Halabi, Abdel K.; Kazi, Ashrah U.; Dang, Vy; Samy, Martin --- "How the top ten stack up" [2006] MonashBusRw 34; (2006) 2(3) Monash Business Review 20

How the top ten stack up

Abdel K. Halabi, Ashrah U. Kazi, Vy Dang, Martin Samy

Abdel K. Halabi, Ashrah U. Kazi, Vy Dang and Martin Samy assess how social responsibility is being reported by Australian corporations.

Corporation stakeholders are demanding that organisations demonstrate greater transparency and accountability beyond the domains of financial performance and profit-making. While Australian CEOs agree that corporate social responsibility (CSR) reporting is an essential component of business strategy, reporting on CSR initiatives is still not mandatory in many countries, including Australia. Some corporations voluntarily report their CSR activities, others do not.

So how widespread is disclosure of CSR in Australia’s top 10 companies? An analysis of their public reports reveals the level of reporting that is undertaken by these corporations.

Corporations are part of the community and therefore have rights and duties that go with that status – these include social responsibility. Furthermore, organisations, because of their longevity, have an especially responsible position – they are large users of the world’s natural resources (land, air and water), and thus should be accountable for their actions and contribute back into society.

The top ten companies News Corporation (News) BHP Billiton (BHP) National Australia Bank (NAB) Commonwealth Bank of Australia (CBA) ANZ Banking Group (ANZ) Westpac Banking Corporation (WBC) Westfield Group (WG) Rio Tinto (Rio) Telstra Corporation (TSA) Woodside Petroleum (WP) This top 10 was selected on market capitalisation at close of trading 30 September 2005. Each company’s annual report (2004), their CSR report (if they produced one) and their website (2005) was examined. While CSR activities were widely reported on websites and in some annual reports, it is important to understand just what CSR activities are in fact being reported. The Global Reporting Initiative (GRI) guidelines are a standard for reporting an organisation’s economic, environmental and social activities. Reporting guidelines Economic DIRECT ECONOMIC IMPACTS Customers, suppliers, employees, providers of capital, public sector Environmental Materials, energy, water, biodiversity, emissions, effluents and waste, suppliers, products and services, compliance, transport, overall Social LABOUR PRACTICES AND DECENT WORK Employment, labour/management relations, health and safety, training and education, diversity and opportunity, strategy and management HUMAN RIGHTS Non-discrimination, freedom of association and collective bargaining, child labour, forced and compulsory labour, disciplinary practices, security practices, indigenous rights SOCIETY Community, bribery and corruption, political contributions, competition and pricing PRODUCT RESPONSIBILITY Customer health and safety, products and services, advertising, respect for privacySource: GRI Guidelines, 2002 Source: GRI Guidelines, 2002

Graph 1 GRI indicators on company website

So what is CSR? It has been defined as “…business decision-making based on ethical values, compliance with legal standards, and respect for communities, their citizens and environment,” Gillis and Spring (2001); “…operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business,” (Business for Social Responsibility); and “…the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.” (The World Business Council for Sustainable Development).

While these definitions have subtle difference, the general consensus is that companies should operate and behave ethically with respect to the community that they operate in and at large, by putting social responsibility and the greater community benefit ahead of profits, the company and its stakeholders.

Globally, a great deal of attention has been directed recently to the CSR reporting activities of companies, especially after the corporate collapses of Enron and WorldCom (post-Enron there has been a dramatic increase in the production of CSR reports). The Global Reporting Initiative (GRI) also stated that major stakeholder groups – shareholders, employees and non-government organisations – are demanding more disclosure on a wider range of issues. Although the development of CSR reporting is still in its early stages, it has gained support from corporations as business leaders recognise that comprehensive reporting helps support business strategy and shows a commitment to sustainable development.

Currently CSR reporting is voluntary, although with the increasing importance, a number of organisations (such as the International Organisation for Standardisation, Social Accountability International and the Global Reporting Initiative) have established guidelines to report non-financial information such as environmental, social and economic performance information.

CSR reporting is being encouraged in Australia, where the government has initiated a number of proposals. Environment Australia for example has issued A Framework for Public Environment Reporting: An Australian Approach. Further, legislation, such as Section 299 (1) (f) of the Corporations Act (2001), require companies to include details of breaches of environmental laws and licenses in their annual reports. Section 1013 (a) to (f) of the Corporations Act 2001 (which applies to providers of financial service products with an investment component) also states that corporations must disclose the extent to which labor standards or environmental, social or ethical considerations are taken into account in investment decision-making.

Furthermore, following in the footsteps of the British standard BS 8900, the Australian Accounting Standards Board (AASB) has started considering developing a standard for CSR accounting – also known as Triple Bottom Line (TBL) accounting. The standard would require companies to add environmental and social issues to their financial reports. It would increase disclosure requirements already in place for environmental and social reporting and add to provisions already set out in the Corporations Act and Australian Stock Exchange Governance Council principles. The standard would cover areas such as responsibilities to clients, customers and consumers, employment practices – including conflict of interest occupational health and safety issues, responsibilities to the community, environmental policies, support for community activities and donations and sponsorships.

Graph 2 GRI indicators in CSR report


Graph 3 GRI indicators in annual report

Website information

When the GRI guidelines were applied to CSR disclosures made on these company websites, it revealed that the top 10 companies tended to disclose ‘positive’ impacts they made in the community, including charities they worked with or contributed to, or achievements made such as awards won. In terms of labor practices, most companies focused on providing employees with a safe and diverse workplace with equal opportunities. Only the banks (Commonwealth, ANZ and Westpac) provided information on product responsibility while the other companies made no mention of it.

Separate CSR reports

When GRI guidelines were applied to the companies which produced a separate CSR report, the information presented was more detailed than on websites. Interestingly, more companies disclosed ‘negative’ incidents in these reports. This information was not on the websites. For example, companies in the mining sector (such as BHP Billiton and Rio Tinto) disclosed tragic accidents and deaths. The reports of the Australian mining companies tended to have more emphasis on the environmental impacts. Rio Tinto and BHP, for example, both have detailed environmental reports where they disclose their uses of materials, energy, water, emissions and waste, whereas the reports of the banking sector mainly focused on social impacts such as customer and employee satisfaction rates and community involvement.

Annual reports

Finally, GRI guidelines were applied to the annual report of the top 10 companies. Generally these were found to be the least useful in providing information on the company’s sustainability practices. Four of the annual reports made no mention of CSR while six contained limited information. If the annual report mentioned CSR, it was contained in the director’s report, and this was usually a few paragraphs or sentences on environmental, social and community issues that the company had been involved in.

Thus, while some companies disclose a significant amount of information in all three mediums, others make no mention of CSR in their annual reports but produce separate social reports or have some information on their websites. It should be noted that just because a company did not report its social activities (either in its annual report, CSR report or website) this does not mean the company is not socially responsible. The voluntary nature of social reporting may mean that the company chooses not to disclose this information.

And while CSR reporting is voluntary, this study shows it is widespread in Australia with all top 10 companies disclosing some information. Australia’s top 10 companies obviously see value and importance in reporting CSR information.

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Cite this article as

Halabi, Abdel K; Kazi, Ashrah U; Dang, Vy; Samy, Martin. 'How the top ten stack up'. Monash Business Review. 2006.; Monash University ePress: Victoria, Australia. http://www.epress.monash.edu.au/. : 20–24. DOI:10.2104/mbr06034

About the authors

Abdel K Halabi

Dr Abdel K. Halabi is a Senior Lecturer with the Department of Accounting and Finance, Monash University.

Ashrah U Kazi

Dr Ashrah U. Kazi is a Lecturer with the Department of Business Law and Taxation, Monash University.

Vy Dang

Vy Dang is an Accountant at PKF Chartered Accountants and Business Reconstruction, Melbourne office.

Martin Samy

Dr Martin Samy is a Lecturer with the Department of Accounting and Finance, Monash University.