Despite social reporting resulting in a decline in market efficiency, there are several reasons which justify the concept of social reporting. These reasons are associated with the various dimensions of social reporting which include the social dimension, environmental dimension, and the economic dimension. The social dimension is concerned with the impact of an organization on the social systems while the environmental dimension is concerned with the effect of the natural system for example the water system, air, and land (Balachandran & Alan, 2009, p. 168). On the other hand, the economic dimension of social reporting deals with the impact of the organization on the economic systems and economic circumstances of the various stakeholders.
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Social reporting contributes to an organization disclosing its social operations to the various stakeholders such as employees, the society, and shareholders. Blowfield and Murray (2003, p. 193) think that social reporting is the 1st insight about an organization’s disclosure.
Additionally, Blowfield and Murray (2003, p.193) further assert that social reporting is a very effective way through which an organization can explain its operationalization about social responsibility. Over the past few decades, social reporting has increasingly been utilized by the organization as a proxy for determining an organization’s social performance (Blowfield & Murray, 2003, p.193).
According to Balachandran and Alan (2009, p.168), social reporting enables an organization to determine its social performance. This is attained by undertaking an analysis of the firm’s impact on the various stakeholders at the various levels which include local, national, and global levels. Additionally, several social indicators affect a firm’s intangible assets such as its reputation and its human capital (Balachandran & Alan, 2009, p. 194).
Despite the decline in market efficiencies as a result of social reporting, it enables an organization to minimize costs that might arise from complaints by the stakeholders and other actions that might negatively affect the firm’s operation. Davis (2003, p. 4) asserts that the core reason for social reporting is to enhance an organization’s social performance. Through social reporting, an organization ensures that its operations contribute towards attaining sustainability. However, to achieve this, a firm’s management team must integrate three main pillars. These include disclosure, dialogue, and development.
According to Davis (2003, p. 205), social reporting enables an organization to assess how effective it is in adhering to the values which it has committed itself to attain. Additionally, social reporting depicts the nature of the relationship that an organization has developed with its stakeholders. Therefore, it gives a clue on the probability of an organization attaining long term survival and development.
Social reporting is also justified in that it contributes towards the creation of information amongst the stakeholders regarding the operation of an organization. Through social reporting, an organization can provide stakeholders with relevant and material information. Some of this information is related to environmental and social policies. This increases the effectiveness with which an.
Currently, businesses are operating in an era whereby a high level of transparency is required. As a result, there has been an increment in demand for information regarding organizational operations. This trend has arisen from various stakeholders such as the society, shareholders, governments, and other special interest groups. According to Davis (2003, p.15), social reporting increases the effectiveness with which an organization attains sustainability. Davis (2003, p. 14) further asserts that sustainability contributes towards an organization attaining financial viability and economic sustainability.
Social reporting can also be justified in that it contributes to a high level of accountability amongst organizations (Hess, 2008, p. 26). The concept of accountability demands firms to be responsible for the various unintended, social, unacknowledged, social, and environmental impacts that they cause in their quest to attain their economic objectives.
Davis (2003, p. 13) opines that social reporting enables organizations to execute their operations in a socially accountable manner just as financial reports enable organizations to discharge their economic accountability to the various stakeholders. Therefore, through social reporting, stakeholders can be able to determine the best practices that they should incorporate in their operation.
Social reporting can also be justified even in cases where it causes market inefficiencies. This arises from the fact that it enables organizations to be effective and efficient in the process of making decisions. This is mainly applicable to publicly funded activities whereby market prices for outputs are absent. It may be easy to determine the cost of some inputs about certain projects in both financial and non-financial terms.
However, the determination of the output about such projects may be challenging. For example, Davis (2003, p. 216) asserts that it is difficult to determine the number of prisoners who are fully reformed or school leavers who employable. However, through social reporting, one can be able to make such decisions. This is because social reporting enables accountants to integrate non-financial values. Additionally, social reporting provides several social-economic accounting models that can be used.
Balachandran, V., & Alan, C. , V., 2009. Corporate governance and social responsibility. New Delhi: PHI Private Learning.
Blowfield, M., & Murray, A., 2003. Corporate responsibility: A critical introduction. Oxford: Oxford University Press.
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