1. Sustainability and Corporate Social Responsibility
Sungkyunkwan University (SKKU) International Summer Semester (ISS) 2017
“Global Synergy: Innovating through Collaboration”
Sustainability and Corporate Social Responsibility
Session 8
Sustainability and CSR reporting
Prof. J. G. Frynas
6 July 2017

2. Growth of CSR reporting world-wide
CSR reporting has grown and has become progressively more sophisticated (e.g. Global Reporting Initiative as a global standard, IPIECA for oil and gas companies). Key areas in reports: environment, human resource, products and consumer, and community involvement. Mandatory reporting, e.g. European Union, Indonesia.

3. Example: Shell Sustainability Report 2014

4. Growth of reporting assurance

5. Broad aim to assess social performance
Ethical
Often a focus on internal management systems
Environmental
Impact on natural environment
Social
Broader remit, often including impact on stakeholders
Sustainability
Focus on triple bottom line
‘Social accounting’ as generic term

6. Defining social accounting
Social accounting is the voluntary process concerned with assessing and communicating organisational activities and impacts on social, ethical, and environmental issues relevant to stakeholders

7. Social accounting established by the Body Shop
Stakeholder dialogue
Publication of report
Verification
Agreement of objectives
Preparation of accounts and internal reports
Internal
audit
Stakeholder surveys
Stakeholder consultation
Agreement of standards and performance indicators
Determination of audit scope
Policy review
Derived from Sillanpää and Wheeler (1997) and Sillanpää (1998)

8. Why do organizations engage in social accounting?
Both practical and moral reasons. Four main motives:
Internal and external pressure
Identifying risks
Improved stakeholder management
Enhanced accountability and transparency
Disincentives for social accounting:
Perceived high costs
Insufficient information
Inadequate information systems
Lack of standards
Secrecy
Unwillingness to disclose sensitive or confidential data

9. What makes for ‘good’ social accounting? (I)
Inclusivity
Comparability
Completeness
Evolution
Management policies and systems
Disclosure
External verification
Continuous improvement

10. What makes for ‘good’ social accounting? (II)
Schemes in place to tackle specific aspects of social accounting:
Reporting
Global Reporting Initiative (GRI)
Auditing and certifying
Social accountability standards SA 8000
Reporting assurance
AA1000S Assurance Standard
Implementation
Sigma framework

11. Global Reporting Initiative (1)
GRI is a common framework for sustainability reporting
The GRI’s vision is that reporting on economic, social and environmental performance by all organizations becomes as routine and comparable as financial reporting. GRI achieves this vision by developing, continually improving, and building capacity around the use of its Sustainability Reporting Framework.
An international network of thousands from business, civil society, labor, and professional institutions created the content of the reporting framework in a consensus-seeking process.
MGT4226, Week 2, 2007

12. Global Reporting Initiative (2)
HISTORY
The idea of a disclosure framework for sustainability reporting is conceived. The Boston-based non-profit CERES starts a “Global Reporting Initiative” project division and staffing, fundraising and network development begins.
1999
Exposure draft of GRI Sustainability Reporting Guidelines . 20 organizations release sustainability reports based on the draft Guidelines.
2000
The GRI’s first Sustainability Reporting Guidelines released. 50 organizations release sustainability reports based on the Guidelines.

13. Global Reporting Initiative (3)
G3 contents:
Defining report content
Defining report quality
Setting report boundary
Profile
Disclosure on management approach
Performance indicators
Sector supplements
CONTENT:
Sustainability context; Materiality; Stakeholder inclusiveness; Completeness
QUALITY:
Reliability; Clarity; Balance; Comparability, Accuracy; Timeliness
BOUNDARY:
Control; Significant influence; Some influence (content of report varies with degree of control)
PROFILE:
Strategy and analysis; Organisation profile; Report parameters; Governance
MANAGEMENT APPROACH:
brief overview of the organization’s management approach to the Aspects defined under each Indicator Category
PERFORMANCE INDICATORS:
See next slide
SECTOR SUPPEMENTS
MGT4226, Week 2, 2007

14. Global Reporting Initiative (4)
Indicator categories:
Economic
Environmental
Social Performance: Labour practices & decent work
Social Performance: Human rights
Social Performance: Society
Social Performance: Product responsibility

15. Global Reporting Initiative (5)
Selected Core Environmental indicators
Materials: Materials used by weight or volume
Percentage of materials used that are recycled input materials
Energy: Direct energy consumption by primary energy source
Indirect energy consumption by primary source
Water: Total water withdrawal by source
Emissions, Effluents, and Waste:
Total direct and indirect greenhouse gas emissions by weight
Emissions of ozone-depleting substances by weight
NOx, SOx, and other significant air emissions by type and weight
Total water discharge by quality and destination
Total weight of waste by type and disposal method
Total number and volume of significant spills
Compliance: Monetary value of significant fines and total number of non-monetary sanctions for non- compliance with environmental laws and regulations.

16. AA1000 (1)
AccountAbility standards, the AA1000 Series, are principles based standards intended to provide the basis for improving the sustainability performance of organisations. They are applicable to organisations in any sector, including the public sector and civil society, of any size and in any region.
Key theme is inclusivity. Stakeholders matter.
MGT4226, Week 2, 2007

17. AA1000 (2)

18. AA1000 (3)

19. AA1000 (4)

20. AA1000 (5)
AA1000 and its users
Adopting organisations can use AA1000 directly in developing their practices, or can use it as a basis for assessing other available specialised standards.
Stakeholders, including civil society organisations and direct stakeholders (internal and external to the organisation), can use AA1000 to assess and hence to comment on the quality of an adopter’s approach to social and ethical accounting, auditing and reporting.

21. AA1000 (6) CORE STANDARDS AA1000 Framework (1999)
AA1000AS (Assurance Standard) (2003)
AA1000SES (Stakeholder Engagement Standard) (Exposure Draft 2005)
AA1000PP (Purpose and Principles) (2007)
AA1000FI (Framework for Integration) (2007)

22. AA1000 (8)
The organisation’s choice of indicators to measure its social and ethical performance is based on the principles of inclusivity, completeness, materiality and information quality (comparability, reliability, relevance and understandability).
Indicators are pieces of qualitative or quantitative data that provide information on the performance of the organisation.
The choice of indicators also reflects stakeholders’ views of the organisation’s performance against its values and in respect of the specific needs and aspirations of stakeholders.
Stakeholders have a role in identifying the performance indicators.
MGT4226, Week 2, 2007

23. SA8000 (1)
Social Accountability 8000 (SA8000) has been developed by Social Accountability International (SAI)
SA8000 is promoted as a voluntary, universal standard for companies interested in auditing and certifying labour practices in their facilities and those of their suppliers and vendors. It is designed for independent third party certification.

24. SA8000 (2)
SA8000 is based on the principles of international human rights norms as described in International Labour Organisation conventions, the United Nations Convention on the Rights of the Child and the Universal Declaration of Human Rights. It measures the performance of companies in eight key areas: child labour, forced labour, health and safety, free association and collective bargaining, discrimination, disciplinary practices, working hours and compensation.
Note similarity with the UN Global Compact we were discussing last week.
MGT4226, Week 2, 2007

25. SA8000 (3)
PURPOSE AND SCOPE
This standard specifies requirements for social accountability to enable a company to:
a) develop, maintain, and enforce policies and procedures in order to manage those issues which it can control or influence;
b) demonstrate to interested parties that policies, procedures and practices are in conformity with the requirements of this standard.

26. SIGMA Guidelines
The Sigma Guidelines “Putting sustainable development into practice” launched in 1999 and then again in 2003 by the BSI, Forum for the Future and AccountAbility.
These guidelines aim to provide clear, practical advice to companies looking to improve their sustainable development performance and disclosure.
Three core sections:
Sigma Guidance Principles, which help a company develop a framework through which it can contribute to sustainable development;
Sigma Management Framework, which is split into 4 core phases and help a company develop, plan, deliver, monitor and report on its performanc; and
Sigma Toolkit which offers advice and guidance on particular challenges, for example, stakeholder engagement.

27. Key issue for pharmaceuticals: drug pricing
Daraprim is a drug for treating parasitic infections such a toxoplasmosis. The drug has often been used by HIV patients. For years Daraprim cost US$ per tablet in the United States. When Turing Pharmaceuticals bought the firm, the new owners raised the price to US$ 750 per pill.
Cycloserine is a drug for treating multi drug resistant tuberculosis. When the patent was sold by the owners to Rodelis Therapeutics, the new company raised the price from US$ 500 (US$ per tablet) to US$ 10,800 per package (US$ 360 per capsule) in the United States.
The cost for antiretroviral drugs for treating HIV/AIDS used to be US$ 10,000 per person per year in Africa. Under pressure, companies lowered the prices to ca. US$ 1,200 per person in some countries. However, the same drug can be produced for US$ in India, while health spending per capita was less than US$ 60 per person in Ghana and Zimbabwe in 2014.

28. Ethical arguments in pharmaceutical pricing
Pharmaceutical companies say that they have to charge high prices for medicines because the cost of research and development (R&D) for a single new drug can be US$ milion or more
If companies are forced to charge lower prices, then patients may suffer or even die because they are deprived of access to new drugs.
Company critics say that pharmaceutical companies charge a lot more than the cost of developing drugs. They also spend a lot more on marketing, advertising, administration and mergers than on R&D.
If companies do not lower prices, more patients will die unnecessarily because they have no access to life-saving medicines.

29. Classroom Task: Pharmaceutical pricing
Please consult the 2015 Citizenship and Sustainability Report of Johnson & Johnson.
Please answer the following questions:
What does the 2015 report say about drug pricing?
In your opinion, is this sufficient information on this issue?
What else could Johnson & Johnson do in order to address the issue of pharmaceutical pricing?

30. The limitations of CSR/sustainability reporting
CSR/sustainability reporting has many limitations:
Failure to measure the impact of CSR initiatives
The benefits of CSR to stakeholders are often taken for granted, but are often not supported with any evidence.
No reporting of micro-level data that matters on the ground (impact of specific branch, factory or refinery)
No consistency between companies (e.g. no common measures for oil spills or energy use)
Companies choose what to report (materiality)
Assurance has not helped to improve the quality of reporting