Basically, Corporate Social Responsibility (CSR) reporting is a self-regulation system incorporated into a business model. CSR functions in way to ensure a firm cooperate with the spirit of the law, ethical requirements as well as national and international norms (Hopwood et al., 2010). Sometimes the self-regulatory mechanisms go beyond compliance and companies get involved in further social good. The main objective of CSR is to raise long-term profits through positive public relations. Again, firms do it to maintain high ethical standards that reduce legal repercussions. However, there are many arguments about CSR. Critics argue that CSR is a big barrier to the role of companies in the economy. On the other hand, the protagonists of this aspect argue that companies increase long-term profits by functioning with the CSR perspective (Hopwood et al, 2010). Nonetheless, CSR calls for the organizations to make positive influence on the environment. Furthermore, assist and impact employees, investors, community among others positively.
The corporate social responsibility report should be well-developed and implicit to shareholders. Meaning the employees, consumers as well as the community should have a clear understanding of what the firm anticipates to do and the outcome. This is significant because when all stakeholders understand the program it is supported by the staff and the community members’. In addition, the shareholders should have detailed information about the CSR policy being implemented. Lastly, a good corporate responsibility policy should ascertain qualified cohorts for the anticipated program (Owner & Odwyer, 2007). It’s of great importance for firms to partner with experts in a particular social issue. Additionally, the report should deliver tools to measure the success.
Some of the principle features of CSR reports include completeness, accuracy compatibility, reliability and stakeholders’ inclusiveness. High quality CSR reports should accommodate the interests of all stakeholders, including shareholders and consumers. Consequently, there will be increased accountability and transparency, as stakeholders will demand for the impact of company’s activities as opposed to balance –sheets only. The CSR report should also be accurate and should not be used as public relationship tool. The accuracy will lead to the reliability of the report, which is also another principle of high quality CSR report (Laufer, 2003).
To accommodate the interests of many stakeholders and shareholders, many companies use accommodative CSR approach. The approach is familiar among many companies because it helps in striking the balance of interests of almost all stakeholders and shareholders. Under this approach, a firm show moderate commitment to its social responsibility to take care of the interests of both shareholders and stakeholders (Owner & Odwyer, 2007). CSR is more of an expense to many companies and may reduce their level of profitability, which may not augur well with many shareholders and owners of various companies. At the same time, there is increased pressure from consumers and other stakeholders like the government that demand social responsibility from companies. Therefore, a company must balance the interests of shareholders and other stakeholders.
CSRs are vital asserts of a company. The main objective of CSR is to raise long-term profits through positive public relations. Again, firms do it to maintain high ethical standards that reduce legal repercussions. Critics argue that CSR is a big barrier to the role of companies in the economy. Consequently, the company must be transparent with the stakeholders. This includes community, investors, customers, NGOs and the media amidst a few. Information sharing with the stakeholders is significant to enhance relationships, reputation as well as building trust. Also, when the companies gives a CSR report they are able to manage risks. CSR reports allows organization catalog their business risks, monitor as well as disclose related data (Owner & Odwyer, 2007). As a result, the business fortitude to alleviate the risk is clear. Better still, CSR reporting ease pressure on the company. Many companies mostly in US feel the pressure of the shareholders who expects them to release the accurate information about the long-term viability of a company.
Consequently, this coerces the companies to report more comprehensive information and report rather than financial statement. This approach is common with the companies that are well developed. Additionally, providing CSR reports gives the company a competitive advantage ahead of the competitors’ (KPMG, 2011). Improved brand image, raised number of customers, investors trust as well as incorporation of CSR in business activities gives a stable position in the market. Again, this leads to new businesses. CSR reporting helps the firm to engage the shareholders especially the customers in a new way. For example, a firm running an ad about environment awareness and advocates environmental conservation may persuade than a competitor running a normal ad .In this approach many consumers are likely to be attracted to such products compared to those that are not environmental sensitive.
The quality of the reports is affected by numerous factors. When reports are voluntary they are likely to be flexible. Meaning the results will be easy to modify. Again, the flexibility of the results will enable the company to adjust to better service. At the same time, the firm will serve the collective interests and desires of all the people. On the other hand, voluntary reports may lead to conflicts of interests. The managers and the directors may conflict for the public reputation. Besides, the resources may not be enough to do the CSR. This is because when it is not accounted on the budget therefore the resources will be scarce (Laufer, 2003). At the same time, cost saving by the firms because it is not an extra expenditure rather a uniform expenditure to all.
Despite the benefits of the mandatory CSR reports there are the drawbacks of the same. One the companies may do them to avoid legal repercussions. The company may do it for the sake of avoiding punishment from the law enforcement. Again, the companies may lack incentives for innovation. Additionally, the firms may lack constraints on efficiency and competitiveness (Laufer, 2003). In either way the quality of the report is affected.
CSR reporting is a self-regulation system incorporated into a business model. This regulation shows the financial audits as well as the social accounting. The financial accounting shows the how the stakeholders money was spent. On the other, hand social accounting shows the social performance like pollution level and injurious of the employees, the policy to aid the community. However, the verification of this report is vital.