ACCA SBR ^UK Syllabus E. Interpret Financial Statements For Different Stakeholders - Non-financial reporting - Notes ^{3 / 12}

Companies should look after ALL shareholders and be transparent in its dealings with them when compiling corporate reports.

CSR requires directors to look at the aims and purposes of the company and not assume profit to be the only motive for shareholders.

Arrangements should be put in place to ensure that the business is conducted in a responsible manner. This includes environmental and social targets, monitoring of these and continuous improvement.

There is pressure now for companies to show more awareness and concern, not only for the environment but for the rights and interests of the people they do business with.

Governments have made it clear that directors must consider the short-term and long-term consequences of their actions, and take into account their relationships with employees and the impact of the business on the community and the environment.

CSR requires the directors to address strategic issues about the aims, purposes, and operational methods of the organisation, and some redefinition of the business model that assumes that profit motive and shareholder interests define the core purpose of the company.

The reporting of the company’'s effects on society at large
It expands the traditional role that company´’s only provide for the shareholders.

Why prepare a social report?

1. Build their reputation on it (e.g. body shop)

2. Society expects it (Shell)

3. Long term it will increase profits

4. Fear that governments may force it otherwise

How companies interact responsibly with society

• Provide fair pay to employees

• Safe working environment

• Improvements to physical infrastructure in which it operates

Is it against the maximising shareholder wealth principle?

Organisations are rarely controlled by shareholders as most are passive investors. 

This means large companies can manipulate markets - so social responsibility is a way of recognising this, and doing something to prevent it happening from within.

Also, of course, business get help from outside and so owe something back. They benefit from health, roads, education etc. of the workforce and suppliers and customers. 

This ‘social contract’ means that the companies then take on their own social responsibility

Human Capital Reporting

Sees employees as an asset not an expense and competitive advantage is gained by employees.

The training, recruitment, retention and development of employees is all part of what would therefore be reported

• Implications

  • People are a resource like any other and so needs to be effectively and efficiently managed

  • Safeguarding of the asset as normal

  • Impairment could mean a simple drop in motivation

• HCM reports should:

  1. Show size of workforce

  2. Retention rates

  3. Skills needed for success

  4. Training

  5. Remuneration levels

  6. Succession planning