Question

Corporate Social Responsibility (CSR)

Mars Dump is a multinational company that is caught by the Emissions Trading Scheme (ETS).

Details of ETS are as follows:

It is a cap and trade scheme in which permits are traded in an active market. Its annual compliance period is from 1 July of the current period to 30 June of the following year.

Each participating company receives an allocation of free permits each year based on their reporting carbon emissions from the previous period. In the case of Mars Dump Ltd, permits to emit 36 000 tonnes of carbon dioxide equivalents have been issued on the first day of the current period (i.e. 1 July 2019) when the market price of a permit was $25 per tonne of carbon dioxide equivalents.

During the 2019/2020 financial year, Mars Dump emitted 37 000 tonnes of carbon dioxide equivalents, which exceeded its permitted emissions of 36 000 tones. This occurred despite the managers of Mars Dump estimating that it had emitted 19 000 tonnes of carbon dioxide equivalents by 31 March 2020 and was therefore on target to emit 36 000 tonnes by 30 June 2020. The market price of a permit is $27 on 31 March 2020. As a result of exceeding allowed emission levels, on 30 June 2020, Mars Dump purchased 1 000 permits at a market price of $33 per tonne. Mars Dump uses the cost model in accordance with AASB 138, and amortises any deferred income arising from the permits using the proportion of actual emissions to estimated total emissions.

Required

1. How can stakeholder theory be used to explain companies voluntarily undertaking corporate social responsibility reporting? Discuss.                                                                            
2. “There is no mandatory reporting of corporate social responsibility in Australia.” What is your understanding of this phrase? Explain.                                                          

Account for above events in the books of Mars Dump Ltd for the period 1 July 2019 to 30 June 2020 in accordance with the requirements of Interpretation 3 and AASB138.

Answer 1

Influences companies to voluntarily undertake corporate social responsibility reporting.

A business will manage it’s resources so as to please it’s multiple stakeholders

Corporate Social Responsibility Reporting

The effect stakeholder theory has on CSR reporting,Stakeholder theory presents a large motive for CSR reportingConsumers and suppliers are likely to favour altruistic actions and provide the company more business

Empirical evidence of stakeholder theory in CSR reporting

This branch asserts that a business should meet the expectations of all stakeholders equally, irrespective of the power or standing certain stakeholders have within the company

The Companies Act, 2013, envisioned that the private sector can contribute towards achieving the listed sustainable and henceforth, nation-building goals. With that, India is also the first country in the world to make corporate social responsibility mandatory.

If a company falls under the ambit of the Corporate Social Responsibility (CSR) law, it shall invest at least 2 percent of its average net profits in projects in the field of education, water supply, health care, environment, social empowerment, sports, culture, through a registered trust, a registered society or a non-profit (section 8) firm.