key performance indicators on CSR

[Yakub02]

The review should also include:

 analysis using financial key performance indicators; and

 where appropriate, analysis using other key performance indicators, including information relating to environmental matters and employee matters. In the UK, for example, the government has issued guidance on key environmental performance indicators, including quantifiable performance measures relating to emissions into the air, emissions into the water, emissions into the earth and the use of non-renewable resources

Since the business review is a part of the annual directors’ report, the external auditors are required to give an opinion on whether the information in the report is consistent with the financial statements. However, this requirement for a business review applies only in the EU, not internationally.

Voluntary CSR reporting Because of the potential importance of CSR issues for their reputation and public image, many large companies voluntarily publish an annual CSR report. This is often called an Environmental Report, or a Social and Environmental Report. The intended users of social and environmental reports, or environmental, social and governance (ESG) reports, include other stakeholders in addition to shareholders.

The IASB is happy for companies to present such information, but does not prescribe the content or the format of reports.

As a result, the length and style of such reports differs significantly between companies, and the content can vary substantially for companies in different industries. Some companies include their report on social and environmental issues as part of their financial statements (normally in the directors’ report),

whereas other companies publish a report as a separate document. Preparing the information as a separate document helps to distinguish between the readers; the annual report is designed for the shareholders, whereas the corporate social responsibility report is prepared for the other stakeholders in addition to the shareholders

 

[Yakub02]

For Effective KPI

 make sure that they are not compliant in human rights abuses;

 uphold the freedom of association and the effective recognition to the right of collective bargaining;

 uphold the elimination of all forms of forced and compulsory labour;

 uphold the effective abolition of child labour;  eliminate discrimination in respect of employment and occupation;

 support a precautionary approach to environmental challenges;

 undertake initiatives to promote greater environmental responsibility;  encourage the development and diffusion of environmentally-friendly technologies;  work against all forms of corruption, including extortion and bribery.

It is important to understand how a company might suffer financially from a poor track record on CSR issues:

 

[Yakub02]

It is important to understand how a company might suffer financially from a poor track record on CSR issues:

 Bad publicity about social and environmental issues could damage the public image of the company and its brands (‘brand reputation risk’);

and  Companies may be affected by preferences of stakeholders, for companies with positive policy objectives on social and environmental issues. There are some investment organisations that focus on these issues.

More significantly, perhaps, high-quality employees may prefer to work for ‘ethical’ companies.

Companies also need to understand the growing significance of CSR for many institutional investors.

For example, the UNEP Finance Initiative (UNEP is the United Nations Environment Programme) has over 200 members from the financial services sector, such as banks and investment institutions.

The aim of this initiative is to promote a set of principles that define best practice for responsible investment by institutional investors that have the full support of the UN and also of leading institutional investors worldwide