ACC3AFA Advanced Financial Accounting
Abstract:
The report below is based on my own best practice for the assignment task and have Provide a summary of the purpose of Corporate Sustainability Reporting, and have also provide a summary about the two theories stakeholder theory and legitimacy theory including the annual reporting about the company 's Toyota motor corporation and BHP Billiton and the comparison that how they have address the economic social environmental aspect of the companies in their report 2011. And has finalise by comparing two different sustainability report from both company accordingly it has define that how legitimacy is managed through reporting by the two companies from the perspectives of Stakeholder Theory and Legitimacy Theory.
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Requirement 1
Corporate Sustainability reporting is the practice of measuring, disclosing, and being responsible to internal and external stakeholders for organizational performance towards the goal of sustainable development The term Corporate sustainability reporting considered same way with those which describes reporting on economic ,social and environmental impact, for example reporting on Corporate social responsibility of a company. Corporate sustainability reporting provide organisations a guideline to make changes and improvement in aspect to business efficiency, reputation risk management , stakeholder management other social and economic part of the business by disclosing the status of the business in the eyes of society and its stakeholders. Reporting non financial Corporate activities provide a way to communicate and deal with social issues and help to protect a continuing good relationship with company's stakeholders. Organisation that are performing properly in the market and society may face less problems in their business in relationship to their stakeholders. Because of which they may be able to achieve competitive advantages in comparison to other that are not engage in corporate sustainability activities, in this context corporate sustainability reporting can play a vital role in cresting responsibilities and accountability for activities and benchmarking. Corporate reporting and company law/Villiers charlotte Rider,Barrey A corporate sustainability report provides an reasonable and effective explanation of the sustainability performance of both Negative and positive contribution(effect)of a reporting entity. It also help organisations to learn about themselves and to see what has actually been done in the organization. Organisations produce Corporate sustainability reports mainly to look for organizational legitimacy based on Global Reporting Initiative’s. GRI Reporting framework is designed to improved accountability and performance by learning through stakeholders engagement, which release results that occurred within the reporting Period in relation to the entity's obligation Strategy and management approach. On the basis of Global reporting initiative's(GRI) Corporate sustainability report is useful for following purposes. https://www.globalreporting.org/resourcelibrary/G3.1-Guidelines-Incl-Technical-Protocol.pdf Benchmarking and to analyse that company has follow the required rules regulation and have performed with the social values and performing in respect to required standard and have follow all relevant and required laws. Represent how organisation is affecting and affected by its influences and have match the corporate and social expectation about the sustainable development of the company and its progress. It also present a proper idea about if company is respecting the stake holders requirements.
In another aspect Corporate sustainability reporting disclose those information that are relevant to compare organisation with other organisation that are performing along with which result as a gain of competitive advantages for a organisation.
Hence the purpose of corporate sustainability reporting is to find out all the non financial corporate aspects of the organisation and examine them to develop and improved the stakeholders expectation and to benchmarking assessing sustainability performance of the company together with companies demonstrating aspect to compare its performance with other organisation to improve better in the future in the eyes of stakeholders and society. Corporate reporting and company law/Villiers charlotte Rider,Barrey
Requirement 2
As stakeholder theory is a theory that explore about the management or the managing part of the organisation and also explain the values of the people(stakeholder) who count within the particular organisation.
stakeholder theory is somehow a complex label because it has not been refer to both empirical theory of management and normative theory of business ethics, and it has not clearly distinguish both . Whereas stakeholder theory can be explained as a umbrella term which explain about the different stipulations related with the relationship between stakeholders and organisation as well the effect of the right and power of powerful stakeholders in the management. Accordingly the ethical branch of stakeholder theory explicate that all the stakeholder have a right to get fairly treated by their organisation and also the impact of the organisation towards the life of stakeholders than the economic power of the stakeholders to the organisation. Whereas managerial branch of stakeholder theory explain about the effect of powerful full stakeholder and their expectation from organization.
(Deegan, 2009, Financial Accounting Theory, pp. 318-378)
Even though stakeholders theory have two parts to describes about, Freemans stake holder theory have not provide the adequate explanation about the organisation behaviour within in its environment and the link of relation between the relationship between the organisation and its stakeholders. Freemans stakeholders theory may have suggesting that a particular value such as profit and efficiency as suggested by the economic model explains Organisation behaviour within society, and as a result in revolve explains its relationship to stakeholders. On the other hand, other motivating principles might work just as well such as legitimacy as suggested by Davis's iron law of responsibility and corporate social presentation model.
Accordingly some of the criticism towards the stakeholders theory are as below * insufficient explanation of process,
* incomplete linkage of internal and external variables,
* unsatisfactory attention to the system within which business operates and the levels of analysis within the system, and poor environmental assessment (Susan Key, (1999) "Toward a new theory of the firm: a critique of stakeholder “theory”", Management Decision, Vol. 37 Iss: 4, pp.317 - 328)
The stakeholders theory have not provided the adequate vision about the stakeholders relation with their organisation and the effect(impact) of both organisation and the stakeholders and firm towards each other, however freeman stakeholders theory have shows some practices to explain about the matters that arrives between the stakeholders and their co-relation between each other.
Legitimacy theory explicate that organisation continually seek to ensure that they are identify as operating within the bounds and norms of their society, and firms make sure that all of their activities are legitimate. as social norms and values(bounds ) are not fixed organisation needed to operate accordingly.
Legitimacy theory has been played a vital role as a measure of societal perceptions of the competency of corporate behaviour. it is a explanation of society towards the organisation. Whereas legitimacy theory has explicate more about the power of society towards the organisation that they are operating at.
Accordingly any social institution or business cannot operates without social contracts or by expressing that society and its values are implied by the organisation.
The legitimacy is the best practice for the organisation that being legitimate means that increasing the numbers of customer, and securing the firms position in the society. Whereas also taking community expectation to the account and implementing corporate social responsibility are become the self interest for the organisation. Some of the considerable statements that arrived form legitimacy theory are as below: * Community expectation are not static
* Business need to be updated with social changes
* To be success in the business they must comply with social expectation
while critiquing the legitimacy theory there are more positive aspects of it than the negative part in general Legitimacy theory allow organisation to be continues relation with its society by legitimating them with social norms and values . However in another hand if organisation failed to comply with society's expectation than it will create the social gap, that can be a threatened for businesses.
(Deegan, 2009, Financial Accounting Theory, pp. 318-378)
Requirements:3
Two companies chosen for comparison of their reporting on economic, environmental and social aspects in their annual reports and standalone sustainability reports for the reporting year 2011 are Toyota motor Corporation and BHP Billiton.
Comparing Economic aspect of the annual report of Both company Toyota motor corporation and BHP Billiton: The economic aspect of the annual report of the Toyota company have provide the details about the company's. financial position through their consolidated financial summary and consolidated financial statements it has also reported on the management annual report on the internal control over financial reporting and have clearly provided the information about the investors and also economic aspect of this annual report has included the selected financial summary of the company All financial information discussed in this section is derived from Toyota’s consolidated financial have been prepared in conformity with accounting principles generally accepted in the United States of America( U.S GAAP) This type of approaches in annual reporting have provided clear vision of the financial status of the company as a whole. Unlike Toyotas annual report BHP have details of information about its Economic aspects of the report as a large multinational company it has to generate its report for the Australia and the base don the USA accounting rules(USA GAAP) and regulation as a company that directly deals with environment has to generate reports that are familiar with the environment, the economic perspective of BHP has included the details about the company's financial status of the company for example it has provided the details reports about the its value of assets, dividends, securities and all the required details
.
Comparing Environmental and social aspect of the annual report of both company: This part of the report have included that how Toyota take in to the account these two environmental and social perspective, in which they have included the corporate governance as a title and the details about the support for recovery from the great Japan earthquake which have clarify that Toyota take its environment and society seriously into their account
Comparing Environmental and social aspect of the annual report of both company: This part of the report have included that how Toyota take in to the account these two environmental and social perspective, in which they have included the corporate governance as a title and the details about the support for recovery from the great Japan earthquake which have clarify that Toyota take its environment and society seriously into their account
Whereas BHP Billiton is a multinational
company that deals directly with the environment. Unlike Toyota it has to
consider more about the environmental aspect , where it has clearly explicate
the title environmental performance of the company and reports about the effect
of the company's operation on the environment. Accordingly it has clearly
reported its social aspect by explicating the topic like "Conformance with
corporate governance standards", and governance at BHP Billiton. It shows
that annual report of BHP Billiton has clearly address the environmental and
social aspect of the company.
Comparing Sustainability reporting of the
Toyota motor corporation and BHP Billiton 2011:It has provided the details
about how Toyota has become sustainable in the market and society, this
sustainability reporting have explicate that the values of society, customers
suppliers and in general the stakeholders of the company. sustainability
reporting have provided a clear vision about the future expectation of its
stakeholders and how Toyota is taking in the path to match their expectation.
It has explicate the vision of the company towards its customers, employees,
business partners, global society/local communities, and shareholders
addressing these types of aspects of the company assist these multinational
organisation like Toyota to be sustainable in the world continually
The
approach of the sustainability report of the BHP is "By integrating
sustainability concepts into our culture, policies and processes, we are able
to make an enduring contribution to society" As the statement above have
clearly explain about the sustainability report the company have become
sustainable in the market by taking the key issues like culture and policies
into the account of the company , where they have address their stakeholder and
the vision towards the matching expectation about the society and the
stakeholders as a whole. The main focus of the BHP"s Sustainability report
have clearly explain that company have clear vision about the company's vision
and goals towards is stakeholders society including safety and health of their
employee.
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Requirement 4
In the report of the both company Toyota Motor Corporation and BHP Billiton, Both company have manages and have address the stakeholders theory and the Legitimacy theory. in aspect of stakeholder theory they have equally treated their stakeholder, and have clearly shown the vision that that how these companies will address and act for the stakeholders expectation. For example Toyota have a mission to inspired its employees by providing safety procedures in the workplace and by rewarding them accordingly.
Both company have define the legitimacy in their annual report as a" theory asserts that organisation continually seek to ensure that they are perceived as operating within- that they attempt to ensure that their operating activities are perceived by outsides parties as being legitimate" the bounds and norms of their respective societies and have clearly explain that they have match social expectation and are working within the bound of social norms and values, and companies are changing accordingly to the expectation on society changes which have allowed these two multinational companies to be sustainable in their business.
Conclusion: Corporate sustainability reporting provide a guideline to businesses and other organisation by allowing them to review their past
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