Question

You are the chief financial officer of Superior Paint Company, a company that manufactures paint and paint products in a large township. Chemicals used in the production process are disposed off in compliance with environmental regulations but some of the components of the products such as solvents, monomers and softening agents still present serious ecological risks. The company provides regional employment. The chief executive officer has asked you to prepare a report on whether the company should engage in social and environmental reporting.

REQUIRED:

Write a report that covers the following:

1. Explain what social and environmental reporting is, why it is important, why it is different from traditional financial reporting and how the information is disseminated to the various stakeholders;
2. Identify and explain the potential costs and benefits for the company to produce a social and environmental report; and
3. Recommend to the chief executive officer whether Superior Paint Company should engage in social and environmental reporting and provide two supporting reasons with reference to the GRI Framework.

Answer 1

Social and environmental reporting is very important for any organization now a days. It is referred to as a report made by the organization to show its social contributions towards society and environment and complying with the social contract. It comes under the corporate social responsibility where any organization must work in the favour of the society and should benefit the society and environment.

It is very important as it is adding value to the organization as when people would come to know about the activities performed by organization for the welfare of society, they develop a positive thought fir the company, which adds to its goodwill and people prefer that organization over other which helps in making financial benefits also.

Not only this, the society and environment is also benefitted from this small steps by organization and it's a big contribution towards the society. The society on return shows acceptance to the organization due to the works performed by them. Thus it's very important for any organization.

Earlier the organization were only focussed on financial benefits that is profit maximization was the only motive if the organization. But today companies are focussing on wealth maximization that is increasing the wealth of shareholders which in return would increase the wealth of the company.

And all the activities done by the company for the welfare of the society can be known to its various stakeholders like public, media, employees, government and others as these reports are made public where any one can have access. This makes everyone know the steps taken by the company for the welfare of the society.

But this social and environmental reporting also lead to some costs to the company. For implementing actions, that is in favour of the society, one company requires additions costs. Like for example, a company wishes to manufacture goods with a machine that is producing very low waste and chemicals to be discharged. Maximum of it is recycled and used. So, for such manufacturing additional machinery and setup is required. These are the costs which are associated with the social and environmental report.

Along with these costs, there are benefits also associated like, when the people would know that company is producing products with devices which produce less waste, they will prefer buying that product over other products, which would add revenue to the company.

So, thus the costs associated in producing social benefits leads to the additional benefits for the company.

Therefore the company must indulge in social and environmental reporting. Two reasons suppoting this idea with reference to GRI framework are:

• One is multi stakeholders input where reports are prepared such the each and every stakeholders can access and understand that report which would further lead to a proper presentation of reports according to guidelines. Thus would help maintain the conduct in the business and correct information reaches to stakeholders.
• Second is the using the GRI framework, one can produce more sustainable reports using various GRI standards. Data represented using these are better in comparison to others, that bring the transparency of the data.

Thus, it is beneficial to carry the social and environmental reporting for the organization.