Importance of Sustainability Reporting in Modern Day Business

This report discusses the importance of sustainability reporting in modern day business and its relevance in providing a holistic view of CSR. It also covers the stakeholder and legitimacy theories and their contribution to sustainable reporting. The report assesses the quality of sustainability reporting of Pact Group Holdings Limited.

Running head: CONTEMPORARY ACCOUNTING THEORY
Contemporary Accounting Theory
Name of the Student
Name of the University
Author Note

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Executive Summary
This report consists of two main parts. The first part deals with the identification of the
importance of corporate social responsibility (CSR) and sustainability reporting amongst the
modern day businesses. After which, the importance of sustainability reporting in providing a
holistic view on CSR is explained through the help of the stakeholder and the legitimacy
theories. The second part of the report starts off with an introduction of the company Pact Group
Holdings. After this, a scoring index on sustainability reporting is created by following the
Global Reporting Index (GRI) guidelines. The quality of the reports of the entity Pact Group is
assessed against the above score index to estimate the quality of the sustainability reporting of
the entity. The report ends with an overview of the learnings of the report.

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Table of Contents
Introduction..................................................................................................................................2
Part A...............................................................................................................................................2
Importance of Corporate Social Responsibility...........................................................................2
Sustainability Reporting and CSR...............................................................................................3
Important theories related to sustainability reporting..................................................................4
Part B...............................................................................................................................................5
Introduction of the company........................................................................................................5
Sustainability Reporting Scoring Index as per GRI guidelines...................................................6
References....................................................................................................................................9

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Introduction
Corporate Social Responsibility (CSR) is a set of regulations and internal guidelines
followed by the company which are aimed at undertaking activities for the benefit and
achievement of the goals of the society. They usually involve activities outside the business
activities of the entity and are done to benefit the society as a whole. In recent years, CSR has
gained prominence amongst firms from all industries and has become a mandatory part of the
activities undertaken by a firm. To understand the relevance of CSR in the modern day business,
a thorough research of the available literature is conducted. After studying the same, the
importance of sustainability reporting is analysed to know why it is relevant for providing a
holistic view of CSR than the other forms of available reporting. To further highlight the
importance of sustainability reporting in the modern day business, the stakeholder theory and the
legitimacy theory are studied in detail and their contribution to sustainable reporting is
understood. After which, the reports of Pact Group Holdings Limited are studied in depth to
prepare a sustainability reporting scoring based on the Global Reporting Initiative (GRI)
guidelines. These are meant to understand how well the company is following the sustainability
reporting guidelines and how it is contributing towards the benefit of the society as a whole.
Part A
Importance of Corporate Social Responsibility
As the success of a modern day business depends on its goodwill among the customers,
conducting CSR activities and undertaking responsibilities has become more important than
ever. It has been found that CSR contributes towards the better financial performance of the
firms. The reasons for this are the better reputation and competitive advantages obtained by the
firms. Another main reason is that undertaking CSR activities provides firms with a sustainable

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competitive advantage that enables them to conduct their business successfully over a long
period of time and not just in the short run. Although these relations may not be true in all cases,
the indirect relation between CSR and financial performance cannot be ignored by the different
stakeholders in a business (Saeidi et al., 2015). It has also been observed that customers tend to
be more loyal towards firms that follow CSR activities in a strict manner and prefer to reward
them than the firms that do not undertake the activities. However, the customers are also wise
enough to recognise whether a firm is undertaking the activities in a strict manner or not. In case
the company tends to be lenient about the allocation of resources, people do recognise it. Hence,
it is of utmost importance for firms to undertake these activities seriously and allocate the
maximum possible resources for appropriate CSR activities (Arıkan & Güner, 2013). In
economies that are not very rich, the quality and necessity of the CSR steps is given much
importance than the ethics and values of the company. Hence, it can be suggested that being
involved in important activities outside of its business that are beneficial to the society tends to
get the company more recognised than just conducting its business in an ethical manner. The
approval for these companies in the poorer economies is much higher than the normal entities
(Kavaliauskė & Stancikas, 2014).
Sustainability Reporting and CSR
According to the Global Reporting Initiative (GRI) guidelines, a sustainability report is
one which contains the economic, environmental and social impact that the business is likely to
have on the society. An increased emphasis on financial results tends to make the companies lose
focus on their role as a part of a society and may cause irreparable damage to the environment.
The lack of transparency also does not fill the stakeholders with confidence about the future of
the company. Hence, transparency should be maintained in all aspects of the business and not

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just be limited to the financials. The main advantage that sustainability reporting holds over the
other forms of reporting is that it is much easier to understand and communicates relevant
information. The financial reporting in the recent years has been found to be filled up with
insignificant measures that cannot be easily understood by the stakeholders. The different
number of factors influencing a business are many in number and varied in nature. It is not
possible to communicate them through the financial reports and a simple statement. Hence, it
becomes essential for the entity to adopt to sustainable reporting which contains a clear and
simplified explanation of the important matters (Piecyk, 2015). The sustainability report is
important for an entity in fulfilling its moral and societal obligations. It is also necessary for an
entity to ensure that its reputation in the public remains clean and the community relations are
maintained effectively. The CSR activities undertaken by the companies outside their business
are not very large scale in nature. The majority of their obligation towards a society is
conducting their business in an ethical manner and reporting about it in a timely manner
(Epstein, 2018). It has been found out that mandatory sustainability reporting regulations
implemented on firms enhances the value of the firms and not destroys them in any manner.
Increased regulations from the government increases the necessity of the business to assess the
impact of its activities on the society before undertaking those (Ioannou & Serafeim, 2017). Ever
since its introduction, the sustainability reporting guidelines have evolved to a large extent and
are now at a stage where they are flexible enough to accommodate the needs of companies
belonging to different industries (del Mar Alonso‐Almeida, Llach & Marimon, 2014).
Important theories related to sustainability reporting
One of the theories that is closely related to the essence of sustainability reporting is the
legitimacy theory. The main suggestion of this theory is that the actions of a business entity are

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legitimate, fair and have some values and beliefs guiding those (Hahn & Lülfs, 2014). Hence,
this theory suggests that entities should implement voluntary social and environmental
disclosures as a part of their financial reporting. This enables them to fulfil the social contract
that exists between them and the society. Studies have shown that the quality of sustainability
reporting adopted by an entity is an indicator of the quality of sustainable development activities
followed by it. Legitimacy theory suggests that an entity that does not disclose its sustainability
activities in a sufficient manner does not follow the same in its business and thus tries to hide the
same through low quality sustainability reports prepared by it. It suggests that the main intention
behind employing the sustainability theory by a company is to improve its image amongst the
public (Hummel & Schlick, 2016). Another important theory in this regard is the stakeholder
theory which suggests that every entity has a large number of stakeholders who are likely to be
impacted by the activities undertaken by the firm. Because of the agency relationship that exists
between the stakeholders and the entity, these stakeholders have a right on the entity and expect
that it addresses their concerns in a satisfactory manner. Hence, by the logic of this theory, it
becomes necessary for the entity to address the concerns of these people and report about the
impact its activities are likely to have on them (Harrison & Wicks, 2013). After global events
like the 2007-08 financial crisis and other corporate scandals in recent times, stakeholder
pressure has increased on the companies to report in a comprehensive manner which measures
their impact on the society. Hence, sustainability reporting is considered to be extremely
prominent in the modern day business (Hahn & Kühnen, 2013).

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Part B
Introduction of the company
Pact Group Holdings Limited is an Australian company involved in the materials sector.
It was founded by Raphael Geminder in 2002 and has grown significantly since then. According
to its annual reports, the company is the largest manufacturers of plastic packaging products in
the Australasia region. Its presence has been increasing in the Asia region in the recent times.
The company operates in more than 100 market segments and sells across 22000 product
variants. The customer base is more than 4000 and it began listing in the Australian Stock
Exchange (ASX) from 17 December 2013 (Pactgroup.com.au, 2019). The board of directors of
the company consists of six people who are responsible for implementing the decisions of the
majority shareholders. The remaining ownership of the group is held by different shareholders.
The board has recognised and acknowledged the importance of maintaining good corporate
governance standards in ensuring that they remain accountable to the shareholders. The main
concern of the board is to protect the interests of all the stakeholders of the company in all
situations. Hence, it has adopted the corporate governance framework that is in line with the
principles suggested by ASX. The members of the Board of Directors consist of people from
different backgrounds and varying skill sets. The policies and measures implemented by the
company include maintaining necessary internal controls, risk management procedures and
processes and ensuring that the organisation remains committed to maintaining diversity and
equality in all of its business areas. There is also a code of conduct in place which is necessary to
guide the employees regarding their behaviour in various situations. The annual financial reports
of the group for the F.Y. 2019 suggest that the revenue of the entity has gone up by 10% from
$1674 million to $1834 million. The revenue from contract services of the company has gone

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down by 37% from the previous year. The EBIT, EBIT margin and the NPAT have all gone
down from the previous year. This indicates a reduction in the profitability of the operations of
the entity from previous years. The sustainability reporting details suggest that the increased
energy costs that were incurred could not be recovered properly in some of the markets.
Although the operating cash flow declined from 94% to 88%, the company reckons that it could
still maintain a strong operating cash flow. This was despite the increased purchases of resins by
the customers in Australia. The gearing ratios were better in the second half of the financial year
when compared to the first half of 2019. The financial information provided by the company
suggest that it believes in maintaining transparency in the communication of information and
also communicates the same to the stakeholders. The information is also communicated in a
highly simplified manner which ensures that there is no misleading or false information
communicated to the users of the statements.
Sustainability Reporting Scoring Index as per GRI guidelines
Scoring Criteria Score Grade
Human Rights
External Stakeholder
management
Labour Relations
Codes of Conduct
Supply Chain
Environment

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Governance
Chairman's message
Philanthropy
Score Grade
0-40 F
40-49 E
50-59 D
60-69 C
70-79 B
80-99 A
The above sustainability scoring has been prepared by following the GRI guidelines.
These guidelines suggest that an entity, in its sustainability report should make a mention of all
the factors that are a part of the activities undertaken by it. These factors should also be likely to
have an impact on the external environment and not just on the internal business environment
itself. The information provided by them should also be reliable, standardised and should be a
clear indicator of the risks and opportunities facing the organisation in the long run. Quality of

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reporting has been rated on the basis of the extent to which the information has been provided
and how relevant it is in the context of the organisation.
Extent and Quality of Sustainability Reporting of Pact Group
As a company involved in the manufacture of plastic products, the sustainability reports
of Pact Group for the year 2018 begin with the chairman’s message which clearly suggests that
the company is trying to reduce the plastic wastage and its next motive is to ensure the end of
waste. This suggests that the company is aware of the risk that it possesses to the environment
and is working on reducing the same. The chairman’s message also restates the company’s
commitment to following the UN guidelines in terms of reducing the plastic waste and protecting
the environment. It also provides a list of the important stakeholders and recognises their
importance to the organisation. Although the chairman’s message makes a note of the key items
affecting the business and reinstates the commitment of the organisation towards maintaining
sustainability, it does not state about any specific steps or significant measures that were
undertaken by the organisation in the particular year. The quality of the message cannot be said
to be very high and is more like an obligation. With regards to the management of the external
stakeholders, the company involves in different activities like conducting surveys, regular review
meetings and having a proper mechanism in place to address third party grievances. The
reporting of the company is very efficient and it can be said that it recognises the value of the
external stakeholders to the organisation and is actively involved in meeting their requirements.
The company is also actively involved in maintaining the relations with its employees and
reports about the various programs like the ‘Ussie’ campaign and the WHSE audit conducted by
it during the year (Pactgroup.com.au., 2019). The inclusion policy in the organisation also makes
sure that diversity is maintained in the recruitment and sufficient training programs are

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conducted for the training of employees. In case of them leaving the organisation, exit interviews
are also conducted to make sure that the suggestions of the employees are considered. The
reporting quality of the organisation in the aspect of labour management is extremely
informative and it also recognises the various issues that the organisation can face during the
course of its business. In terms of environmental reporting, the company does well in identifying
the key issues like emissions, wastage and product stewardship. In terms of protecting the
environment, the company suggests that it complies with various necessary regulations like the
National Greenhouse Energy Reporting and National Pollutant Inventory in Australia. However,
there is no mention of any initiatives undertaken by the company itself and it can be suggested
that the quality of reporting of the entity in this area is not very insightful. While the details of
the energy emissions have been stated, the steps undertaken to keep them in control have not
been very clear. The information regarding the waste control measures is provided in an
extremely detailed manner and suggests the steps that the company is undertaking to avoid the
problems caused by the waste. The materials aspect provides some information about the usage
of recycled resin in the manufacture. The other materials used by the entity have also been
clearly stated. In terms of environmental reporting, the steps undertaken by the company to
reduce plastic wastage are commendable. However, the quality of reporting in terms of energy
emissions needs to improve. The company’s reporting is also lacking in the area of human rights.
While no complaints have been lodged against the entity for the breach of human rights, there
are no other significant mentions of any other measures taken by the entity. The reporting in
terms of the code of conduct is detailed and clearly states the manner in which the employees are
expected to conduct themselves in different aspects. The supply chain of the entity is very clearly
explained with the help of a diagram and is easily understandable. It also mentions the

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commitment of the organisation towards responsible procurement of the required raw materials.
On an overall basis, the quality of the sustainability reporting of the entity can be suggested as
good with some scope for improvement in areas like human rights, labour relations, philanthropy
and the environment.
Conclusion
From the above discussion, it can be suggested that corporate social responsibility is an
important aspect of the modern day businesses as it has an impact on their financial results.
Sustainability reporting, which is a more complete form of reporting than the traditional financial
reporting is useful in understanding the impact of the business on the society as a whole. In
recent times, the emphasis on the quality of sustainable reports has increased. Pact Group has
been preparing the sustainability reports over a period of time and the quality of its reports when
measured against the GRI guidelines can be suggested to be good with the scope for
improvement in some areas like philanthropy, human rights and labour relations.

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References
Arıkan, E., & Güner, S. (2013). The impact of corporate social responsibility, service quality and
customer-company identification on customers. Procedia-Social and Behavioral
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del Mar Alonso‐Almeida, M., Llach, J., & Marimon, F. (2014). A closer look at the ‘Global
Reporting Initiative’sustainability reporting as a tool to implement environmental and
social policies: A worldwide sector analysis. Corporate Social Responsibility and
Environmental Management, 21(6), 318-335.
Epstein, M. J. (2018). Making sustainability work: Best practices in managing and measuring
corporate social, environmental and economic impacts. Routledge.
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reporting: A qualitative analysis of corporate disclosure strategies. Journal of business
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