Research Paper Essay

Organisation’s Profile and Management Approach8 Report Content and Quality9 Range of the aspects of performance reported11 Performance Indicators11 Conclusion14 References16 Part 1 – An analysis of a published academic paper Introduction We have evaluated a published academic paper – â€Å"Corporate sustainability: historical development and reporting practices† (by Andreas Christofi, Petros Christofi and Seleshi Sisaye, 2012). The purpose of the paper was to compare the disclosure requirement between the two widely used sustainability reporting instruments  Ã¢â‚¬â€œ Dow Jones Sustainability World Indexes (DJSI World) and Global Reporting Initiative G3 Guidelines (GRI-G3 Guidelines). These two instruments are similarities in the content but their disclosure requirement are different and the depths of the complexity of sustainability indicators are vary. The authors suggested that sustainability reporting framework needs undergo further standardization and enforcement of the disclosure indicators to avoid any negative impact on investors and consumers in case of corporate failure or mismanagement in the upcoming future. There is growing concerns associated with whether organisations have to report their sustainability performance from the early 1990s. Fortunately, there are many corporations are voluntary elect to employ and report their sustainability performance. Nevertheless, there is no indication of any development of formal international recognised legislation to enforce corporations to report its sustainability performance. The authors believed that part of the recent corporate failures were caused by corporate mismanagement mostly a human error and failure moral-hazard system risk control. Hence, the motivation of this academic paper was to recommend that an adequate risk control was necessary to be put in place, and a meaningful and accurate corporate sustainability disclosure to be required. The paper suggests that Financial Accounting Standards Board (FASB) should actively work on a standardised sustainability reporting. Theoretical Concepts There are theoretical and practical rationales in this research. The theoretical concepts examined in the paper are stakeholder theory and public interest theory. There are many organisations that voluntary report their sustainability performance to the public. There are different reasons for them to adopt this reporting strategy. This may due to an entity is more likely to focus on meeting the expectations with a particular group of stakeholders such as investors, employees, customers, regulators and other specific groups. Usually an organisation has the responsibility to account for the right of their stakeholders such as ‘right to information’. If an organisation fail to meet the expectation of the public and stakeholders, this may result lose their support from the community and the opportunity to run their business locally. Therefore â€Å"alignment of company reporting with the expectations of key stakeholders serves to improve the quality of a company’s relationships with such stakeholders and thus protect and enhance the value of the organisation† (G100, 2003). Therefore it is critical for an organisation to address the needs and expectation from their identified stakeholders. On the other hand, the authors analysed the disclosure indicators between GRI and DJSI. In 2009/2010 there were 317 global organisations listed on the DJSI. In 2009 there were 1299 registered reports with GRI. Among these 1299 reports, the authors discovered that the level of compliance with the GRI guidelines were inconsistent. In general, there are three levels in GRI Guidelines to determine what the degree of compliance that a reporting organisation has account for their disclosure on materiality. Level A is intended for advance reporting organisations. Suppose these ‘Level A’ reporting organisations are expected to report a thorough materiality process in response and communication with their stakeholders. Lower compliance level is Level C that includes those reporting organisations are at lower compliance level. However, the authors found that there were only 31% of the reporting organisations were with great process towards sustainability implementation. In addition, there were 25% of the reporting organisations were most likely not to adhere to the disclosure guidelines. The reason for this are either (1) reporting sustainability are voluntary so they don’t need to adhere all the requirements, (2) some aspects may not be relevant to a particular organisation or the organisation choose not to report part of the requirement, (3) they have combined/used other sustainability instrument to report their sustainability performance. The authors reveal the above were some of the limitation to the current G3 Guidelines. As GRI Guidelines are non-regulatory and non-binding disclosure requirements, as well as missing ‘enforcement’ that require those reporting organisations have to comply with. The authors believed that legislation is necessary to be put in place by an authority and/or professional bodies. They said legislation is needed in order to maintain a stable capital market, and refinement and early detection of any corporate mismanagement. As a general rule, the introduction of regulation is to rotect investors as well as the public. It is believed that regulations are initially to benefit the society as a whole and it is an instrument to create confidence to the society in relation to the capital market. However, there are arguments about the cost-and-benefit to the increasing of regulations. These regulations may create huge cost to companies but with less corresponding benefit and it may crea te a false sense of security to the society. This may be one of reason why there is uncertainty for other organisations to employ the sustainability development. Comparison We have found that the authors have compared the GRI reporting guidelines with the DJSI World disclosure indicators and the report revealed some difference between the GRI-G3 Guidelines and DJSI World: (1) Data Availability and Accessibility: The DJSI covers the top 10 percentage of the biggest 2500 companies in the Dow Jones Global Total Stock Market Index (DJGTSM) that pursue economic, social, and environmental reporting (DJSIs, 2009). Each year, the index components will be announced by the SAM Indexes GmbH, a Switzerland-based investment group. It serves as a reference point to the global rating agencies and investors. On the other hand, the GRI Guideline is designed and developed through a process of multi-stakeholder consultation including individual, professionals and non-governmental organisations (NGO). According to G100, 2003, â€Å"Internationally, the most prominent, comprehensive and generally accepted guidance is that published by the GRI. † The GRI-G3 Guidelines provide reporting framework to an organisation of any size, sector or location to prepare their sustainability report. 2) Objectives: The DJSI defines corporate sustainability as â€Å"a business approach that create long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments. † (DJSIs, 2009) and that can be quantified and screened for investing purposes. On the other hand, the GRI guidelines are based on the notion that transparency and accountability about economic , environmental, and social impacts are of interest to a diverse group of stakeholders (GRI, 2008). 3) Application disclosure information: The authors utilize sample firms from both standards to draw inferences on sustainability indicators of performance. They discovered that the content of both standards are similar but the disclosure format method and the depth of indicators are differences. For example, they have compared the ‘social responsibility’ between both standards. The authors find that GRI Guidelines have better disclosure indicators especially in the systemic risk of moral hazard such as anti-corruption and anti-trust practices. As a result of the above findings, the authors believe that DJSI’s information is focus on an investment perspective. Alternatively, GRI Guidelines are more focus on a wider group of stakeholders. Although both standards are served for the same purpose that is to enhance sustainability measuring and reporting. However, these two standards are with different scope of data availability, accessibility, objectives and indicator measurement. The authors suggested it is necessary to further standardization sustainability disclosure and enforced by a professional body such as Financial Accounting Standards Board (FASB). Implications & Conclusion The implications of the above findings indicated that it is significant to form a standard sustainability guideline that appropriate to any size of corporations to employ their sustainability development. The quality, content, as well as the disclosure indicators are the critical factors; this is to determine the level of risk and materiality related to the financial and non-financial information. In particular, to certain an entity’s sustainability development can create an opportunity for an entity to sustain itself through risk management in the long run. The research paper written by Christofi A. , Christofi P. , and Sisaye S. as discussed about historical development and reporting practices of corporate sustainability. To be exact it gave an overview of how and why sustainability reporting has been developed and moreover it discussed reporting instruments such as GRI and DJSI. We understand the reason why organisation will voluntary to report their sustainability performa nce as well as how important of the disclosure indicators are. According to GRI, 2008 – â€Å"A sustainability report should provide a balanced, objective and reasonable representation of the sustainability performance of a reporting company – including both positive and negative contributions†. We will take into account of all these factors when we  evaluate the sustainability report of our chosen organisation – Samsung Electronics. Part 2 – A Critical Evaluation of an Organisations’ Sustainability Report Introduction Samsung Electronics Co. , Ltd. is found in 1969 in Suwon of Korea. They are the first Korean company included in the Global 100 Most Sustainable Corporations in the World in February 2011. In 2010, they was ranked 19th in the Interbrand’s Best Global Brands. Their main business is manufacturing and sells a wide range of electronic goods, communication devices, and semiconductors. They have one global headquarter in Korea and nine regional headquarters worldwide, which consists of 199 subsidiaries, and they have employed 178,732 full time staff and 11,732 contractors at the end of 2010. As they are one of the largest manufacturing corporate in the world, so we are interested to evaluate their sustainability performance. Vision & Strategy Since 2009, they set their long term corporate vision for 2020 as ‘Inspire the World, Create the Future’. The objectives of their core strategy are harmonising among diverse stakeholders by (1) protecting the environment, (2) improving the social conditions in their service regions, and, at the same time, (3) generating economic performance (as per the CEO report in 2011 sustainability report). They believed that integration of sustainability development is essential for sustainability growth. To achieve their sustainability development, they have categorised their strategies into six areas: talent management, integrity management, green management, social contribution, partner collaboration, and product and services. In recent years,  Samsung has built their organisation structure into eight divisions, including visual display, IT solution, Digital Appliance, Mobile Appliance, Mobile Communications, Network, Digital Imaging, Semiconductor, LCD divisions. The goal of organisation structure is help managers to implement and control the system facility and efficiency. Furthermore, the new structure enhances global competitiveness and more effectiveness organisation management. Samsung has established successfully the corporate governance to implement and monitor the sustainability strategy across the company. As seen in the annual sustainability report, the company has suggested three significant strategic approaches; visions for industry, vision for society and vision for employees. To ensure the accuracy of implementing and monitoring these approaches, Samsung has established creative management, partnership management and talent management. The responsibilities and roles of each department are increasing the external capabilities, partner collaborations, satisfying the expectation of its stakeholders. Organisation’s Profile and Management Approach Furthermore, Samsung has set up the management systems to ensure the company continuously obtaining future probability and sustainability, which is based on main direction of creation, innovation and change in consistent with the global economy. Their scope and tasks to achieve their sustainability development, that reflecting significant influences to employees, societies, partnerships, and customers as a whole, are classified in the following areas: * Talent management: employee value, work-life balance. * Integrity management: corporate ethics, fair trade compliance and intellectual property protection. Green management: emphasis on climate change, develop eco-products, encourage Eco-Friendly workplace, green communication. * Social contribution: pursuing a happier society, partnership programs. * Partner collaboration: global competitiveness. * Products and services: customer enjoyment service and customer trust. In January 2009, Samsung built the Corporate Social Responsibility (CSR) Liaison Office that is responsible for reporting directly to the CEO and the Sustainability Management Committee. Report Content and Quality There are four principles for defining report content: materiality, stakeholder inclusiveness, sustainability context and completeness. (1) Materiality: We found that the level of information provided form Samsung sustainability report is not detailed enough. For example, information about global network gives us an understanding on how many departments of production, research and development and sales in each region and the report also provided information about how many people are working in each region; but it is missing further information on how many people work in individual division. This is key information for us to compare with the accident rate. It seems they are not complied with this principle. (2) Stakeholder Inclusiveness: In both of their reports, they have identified their stakeholders into eight groups – customer, business partners, shareholders/investors, non-governmental organisations, employees, local communities, government and press. In order to meet with the needs from their stakeholders, they will identify all relative issues and will follow up with communication activities. In addition, they have expanded social network services to strengthen communication with both internal and external stakeholders. In essence, Samsung has satisfies this principle. (3) Sustainability Context: Samsung has categorises its sustainability issues into 6 areas – talent management, integrity management, green management, social contribution, partner collaboration, and product and services. At the end of the report, it contained performance highlights, short-term plan for the next year and performance indicators. Basically, Samsung has satisfies this principle too. (4) Completeness: Overall, Samsung has provided general information in their reports. By looking at the table of the content of the report, the reader can find that all important topics. Yes, Samsung has satisfies this principle. There are six principles for defining report quality:   balance, comparability, accuracy, timeliness, clarity and reliability. (1) Balance: The balance of the information provided by Samsung is enough but they are relatively emphasised on those positive aspects. In the negative aspects, for example, in the area of product and service, they have employed outside agency to conduct a global customer satisfaction survey and used it for setting improvement targets, but it is missing further information about the effect of the survey. Another example is they have disclosed that they have 57 million customer inquiries and grievances (Korea: 34 million, overseas: 23 million) on their product and after sales services, again, there is no further information. It seems they are trying to meet the disclosure requirement. In general, they have relatively emphasised on the possible aspects, like awards, partnership program in social contribution, economic performance and so on. It is obviously, Samsung has failed to meet with this principle. 2) Comparability: We found that the two reports were inconsistent, the format and level of information provided are different. In 2011 report was with more information with performance highlights, indicators as well as a short-term plan for next year. In 2010 report is with more information in the individual areas, for example, they have included their company code of conduct in their integrity management. Besides, we found that it is quite difficult to compare their report with other company especially in the same industry. Because the format and information are vary from one company to others. We believe that this is caused by lack of a standard sustainability reporting framework. Therefore, their report does not comply with this principle. (3) Accuracy: In general, Samsung as a big corporation have responsibility to provide accurate information. We believe the information they have provide are accurate and reliable, and stakeholders assess their company’s performance. Yes, Samsung satisfies this principle. (4) Timeliness: Organisation should make report available on time for the stakeholders to make informed decisions. In general, Samsung has provided their reports on a regular schedule and information is available in time. Their reports are generally available around early of June. Yes, Samsung satisfies this principle. (5) Clarity: In general, everybody can assess Samsung sustainability information from their company website and can obtain a PDF format of the sustainability report. Besides, their website provides information and contact details of their CSR office and stakeholders can contact them for any queries on their report. Yes, Samsung satisfies this principle. 6) Reliability: Basically, the level of information in Samsung’s report is quite general. However, it still can subject to examination and that establishes the quality and materiality of the information. Range of the aspects of performance reported The range (breadth) of the aspects of performance reported for these two years are adequate. In these two reports, they have categorized their sustainability development into six s egments which are talent management, integrity management, green management, social contribution, partner collaboration, and product and services. In the 2011 sustainability report, they have presented the highlights of progress, a three year performance indicator, and a short-term plan for each of the segments. The level of information provided in each segments is sufficient. However, due to there are lack of standard requirement of what level of information should be presented, we found that the information between the two years are difference and inconsistent. In addition, there are no comparisons with other companies or with industry average. Sometimes, it may be difficult to know how a particular company compares with another one. As a reader, we would like to have more meaningful information and progress in regarding to their economic, environmental and social performance. Performance Indicators In 2010 sustainability report, Samsung has set number of the action plans for year of 210 and they are:- * Sharpen competitive edge in core businesses * Promote open innovation * Develop new businesses and new markets * Expand partner collaboration and establish green leadership * Establish market-driven system * Foster a creative organisational culture We will use the above as short-term goals and will evaluate their sustainability performance. As Samsung is one of the largest manufacturing corporate. We are interested to understand their disclosure indicator in the social performance of (1) labour practices and decent work and (2) society. (1) Labour practices and decent work: Overall, Samsung has demonstrated the results of performance against goals in this area. Information has been covered in the area of talent management. They have set the objective to attract and retain top talent with promoting worker diversity and fostering a creative organisational culture through strengthening employee competencies. The level of information is met with requirement in the performance indicator related to employment and occupational health and safety. Employment status by region| Region| 2008| 2009| 2010| Korea| 84464| 85089| 95662| Other| 77236| 72612| 94802| Total| 161700| 157701| 190464| In 2010, their sales and profits has been boost even though there are weak euro stemming from debt crisis in Europe and they have expanded more business subsidiaries in overseas. Their workforce has been increased significantly. Some of their contractors have been transferred as permanent staff especially in the peak season. However, this situation may arise with some restraint in the labour budgets, overall staff management when the global continuous economic downsizing more severely in the upcoming years (2) Society: As per requirement from G3. 1, society performance indicators focus on any impacts that will arise from the local communities in where they operate, and disclose any risks that may arise from interactions with other social institutions of which are managed and mediated. Risks including bribery, corruption, undue influence in public policy-making, and monopoly practices. In the 2011 sustainability report, it has demonstrated the result of performance against the above plan. They have opened 3 more subsidiaries in 2010 from a total of 196 to 199. The movement of their subsidiaries are as follows:- Global Network| Production| Sales| R&D| Other| Total| Year 2010| 40| 50| 18| 91| 199| Year 2009| 39| 53| 24| 80| 196| Movement| 1| -3| -6| 11| 3| Once their new business subsidiaries are in operation, they will implement their sustainability strategy in the area of social contribution and integrity management. In the social contribution, Samsung has incorporated their corporate social responsibility philosophy: â€Å"leverage Samsung legacy of technology innovation to change our communities and human life and offer new opportunities to more people by preserving the environment for future generations†. In return, Samsung has developed various contribution programs through, partnership, donations and volunteering, which are tailored to each local community and aim at deliver real change to these local communities. Result in 2010 is positive. The number of people participating in volunteering is increased significantly. However, the dollar value on social contribution which is only KRW239 billion. When we compared it with the sales KRW154 trillion and net income KRW16. 1 trillion, the percentage to sales is less than 0. 15% and to net income is 1. 5%. It seems their dollars value contribution to the society is so little. Samsung has identified organisational risks of unlawful activities and violation of the laws in each region, in order to minimise these risks. Samsung has established its own code of conduct outlining ethical standards that require all employees has to comply with. Besides, they have introduced different compliance programs such as compliance education, integrated training through self-inspection to raise awareness of compliance among employees to follow. Any unlawful activities such as bribery, corruption and influence in public policy-making and monopoly are strictly prohibited. Although they have integrated different compliance programs, however wrongdoing activities are still happened. In 2010, 28% of the people who were disciplined were dismissed by Samsung. Besides, Samsung has been fined with KRW16 billion with violation of collusion on system air conditioners in Korea and $145. 73 million Euros with violation of DRAM price collusion in overseas. It seems their controlling system is inefficiency and we believe they need a tightening monitoring system in order to minimise their business risks. Conclusion Based on our evaluation on our chosen organisations’ sustainability report, we are of the opinion that their sustainability reports have covered enough information and this information can be easily accessed. However, the level of detail in their information provided in their report is very general. Their compliance program, for example, is an essential for any company, and does not provide the necessary information for us to properly analyse their integrity. The report roughly covers the data. As a reader, we would like to know more details of how problems occur, instead of what, and how they are going to rectify or prevent it. Besides, when we referring to their report, the currency they are using is South Korean Won which is quite difficult for us to understand the monetary effect. We would suggest an appropriate international currency should be used. The clarity of change between the two years reports are inconsistent. The 2010 report was with more information such as code of conduct, value system which is a useful insight, and the 2011 report was with more information such as short-term plans, performance highlights and more performance indicators. We are trying to compare Samsung’s performance with other company that is in the same industry. However this is quite difficult as the format and level of information are different from Samsung to the other company. This may be a restraint of a voluntary report. These different indicated the current limitation of sustainability development, that is lack of standard sustainability reporting. Currently sustainability reporting is a non-regulatory and non-binding requirement. After we evaluated Samsung’s sustainability report, it seems their â€Å"voluntary sustainability report may more about public relations than about increasing the transparency and accountability of corporations with respect to their sustainability performance† (Cho, 2012). We believe that â€Å"the development of CSR standards could become a major influence on global trade and investment. Questions of effectiveness, transparency, accountability and democratic participation are important for any new manifestation of regulation or governance† (Bendell, 2011). As per the insight from KPMG 2011 â€Å"while the GRI Guidelines will continue to be the de facto standard, we believe that global CR reporting would benefit from further global standards that enable the benchmarking of the quality of the information and quantitative performance in CR activities†. We believe that an organisation should initiative to ensure they have made every effort to listen and meet the needs from both their internal and external stakeholders, through incorporated the sustainability development this should be the best channel for an organisation to improve the communication with both their internal and external stakeholders. 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