Importance of Corporate Social Responsibility and Sustainable Reporting: A Case Study of IGO Group

The report analyzes the importance of corporate social responsibility and sustainable reporting for businesses to meet the interests of all its stakeholders. It also evaluates the sustainability reporting practices of IGO Group as per the GRI guidelines.

Accounting Theory & Contemporary Issues
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Executive Summary
The present report has been developed for analyzing the importance of corporate social
responsibility for business firms to meet the interests of all its stakeholders. In this context, it has
been illustrated through the overall analysis that CSR disclosures is important for firms to
achieve stakeholders satisfaction that in turn assist them to achieve the financial objectives.
Also, GRI standards are providing adequate guidelines for businesses to develop their
sustainable reports. The selected ASX listed entity, IGO, has also adequately developed and
disclosed its sustaible reports as per the GRI guidelines.
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Contents
Introduction.................................................................................................................................................4
Part A: Theoretical Knowledge....................................................................................................................4
(i) Undertaking a review of literature for gaining an understanding of importance of corporate social
responsibility (CSR) in firms operating with financial objectives.............................................................4
(ii) Explanation of sustainability reporting representing a holistic view of CSR in contrast with
relevance to other reporting concepts....................................................................................................6
(iii) Identification and Explanation of Two Theories depicting the significance of sustainable reporting 7
Part B: Application of theoretical knowledge to explain reporting practices..............................................8
(iv)Company Introduction including reviewing of its history, ownership, governance and financial
performance............................................................................................................................................8
(v) Sustainability Reporting Disclosure Scoring Index as per the GRI (Global Reporting Initiative)
Guidelines..............................................................................................................................................10
(vi) Evaluation of sustainability reporting practices of IGO Group to the extent of sustainability
reporting scoring index as described in B (v) part..................................................................................13
Conclusion.................................................................................................................................................14
References.................................................................................................................................................15
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Introduction
The businesses around the world with the advent of globalization are seeking to expand
their products and services across the world for generating large amount of revenue and
improving their profitability position. The rapid expansion of businesses can have major negative
impact on the society and environment in which they operates and therefore it is becoming
highly essential for them to report their performances in these contexts also besides providing
financial reports. As such, the businesses are focusing on developing their Corporate Social
Responsibility (CSR) reports that disclose information about their social, economic and
environmental performance. In this context, the report intends to conduct a research on the
importance of CSR within businesses and the evolution of sustainable reporting for disclosing
the information about CSR initiatives of businesses. The theories relevant to sustainable
reporting has also been discussed in the report. The next section of the report has analyzed the
sustainability reporting practices of an ASX listed company, that is, IGO (Independence Group)
as per the GRI guidelines. The overall data for conducting the research in the report has been
gathered with the use of secondary methods that is extracting information from journal’s, books,
annual report and online websites in reference to the research issues.
Part A: Theoretical Knowledge
(i) Undertaking a review of literature for gaining an understanding of
importance of corporate social responsibility (CSR) in firms operating with
financial objectives
Asemah Okpanachi & Edegoh (2013) has stated that the concept of corporate social
responsibility (CSR) is continuing to grow in importance in the context of business
organizations. It is becoming a prominent business ideology as it drawing the need for businesses
to meet the expected social and environmental standards and becoming responsible not only for
its shareholders but also their nearby communities. The increase in the global competition is
causing the need for companies to implement the use of adequate business strategies that enables
them to achieve a distinctive competitive advantage. As such, the businesses are placing large
importance of promoting their social and environmental performance as to achieve a positive
brand image in the eyes of all its stakeholders (Asemah Okpanachi & Edegoh, 2013). The
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businesses have realized that in order to promote their sustainable growth in the highly
competitive business world of today it is necessary to not only emphasize on maximizing their
financial performance but also promoting its social and environmental performance. This is
because the improved social and environmental performance enables businesses to achieve an
ethical image in the eyes of all the stakeholders. This in turns supports their long-term growth by
achieving continuing support from the stakeholders which is necessary for the survival and long-
term growth of the business organizations (Carroll & Shabana, 2010).
The there major aspects of corporate social responsibility (CSR) includes economic
aspects, social and environmental aspects. The economic responsibility of a company refers to its
financial accountability and the direct and indirect impact that an organization have on all its
relevant stakeholders. The social aspects of CSR refer that an organization should be responsible
for to all the community members that are impacted by its different operational activities such as
customers, employees and the society at large. It is the major responsibility of an organization to
provide high quality goods and services to its customers and developing long-term relations
based on faith and trust with them. Also, the business companies need to promote personnel’s
welfare and safety at work and places focus on improving the quality of working life. It is the
major responsibility of the businesses to act in a responsible manner towards its employees
(Nurn & Tan, 2010).
According to Matten & Moon (2010) the companies also need to promote the growth and
property of the communities in which they carry out their business operations. Lastly, the
environment aspect of CSR refers to reducing any type of negative impact that the business
operations can have on the environment. The environmental impacts can include overuse of
natural resources, pollution, wastage, and climate change and deforestation that can degrade the
quality of environment. Thus, corporate social responsibility by addressing these three aspects of
businesses largely assists them to achieve their determined financial objectives. It has been
argued by various theorists that improvement of CSR towards stakeholders helps in increasing
the firm performance. This is on account of increased customer satisfaction, reduce employee
turnover and support from the nearby communities that helps them to achieve their stated
financial objectives by increasing the sales and quality of products. Thus, the improved goodwill
in the market through better CSR activities of the companies helps them to improve their brand
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reputation, customer loyalty, attaining tax advantages and trust of the investor that enables in
achieving a financial advantage over others in the long-term (Matten & Moon, 2010).
(ii) Explanation of sustainability reporting representing a holistic view of CSR
in contrast with relevance to other reporting concepts
The research study by Porter & Kramer (2010) has stated that the corporate decision-
making traditionally has been largely dependent on the financial information but it has been
realized that such information is not able to provide complete picture of an organization and the
environment which it operates. It is very essential to gain an insight into the other aspects of an
organization as well besides only emphasizing on financial results such as the measures taken by
it to improve its social and environmental performance. This is essential to ensure that business
and its operations are not having any negative impact on the ecosystem and it adequately
addressing its stakeholder needs and expectations. Thus, in order to provide such a wider
perspective into their performance business organizations have started to develop and present
their corporate social responsibility initiatives in the form of sustainability reporting (Porter &
Kramer, 2010).
Sustainability reporting is regarded as a most important tool used by businesses for
monitoring and evaluation of CSR activities of a business. There has been increased need for
businesses to develop and present their sustainability reports for meeting the diverse needs of
stakeholders by improving the transparency within the business operations. In this context, GRI
(Global Reporting Initiative) standards have been developed for the purpose of providing
guidelines to businesses for developing and presenting their sustainability reports. These
guidelines provide large help to the businesses for developing and publishing their sustainability
reports to disclose the economic, environmental and social impacts of a business (Nikolova &
Arsic, 2017).
Thus, according to Buchholtz (2011) it can be said that sustainability reporting is
regarded as an effective tool used by businesses for promoting transparency and accountability
within its operations and achieving the trust of the stakeholders. The sustainable reports present a
holistic approach to CSR reporting by disclosing information related to all three aspects of a
business, that are, social, economic and environmental. Thus, it can be said that sustainability
reporting in comparison to other reporting frameworks such as financial reporting enables a
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business organization to adequately report about its social, economic and environmental
performance (Buchholtz, 2011). There have been many developments taken into the context of
preparing and disclosing the sustainability reports such as GRI, OECD (Organization for
Economic Co-operation and Development) guidelines, ISO 26000 and latest integrated reporting
framework that emphasizes on integrating both financial and non-financial information in a
single report as provided by the IIRC (International Integrated Reporting Council) (Michelon,
Boesso & Kumar, 2013).
(iii) Identification and Explanation of Two Theories depicting the significance
of sustainable reporting
As per Figar (2011), the importance of sustainable reporting can be adequately addressed
by the use of sustainable reporting. As per the context of stakeholder theory, the business
organizations hold the responsibility of meeting adequately the diverse needs and requirements
of its different stakeholders. The business corporation and all its stakeholders make up the
stakeholder system in accordance with the stakeholder theory. The different stakeholders of a
business firm consists of employees, customers, communities, government, investors, suppliers
and all others who have a direct impact from the business operations (Figar, 2011). The research
study of Homayoun, Rezaee & Ahmadi (2015) has stated that the major characteristic of CSR
initiatives of a business firms that are disclosed through sustainable reports is to report the
information that ensures that it is being accountable to its various stakeholders. In context of this
theory, the major aim of sustainable reporting by businesses is to provide the relevant social and
environmental information that ensures that they are effectively meeting all the obligations
towards its different stakeholders (Homayoun, Rezaee & Ahmadi, 2015).
Mousa & Hassan (2015) has stated that the legitimacy theory of corporate governance
can also be adequately applied for demonstrating the significance of sustainable reporting within
the business corporations. As per this theory, the organizations need to conduct its activities in a
manner that leads to developing its legitimate position within the mind of its stakeholders. The
business organizations can significantly improve their legitimacy in the eyes of all its
stakeholders through developing and publishing their sustainable reports (Mousa & Hassan,
2015). According to Kolk (2016), the sustainable reports adequately disclose the information
related to the social and environmental performance of the companies and helps them to achieve
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a legitimate position in the mind of the stakeholders. There is increasing pressure on the business
organizations from different stakeholders to report their social and environmental performance.
As such, the sustainable reports provided by the business corporations help them to improve the
transparency in the business operations and thus justifying their legitimacy and gaining
continuous support from the society. The theory has emphasized on the need for businesses to
undertake social contract whereby they need to follow all the societal obligations and rules for
ensuring that are able to successfully carry out their diverse activities (Kolk, 2016).
Part B: Application of theoretical knowledge to explain reporting
practices
(iv)Company Introduction including reviewing of its history, ownership,
governance and financial performance
Independence Group is recognized to be a leading mining and Exploration Company
within Australia publicly listed on the ASX (Australian Securities Exchange) and has been
established in the year 2002. The company is involved in exploration of diversified minerals
such as gold, nickel, copper and cobalt in Australia. It is headquartered within Perth and holds
about 100% interest within nickel-copper-cobalt operation and 30% non-operational interest
within Tropicana gold mine. The company strategic visions to be become a globally recognized
mining company involved in exploration of metals critical for energy storage. The company has
achieved excellence in its mining operations owing to maintaining its high standards of safety
and environment protection and emphasizing on creating shared value. It has maintained a
leading position within the mining sector of Australia by delivering quality products desired by
the end users (About IGO, 2019). The ownership structure of the company consists of substantial
shareholders and also having institutional ownership. Substantial shareholders refer to
shareholders of the company having a possession of more than 5 per cent of equity securities of a
company. On the other hand, institutional ownership refers to having a stake within a company
that is held by large financial organizations who are having possession of larger part of
outstanding shares and thus have a large influence on the management decision-making process.
The substantial and institutional ownership of the company can de illustrated as follows:
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(Source: IGO Annual Report, 2018)
As analyzed form the annual report of the company, IGO places higher emphasis
on developing and implementing an effective corporate governance framework that has largely
contributed to promoting its long-term growth. The Board of Directors holds the responsibility of
ensuring that all business activities are carried out in accordance with the stated corporate
governance principles and guidelines. The governance framework plays an important role within
the company for ensuring responsible decision-making at IGO. The Board is responsible for
promoting the success and growth of the company by development and implementation of an
effective corporate governance framework. The framework is developed and maintained as per
the ASX corporate governance council standard for ensuring integrity and reliability in its
business operations in the mind of its stakeholders. The ethical code of conduct maintained by
the Board of directors in reference to the ASX governance principles has resulted in improving
accountability and integrity within the business operations and ensuring that all activities are
carried out in an ethical and responsible manner (IGO Annual Report, 2018).
As stated within its annual report, the major objective of IGO Group is to create long-
term value for its shareholders through exploration of high grade base metals. The company can
be regarded in a phase of having good financial growth with significant increase in the cash
inflows from its operations to about $277.8 million in the year 2018 as compared to $77.7
million in the financial year 2017. The net profit has also depicted an increase to about $52.7
million in comparison to $17 million during the financial period 2017-2018 mainly due to
commencement for its nova operations form the financial year 2017. The nova operations has
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resulted in deriving additional revenue of about $ 348.8 million in the financial year 2018 mainly
from the exploration of metals such as nickel, copper and cobalt that has been illustrated as
below:
(Source: IGO Annual Report, 2018)
Similarly, there has been increase in the revenue realized by the group form its Tropicana
in the financial year 2018 as compared to that in the financial year 2017. There has been increase
in the revenue realized from Tropical operation by about 13% over the financial period 2017-
2018. However, the revenue realized from long and jaguar operation for the Group has depicted
a decline due to decrease in the mining activities. There has been recorded a decrease of about
8% in the long nickel mining and decline about $112.2 million revenue from jaguar operations
over the financial period 2017-2018 (IGO Annual Report, 2018).
(v) Sustainability Reporting Disclosure Scoring Index as per the GRI (Global
Reporting Initiative) Guidelines
The Global Reporting Initiative (GRI) guidelines providing assistance to businesses for
preparation and disclosure of their sustainability reports that provide information about its
environment, social and economic performance. The guidelines are developed for addressing the
varying needs and requirements of multi-stakeholder and are developed in alignment with
internationally reporting requirements developed for presenting the sustainable information
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(About GRI, 2018). The sustaible disclosure index prepared as per the GRI standards can be
depicted as follows:
Category Subject GRI Standards Information need
to be presented
General
Disclosures (GRI
102)
Organizational
profile
GRI 102-1 to GRI 102-
13
Information such as
organization
activities, brands,
products, services,
ownership details,
supply chain, and
other information
related to
organization
Strategy GRI 102-14 and GRI
102-15
Key impacts, risk,
and opportunities
and detailed
statement from
decision maker
Ethics and integrity GRI 102-16 and GRI-
17
Values, principles,
behaviour and other
details related to
ethics
Governance GRI 102-18 to GRI
102-39
Information related
to corporate
governance, risk
management
process. Most of the
details come from
corporate
governance report
Stakeholder GRI 102-40 to GRI-44 Identification of
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engagement
stakeholders group,
stakeholders
engagement and
other matters related
to stakeholders
Reporting practice GRI 102-45 to GRI-56
It consist of details
presented in
financial reports
Management
Approach (GRI
103)
Material topic and
its boundary GRI 103-1
Explanation why
each topic is
material and
description its
boundary
Management
approach and its
components
GRI 103-2
All the components
of management
approach
Evaluation of
Management
approach
GRI 103-3
Mechanisms used to
evaluate the
effectiveness of
management
approach, results
and adjustments
Specific
Disclosures (GRI
200, GRI 300 and
GRI 400)
Economic GRI 201, GRI 202,
GRI 203 and GRI 204
Economic
performance,
indirect impact,
procurement
practices
Environmental GRI 301, GRI 302,
GRI 303, GRI 304,
GRI 305 and GRI 306
Disclosures on all
material aspects
such as energy,
water, biodiversity,
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carbon emissions,
waste management
Social GRI 401 to GRI 19
Assessment of social
impacts created by
organization
(G4 Sustainability Reporting Guidelines, 2018)
(vi) Evaluation of sustainability reporting practices of IGO Group to the extent
of sustainability reporting scoring index as described in B (v) part
IGO Group prepare its sustainability report according to GRI reporting guidelines and
also follows the GRI index to report on the sustainability performance. According to the level of
disclosures made in sustainability report of IGO Group it has been evaluated that company make
use of GRI Level A reporting structure. Most of GRI disclosures have been reported in report
that is considered material for the company. Level “A” GRI reporting specifies 100% score on
reporting requirement on sustainability disclosures (IGO Sustainability Report, 2018).
Sustainability reporting scoring index has been evaluated on the basis of disclosures
made for each of the standard on both general and specific disclosures. Each of standard
disclosures made by IGO Group has been evaluated below:
General Standard disclosures
 Organizational Profile: Most of standards have been disclosed (GRI 102-1 to GRI 102-
10), only few of them have not been reported. GRI 102-11 to 102-13 are not much
important for companies like IGO Group.
 Strategy: Only statement from senior decision maker is provided but no disclosures has
been made on impacts, risk and opportunities
 Ethics and integrity: IGO Group has provided information on organization values,
principles, standards, norms of behaviour. No disclosures on mechanisms for advice and
issues related to ethics.
 Governance: Very little information has been disclosed related to governance as most of
information has been provided in corporate governance report.
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 Stakeholder engagement: Most of the information has been provided related to
stakeholders such as list of stakeholder groups, selection of important stakeholders,
approach used for stakeholder engagement and concern raised by stakeholders.
 Reporting Practices: Almost all the information related to reporting profiles has been
provided in details by IGO Group.
On the basis of information provided on part of general disclosures, IGO Group has been
succeeded to achieve maximum index score due to transparency in reporting practices(IGO
Sustainability Report, 2018).
Conclusion
It has been inferred on the basis of stakeholder and legitimacy theory that CSR reporting
is essential for firms to address the varying needs and requirements of all stakeholders. The GRI
initiatives have been developed for guiding the preparation of sustainable reports by businesses.
It has been observed by analyzing the sustaible reports of IGO that it has adequately complied
with all GRI standards in development and presentation of its sustainable reports.
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