelessness, education, literacy and human rights protection. Historically, corporate success was measured by financial performance. Recent developments in accountability and sustainability practice suggests that corporate success should be measured and reported differently, reflecting performance indicators that comprehensively incorporate all aspects of strategy (Force for Good [sa]). In order to overcome the information asymmetry arising from the ‘agency problem’ resulting from the separation of company owners and management (as described in section 2.4.5), company performance should be reported in a consistent manner, both internally and externally. According to Force for Good [sa], companies should invest in internal reporting systems and have the courage to openly explain their corporate strategy and results to both employees and external stakeholders, to the same extent and with the same clarity that management uses for corporate decision-making. As described in 2.7.7.6, the International Integrated Reporting Council (IIRC) released the Integrated Reporting Framework in 2013 as the first global initiative attempting to formalise this broader stakeholder accountability (IIRC, 2013b). It should however, be pointed out that integrated reporting complements and does not replace other forms of company reporting.Being a truism does not diminish the validity of ‘we manage what we measure’. It is now the right time to ask whether the right things are being measured in the right way and correctly communicated to the right people, causing some companies to start reporting on their nonfinancial performance using one or more of the emerging frameworks and guidelines (Manwaring & Spencer, 2009).The need for the human race (and by implication for companies) to deal with today’s sustainability challenge of avoiding an impending environmental and social collapse, is succinctly articulated in the statement that “If we insist on ruining the planet, we have to stop claiming we’re a superior species” 3 (Berliant, 2009). Similarly, the truism “no people, no planet, no profit”4 (unknown) may be considered prophetic.Since the primary objective of this thesis is to examine the characteristics of CSR assurance, it is necessary to first understand the contemporary CSR discourse. Similarly, since the purpose of an assurance engagement is to establish the veracity of the underlying CSR disclosures, this chapter considers prevailing CSR reporting practices. The global CSR movement is impacted by the contextual environment of particular countries; the various social, economic and management theories relevant to CSR are accordingly introduced. Companies are juristic bodies, implying that their CSR approach is influenced by the company leadership. As a result, the chapter describes the ethical and moral theories influencing company CSR approaches.

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ABSTRACT 
ACKNOWLEDGEMENTS 
LIST OF TABLES
LIST OF ANNEXURES 
LIST OF ABBREVIATIONS AND ACRONYMS
CHAPTER 1 – INTRODUCTION
CHAPTER 2 – CORPORATE SOCIAL RESPONSIBILITY REPORTING
CHAPTER 3 – CORPORATE SOCIAL RESPONSIBILITY ASSURANCE
CHAPTER 4 – RESEARCH METHODOLOGY
CHAPTER 5 – EMPIRICAL CORPORATE SOCIAL RESPONSIBILITY REPORTING RESULTS
CHAPTER 6 – EMPIRICAL CORPORATE SOCIAL RESPONSIBILITY ASSURANCE RESULTS
CHAPTER 7 – CONTRIBUTION AND CONCLUSION
BIBLIOGRAPHY

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