Advanced Corporate Reporting Essay Example | Topics and Well Written Essays - 1500 words

Advanced Corporate Reporting - Essay Example However these are voluntary in nature and not mandatory for the organizations. The triple bottom line approach theory to sustainability stipulates that profit is not the only parameter, based on which performance of a company need to be evaluated and judged. This is a narrow way of performance evaluation. There other â€Å"bottom lines â€Å"which should be taken into consideration for effectively measuring performance of a company. These are: economic, social and environmental performance. John Elkington first coined the term triple bottom line approach in 1997 (Elkington,, 1997). The most important question that comes to mind is why do companies provide information about their role in preserving environment and social responsibility? According to the Committee for Economic Development (1971), it is important for an organization to take care of the demands of its stakeholders which consists of its employees, customers and other sundry shareholders. These demands should be met with by the organizations, within the acceptable limit of legal framework and the one which is socially acceptable in the society. One has to examine whether the provisions of non – financial information is compatible with the view that the social responsibility of a business is to increase profits. This needs to be examined in terms of specific theories. The corporate social reporting is done on the basis of two theories that are Stakeholder theory and Legitimacy theory. According to Stakeholder theory, any group which is part of the organization can influence its decision. The organization and the stakeholders are interconnected and are accountable for their actions to the society. Organization and the stakeholders are also interconnected to take care of the interests of the organization (Villiers, 2006). The legitimacy theory has a different view on the reporting of social responsibility. According to this theory, organizations continuously make attempts to make sure that they work within the parameters of and customs lay down by the society they work in. In other words, their focus is on carrying out those activities which are perceived as legitimate by forces existing in the external environment. (Degan 2000). The legitimacy theory further states that an organization can adopt the following strategies for reporting its social responsibilities. The first one is, educate the stakeholders. This is done by explaining to them, specific tasks being performed by the organization in meeting their obligations towards the society. Advertising and public relations activities play a significant role in fulfilling this task. Educational programs, specifically designed for this purpose would be quite helpful in educating the stakeholders. The second option available with the organization is bring out change in the external expectations of its performance. By continuously publishing in the media, stories of its achievements the expectations of its performance can be changed to a large extent. For example, if a company releases advertisement in the newspaper (and other electronic media) about declaring dividends on a regular basis, then the expectations in the mind of investors would also change and they would expect the company to perform well, year after year. This can have dangerous repercussions for the company because if it is not able to perform well in a particular year, then its image would suffer greatly. By following the strategy of changing the stakeholders’ perceptions of the events, organizations can carry out their responsibilities. These events can range from positive to negative. For example in case of negative event such a report published in the media about