Corporate Financial Reporting and Sustainable Social Well-being Ahmed El-Zayaty, PhD
Sep 13, 2014
Corporate Financial Reporting and
Sustainable Social Well-being Ahmed El-Zayaty, PhD
• Corporate sustainability: It requires a shift from shareholders to stakeholders concept and a business model that goes beyond shareholders’ wealth maximization to incorporate environmental and social dimensions. Lo, S-F and Sheu, H-J (2007) found a significant positive relation between corporate sustainability and corporate market value. Their study indicated that companies with remarkable sustainable development strategies are more likely to be rewarded by investors in the financial markets.
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Corporate Reporting: Current corporate financial reporting does not require specific disclosure of corporate social and environmental activities. Some large companies, however, voluntarily disclose their contribution to social well-fare (See handouts).
Financial Analysis and Social Well-Fare: traditionally, financial analysis courses focus on financial performance and more specifically on profitability and risk. Corporate social responsibility receives little or no attention in classrooms. The concept of shareholders’ wealth maximization dominates the analysis. The concept of stakeholders rarely receives attention by financial analysts.
Modifying Course Content and Teaching Methodology: Students were required to pick companies that offer social responsibility reports. Perform analysis for both financial as well as social performance through the use of a variety of analysis techniques such as ratios, common size, and narratives.
Management Ethics and Responsibility: Management performance is measured not only by achieving financial goals, but expanded to include achieving ethical standards in financial reporting and accounting quality, stakeholders wellbeing, and contribution toward sustainable social well-fare of their communities.
Course Learning Outcomes: Learning outcomes are modified to align with the UN’s six principles for responsible management education.
Baldridge Sustainability and Corporate Responsibility Josephine M. Kershaw, PhD ACBSP Region 4 Conference October 5, 2012
History
Established by Congress in 1987 for manufacturers, service businesses and small businesses
Mission: To improve the competitiveness and performance of U.S. organizations
The framework for performance excellence is an integrated, systems-based approach to:
deliver value to customers and stakeholders
achieve world-class results
encourage learning and innovation
promote organizational improvement and ultimately organizational sustainability
The Baldridge Criteria
Societal Responsibility
The concepts of social/societal responsibility and sustainability have evolved within new versions of the Baldridge Criteria, reflecting business trends in general as well as the growth of sustainability globally.
Focused on organizational sustainability
Has been expanded to include an organization’s impact on environmental, social and economic systems and its societal responsibility in these areas.
What is Sustainability?
Sustainability reporting is a process for publicly disclosing an organization’s economic, environmental, and social performance.
It has become a standard to ensure the shareholders, customers, and community about overall organizational performance.
Similarities in Framework
GRI
Profile
Disclosures on management approach
Performance indicators
Baldridge Criteria
Profile, Leadership, Strategic Planning
Leadership, Strategic Planning, Customer Focus, Workforce Focus, Operations Focus
Results
Criteria on Leadership
Like the GRI framework, the Criteria recognizes that an integrated and strategic approach to societal responsibility is a senior leadership responsibility.
Criteria Discusses how organizations should govern and meet their social responsibilities:
Governance, a key area of sustainability and corporate responsibility addresses accountability, transparency and performance evaluation of leadership.
Legal and Ethical Behavior, addresses the adverse impacts of products and operations on society and anticipates public concerns.
Addresses compliance processes, including goals for surpassing regulatory and legal requirements as well as promotion and monitoring ethical behavior.
Addresses the community and how an organization identifies and supports it.
Ex: philanthropic work, describing roles on non-profit boards, staff volunteering in the local community, participation in blood drives, and financial contributions to charities.
Benefits of Reporting!
Performance management and governance tools
Identification of risks and opportunities
Strengths and weaknesses
Continuous improvement and innovation
Demonstration of transparency and accountability
Increased stakeholder trust and engagement
Enhanced brand value and market differentiation
Workforce attraction, retention, and engagement
Competitive advantages
Comparability/benchmarking
In the Classroom
Baldridge Award Winners Small Business and Health Care 2010 & 2011
K&N Management
2010 Malcolm Baldrige National Quality Award
Sustainability Initiatives:
A succession plan for senior leaders, established with processes and systems to ensure the sustainability of the leadership system and the organization.
Fiscal meetings are internally conducted each month by key senior leaders to review the Profit and Loss statements in order to analyze fiscal performance opportunities
Internal and external reviews protects interests and takes measures to ensure sustainability through fiscal and legal responsibility
Initiatives cont.
Prepare for and handle seasonal or economic fluctuations in business volume through forecasting and scheduling based on historical trends
Operate through tight inventory controls, security cameras, thorough training processes, and cross training to ensure labor and food cost goals are consistently met.
This is evident in the continuing rise in gross profit margin
Senior leaders foster an organizational environment that requires legal and ethical behavior by stressing the organizational core value, relationships, and by using the plan-do-check-act process
Promotes care for the environment through recycling efforts
Recycle glass bottles and cardboard.
Grease traps are properly rendered and collected by an approved vendor
Cups are designed to be multi-use instead of single-use
Participate in the Keep Austin Beautiful campaign, maintaining the cleanliness of two local streets.
Henry Ford Health System
2011 Malcolm Baldrige National Quality Award
Sustainability initiatives:
Vendor Compliance Policy, which specifies vendor requirements for staff interaction and enhances patient safety by controlling vendor access to patient care areas
The BOT Nominating & Governance Committee reviews the composition of all boards to ensure members possess required skill sets and reflect each BU’s community, culture, and demographics.
To ensure long-term sustainability, launched an Enterprise Risk
Council (ERC) in 2010.
Responsible for designing and executing a robust enterprise risk management program.
Initiatives Cont.
HFHS conserves natural resources directly and through their supply chain.
Processes include: materials recycling, pest management to use less toxic materials, cleaning with low-volatile organic compound and Green Seal products, stocking unbleached products in bathrooms and wash stations, high-efficiency lighting, food service process redesigns to reduce food waste, and System-wide shift to healthier food choices.
All new construction meets “green” standards, using recycled flooring products with low-volatile organic compound finishes and “green” wall coverings.
Schneck Medical Center
2011 Malcolm Baldrige National Quality Award
Sustainability initiatives:
promoting and supporting the philosophy of a Just Culture
The “Green Team” was formed with the purpose of educating and promoting awareness of environmental stewardship though reducing, reusing, or recycling waste.
SMC recycles paper, bottles,plastic, batteries, cans, metal, cardboard, and
light bulbs. recycled 183.6 tons of plastic, glass, metal, paper, and cardboard in 2010 for a
recycling rate of 35%. SMC was the only independent healthcare organization in Indiana to be recognized by Practice Greenhealth in 2011.
Initiatives Cont.
The Operational Rhythm, was developed and deployed to provide a more systematic approach to performance review and evaluation, helping to sustain the key changes resulting from implementation of action plans.
Leaders review actual performance in achieving strategic objectives against measurable goals
In 2010, nursing began to evaluate how much linen was actually needed in a patient’s room. after measuring how much was actually being utilized, nursing began to cut back on the linen delivered in each room.
All employees were given insulated mugs to use in the cafeteria. When employees use the mugs in the cafeteria they are able to purchase drinks for just $0.25.
Summary of Initiatives
Commonalities shared between all winners
Social well-being programs through support of local charities
Program that tracks efficiency of current management practices
Educational services provided to clients or community members
Programs to detect future concerns
Environmental care
Either through a specific team or initiatives to reduce waste or improve waste management
Thank You!