Introduction
Value creation is one of the many objectives that any firm wants to achieve. Performance measurement should be used as a tool of sustainability assessment by firms. According to Figge, Hahn, Schaltegger and Wagner (2002, 270), sustainability reporting is a process of a company understanding its impact on the people, the planet and the profit.
They further suggest that when a company discloses its economic, environmental, and social performance, it can easily access its impact on the community. This report seeks to identify the importance of sustainability reporting for the firms in Australia. There are rules that require the firms whether they are in public or in private sector to give their reporting according to GRI guidelines.
Adopting Sustainability Reporting
Figge et al. (2002, p. 271) point out that in Australia, the federal government through the treasury has given funds to St James Ethic center in order to expand responsible business practice (RBP). Companies in Australia to enhance their brand reputation among the users also do sustainability reporting. Lack of company’s sustainability report is a global problem.
Therefore, all businesses regardless of their sizes should be at the first line to solve these problems. In conjunction to this, Australian government has released GRI reporting framework that has a global applicable standard suitable to meet the needs of different stakeholders.
According to Dwyer and Owen (2005, p. 212), the reporting process for GRI makes organization understand its impact on the economy, environment, and social life of the stakeholders. Any type of the company can apply the processes across the globe. For a good sustainability report, an organization should consider its purpose and experience.
Cch (2009, p. 68) claims that it should also consider the interest and expectations of the stakeholders or the customers. Therefore, the reporting organization should include the measures that they have used to satisfy the needs of its stakeholders. This is known as the stakeholders’ inclusiveness. Figge et al. (2002, p. 274) agree that the report should also meet the completeness aspect that is the provision of sufficient material to help he stakeholders to assess the performance of the reporting organization.
As noted by Dwyer and Owen (2005, p. 215), there are steps that accompany must follow to implement sustainability reporting process. The first step is to prepare, which is aimed to promote internal discussion by the management persons to identify the impacts of the organization on the stakeholders.
The second step is connecting, which is how the stakeholder’s aspect should be included in the report. Definition is the third step; this is to identify what matters most in the report (Dwyer and Owen 2005, p. 215). Then the organization monitors and gathers the information that is to be included in the report. The GRI (Global Reporting Initiative guidelines) also developed reporting principles to enable the firms check their monitoring process and obtain the information that is of high quality.
To communicate is the final process that involves preparation, writing the final report and translating the result of the report. The number of organizations reporting there economic, environmental and social performance is increasing day by day in Australia. This is not because the government requires them to do so, but because they have seen the benefit of doing it like gaining popularity among the stakeholders (Figge, Hahn, Schaltegger and Wagner 2002, p. 270).
Perego (2009, p. 412) claims that for the sustainability report to be effective, the organization should present it first to the assurance providers to verify the report. An examination done on the sustainability report of 130 companies presented between 2002 and 2004 shown that characteristic of assurance providers differs with each type of the assurance providers. There are three major different types of assurors that are, accounting firms, and certification bodies and specialists consultancies (Perego 2009, p. 413).
The accounting firms are classified as the high quality assurance providers as compared to the other providers. This is because they offer internal mechanisms of control to ensure that the reports released by their members are good quality. Choi and Wong (2007, p. 20) posits the likely hood to chose a quality assurance provider in a country with a weaker legal regime is high than in a country with strong legal regime.
Oxfam Australia is one of the non-profit making organizations in Australia. Its vision is to make the world fair for every one to control his or her life without interference. This organization presented its environmental sustainability report for 2008 to 2013. They include the aim to use the resources that are People, finances and materials effectively and efficiently.
The organization also wants to be accountable to the communities, partners and allies that they work with and demonstrate the best practice in operational environmental management and reporting. Companies face pressures for them to disclose non-financial information. This drives are market, societal, stakeholder’s needs, to uphold the reputation of the organization among many others (Vormedal and Ruud, 2006, p. 208).
Oxfam organization aims at reducing the emitting of carbon to 0 % by the year 2015. The long-range plan involves generation of renewable source of energy for it to reduce the environmental pollution. In addition to using the drives mentioned above, the organization has used the internationalization degree to influence the level and quality of the reporting.
The organization is aiming at reducing energy consumption by 15% of 2007 levels. This will be achieved by monitoring and evaluating actions from the previous years to indentify the initiatives that contributed to successful reduction of energy consumption. The organization reports on its environmental measures every quarter of the year. This is to assess the progress of the company and assures the best practice by the suppliers.
Salvation Army is another NGO and non-profit making organization in Australia and its aim is to provide care for the poor and disadvantaged people. They also provide the emergency assistance for the people who have the financial pressures. The organizations sustainability reporting is driven by the need for the organization to legitimate its operations and to meet the needs of the stakeholders.
They involve the auditing companies in their financial reporting and have chosen the best audit firm to be there assures. The organization reports their performance generally without grouping. The reports are based on departments that is, general corporate responsibilities, and management systems, codes of conducts, managements systems and supply chains.
Perego (2009, p. 412) argues that for an organization to give a quality reporting they must involve more than one assurance providers to verify the report. This is because for a company to exist for a long period, it should be aware of the impact it has on the stakeholders (Tencati and Perrin 2006, p. 298).
Both the Salvation Army and Oxfam Australia are driven internally and externally to give their reporting. These are national and international policies and pressure from the wider society. This has made them survive in the country for a long period since they are able to meet the policies of Global Reporting Initiative (GRI) (Vormedal and Ruud, 2006, p. 213).
According to Tencati and Perrin (2006, p. 299), the organizations must apply appropriate systems to control and measure their behaviors in order to get the assessment of the extent to which they are meeting the needs of the stakeholders and the need of the government.
Finally, for the organization to meet all the rules and the regulations related to the sustainability reporting especially those for the SMEs there should be a system that should be applied to monitor all the qualitative and quantitative performance. This reporting system includes the annual financial reports, social reports and environmental reports (Unerman and Bebbington 2007, p. 112).
The advancement of technology in the 21st centaury has been a booster to the reporting system of the organizations. The technology has lead to the invention of integrated reporting systems which groups the reports together for an easy access.
A significant benefit realized from annual financial reporting is the use of notes, which substantially assists, in explaining diverse monetary data presented in financial reports this becomes helpful to a user who is not familiar with financial reports regarding to a specified company. It also becomes important when making comparison of different firms that employs different policies in their operations.
For instance, if a company collapse while the director had assured employees and shareholders of going concern then director is liable to compensate the latter parties. In areas that require compulsory information regarding the preservation and conservation of the environment, companies find it difficult to hide their mission regarding to maintaining status of the environment (Perrini and Tencat 2006, p. 299).
Perhaps the rules and regulations governing annual financial reporting is more liberal compelling companies to outside some pertinent information, which could help an investor, make useful decision. Again, some firms take advantage of providing unnecessary details. The firm may also tend to go against the principle of releasing true and fair information.
While providing annual report, it is quite difficult to identify whether is presenting true and fair information or not. According to Financial Reporting Council (34), there is high tendency of the annual financial reporting relies so much on the positive matters leaving negative information hidden. Information relating to the operation of any company is fundamental in making useful and informed decision.
In conclusion, Australian organization must adopt sustainability reporting. The sustainability of an organization is determined by the sustainability of its stake holder relationship. The relationship is build by the ability of the organization to involve all of them including the suppliers, public authorities and civil society in general.
The stakeholder’s view of the firm is what should guide the organization to prepare a report this can change dramatically the role of the firm in the society. Therefore the entire firm should be ready to install the systems that will enable them to adopt the sustainability reporting without being pushed by the government. Although the process seems difficult, it is for the benefit of the organizations.
List of References
Cch, C 2009, Australian master environment guide, CCH Australia Limited, Melbourne.
Choi, J & Wong, T 2007, ‘An international investigation’, Contemporary accounting Research, pp, 13-46.
Dwyer, B & Owen, D 2005, ‘The British accounting: Review assurance statement practice in environmental, social and sustainability reporting, a critical evaluation’, British Accounting Review, vol. 37, no. 2, pp. 205-29.
Figge F, Hahn, T, Schaltegger, S & Wagner, M 2002. ‘The sustainability balanced scorecard: linking sustainability management to business strategy’, Business Strategy and the Environment, vol. 11, no. 5, pp. 269–84
Perego, P 2009, ‘Causes and consequences of choosing different assurance providers’, International Journal of Management, vol. 26, pp, 413-25.
Perrini, F & Tencati, A 2006, ‘Sustainability and stakeholder management: the need for new corporate performance evaluation and reporting systems’, Business Strategy and the Environment, vol. 15, pp. 296-308.
Unerman, J & Bebbington, J 2007, Sustainability accounting and accountability, Taylor & Francis, Melbourne.
Vormedal, I & Ruud, A 2006, ‘Sustainability reporting in Norway: an assessment of performance in the context of legal demands and socio-political drivers’, Strategy and the Environment, vol. 18, no. 4, pp, 207- 22.