Sustainability Accounting Report: BHP Billiton Compliance Analysis

This report provides a critical analysis of sustainability accounting, examining the principles and frameworks used in corporate social responsibility reporting. The study focuses on BHP Billiton's sustainability reports from 2012 and 2017, evaluating their alignment with the Global Reporting Init...Read More

Running head: SUSTAINABILITY ACCOUNTING
Sustainability Accounting
Name of the Student:
Name of the University:
Author Note

1SUSTAINABILITY ACCOUNTING
Table of Contents
Introduction......................................................................................................................................2
Report Analysis of Academic Theory and Framework...................................................................2
Literature Review............................................................................................................................3
Extent of Compliance with GRI’s requirements.............................................................................5
Critical Analysis of Assurance Levels.............................................................................................7
Conclusion.......................................................................................................................................7
References........................................................................................................................................9

2SUSTAINABILITY ACCOUNTING
Introduction
Sustainability accounting refers to that concept of accounting, which primarily focuses on
the non-financial information that has been presented in the financial report, prepared by the
management or administration of an organization. A sustainable report is essentially a corporate
social report that concentrates on the non-financial information that has been disclosed by the
management in regards to the performance of the firm. A sustainable financial report is of great
help to the external stakeholders as they get a clear image of the company. This helps the
external stakeholders to make particular financial decisions (Ioannou & Serafeim, 2017).
This particular study aims to critically analyze the statement that has been provided in the
question. The statement that has been provided effectively summarizes the fact that the
sustainability reports that have been prepared by the listed organizations do not present crucial
information in regards to the non-financial performance of the company. The sustainable reports
that are prepared by the management of the listed organizations instead represent the particular
way in which the management has addressed the concept of sustainability. This particular
perspective conveyed by Gray, in his social accounting journal has been aimed to be analyzed in
this particular study (Fonseca, McAllister & Fitzpatrick, 2014).
The company that has been chosen for the purpose of determining the usefulness of the
sustainability accounting principles is BHP Billiton. The sustainability report of BHP Billiton for
the financial year of 2017 and 2012, has been attempted to be analyzed in regards to the global
framework reporting standards. This particular study also focuses on the different sustainability
theories and tries to determine whether the sustainable report has been published complying to
the proposed theories. The study also aims to find out whether the sustainability of the proposed
organization has been achieved by the practice of measuring, disclosing and being accountable to
the internal and external stakeholders of the firm.
Report Analysis of Academic Theory and Framework
The theories that are, in general adopted by the organizations in executing their corporate
social responsibilities can be counted as legitimacy theory, stakeholder theory, signaling theory
and social contract theory (Hughen, Lulseged & Upton 2014).
The legitimacy theory refers to the theory that depends upon the notion that there a social
contract exists between the organization and the surroundings in which it operates. This means
that the corporate body operating in the society is obligated towards positively contributing to its
surroundings, which further justifies its existence. According to this theory, some executives
utilize the corporate social responsibility as an effective tool for managing the complexities of
the multinational companies (Fernandez-Feijoo, Romero & Ruiz, 2014).
Next, the stakeholder theory states that the management of a particular organization are
not only accountable to the stakeholders but also is obligated to reveal the respective interests of
the stakeholders that are in collision with the organizational objectives (Deegan, 2014).

3SUSTAINABILITY ACCOUNTING
The social contract theory is same as the legitimacy theory that indicates the existence of
a social contract between the organization and the society. This obligates business to be
positively contributes to the society in which it operates (ArAs, 2016).
Lastly, the signaling theory refers to the theory that states that firms should have an
incentive structure for disclosing information voluntarily to the capital market. The effectiveness
of the voluntary disclosures lies in the fact that such disclosures give a healthy boost to the
competing strength of the company using the signaling theory (Frias‐Aceituno, Rodríguez‐Ariza
& Garcia‐Sánchez, 2014).
The essence of the stakeholder theory lies in the fact that it focuses on the primary entity
of any organization that are the stakeholders. This means that entire objective of services
contributed towards the society revolves around the stakeholders of business. The stakeholder
theory essentially postulates that there are various groups in the society that an organization can
impact upon. The stakeholder theory states that it is the primary responsibility of business to
incorporate the expectation of its stakeholders into their policies and planning.
The particular challenge that the businesses face while implementing the stakeholder
theory as a primary tool for sustainable reporting is that the identification of the potential
stakeholders of business becomes difficult. However, the stakeholder theory is the major element
of the corporate social responsibility in case of every organization that engages itself in
interaction with the open society. The company being discussed in this particular report has
successfully aligned the corporate social responsibility program with the expectations of its
stakeholders.
Nonetheless, the preparation of a sustainability report is a complex procedure and cannot
be supported by just one theory. The simultaneous integration of the environmental, economic
and social theme is a complicated process. Thus, experts in this field are of the opinion that no
single theory can ever be conclusive. (Cho, 2015) is of the opinion that legitimacy theory is
another potential theory. The legitimacy theory as mentioned earlier assumes the existence of a
contract between the society and the organization. The reporting on the social, economical and
environmental aspects of business is a part of fulfilling that contract. (Reimsbach & Hahn, 2015)
is on the other hand of the opinion that compliance to the agency theory while reporting can
invariably decrease the information asymmetry that exists between the management and the
stakeholders of the business thus resulting in the reduction of the agency costs. The agency
theory also focuses on the importance of specific disclosures that are effective in winning the
trust and loyalty of the investors. Thus, the common factor of the all the above mentioned
theories is that all of them can be integrated and incorporated within the stakeholder theory.
Thus, the management of BHP Billiton adopting the stakeholder theory appears to be beneficial
for the purpose of reporting.
In case of BHP Billiton the particular theory that has been utilized by the management of
the organization is the stakeholder theory. This is because the management of the organization
has focused on the welfare of its stakeholders. The management of the company has also
established compliance codes and policies for protecting the interests of the stakeholders.
Therefore, it is evident from the above discussion that the particular theory adopted by the
organization in executing the corporate social responsibilities is the stakeholder theory.

4SUSTAINABILITY ACCOUNTING
Literature Review
The Global Reporting Initiative Framework has been established for the purpose of
serving the requirement of a generally accepted framework that has to followed for evaluating
the organization’s environmental, social and economic performance. (Cheng, 2014).
The sustainability reporting guidelines essentially consists of the principles that ensure
the quality of the content or the reported information. The three major elements of the reporting
procedure consist of the Reporting Principles, Reporting Guidance and Standard Disclosures.
The component of the reporting principles and reporting guidance fundamentally consists of
guidelines that define the content of the report, its quality and boundary. These principles help
the management of the organization in determining the areas that should be invariably included
in the sustainability report and ensure that, such reporting should be done by maintaining the
proper quality standards. The standard disclosure component on the other hand specifies the base
content that should appear in a sustainability report(del Mar Alonso-Almeida, 2015).
The regulating body has also been updating its principles in order to improve the quality
of the sustainability report. The G4 sustainability reporting guidelines were in effect from 31st
December, 2015. The new guidelines have been presented in two parts. Here, in this part focus
has been more on the materiality aspects. The core options and the comprehensive options of the
sustainability principles efficiently list out the essential elements of the sustainability report and
the comprehensive option specifies the additional disclosures in regards to the organizational
strategies, governance, ethics and integrity.
However, as mentioned in the journal articles, presented in the question, ‘social
accounting practice in the form of corporate self-reporting, has systematically failed to open up
substantive critique’. This may be because of the specific issues that have been reported by the
entities in preparing a sustainable report. The sudden jump from the ongoing discussion of
preparing a sustainable report to the establishment of the mandatory principle of preparing a
sustainable report annually has left the organizations unprepared and made the procedure of
sustainable reporting, an issue (Ioannou & Serafeim, 2017). (Grey 2010) has been partially
correct in his assumptions that the sustainability reports have been a green wash in the eye of the
regulators. This may be supported by the fact that annual publishing of the sustainability reports
may be an issue for the small-scale companies that are the suppliers for the conglomerates. For
instance, Apple had requested detailed information from their suppliers instead of the fact that
Apple itself did not release a sustainability report (Fonseca, McAllister, & Fitzpatrick, 2014).
Though the inclusion of a sustainability report has not been mandated by the regulators,
the recent trend has been such that the stakeholders all over the world have been demanding
more information in the form of disclosures. This has made the regulators include in their
sustainability policies that the companies disclose viable information, wherever possible. This in
turn has resulted in the management of a particular organization to include huge amount of
information that may appear to be irrelevant or non-crucial from the viewpoint of the
stakeholders. The stakeholders frustrated with such information may in turn push the
management to disclose more information. Thus, this vicious cycle of disclosing more
information that leads to demand for the disclosure of more information is one of the major
sustainability issues (Cheng, 2014).

5SUSTAINABILITY ACCOUNTING
The above mentioned issues are the primary reasons that the firms are facing in the
preparation of a sustainable report. This has invariably made the sustainable reports, as stated by
Rob Gray in his journal, nothing to do with sustainability. These issues have resulted in the
preparation of the sustainability reports in such a format that, the reports summarize the way in
which the management addresses the concept of sustainability rather than providing enough
information as to how the administration has ensured the achievement of the sustainability goals.
However, (Hughen, Lulseged & Upton, 2014) is of the opinion that entities preparing
their sustainable reports in accordance to the global framework standards will in all probabilities
generate reports that promote essential ethical values within the organization. Essential values
like building of trustful environment within the organization improve internal control and
decision making processes, pull out an effective analysis of the strengths and weaknesses of the
organization that is necessary for the stakeholders to understand and further make financial
decisions, reduction in the compliance costs are facilitated by the proper preparation of the
sustainability report. Therefore, in order to understand whether the chosen organization has
prepared the sustainability report properly, the components of the report have been evaluated and
analyzed in order to ensure that the sustainability report has complied with the sustainability
principles that have been developed by the global reporting initiative framework.
Extent of Compliance with GRI’s requirements
BHP Billiton is an Anglo-Australian conglomerate that deals in mining, petroleum and
metals. The merger of the Australian Broken Hill Proprietary Company Limited (BHP) and the
Anglo-Dutch Billiton plc marked the formation of the company in the year of 2001. BHP Billiton
has been listed among the 90 companies that have been marketing and extracting fossil fuels.
The management of the company has also been criticized for lobbying against carbon pricing in
Australia. The sustainability report published by the management of BHP Billiton for the
financial year of 2017, has been analyzed in order to find out whether the sustainability report
has complied to the reporting standards.
The sustainability report produced by the entity promotes the values of sustainability,
integrity, respect, performance, simplicity and accountability. This has been mentioned in the
cover page of the sustainability report. This enhances the ethical aspect of the sustainability
report and assures the user of the integrity of the information provided in the report.
The first guideline of the sustainability principle is that the content of the report should be
such that it provides a balanced and rational view into the operational proceedings and the
organizational performance of the company (Barkemeyer, Preuss & Lee, 2015).
The concept of materiality refers to the material considerations or events that are worth
highlighting and should be reported in the annual financial report. BHP Billiton in its financial
report for the financial year of 2017, states that the materiality that has been considered by the
management not only includes the financial aspects but also the non-financial aspects of
business. It has been further revealed in the annual report that the materiality for the audit of the
financial statements have been set at US$400 million. Enough explanation has also been
provided in the proceedings of the determination of the amounts of materiality. The assertions in
regards to the material misstatements that have occurred in the financial statements also provide
enough overview into the integrity of the workforce of the company. Thus, enough overview has

6SUSTAINABILITY ACCOUNTING
been provided in the materiality context of business, which indicates that the management of
BHP Billiton has successfully achieved the first GRI 4 sustainability principle. The materiality
analysis disclosure that has been provided in the sustainability report also state that the
materiality assessment has been conducted by a review of the sustainability risks and
opportunities that have been identified with the help of analyzing inputs that concern the internal
and external stakeholders (Barkemeyer, Preuss, & Lee, 2015). In comparison to the sustainability
report that has been prepared by the entity for year of 2012 strongly adheres to the GRI 3.1
sustainability principles.
Stakeholder inclusiveness refers to the act of identifying the potential stakeholders of
business and evaluates the way in which the report has responded to the reasonable interests and
expectations. The potential stakeholders of business can include entities like employees,
shareholders, suppliers, local community groups and the government. (Reimsbach & Hahn,
2015). The sustainability report for the financial year of 2017 has been prepared in accordance to
the GRI 4 principles. This is evident from the fact that materiality section has been disclosed in
details. The report also features the core options and the comprehensive options properly which
is evident from the fact that more stress has been given on the particular areas of application
levels, boundary, discussion on management approach, governance and increased disclosure on
emission.
The sustainability report for the financial year of 2012 though includes the topics of
materiality and other necessary components like people, environment, society and governance.
But the report does not appear to be structured as for the financial year of 2017. Moreover, the
critical disclosures have been missing from the sustainable report.
The GRI 4 sustainability principles have stated that the primary duty of the organization
preparing the sustainability report is to disclose the information that concerns the stakeholders of
business. A particular charter and BHP Code of Business Conduct has been constructed by the
administration of the organization for the purpose of articulating the standards that control or
regulate the quality of the information that is disclosed in the report and also keeps an eye on the
degree to which such information concerns the stakeholders. The BHP Forum on corporate
responsibility is constructed for the stakeholder engagement program. The management also has
stated in its sustainability report that the media via which the company communicates with its
stakeholders are the Annual General Meetings, Annual Report, Sustainability Report, market and
media releases, stakeholder engagement activities like reports, newsletters, consultation groups
and community perception surveys. The publications of the key stakeholders indicate that the
organization has potentially identified the stakeholders of business. This has also enabled the
management to design the content of the report in such a way that it contains information
concerning the identified stakeholders. The administration of the company has also maintained
enough transparency in order to enable the stakeholders to better understand the operational
proceedings of the company. This effort however is missing, as revealed by the sustainability
report for the year of 2012. This also indicates that GRI has improved the sustainability
principles in order to increase the effectiveness of the sustainability reports.
BHP Billiton has managed to draw up a table showing the performance of the company
in regards to the sustainability goals set by the management starting from the financial year of
2013 to the financial year of 2017. The target performance table also highlights the particular
sustainable projects that have still not been completed and provides satisfactory reasons behind

7SUSTAINABILITY ACCOUNTING
such failings. Next, the management has published another table that displays the future
sustainability targets of the company. The targets related to organization environment that have
been aimed to achieve are zero work related fatalities, improvement of the total recordable injury
frequency.
Thus, it is evident from the above mentioned facts that the sustainability report of BHP
Billiton has successfully complied with the GRI 4 principles. Furthermore, the comparison
between the sustainability reports of the company reveals that the sustainability principles have
also improved over the years which have effectively increased the quality of the reports. The
opinion conveyed by the journals as mentioned in the question have been proved wrong with the
newest reporting guidelines. This is evident from the reporting success that has been achieved by
the management of BHP Billiton from 2012 to 2017.
Critical Analysis of Assurance Levels
BHP Billiton has also included an assurance disclosure in the sustainability report. The
audit of the company has been carried out by KPMG and in the Independent Assurance Report to
the Directors and Management of BHP, it has been stated that the criteria used as the basis of
reporting are the Global Reporting Initiative Standards. It has been further stated that the
sustainability operations has been conducted in accordance to the Assurance Engagements ISAE
3000 and ISAE 3410. Thus, here the management too has adhered to the sustainability
principles.
This has been disclosed in a much transparent manner in the sustainability report thus,
satisfying the assurance standards of the GRI 4 sustainability principles. However, in the
sustainability report belonging to the year of 2012, no information in regards to the assurance
engagements has been provided. Thus, the required corrections have been carried out in the
sustainability report belonging to the year of 2017 that has been prepared in accordance to the
GRI 4 sustainability principles.
Conclusion
The role of sustainable development has truly become central in determining the quality
of performance delivered by a particular organization. This opinion that has been conveyed in
the journal Accounting Organisation and Society’, 39(6):395-413 truly holds today. This is
because with the numerous instances of accounting scandals the role of a sustainable report
becomes imperative. Moreover, the contributions by business towards the society, economy and
the environment also are an important consideration that is revealed by a sustainability report.
The perspective that has been highlighted in the journal, Social accounting's
emancipatory potential: A Gramscian critique’, Critical Perspectives on Accounting, 20(2):205-
227 however, stands corrected today. This is because the emergence of the GRI 4 sustainability
principles makes the sustainability report effective and to the point in nature. Therefore, it can be
concluded here that the initiative taken by the Global Reporting regulating body has been
commendable.
Lastly, the opinion conveyed by (Gray 2010) is not applicable anymore as an
organization preparing its sustainability reports in accordance to the sustainability principles gets

8SUSTAINABILITY ACCOUNTING
no scope for creating a green wash in the eyes of the regulating bodies. Moreover, Grey
comments that in the discourse of preparing a sustainability report most of the organizations
explain the way they have approached the concept of sustainability. The company that had been
chosen for evaluating the effectiveness of such a comment reveals that the compliance with the
GRI 4 principles has resulted in a quality sustainability report that reflects all the necessary
crucial information. Thus, the viewpoint communicated by the journal is no more applicable.
Therefore, as it can be concluded from the above discussions, the sustainability report
prepared by the management of the company has been prepared in perfect adherence to the
Global Reporting Initiative principles. This has further enabled the management of the company
to derive the benefits of the preparing a sustainable report. Though there is a huge quantity of
literature criticizing the effectiveness of a sustainability report, the organizations preparing their
reports in compliance to the global sustainability principles, in all probabilities will reap its
benefits.

9SUSTAINABILITY ACCOUNTING
References
Alcaraz-Quiles, F. J., Navarro-Galera, A., & Ortiz-Rodríguez, D. (2015). Factors determining
online sustainability reporting by local governments. International Review of
Administrative Sciences, 81(1), 79-109.
ArAs, G. (2016). A handbook of corporate governance and social responsibility. CRC Press.
Barkemeyer, R., Preuss, L., & Lee, L. (2015). On the effectiveness of private transnational
governance regimes—Evaluating corporate sustainability reporting according to the
Global Reporting Initiative. Journal of World Business, 50(2), 312-325.
Beare, D., Buslovich, R., & Searcy, C. (2014). Linkages between corporate sustainability
reporting and public policy. Corporate Social Responsibility and Environmental
Management, 21(6), 336-350.
Ceulemans, K., Lozano, R., & Alonso-Almeida, M. D. M. (2015). Sustainability reporting in
higher education: Interconnecting the reporting process and organisational change
management for sustainability. Sustainability, 7(7), 8881-8903.
Cheng, M., Green, W., Conradie, P., Konishi, N., & Romi, A. (2014). The international
integrated reporting framework: key issues and future research opportunities. Journal of
International Financial Management & Accounting, 25(1), 90-119.
Cho, C. H., Laine, M., Roberts, R. W., & Rodrigue, M. (2015). Organized hypocrisy,
organizational façades, and sustainability reporting. Accounting, Organizations and
Society, 40, 78-94.
Deegan, C. (2014). An overview of legitimacy theory as applied within the social and
environmental accounting literature. Sustainability accounting and accountability, 248-
272.
del Mar Alonso-Almeida, M., Marimon, F., Casani, F., & Rodriguez-Pomeda, J. (2015).
Diffusion of sustainability reporting in universities: current situation and future
perspectives. Journal of Cleaner Production, 106, 144-154.
Fernandez-Feijoo, B., Romero, S., & Ruiz, S. (2014). Effect of stakeholders’ pressure on
transparency of sustainability reports within the GRI framework. Journal of Business
Ethics, 122(1), 53-63.
Fernandez-Feijoo, B., Romero, S., & Ruiz, S. (2014). Effect of stakeholders’ pressure on
transparency of sustainability reports within the GRI framework. Journal of Business
Ethics, 122(1), 53-63.
Fonseca, A., McAllister, M. L., & Fitzpatrick, P. (2014). Sustainability reporting among mining
corporations: a constructive critique of the GRI approach. Journal of Cleaner Production,
84, 70-83.

10SUSTAINABILITY ACCOUNTING
Frias‐Aceituno, J. V., Rodríguez‐Ariza, L., & Garcia‐Sánchez, I. M. (2014). Explanatory factors
of integrated sustainability and financial reporting. Business strategy and the
environment, 23(1), 56-72.
Frias‐Aceituno, J. V., Rodríguez‐Ariza, L., & Garcia‐Sánchez, I. M. (2014). Explanatory factors
of integrated sustainability and financial reporting. Business strategy and the
environment, 23(1), 56-72.
Hahn, R., & Lülfs, R. (2014). Legitimizing negative aspects in GRI-oriented sustainability
reporting: A qualitative analysis of corporate disclosure strategies. Journal of Business
Ethics, 123(3), 401-420.
Hughen, L., Lulseged, A., & Upton, D. R. (2014). Improving stakeholder value through
sustainability and integrated reporting. The CPA journal, 84(3), 57.
Ioannou, I., & Serafeim, G. (2017). The consequences of mandatory corporate sustainability
reporting.
Kozlowski, A., Searcy, C., & Bardecki, M. (2015). Corporate sustainability reporting in the
apparel industry: an analysis of indicators disclosed. International Journal of
Productivity and Performance Management, 64(3), 377-397.
Kozlowski, A., Searcy, C., & Bardecki, M. (2015). Corporate sustainability reporting in the
apparel industry: an analysis of indicators disclosed. International Journal of
Productivity and Performance Management, 64(3), 377-397.
Lozano, R., Nummert, B., & Ceulemans, K. (2016). Elucidating the relationship between
Sustainability Reporting and Organisational Change Management for Sustainability.
Journal of cleaner production, 125, 168-188.
Martínez‐Ferrero, J., Garcia‐Sanchez, I. M., & Cuadrado‐Ballesteros, B. (2015). Effect of
financial reporting quality on sustainability information disclosure. Corporate Social
Responsibility and Environmental Management, 22(1), 45-64.
Pérez‐López, D., Moreno‐Romero, A., & Barkemeyer, R. (2015). Exploring the relationship
between sustainability reporting and sustainability management practices. Business
Strategy and the Environment, 24(8), 720-734.
Piecyk, M. I., & Björklund, M. (2015). Logistics service providers and corporate social
responsibility: sustainability reporting in the logistics industry. International Journal of
Physical Distribution & Logistics Management, 45(5), 459-485.
Reimsbach, D., & Hahn, R. (2015). The Effects of Negative Incidents in Sustainability Reporting
on Investors’ Judgments–an Experimental Study of Third‐party Versus Self‐disclosure in
the Realm of Sustainable Development. Business Strategy and the Environment, 24(4),
217-235.
Reimsbach, D., & Hahn, R. (2015). The Effects of Negative Incidents in Sustainability Reporting
on Investors’ Judgments–an Experimental Study of Third‐party Versus Self‐disclosure in

11SUSTAINABILITY ACCOUNTING
the Realm of Sustainable Development. Business Strategy and the Environment, 24(4),
217-235.
Thijssens, T., Bollen, L., & Hassink, H. (2016). Managing sustainability reporting: many ways to
publish exemplary reports. Journal of Cleaner Production, 136, 86-101.