Analysis of CYBG Plc's CSR and Sustainability Report - ACCT20074

This report examines the importance of Corporate Social Responsibility (CSR) in the modern business era, focusing on its impact on financial objectives and stakeholder relations. It begins with a literature review on CSR, comparing sustainability reporting to other reporting concepts and explaining re...Read More

1
ACCT20074 Contemporary Accounting Theory

2
Section 1: Executive Summary
The main aim of this report is to review the literature review on importance of corporate
social responsibility within the modern business era in order to fulfill the requirements of all the
stakeholders. On the basis of overall review of literature present in selected journal that CSR
disclosures are highly important for the reporting entities as they deliver their products and
service to society through using their own resources. Sustainability reporting requirements as
prescribed by GRI guidelines aims to provide performance of company towards various
indicators of sustainability and also discloses information on material aspects that impacts the
performance of the company. In this report CYBG Plc has been selected to review its disclosure
made on behalf of its sustainability performance.

3
Table of Contents
Section 1: Executive Summary........................................................................................................2
Section 2: Introduction....................................................................................................................4
Section 3: Part A: Theoretical Knowledge......................................................................................4
(i) Literature Review for explaining the importance of Corporate Social Responsibility (CSR)
in firms to improve the financial objectives.................................................................................4
(ii): Comparison of Sustainability reporting to other Reporting Concepts Providing Complete
View of CSR activities of businesses..........................................................................................5
(iii): Explanation of the theories relevant for explaining the significance of sustainability
reporting.......................................................................................................................................6
Section 4: Part B: Application of Theoretical Knowledge for Explaining Reporting Practices of
CYBG Plc Cdi 1:1 Foreign Exempt LSE........................................................................................7
(iv): Company Brief about its ownership, governance and financial performance.....................7
(v): Use of Global Reporting Guidelines to prepare the sustainability reporting scoring index. 8
(vi): Extent and quality of disclosure of sustainability reporting of the selected company
according to the GRI scoring index...........................................................................................13
Section 5: Conclusion....................................................................................................................14
Section 6: References....................................................................................................................15

4
Section 2: Introduction
The report is developed to analyze and examine the importance of corporate social
responsibility measures that a business organization should adopt for maximizing the faith and
interest of its stakeholder members. The significance of sustainable reporting for providing a
complete view of CSR activities of a firm has also been discussed within the report. The
significance of sustainability reporting is discussed in the context of stakeholder and resource
based theories. In addition to this, the report ahs also examined the annual report of a selected
ASX listed entity, that is, CYBG PLC (CYB) for determining its governance outlook and the
nature of sustainability reporting as per the GRI (Global Reporting Initiative) guidelines.
Section 3: Part A: Theoretical Knowledge
(i) Literature Review for explaining the importance of Corporate Social Responsibility
(CSR) in firms to improve the financial objectives
The corporate social responsibility (CSR) can be regarded as an internal business strategy
used by businesses for incorporating the social and environmental concerns in its different
activities and behave in a responsible manner towards all its stakeholders. There is high pressure
on the business companies nowadays to develop their goods and services in a socially
responsible manner from all of its stakeholders. This is because the rising concerns about the
damage caused to our ecosystem due to negative influences of business operations is causing the
need for them to conduct their different activities in a responsible manner. The CSR activities
that are measures undertaken by businesses to increase their social, economic and environmental
performance is leading to improving the integrity in the business operations in the mind of its
different stakeholders ((Porter & Kramer, 2010). This increased satisfaction of the stakeholders
helps in improving the firm performance by enhancing its goodwill and brand image leading to
higher sales and profits. Also, the businesses are able to enhance their competitive position
which in turn promotes their long-term growth and development (Deegan, 2014).
The businesses have placed less importance on incorporation of CSR activities within
their strategic objectives initially as they believed that it would lead them to incur additional
costs and can have a negative impact on their profitability. However, with the growing concerns
regarding the social and environmental impact of businesses and the increasing pressure from
stakeholders has caused the need for them to integrate CSR strategies as an integral part of their
corporate strategies (Nikolova & Arsic, 2017). The business companies around the world has
identified the importance of integration of CSR activities for improving their competitive
position by achieving increased customer satisfaction that in turns helps in improving the
financial performance. The customers around the world are becoming largely aware of the social
and environmental issues that are resulting due to negative impact of the business operations. As
such, there is increasing trend among them to consume the products or services that have been

5
provided to them in an ethical and responsible manner. Therefore, the businesses that have
presence of an adequate CSR strategy are able to achieve a higher financial growth as their
products are largely consumed by customers in comparison to the companies that do not
integrate the use of an adequate CSR strategy (Buchholtz, 2011).
It has been depicted by various researches that CSR influences the financial performance
of businesses through creating higher value for all its stakeholders. As such, it can be described
as a value-enhancing activity as it leads to improving the product market competition. The
business firms with strong governance structures as a sort of their CSR strategies have higher
equity returns due to improved operating performance and higher market value. The relation
between the CR and the financial performance of a firm can also be adequately explained with
the use of agency theory (Deegan, 2014). The agency theory has stated that the alignment of goal
and objectives of the business managers and shareholders is largely essential for maximizing a
firm value. The conflict of interest between the managers and owners can be regarded as a major
problem that can result in negatively influencing the business performance. However, the use of
CSR strategies by the business managers helps in improving transparency within business
operations from the perspective of its owners, that are, shareholders and thus leading to
alignment of their goals with the shareholder goals. This helps in reducing the agency costs and
thus maximizing a firm performance.
The CSR activities are helping the business firms to drive innovation, resolve their
material issues, strengthening the community engagement and overcoming the business risks in
an effective manner. Also, it helps them to ensure that they are complying with all the legislative
and regulatory requirements and thus seeking continuous support from the government. The
global investors around the world also intend to invest more in business corporations that have
an improved goodwill among the society. This in turns helps the businesses using CSR strategies
to drive their business growth and expansion in an adequate manner (Michelon, Boesso &
Kumar, 2013).
(ii): Comparison of Sustainability reporting to other Reporting Concepts Providing
Complete View of CSR activities of businesses
The increasing importance of CSR realized by the companies has resulted in undertaking
the various voluntary disclosure initiatives by them to report on their social or environmental
performances. This type of information is provided within the annual reports of companies that
help the stakeholders to gain an insight about the measures that the company is undertaking to
overcome the negative impact of its different operations on the society or on the environment.
The changes in Australian Corporations Law in the year 1998 have also mandated certain
companies to report on their environmental performance (Figar, 2011). This is essential to
analyze the CSR strategies of a firm and ensuring that all its activities does not have any negative
impact on the society and the environment. The development of sustainability standards provided
by the Global Reporting Initiative (GRI) and other frameworks such as Integrated Reporting
framework is now causing the need for businesses to report on their CSR performances. This

6
type of mandatory reporting by firms related to their non-financial information is largely being
adopted by them to provide disclosure about their information elated to society and
environmental aspects (Homayoun, Rezaee & Ahmadi, 2015).
The development of GRI standards and other relevant framework has provided well-
defined guidelines for businesses to provide information about their CSR initiatives in the form
of developing a sustainable report. It is an approach used by business firms to a large extent for
disclosing the materialistic non-financial information and communicates with its key
stakeholders about its social and environmental issues ((Mousa & Hassan, 2015). The disclosures
provided by the firms helps in improving the reliability of business operations in the mind of
stakeholders by gaining an insight about the ways in which they are managing their social and
environmental issues (Deegan, 2014). The major difference that can be stated between
sustainability reporting and other relevant reporting types adopted by business to report on their
CSR performance is that sustainable reports are developed on the basis of defined set of
standards and guidelines such as GRI. They integrate information related to all the CSR aspects
of a business corporation such as social, economic and environmental whereas other reporting
framework are not largely helpful in providing disclosures about all the CSR aspects of a
business. There is no defined set of pattern or standards on the basis of which the information is
disclosed. Thus, sustainability reporting is regarded as the most effective way adopted by
businesses to interact with its stakeholders as compared with other relevant reporting frameworks
(Kolk, 2016).
(iii): Explanation of the theories relevant for explaining the significance of sustainability
reporting
The most relevant theory in this context can be regarded as the stakeholder theory which
has stated that business companies should emphasize on developing long-term relations with all
its stakeholder members for maximizing its value creation. The stakeholders on the basis of this
theory have been identified as members who have either a direct or indirect impact form the
various activities of a business firm (Carroll & Shabana, 2010). The important stakeholders of a
firm can be regarded as customers, employees, creditors, investors, debtors, government and
other members who are impacted by its different operational activities. As such, it can be said on
the basis of this theory that a firm can achieve the satisfaction of all its stakeholder members
through reporting on their CSR activities in the form of a sustainable report (Deegan, 2014). The
sustainable report provides information to the various stakeholders of a business about their
social, economic and environmental aspects which in turn helps in achieving stakeholder faith
through ensuring that their different needs and requirements are met in an appropriate manner
(Asemah Okpanachi & Edegoh, 2013).
On the other hand, the resource based theory can also be regarded as an effective
theoretical formwork that can be used for demonstrating the significance of sustainable reporting
within businesses. The resource-based theory has stated that strategic resources of a firm should
be exploited in a sustainability manner for ensuring its long-term growth and success. The

7
strategic resources play an essential role in developing the capabilities of a firm and thus
achieving superior performance over time (Matten & Moon, 2010). As such, the sustainable
reporting enables the firms to gain an analysis of the strategic use of its different resources and
identifying the issues of concerns that need to be addressed for prompting its sustainable growth.
The CSR strategies enable a firm to develop new internal resources such as adequate workplace
culture and also realizing large benefits by achieving higher corporate reputation (Nurn & Tan,
2010).
Section 4: Part B: Application of Theoretical Knowledge for Explaining Reporting
Practices of CYBG Plc Cdi 1:1 Foreign Exempt LSE
(iv): Company Brief about its ownership, governance and financial performance
CYBG PLC (CYB) is regarded as company operating within the financial sector and is
listed on the Australian Securities Exchange (ASX). It is regarded to be a holding company of
Clydesdate Bank that has been established by the National Australia Bank in the year 2016. The
bank has largely been involved in promoting growth and innovation within the financial sector of
Australia. The bank operates through retail and commercial bank channels of Clydesdale bank. It
adopts the use of a multichannel approach to reach to its customers and is highly focused on
providing them improved value services. It has maintained a strong and growing digital offering
in addition with its branch network and extensive broker channel that has enabled in achieving
higher business growth. The bank is also promoting its extensive investment in improving its
digital platform and accelerating the adoption of mobile and online tools to increase the
automation of the banks. The holding company is owned by Clydesdate Bank and thus conducts
its business operations on the part of the banking corporation (Annual Report, 2018, p. 256).
The Board is focused on achieving the highest standards of corporate governance and is
highly dedicated towards delivering long-term value to the shareholders through emphasizing on
creating sustainable value. The Board has developed strong governance and nomination
committee, audit and risk committee and remuneration committee to ensure that it is conducting
its diverse operations in an ethical and responsible manner. The Board has highly focused on
creating long-term sustainable value to the shareholders and has developed a strong leadership
team for attainment of its determined strategic objectives. It also places higher importance on
developing a team-based culture that is based on determined set of ethical values and behaviors.
The Board largely emphasizes on developing a workplace culture that is determined by strong
governance and is committed to developing leaders that enable the business to continually evolve
and change in line with the market strategy. Also, there have strong principles developed in
relation to promotion of stakeholder engagement within the company that include its customers,
shareholders, colleagues and government bodies (Annual report, 2018, p. 50-68).
It has been analyzed from the annual report of the bank that the financial year of 2018 is
regarded as another strong year determining its financial progress in terms of its strategic pillars

8
such as sustainable organic growth, efficiency and the optimization of capital. The financial
results of the company has depicted increase in its financial performance by depicting improved
underlying profits and returns, sustainable loan growth and paying an ordinary dividend of 3.1p
per share (Annual Report 2018, p 34-37). The extracts from the annual report of the bank
depicting its improved financial performance as follows:
(CYBG Plc Annual Report 2018, p. 3)
(v): Use of Global Reporting Guidelines to prepare the sustainability reporting scoring
index
The purpose of GRI sustainability reporting guidelines help companies with reporting
principles, standards of sustainability reporting and handy manual used to prepare the
sustainability reports, These guidelines does not differ the reporting initiative on the ground of
company size, sector and location (GRI, 2016, p. 5). GRI reporting guidelines have provided
various criteria that are used to score the sustainability reports prepared by the company. All
these criteria have been described below:
Two options to prepare sustainability reports: GRI Guidelines provides two different options
to prepare the sustainability reports “In accordance” with defined GRI guidelines. These two
core options are Core Option and Comprehensive Option. Any one option can be applied by
organization without considering their size, sector or location. The main focus of both the
options is to identify and make disclosure of all the material aspects. With respect to
sustainability disclosures, material aspects include the information on entities important
environmental, social, and economic impacts. In addition to this, it provides information on
matters that substantively influence the assessments and economic decisions of stakeholders
(GRI, 2016, p. 11).

9
Core option contains all the essential elements that need to be disclosed in sustainability
report and provides all the material information organizational impacts due to social,
environmental, economical and governance performance of the company. On the other hand,
comprehensive option discloses information in addition to core option through adding the
requirement of additional standard disclosures on organizational strategy, ethics and integrity and
governance components. In comprehensive option organizations are required to communicate the
performance more extensively through reporting all the indicators mentioned and identified for
all the material aspects (GRI, 2016, p. 11).
Following are criteria provided under GRI guidelines for general standard disclosures and
subdivision according to above defined two CORE options:
(Source: https://www.globalreporting.org/resourcelibrary/grig4-part1-reporting-principles-and-
standard-disclosures.pdf, page 12)
According to above table, companies are required to provide above mentioned general
disclosure standards for both core and comprehensive options. It has been seen that core option
limits the standard disclosures while in comprehensive option it is required to provide all
standards. It is certain that companies that make use of comprehensive option to disclose
sustainability information aims to score higher in comparison to reports that make of core option.

10
(Source: https://www.globalreporting.org/resourcelibrary/grig4-part1-reporting-principles-and-
standard-disclosures.pdf, page 21)
Following are the criteria for specific standard disclosures for both core and comprehensive
options:

11
(Source: https://www.globalreporting.org/resourcelibrary/grig4-part1-reporting-principles-and-
standard-disclosures.pdf, page 13)
As defined in above table companies are required to disclose management approach for
all material aspects that impacts the organization performance. Disclosure of management
approach is equally important for reports prepared using core or comprehensive option.
Sustainability reports that make use of core option are required to provide at each indicator of
material aspects identified. While in case of comprehensive option there is need to provide all the
indicators with respect to each of identified material aspects. All the indicators defined in GRI
guidelines are based on following categories:
 Economic
 Environmental
 Social
All these three categories have several indicators as shown in below images and
companies are required to provide material aspects of all such indicators so that they can score
maximum points.

12
(Source: https://www.globalreporting.org/resourcelibrary/grig4-part1-reporting-principles-and-
standard-disclosures.pdf, page 22)

13
(Source: https://www.globalreporting.org/resourcelibrary/grig4-part1-reporting-principles-and-
standard-disclosures.pdf, page 23)
Scoring index is based on the quality of disclosure made by company in their
sustainability report. It is highly expected that companies who prefer comprehensive disclosure
option in sustainability disclosure will tends to score more in comparison to companies who
make use of core option.
(vi): Extent and quality of disclosure of sustainability reporting of the selected company
according to the GRI scoring index
As per the information provided and reviewed, it has been found that CYBG Plc do no
prepare sustainability report but disclose few aspects of sustainability in annual report and some
in corporate governance report. Therefore, it has been decided to evaluate the annual report of
CYBG Plc accounting the GRI index described above and report on any missing information
which is material on the part of CYBG Plc.

14
Review of sustainable disclosures made by CYBG Plc in its annual report
General Disclosures
 Organizational Profile: It has been found that CYBG Plc has disclosed very small
sections on organization profile such as its activities delivered by company, headquarter,
contact details, locations, supply chain, employees details, ownership form and supply
chain.
 Strategy: Detailed information on strategies has been disclosed by company that contains
material risk, steps taken and key opportunities (CYBG Plc Annual Report 2018, p. 16-
17).
 Ethics and integrity: The strategic report of the company provides information on
organizations values, its principles, culture, standards, norms of behaviour and other
deliverables (CYBG Plc Annual Report 2018, p. 29-30).
 Governance: CYBG Plc prepares separate report to define its corporate governance and
also discloses information such as board orientation, boards’ member’s details and
remunerations details in its annual report (Corporate Governance report, 2018).
 Stakeholder engagement: Stakeholders engagement has been well disclosed in the
strategic report section of Annual report (CYBG Plc Annual Report 2018, p. 26-28).
 Reporting Practices: Well defined information has been disclosed related to all the
reporting matters (CYBG Plc Annual Report 2018, p. 172-236).
In additions to this CYBG Plc has disclosed information on material aspects impacting
the organization in its annual report. No other indicators have been provided in annual report.
Specific Disclosures
Specific disclosures are required to make by every company in relation to their impact on
environment, social and economic segments. At least one of factor related to each of
environment, social and economic segment need to be presented in annual report or sustainable
report. But CYBG Plc has not prepared sustainable report and there is very little information on
impacts made by company on environment, social and economic segments. Following
information has been disclosed in annual report and website of CYBG plc in relation to
environment, social and economic disclosures:
Environment: Environment disclosures are shown on page 30 of annual report and some
information has also been disclosed on its website. Information such as impact of Green House

15
Gases Emissions and organization commitments to reduce the emissions has been provided very
briefly but still satisfactory information has been disclosed. According to GRI index, it can be
said that CYBG Plc has concentrated its disclosure on only one factor and it is green house gases
emissions and equipments used to control the overall emissions (CYBG Plc Annual Report 2018,
p. 30).
Social: CYBG plc has provided information in relation to social factors such as employees,
human rights, social matters, laws put in force for anti corruption and anti bribery, and other
social categories that impacts the social behaviour of a company. All this information has been
provided in annual report of company through using the table format to increase the
understanding (CYBG Plc Annual Report 2018, p. 31).
Economic: Economic factors provide information such s flow of capital among different
shareholders and economic impacts on the organization throughout the society. Economic
performance of CYBC plc has been reported through different perspective such as financial
value delivered to various shareholders. It has been presented in from of financial statements and
other financial performance and non financial matters integrated in different sections of the
annual report. It can be said that no separate section in annual report has been provided to check
economic disclosures made by the company (CYBG Plc Annual Report 2018).
Section 5: Conclusion
It can be said on the basis of discussion held that sustainable reporting is becoming
higher necessary for business companies to provide information about their social, economic and
environmental growth. The theory of agency and stakeholder has adequately explained the
significance of undertaking CSR activities by a firm. In addition to this, it has been analyzed on
the basis of examining the annual report of CYBG PLC that it has developed an effective
governance structure and also has realized improved financial performance in the year 2018.
However, the bank is not involved in developing and disclosing its sustainable information in an
integrated manner in the form of sustainable reporting. As per the GRI guidelines, it is highly
recommended that the bank should develop and provide its sustainable information through
publishing a sustainable report on an annual basis.

16
Section 6: References
Annual Report. (2018). CYBG PLC Annual Report and Accounts. Retrieved on October 7, 2019,
from https://www.cybg.com/resources/0e94c28f-78b1-4a4e-826a-2eb90ee5c072/
CYBG+ARA2018-final.pdf
Asemah, E., Okpanachi, R. & Edegoh, L. (2013). Business Advantages of Corporate Social
Responsibility Practice: A Critical Review. New Media and Mass Communication 18, pp.
45-54.
Carroll, A. & Shabana, K. (2010). The Business Case for Corporate Social Responsibility: A
Review of Concepts, Research and Practice. International Journal of Management
Reviews 12(1), pp. 86-102.
Carroll, A.B. & Buchholtz, A.K. (2011). Business and society: Ethics and stakeholder
management. Australia: Thomson South-Western.
Corporate Governance Report. (2018). CYBG Plc. Retrieved on October 7, 2019, from
https://www.cybg.com/about-us/corporate-governance/
Deegan, C. (2014). Financial Accounting Theory. Australia: McGraw-Hill Australia
Figar, N. (2011). Corporate Social Responsibility in the Context of the Stakeholder Theory.
Economics and Organization 8(1), pp. 1-13.
GRI. (2016). G4 Guidelines. Retrieved on October 7, 2019, from
https://www.globalreporting.org/resourcelibrary/grig4-part1-reporting-principles-and-
standard-disclosures.pdf
Homayoun, S., Rezaee, Z. & Ahmadi, Z. (2015). Corporate Social Responsibility and Its
Relevance to Accounting. Journal of Sustainable Development 8(9), pp. 178-189.
Kolk, A. (2016). The social responsibility of international business: From ethics and the
environment to CSR and sustainable development. Journal of World Business 51, pp. 23-
34.

17
Matten, D & Moon, J. (2010). Implicit and explicit corporate social responsibility: A conceptual
framework for a comparative understanding of corporate social responsibility. Academy
of Management Review 33 (2), pp. 404-424.
Michelon, G., Boesso, G. & Kumar, K. (2013). Examining the link between strategic corporate
social responsibility and corporate performance: An analysis of the best corporate
citizens. Corporate Social Responsibility and Environmental Management 20, pp. 81-94.
Mousa, G. & Hassan. N. (2015). Legitimacy Theory and Environmental Practices: Short Notes.
International Journal of Business and Statistical Analysis 2(1), pp. 42-53.
Nikolova, V. & Arsic, S. (2017). The Stakeholder Approach In Corporate Social Responsibility.
Engineering management 3 (1), pp.24-35.
Nurn, C. W. & Tan, G. (2010). Obtaining intangible and tangible benefits from corporate social
responsibility. International Review of Business Research Papers 6(4), pp. 360 – 371.
Porter, M.E. & Kramer, M.R. (2010). Strategy & society: the link between competitive
advantage and corporate social responsibility. Harvard Business Review 84, pp. 78–92.