Introduction to ConTEMPORARY ACCOUNTING THEORY 11 CONTEMPORARY ACCOUNTING THEORY

Sustainability reporting of Sandfire Resources 9 Conclusion 11 Reference 12 Executive summary Aim of the report is undertaking the literature review in context of the reason why corporate social responsibility (CSR) is gaining importance for the organisations those have financial objectives. Part A – Theoretical knowledge Significance of CSR for the entities with financial objective Relationship among CSR and financial performance are directly related as CSR is considered as the crucial driver for improving the financial performances and thereby fulfilling financial objectives.

Running head: CONTEMPORARY ACCOUNTING THEORY
Contemporary accounting theory
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1CONTEMPORARY ACCOUNTING THEORY
Table of Contents
Executive summary....................................................................................................................2
Introduction................................................................................................................................3
Part A – Theoretical knowledge.................................................................................................3
i. Significance of CSR for the entities with financial objective.........................................3
ii. Sustainability reporting as compared to other reporting concepts..................................4
iii. Theories for explaining essence of the sustainability reporting......................................6
Part B – Applying theoretical knowledge for explaining reporting practices............................7
iv. Overview of Sandfire Resources....................................................................................7
v. Sustainability reporting scoring index............................................................................8
vi. Sustainability reporting of Sandfire Resources..............................................................9
Conclusion................................................................................................................................11
Reference..................................................................................................................................12

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Executive summary
Aim of the report is undertaking the literature review in context of the reason why
corporate social responsibility (CSR) is gaining importance for the organisations those have
financial objectives. The report will contrast the sustainability reporting with integrated
reporting and will determine whether sustainability reporting offers holistic view for CSR. In
addition, the report will highlight 2 theories like legitimacy theory and institutional theory to
explain the importance of sustainability reporting. Theoretical knowledge for reporting the
practice, the task will consider reporting criteria of ASX listed company Sandfire Resources.
Sandfire Resources is the mid-tier, dynamic Australian exploration and mining entity that is
listed under ASX with its headquarter in West Perth of Western Australia. Reporting criteria
of the entity will be compared with the sustainability reporting scoring index of GRI to find
out whether the entity complies with same or not.

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Introduction
CSR is considered as management concept where the entities integrate the
environmental as well as social concerns in the business operations and the interactions with
the stakeholders. It is generally considered as the way in which the entity achieves the
balance among social, economic and environmental imperatives. As CSR is crucial for the
community, it is equally crucial for the entity. It can help the entity to establish stronger bond
among the corporation and its employees. Various theories those can be used to explain the
CSR essence are stakeholder theory, legitimacy theory, institutional theory, positive
accounting theory and accountability model (Wang et al., 2016).
Part A – Theoretical knowledge
i. Significance of CSR for the entities with financial objective
Relationship among CSR and financial performance are directly related as CSR is
considered as the crucial driver for improving the financial performances and thereby
fulfilling financial objectives. In accordance with agency theory and stakeholder’s theory,
CSR exerts positive impact on financial performances. However, the evidences accumulated
till date shows that the relationship is equivocal and the major reason behind the same is
contradictory and diverse results while measuring both (Korschun, Bhattacharya & Swain,
2014). Various financial objectives those can be fulfilled through implementation of CSR are
as follows –
 Human resource – nature and the scale of benefits those can be drawn from CSR may
vary based on the nature of business. However, the CSR can assist in recruitment as
well as retaining the experienced employees particularly in the competitive market.
Potential recruits generally ask regarding the CSR policy of the entity as having the

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comprehensive policy may be additionally advantageous to the employees. It further
can improve the entity’s perception among its employees specifically when it comes
to the issues like payroll, community volunteering and fundraising activities. It is
further found to encourage the customer orientation among the frontline employees
and it is obvious that the satisfied employees will be in a better position to fulfil the
financial objectives of the entity (Di Giuli & Kostovetsky, 2014).
 Differentiation of brand –under the competitive marketplace, entities struggle for
obtaining USP (unique selling proposition) that will gain competitive advantage for
them. CSR can be used to play the role of building loyalty of customers based on
distinct ethical values (Harjoto, Laksmana & Lee, 2015).
 Saving costs – through reducing the usage of resources, emissions and wastes the
entity can save the costs and assist in improving the environment. Hence, with few
simple steps the business will be able to reduce its utility bills along with achieving
savings for the business (Glavas & Kelley, 2014).
Apart from the above mentioned advantages, CSR also helps the entities in accessing
finance as the investors will be more likely to be associated with a reputable business.
Further, it will attract positive attention from the media along with reducing regulatory
burden and identifying new opportunities for the business. Owing to all these factors
importance of CSR is increasing for the entities those are operating with the financial
objectives (Watson, 2015).
ii. Sustainability reporting as compared to other reporting concepts
Company executive, management and boards are investing more resources as well as
times on sustainability issues like technology efficient in energy, usage of water, carbon
emission, biodiversity and clean-tech are few to be named. Sustainability report (SR)
primarily consists of the non-financial data including the things like corporate awareness,

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employee satisfaction, and betterment of the communities through carbon reduction and
recycling initiatives. It further includes narrative description regarding benefits as well as
risks to the natural and social environment generated from the operations of the entity and the
statement regarding management of risks (Ioannou & Serafeim, 2017). Apart from that it also
includes the description regarding how the data determines the successful implementation of
the corporate values. It is aimed for large numbers of stakeholders that includes customers,
employees, investors, suppliers and general community. SR takes into consideration the past,
near future as well as present period and includes both numerical data and is in narrative
format. Generally the SR is prepared as per different global standards applicable to the non-
financial reporting or in accordance with the updated version of GRI (global reporting
initiatives) (Amran, Lee & Devi, 2014).
On the contrary, the integrated report (IR) consists of financial as well non-financial
data associated by the narrative explanation of what the data signifies regarding the entity’s
future profitability. Further, it states how the entity may generate profits from the programs
those are beneficial for natural and social environment (De Villiers, Unerman & Rinaldi,
2014). It is aimed for stockbrokers, debt financier and equity investors. IR generally takes
into consideration the near future as well as far future period and primarily is in narrative
format that does not include numerical data. IR is prepared as per descriptive framework
issued by IIRC (international integrated reporting council). Further, it builds on financial data
incorporated in financial report as well as the non-financial data provided in sustainability
report (Stubbs & Higgins, 2014).
Hence, it can be stated on the basis of above discussion that sustainability reporting
against other reporting like integrated reporting provides holistic view regarding CSR.

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iii. Theories for explaining essence of the sustainability reporting
At present scenario no business can be successful without approval from its
stakeholders as environmentally as well as socially responsible organization. As there are
wider level of concern and awareness regarding the activity and its impacts of the
organizations, sustainability reporting provides transparency in context of social and
environmental performance issues (Amran, Lee & Devi, 2014). Different theories those can
be used for explaining the sustainability reporting’s essence are as follows –
 Institutional theories (IT) – in previous times the organizations were found to be as
the closed systems depend on themselves and had least level of relationship with the
institutional environment. After acknowledgement of the institutional environment’s
importance in 1960s and 1970s IT considered to have greater role for understanding
existing phenomena of organization’s life. Major driver of IT is that the firm carries
out its operations within social grid where the practices are initiated through the
golden norms and rules considering what are the acceptable or adequate behaviour in
environment under which the entity operates (Hoffman & Jennings, 2015). Owing to
this fact, social reality becomes guidance for the social behaviour. Further, the
organizations yield to the institutional pressures for changing as the increasing
resources, legitimacy as well as survival capacity will provide them with higher
reward for doing the same. It is one of most dominant theoretical aspect and
facilitates in wider presentation of accounting as the object of better coordination and
institutional practices as part of the accounting under the process of
institutionalization (Higgins & Larrinaga, 2014).
 Legitimacy theory –legitimacy search process is related directly with the IT as it
recommends that institutionalization of normative values of integrated social systems
for the institution’s concrete behaviour. Process of legitimization strengthens

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legitimacy of existing systems of social values. This theory assumes that the
organizational attempt for ensuring that they carry on their operation within the limits
and norms on continuous basis.In this context, a social contract is there among the
firm and the people impacted by the firm’s operation (Hummel & Schlick, 2016).
Hence, conformity with the social myths highlights the organization’s social
legitimacy which in turn convinces the people that they are valuable for supporting as
well as improving the survival perception. 4 strategies those shall be adopted by the
organizations while seeking the legitimating are – (i) inform and educate the relevant
people regarding real changes in context of activities and performance of the firm (ii)
manipulating the relevant people’s perception through diverging the concentration
from one issue to another (iii) changing their perception without changing the real
behaviour and (iv) altering the external expectation in context of the performance
(Czinkota, Kaufmann & Basile, 2014).
Part B – Applying theoretical knowledge for explaining reporting practices
iv. Overview of Sandfire Resources
Sandfire Resources is the mid-tier, dynamic Australian exploration and mining entity
listed under ASX. It has it’s headquarter in West Perth of Western Australia and the CEO of
the entity is Karl M Simich. Major competitors of the entity are Newcrest, PanAust and OZ
Minerals. It operates through 2 segments namely The DeGrussa Copper Mine and
Exploration and Exploration and Evaluation (Sandfire.com.au, 2019). The board as well as its
management for all levels are committed fully for maintaining and improving the corporate
governance so that it can be contributed to vision of the entity for building sustainable future.
Corporate governance statement of the entity outline its key features regarding the framework
of corporate governance through referring to 3rd edition of ASX Corporate Governance

8CONTEMPORARY ACCOUNTING THEORY
council that states the Corporate governance principles along with the recommendations
(Sandfire.com.au, 2019). Looking into its financial performances over the years it can be
established that sales revenue of the entity over the years from 2017 to 2018 has been
increased from $ 513,153 thousands to $ 596,242 thousands and likewise the bottom line
profit that is the net profit of the entity over the same period increased from $ 75,016
thousands to $ 120,753 thousands. Major expense carried out by it during the year 2018 was
towards mine operation amounting to $125,452 thousands along with the expenses of
depreciation and amortization amounting to $ 130,311 thousands. Hence, the profitability
position of the entity over the past 2 years has been improved (Sandfire.com.au, 2019).
Further, the earning per share has been increased from 49.16 cents to 77.85 cents. In addition,
it is found that the though the current assets as well as current liabilities both has been
increased increasing rate of current assets is higher as compared to the increasing rate of
current liabilities. Hence, it can be stated that the liquidity position of the entity has been
improved. Apart from that it is found that the entity is lower leveraged as major proportion of
the capital is raised through equity. Cash position of the entity also improved as the closing
cash balance reached to $ 243,367 thousands against $ 126,743 thousands. Hence, it can be
determined that the overall financial position of the entity has been enhanced over the years
from 2017 to 2018 (Sandfire.com.au, 2019).
v. Sustainability reporting scoring index
Sustainability reporting is the framework reports that are released by the entities
voluntarily that provides the additional information to stakeholders in context of the impact
of their activities have on the society as well as environment. Under GRI the organizations
come together for enhancing the procedures of business and assisting in shaping the future of
sustainability reporting. Scoring index is segregated into 3 parts including the disclosures in
context of management approach, performance and profile disclosures. Ong, Trireksani &

9CONTEMPORARY ACCOUNTING THEORY
Djajadikerta, (2016), in their journal named as ‘Hard and soft sustainability disclosures:
Australia’s resources industry’ presented the scoring index as follows –
vi. Sustainability reporting of Sandfire Resources
During the year 2017, the entity established the sustainable strategy for guiding the
entity through the period covering 2017 to 2021 and assured its position in context of
responsible business. Overreaching goal of the entity for sustainability is achieving high
standards of environmental management, safety, transparency and governance while
delivering the positive outcomes for the society (Sandfire.com.au, 2019). In past years it
achieved different goals as well as targets for its strategy. Major focus area of the entity

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includes carrying out its operation responsibly, supporting the economic development,
offering supportive and safe workforce and engaging respectfully with the stakeholders. It
undertakes the work in an approach that respects as well as supports the people along with
environment through minimising the negative impact along with supporting the positive
outcomes (Sandfire.com.au, 2019). It acknowledges that the success supports the economic
empowerment of communities and individual and aim to maximise the benefits with
minimising unfavourable impacts of the economic influences. It places highest emphasis for
offering inclusive and safe workplace. It further aims that it will enable all the employees for
developing the skills required to be reached in context of their organisational potential.
Further, it engages with its stakeholders respectfully, behaves with the integrity and ethics all
the times in their working cycle and thereby meets the expectation of the stakeholders in
context of transparency and accountability (Bonilla-Priego, Font & del Rosario Pacheco-
Olivares, 2014). If the sustainability reporting quality of the entity is compared with the
scoring index table presented above following have been found –
Disclosure Items Yes No
Management systems and Governance structure

Creditability

Indicators for Economic performance

Indicators for Environmental performance

Indicators for Social performance

Indicators for Social performance for human rights

Indicators for Social performance for society

Indicators for Social performance for product responsibility

Spending associated with sustainability


11CONTEMPORARY ACCOUNTING THEORY
Strategy and vision

Sustainability initiative

Disclosures - management approach (labour)

Disclosures - management approach (environmental)

Disclosures - management approach (product)

Disclosures - management approach (human rights)

Disclosures - management approach (economic)

Disclosures - management approach (society)


Hence, it can be stated from the above that the entity complies with almost all the
requirement for the items to be disclosed in the sustainability report. Only exception with the
requirement is that it does not provide any disclosures regarding its products in the
sustainability reporting (Sandfire.com.au, 2019).
Conclusion
From above it can be determined that CSR can help in recruiting and retaining the
experienced employees that is very important for the success of the entity particularly in the
competitive market. Further, through reducing the usage of resources, emissions and wastes
the entity can save the costs and assist in improving the environment. Apart from that,
sustainability reporting provides holistic view regarding CSR against other reporting like
integrated reporting as the SR takes into consideration the past, near future as well as present
period and includes both numerical data and is in narrative format. On the contrary, IR only
considers the near and far future period and primarily is in narrative format that does not

12CONTEMPORARY ACCOUNTING THEORY
include numerical data. It is further found that Sandfire Resources complies with almost all
the requirement for the items to be disclosed in the sustainability report as per GRI.

13CONTEMPORARY ACCOUNTING THEORY
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