Ethics and Sustainability Reporting

Subject: Business Ethics
Pages: 5
Words: 1487
Reading time:
7 min
Study level: Master

Introduction

The global economy is heavily dominated by the private sector, which plays an upper hand in revenue generation and management. Competition is high among national and international rivals, which has seen markets flood with high-quality products and services (Mion and Loza, 2019, p. 4612). Over the years, investors pumped resources into profitable or potentially profitable investments. Competition, poor leadership, and bad regulatory practices saw most of the investors lose their wealth. As a result, companies have developed strategies that make them sustainable in all spheres of their operations (Hoegen et al., 2018, p.329; Dyllick and Rost, 2017, p. 346). Conventionally, the reporting frameworks on sustainability touch on financial gains, effect on the environment, and impact on the social lives of the affected communities.

In only 3 hours we’ll deliver a custom Ethics and Sustainability Reporting essay written 100% from scratch Get help

What Is True Sustainability?

Businesses and investments formulate and implement policies within which they can reach their goals and targets. However, not all companies reach these goals without straining the available resources. Other companies do not utilize all their resources. In a nutshell, companies are expected to operate within some set limits to survive in competitive markets and make profits. According to Gold and Schleper (2017, p. 425), sustainability is the ability of an entity to provide for its needs without straining resources intended for other operations or generations. Resource utilization has been around for decades, with companies competing for natural resources such as minerals, wood, sand, coal, to mention a few. The resource acquisition and utilization processes constitute a significant cause of concern as industrialization has proven to be a burden to global well-being (Liu and Kong 2021, p. 657; Damascus and Groot, 2017, p. 510). Organizations are expected to account for their contribution to their financial success, social life, and impact on the environment. for true sustainability to be achieved, they should perform such that they are self-reliant on financial matters (Fisch 2018, p. 923). The organizations should also deliver products and services that impact society positively without straining the company resources. Lastly, the organization’s activities should not grossly destroy the ecological balance.

Initially, organizations ventured into particular disciplines, domains, or market segments solely to make profits. Profitability was adequately used to measure the success and sustainability of such organizations. Companies could acquire natural raw materials in less competitive environments, process them into finished products, and deliver them to the market without involving third parties (Damastuti and Goot 2017; Neill 2021). Such a situation is ideal for large organizations which could harness the power of their departments or subsidiaries. However, as competition gained roots globally, profits declined, and organizations were forced to make the different investment, management, and marketing approaches to ensure profitability, social acceptability, and compliance with environmental regulations. Today, companies report to investors and shareholders on their sustainability. The reporting frameworks used help attract investors, retain and attract more customers while preserving the environment.

What Is Corporate Social Responsibility(CSR)?

Corporate and non-corporate organizations have two things in common: they affect people and the environment (Lee et al., 2017). Irrespective of whether the organizations develop products and services for the general good, their main goal should focus on improving lives without draining natural resources. Organizations are modeled on accountability to self, investors, and the host or affected communities. CRS is one of the most popular models employed in the current competitive markets to ensure organizations remain effective in their operations. According to Lu et al. (2019), the CSR model seeks to make an organization more accountable while operating sustainably in the markets. Fully operational CSR policies and practices are beneficial to the organization, community, and environment. First, organizations concerned about the welfare of the organizations gain customer trust and improve their sales. Gaining customer trust helps organizations build a substantially positive relationship with their community of customers. It creates a good working environment for its employees, improving their performance and output in and out of work. CSR is essential for sustainable investment and development in the long term and short term goals. As organizations embrace CSR, they set and achieve ground-breaking goals on cutting carbon emissions and other environmental hazards. The profitability of a business organization is predominantly dependent on sales. Companies that implement CSR tend to win the hearts of their customers, improving their sales, and subsequently, profits. CSR helps organizations identify and invest in research and development of products and services that align with community needs and expectations while reducing the regularity burden on their back.

Sustainability Reporting Frameworks

Sustainability entails several domains and spheres of life, natural resources, and people. Companies have slowly moved away from financial to non-financial reporting frameworks (Brosseau et al., 2019). Experts warn that financial-based sustainability assessment approaches are no longer practical as organizations significantly affect people and the environment (Lubis et al., 2019). Accounting is the main measure of sustainability in organizations as it creates a snapshot and value of all major operations and expenditures. The triple bottom line-based (TBL) frameworks are common in most organizations and focus on three main domains: finance, social implications, and impact on the environment. the financial domain focuses on the value and returns on the organization to its shareholder. The social aspect is concerned with the effect of the organization, its products, and services on the livelihoods of its customers and the society at large. The environmental domain evaluates how company operations affect the environment or contribute to climate change. The TBL framework is reckoned for embracing sustainability while paying attention to social and environmental needs.

The global reporting initiative, popularly known as GRI, is the most popular framework used to report the sustainability of the united nation’s sustainable goals. The framework touches on several aspects, including climate change, social well-being, governance, human rights, and financial performance. The framework targets governments and businesses and seeks to aid them in deciphering and interface their contribution to the aspects mentioned above. The GRI is comprised of four key elements which form the basis for its implementation. They include reporting guidelines, indicator protocols, sector supplements, and technical protocols. Different businesses and government organizations disclose their sustainability reports differently. However, the GRI balances the discrepancies and seeks to move towards a single format in the future. It will thus help organizations assess their sustainability in a universally recognizable and similar way for more straightforward self-assessment and evaluation.

Challenges With Bottom-Line Based Frameworks

The TBL framework is praised for its ability to help organizations assess their impact on society and the environment. However, the financial aspect of the framework poses a significant challenge to accountants. It is not possible to establish the societal impact of financial gains. Whereas the framework compels organizations to operate ethically and preserve environments while making profits, it causes management conflicts (van der Voort and van der Weijde, 2020). This is influenced by the fact that organizations are primarily established to make profits and must do everything within their disposal to reduce the cost of doing business. Scholars challenge the approach used to quantify social and environmental sustainability, citing a lack of tools. Eccles and Krzus (2019, p. 287) note that most organizations tend to observe the regulations put in place rather than participate in constructive or rehabilitative projects, which leaves existing problems unsolved.

Academic experts
available
We will write a custom Business Ethics essay specifically for you for only $16.00 $11/page Learn more

The GRI is primarily focused on internal organizational performance, which poses sustainability auditing. The framework does not give room to explore how the organization associates with the external ecological balance in such scenarios. It also makes it difficult for regulators to convenient the organizations to disclose their interaction with the environment. The framework risks instilling a culture of false disclosures by organizations to cover up their influence on ecological balance. Integrated indicators are elemental decision-making apparatus but miss in the GRI. The credibility of the GRI sustainability framework is questionable when it comes to reporting verification and quality assurance (Calabrese et al., 2017, p. 439). since the organization solely generates the reports files, it is not easy to verify the disclosures from the outside. It means it would be almost impossible to decipher if an organization lies in its disclosures to avoid regulatory hurdles or reputation damage.

Which Framework Is Better?

Although both TBL and GRI pose questions on their applicability, the GRI is more detailed and proposes to address each aspect of sustainability independently. Social and ethical implications and environmental impacts independently. It puts the organization in a better position to establish its true sustainability status. it also aids organizations to make better managerial and investment decisions based on their performance on the sustainability scale.

Conclusion

The global economy is driven by public and private organizations which affect all spheres of human life. Competition is responsible for the struggle for sustainability among corporate and non-corporate organizations. Corporate social responsibility model guides organizations in engaging in ethical practices on social and environmental issues while making profits. The bottom-line-based reporting frameworks address financial, social, and environmental issues. The GRI framework is more detailed than the TBL framework and should be used by all organizations.

Reference List

Brosseau, D., Ebrahim, S., Handscomb, C. and Thaker, S., 2019. The journey to an agile organization. McKinsey & Company, May, 10.

Calabrese, A., Costa, R., Ghiron, N.L. and Menichini, T., 2017. Materiality analysis in sustainability reporting: a method for making it work in practice. European Journal of Sustainable Development, 6(3), pp.439-439.

Damascus, E. and de Groot, R., 2017. Effectiveness of community-based mangrove management for sustainable resource use and livelihood support: A case study of four villages in Central Java, Indonesia. Journal of environmental management, 203, pp.510-521.

Dyllick, T. and Rost, Z., 2017. Towards true product sustainability. Journal of Cleaner Production, 162, pp.346-360.

15% OFF Get your very first custom-written academic paper with 15% off Get discount

Eccles, R.G. and Krzus, M.P., 2019. Implementing the task force on climate-related financial disclosures recommendations: An assessment of corporate readiness. Schmalenbach Business Review, 71(2), pp.287-293.

Fisch, J.E., 2018. Making sustainability disclosure sustainable. Geo. LJ, 107, p.923.

Gold, S. and Schleper, M.C., 2017. A pathway towards true sustainability: A recognition foundation of sustainable supply chain management. European Management Journal, 35(4), pp.425-429.

Hoegen, A., Steininger, D.M. and Veit, D., 2018. How do investors decide? An interdisciplinary review of decision-making in crowdfunding. Electronic Markets, 28(3), pp.339-365.

Lee, C.Y., Chang, W.C. and Lee, H.C., 2017. An investigation of the effects of corporate social responsibility on corporate reputation and customer loyalty–evidence from the Taiwan non-life insurance industry. Social Responsibility Journal.

Liu, C. and Kong, D., 2021. Business strategy and sustainable development: Evidence from China. Business Strategy and the Environment, 30(1), pp.657-670.

Lu, J., Ren, L., He, Y., Lin, W. and Štreimikis, J., 2019. Linking corporate social responsibility with reputation and brand of the firm. Amfiteatru economic, pp.442-460.

Get your customised and 100% plagiarism-free paper on any subject done for only $16.00 $11/page Let us help you

Lubis, S.M., Dalimunthe, R.F. and Siahaan, E., 2019. The effect of learning organizations, achievement motivation through work environment as a moderating variable on the job satisfaction of temporary employees’(non medical) in the administration service of North Sumatra University Hospital Medan, Indonesia. European Journal of Human Resource Management Studies.

Mion, G. and Loza Adaui, C.R., 2019. Mandatory non-financial disclosure and its consequences on the sustainability reporting quality of Italian and German companies. Sustainability, 11(17), p.4612.

Neill, T., 2021. True north, strong and free: Policy options for supporting sustainable development in Northern Ontario.

van der Voordt, G.J. and van der Weijde, R.P.J.B., 2020. The Triple Bottom Line: Reporting tool or reflexive framework?-An employee perspective on Corporate Responsibility in practice.