Sustainability Reporting in the RMG Industry

This assignment delves into the world of sustainability reporting within Bangladesh's Ready-Made Garment (RMG) industry. Students are tasked with examining the Global Reporting Initiative (GRI) G4 guidelines and their application to this sector. A key focus is on understanding stakeholder engagement, particularly considering the social and environmental impacts of RMG production in Bangladesh.

Running head: ACCOUNTING FOR SUSTAINABLE MANAGEMENT
sustainability reporting

Accounting for Sustainable Management 1
Contents
Introduction...........................................................................................................................................2
Requirements for Sustainability Reporting............................................................................................2
Why the report should be provided....................................................................................................2
Stakeholder Theory........................................................................................................................3
Ethical Branch of Stakeholder Theory...........................................................................................3
The Accountability Model.............................................................................................................4
Whom the reports should be addressed..............................................................................................4
Identification of stakeholders.........................................................................................................4
WML’s stakeholders......................................................................................................................5
What to report....................................................................................................................................5
Engagement of Stakeholders.........................................................................................................5
The information to be reported......................................................................................................6
How to report........................................................................................................................................7
GRI- An Introduction....................................................................................................................7
G4 Guidelines................................................................................................................................7
General Standard Disclosures........................................................................................................8
Specific Standard Disclosures........................................................................................................8
Future Implications to WML...............................................................................................................10
Conclusion...........................................................................................................................................10
References...........................................................................................................................................11

Accounting for Sustainable Management 2
Introduction
A report published by an organization or company which provide the information about its
economic, social and environmental performance is known as sustainability report. It also
shows the values of organization and exhibits the connection between its strategies and
objective of contributing to a sustainable economy. It becomes very important for the
organizations to provide a sustainability report as it indicates the merits and demerits of their
activities on the society, economy and environment (Ey.com, 2017).
Wave Master Ltd (WML) is an Australian company, established by Mr Bobster, the
managing director in 2001. It is listed on Australian Securities Exchange (ASX). It deals in
producing wetsuits and surfboards made up of using environment friendly materials.
Surfboards are made from growing bamboo and recycled water bottles. It outsources the
wetsuits production to Hasan Fashions operating in Bangladesh. Currently, WML Ltd. wants
to outsource its production of surfboards to china as it has the better quality of bamboos and
the production cost will also be lower.
This report includes the reasons for filing a sustainability report and what aspects the report
should cover. It also states the implications of outsourcing the surfboard production to China.
A theory is also discussed which will direct the recommendations provided for a
sustainability report.
Requirements for Sustainability Reporting
Why the report should be provided
Sustainability reporting is the key step in achieving a sustainable global economy. The report
will provide sustainable information to the government in order to measure the impact of the
company’s operations on economy. The external stakeholders are directly benefited from the
reporting as it clearly indicates the positive and negative impact of the day to day activities of
the WML, on the overall economy. Therefore, WML should provide sustainability report as it
will show its contribution to the environment and society. Ethical branch of stakeholder
theory is explained to answer question.

Accounting for Sustainable Management 3
Stakeholder Theory
An organization management and business morals theory that states the moral values which
are to be applied in managing the organization. It aims at proper communication with the
stakeholders, efficient management of stakeholders. The theory also states that the company
should adhere to various problems related to stakeholders’ rights and their powers (Freeman
et al. 2010).
Stakeholders are defined as the group of people who has an interest in the company and are
affected by its activities. They can be internal and external. Internal stakeholders are
generally investors, employees who are directly interested in the organization. External
stakeholders are those people who are indirectly affected by the operations of a business.
These are suppliers, creditors and the society in which the company operates.
Ethical Branch of Stakeholder Theory
This gives a normative perspective that all the stakeholders carry an equal right and should be
fairly treated. This is why issues related to their powers are not directly relevant. Moreover,
the branch also states that the organisation has some social responsibilities that mean it
should manage its business for the benefits of all stakeholders. On a whole, it is the duty of
the management to coordinate the interest of stakeholders and it should be capable enough to
deal with the conflicts arising between the interests (Tilt, 2009).
From the above theory, it is very clear that the stakeholders have equal right and with this
they also have a right to access all the information related to the day to day activities of the
company and their effects on the society, environment and economy. Therefore it is expected
from WML to provide sustainability report to its stakeholders as by creating a transparent
report on the sustainable activities performed, the company manages to generate a positive
interest of investors and stakeholders as the report provides all the information regarding how
the business is conduct and how company address to the social, environmental and
governance issues. Sustainability reporting also benefits the company internally as it can
determine the areas or the operations which are required to be improved. So it becomes very
essential for WML to provide sustainability report to its external stakeholders (Bradford,
Earp and Williams, 2014).
The above theory cannot stand alone for reporting as it focuses in a specific group that is
stakeholders. The reports prepared on the basis of this theory majorly reflects the impact on
stakeholders regardless the activities which impacted the survival of the company. WML can

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also apply a legitimacy theory for disclosing its corporate social responsibility. It is based on
a conception that there is a ‘social contract’ between an organization and the society. It says
that the organization make sure that it operates within the boundary of its respective society.
It provides the disclosure of strategies adopted by the company in order to legitimate its
existence. WML should provide information regarding how it deals with environment and
society as the activities performed by them will have a direct impact on its survival. As the
company uses natural raw material for its surfboard production, it is very important to report
about the same in its sustainability reports so as to legitimize their operations.
The Accountability Model
To support the above theory, an accountability model was developed by Gray, Owen and
Adams. They defined accountability as “it is the duty of an organization to provide an
account of those actions for which it is held responsible”. The two duties are:
 Responsible to accept certain actions.
 Responsible to give justification of those actions.
Thus, WML is accountable to provide all the information of its actions which affected the
society and environment. Sustainability report is required to be prepared for providing all the
necessary and relevant data.
Whom the reports should be addressed
Identification of stakeholders
The report should be provided to the stakeholders who are identified on the basis of above
theory. The ethical branch gives a wide range of stakeholders so WML should consider those
who need the sustainability report and are affected by it. Prioritising of the stakeholders
should be done on the basis of their need and perspectives regarding the report.
Stakeholders are classified in two categories that are primary and secondary. The primary are
those, without whom, the organization cannot exist. They are directly affected by the
business’s activities and have direct interest in it. They include employees, shareholders,
strategic partners and top managers whereas secondary stakeholders comprises of media,
suppliers, customers, regulators, governments and communities and social interest groups.
These people are not engaged in the operations of the business but are indirectly affected by
them. In addition to this Lepineux said that civil society should be included in the

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stakeholders list and should be at top of it and mentioned reasons for this (Lépineux, 2005).
Similarly, environment was also considered as a stakeholder because it is the only factor
which is majorly affected by organization’s decisions and activities and is required to be
protected.
WML’s stakeholders
On the basis of above identification and on the current operations of WML, its stakeholders
are as follows:
1. Primary Stakeholders
 Employees
 Strategic partners
 Shareholders
 Top managers
2. Secondary Stakeholders
 Media
 Customer
 Supplier
 Regulators
 Government
 Communities and society
 ENGO in Australia
What to report
Engagement of Stakeholders
It can be defined as a process through which an organization involves its relevant
stakeholders who can be affected by its decisions or can influence them. This engagement
enables the companies to know about the expectations of its stakeholders. For doing this, the
business need to provide all the necessary data about the effects of its actions to the
stakeholders. Hence, WML must report all the facts about its current operations in the report
in order to involve with its stakeholders (Deloitte.com, 2014).
The information to be reported
The information reported must be as per ethical branch of stakeholder theory and the
accountability model. It should provide the positive and negative impacts on its stakeholders.

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The major operation of the company is manufacturing surfboards. Production of surfboards
generally contributes to the environmental issues. It led to the release of greenhouse gas and
hydro-fluorocarbons which depletes the ozone layer. The fibreglass which is used in its
manufacturing has Volatile Organic Compounds (VOC) that produces toxic gases which
affects the health of the workers.
The second activity of WML is that it is currently outsourcing the wetsuits production to a
company operating in Greater Dhaka Area, Bangladesh named as Hasan Fashions. It mostly
employs women. As it has been seen that, the garment industry has largely contributed to the
economic growth of Bangladesh. But on the other hand, this industry also has a bad history
regarding the health and safety of the workers. Many tragedies have occurred like collapse of
Rana Plaza factory building in 2014. The women workers have a large contribution in the
industry but still they are recognized as a cheap labour and are paid minimum wages in the
world. They work under an informal job contract because of lack of education (Rahman and
Siddiqui, 2015). On the top of that, working under improper conditions for long hours,
adversely affect their health and chances of getting sexually harassed are also present
(Unicef.org, 2017). Moreover, wetsuits are made of a sponge. This sponge is made from
neoprene which is extracted from petroleum or limestone. This extraction creates a lot of
environmental pollution because of the melting of chemical substance. (patagonia.com, n.d.).
Implications of WML’s transport fleet should also be reported. The Climate Change
Authority of Australian Government stated that some percentage of Australia’s greenhouse
gas is released through the domestic transport sector (Climate Change Authority,
2017).WML distributes its products across Australia by way of its own fleet of trucks. It uses
domestic transportation which directly impact the environment.
These are the implications which are needed to be taken into account at time of preparing
sustainability report which is to be provided to the stakeholders.
How to report
After discussing the implications, now the company will focus on the ways to report them.
Generally companies prepare their sustainability reports in compliance with the guidelines
provided by the Global Reporting Initiative. GRI mention some standards on the basis of
which companies show their positive and negative impact on the sustainability problems.

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Keeping in view the ethical reasons, WML prepare its report in accordance with GRI
guidelines.
GRI- An Introduction
GRI is an international organization that has laid down the standards and for sustainability
reporting since 1997. It helps the businesses and governments across the world in
communicating the impact of their activities on sustainability issues such as change in
climate, social welfare, governance and human rights. This result in creating environmental,
social and economic benefits for the country (Globalreporting.org, 2017).GRI issued new
guidelines in 2013 “G4” which set out some principles that can be used by organizations for
measuring and reporting their sustainable performance, keeping in view the concept of
“materiality”. The concept focuses on providing real and relevant information, ensures that
the needs of different stakeholders has been considered and prevents issues from getting
ignored. It may also help in reducing reporting costs (Pwc.com, 2017).
G4 Guidelines
The guidelines provide two ‘in accordance’ options to the companies for preparing their
sustainability report. These options are Core and Comprehensive. In core option, organization
needs to report for at least one indicator for the identified material aspects. Whereas, in
Comprehensive option, all the indicators given in guidelines are required to be reported
against material aspects which are identified (Globalreporting.org, 2015). Content which is to
be included in this report is decided on the basis of these two options. Both the options are
applied for organizations of any size, type and location. As it is considered that WML is
doing sustainability reporting first time, Core option seems to be sufficient enough to guide
the company in preparing the report. In addition to this, the general and specific standards
disclosure on the basis of this option will cover enough information that will satisfy the
expectation of the stakeholders (Globalreporting.org, 2017).
General Standard Disclosures
General standard disclosures are identified which are required for the Core option. These
standards are applicable to all the organizations. General standards are divided into seven
parts which are, strategy and analysis, organizational profile, identified material aspects,
stakeholder engagement, report profile, governance and ethics and integrity. All the
information covered in these parts is required to be disclosed in the report
(Globalreporting.org, 2017). In regard of ethics, WML must report about its moral values and

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principles which are followed by the company to achieve its “green” objectives. The
company should also disclose about its response to the expectations of its stakeholders.
Specific Standard Disclosures
G4 guidelines classify these disclosures into three categories which are Economic,
Environmental and Social. The aspects of GRI are covered with each category. Sustainability
report of the organization presents the data related to material aspects. The impacts of the
aspects which are identified as material by the organization are known as material aspects.
They reflect the impact of company on environment, economy and society and sometime
influence the decisions of stakeholders. The facts reported for these aspects are disclosed as
Disclosures on Management Approach and Indicators (Globalreporting.org, 2017). This will
help WML to measure its performance in sustainability.
Economic
This category is mainly concentrated on the impact of WML on the economic condition of its
stakeholders and on the economy at all levels. It does not emphasis on the financial condition
of the company. WML’s activity of producing surfboards locally is reported under this
category. By manufacturing locally, the company provides benefits to the local workers and
the society in which it operates by generating employment opportunities.
WML uses local bamboos as the raw material to manufacture surfboards, which is supplied
from the local supplier in Australia. This creates a positive impact in terms of obtaining the
resources. As far as outsourcing of wetsuits is concerned, the indirect impact of this action is
that give jobs to the needy workers and helps in overall economic development of the
country.
Environmental
It laid down the emphasis on the impact of WML’s operations on natural system that is land,
water, air and ecosystem. This involves reporting of company’s raw materials and its output,
biodiversity, mode of transportation used and the expenses incurred in compliance with
environment. Generally, production of surfboards creates a lot of environmental problems
and also increases the pollution. Currently, WML use two raw materials that are local
bamboos and recycled water bottles to create surfboards. In terms of material usage, WML
can determine the percentage of recycled water bottles used as compare to the local bamboos.

Accounting for Sustainable Management 9
The impact on biodiversity caused by the use of bamboos and the energy consumed by the
company’s operations must be reported.
Importing wetsuits from Bangladesh and distribution of surfboards results in emission of
greenhouse gases. The suppliers of the raw material also have some negative and positive
impact on environment. All these facts are needed to be reported in the company’s
sustainability report.
Social
This category consists of four parts that are Labour Practices and Decent Work, Human
Rights, Society and Product Responsibility. It mainly focuses on the social system which gets
affected within the organizations (Globalreporting.org, 2017). In general, there are several
social issues which are caused by surfboard industry such as its production severely affects
the health and safety of the workers. Therefore, WML should report about the Occupational
Health and Safety (OHS) law for the employee plus the information regarding 200 workers
who are employed in the factory and have the chances of having health problems. OHS is a
law that cover workers safety in an organization. The main aim of the law is to reduce
hazards at workplace and to implement Safety programs. The employer have to monitor and
manage OHS risks as it is required by the law. WML must include the results of health and
safety performance in its reports. The reporting of Occupational Health and Safety is done
according to G4 guidelines. These guidelines require the company to cover types and rates of
injury, occupational diseases, and workers having high risk of diseases which can be caused
by their work. Reporting about management committee for OHS and agreements made by
them covering health and safety of employees is also necessary. All these information is
require to be reported in WML’s sustainability reports (G4.globalreporting.org, 2017).
The company should also report about its supplier company which is operating in Bangladesh
and have maximum number of women workers. The OHS for these workers should also be
provided. Reporting all these data will help WML to satisfy the prospects of the stakeholders
in regard to labour practice and supply chain.
Future Implications to WML
WML will have certain negative and positive implications of outsourcing the production of
bamboo surfboards to China. Outsourcing of surfboards give some positive outcomes to the
company like production cost will be minimized and the better quality of bamboo will be

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10
used in making surfboard which will eventually increase the quality of the product. WML
will also have a competitive advantage in regard to product pricing. Apart from all this, the
decision also has some negative aspects. It will affect society and environment. The local
workers will be highly affected by this. Transferring the production will make the 200 factory
workers jobless which will eventually affect the society.
It will also increase the transportation cost as the surfboards made in China will needed to be
transferred to Australia. The shipping will contribute to carbon footprint and the plantation in
china which is to be used may have certain issues like soil erosion, water pollution and
change in climate. The external stakeholders can also have some negative perceptions
regarding outsourcing as their social and environmental expectations are not met by this
decision of the company. WML must provide some adjustment in its report regarding this
decision.
Conclusion
The report concludes that as a running enterprise, WML is responsible for providing all the
necessary information about its action in its sustainability report. The report should be based
on ethical branch of stakeholder theory so that it can manage its impact on the overall
economy. GRI guidelines are needed to be followed in sustainability reporting as the
guidelines will enable the company to show its environmental, economic and social impacts
in its reports. Moreover it will also help WML in taking best decisions which will satisfy the
stakeholders’ expectations.
References
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