Corporate Social Responsibility has been defined by the European Commission as the integration by companies of social and environmental concerns in their business operations and in the interaction with their stakeholders on a voluntary basis. CSR is about managing companies in a socially responsible manner. Business and society are interdependent. The well being of one depends on the other. Companies engaged in CSR are reporting benefits to their reputation and their bottom line. CSR is a voluntary action that business can take, over and above compliance with minimum legal requirements, to address both its own competitive interests and the interests of wider society.
Why should an organization undertake the lengthy and challenging process of social accounting, auditing and reporting? The issue comes down to how the organization views and treats it’s stakeholders . The CSR reporting is one way of engaging with them.
The growing popularity of CSR reporting and organization’s desire to hear their stakeholders’ views on corporate social performance suggests two possibilities. First, that stakeholders are interested in corporate behavior, and business attitudes are changing from a predominantly managerial emphasis to a collaborative one. Second, that there is an infrastructure of management information systems underpinning the whole process of reporting and providing the information behind organizational decision making.
Researchers have found a great variety of perceptions of stakeholders. The largest group saw them as ‘those who influence or are influenced by the organization’. To some others they are seen as the people who affect or are affected by the achievements of the organization. And to the rest, they are the people for whom the organization exists, suggesting relationships characterized by partnerships and alliances.
The correct paradigm depends on the structure of the organization and its motivation to interact with stakeholders, but what is certain is that any social reporting must be effective and planned. Social accounting systems identify and measure social performance. If an organization chooses to disclose this information in the interest of transparency and openness, its management must be confident that the information is true.
Reliable information systems reduce the risk that reporting inaccurate information could damage the firms reputation. Many organizations collect information that is pertinent to stakeholder groups, but not all choose to disclose it.
Most companies routinely collect information on employees, meeting customer requirement, working with suppliers, occupational health and safety, environmental issues etc. Only few companies possess a specific social accountability team to collect this data. The rest of the companies ask various departments to collect different information which could make it harder for them to gather the information together for a report.
The most popular management accounting tool used for social reporting is the balance scorecard. But this is not the best solution. Why? One of the key features of social accounting and auditing is supposed to be transparency and openness about the corporate activities. The balanced scorecard is primarily an internal management tool that may not readily translate into a social account for public disclosure.
The application and potential adaptation of fashionable management accounting tools for use in a social accounting framework requires further research before their use becomes more widespread.
Corporate attitudes towards stakeholders are changing. Rather than holding stakeholders at arm’s length, many organizations are now seeking to engage with them. It is a definite change from the hostile encounters that gave rise to early forms of social accounting and reporting. Stakeholders are becoming more articulate about their interests and concerns, and organizations are getting better at communicating about social performance issues.
CSR reporting is increasingly popular for communicating data about social performance to multiple constituents. The wave of corporate communication is underpinned by existing management information systems. But while popular management accounting tools are being used for social responsibility decision-making, they require skilful adaptation if they are to demonstrate transparency and accountability.
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