The Business School BUACC2606 – Corporate Accounting Semester 2, 2013 RESEARCH ASSIGNMENT Assessment weight: 25% Due Date: Week 10 Length: 2000 words Group Assignment: 2 people Stigler’s ‘private...

Running head: CORPORATE SOCIAL RESPONSIBILITY 1
Corporate Social Responsibility
Name of the student
Course a
eviation and number
09/18/2013
Instructor‟s name
CORPORATE SOCIAL RESPONSIBILITY 2
Abstract
Corporate social responsibility is the management concept wherein companies integrate
the social and environmental issues in their business operations and interactions with their
stakeholders. Various economists have expressed their views on the social responsibility of the
usiness. While Milton Friedman asks for the need to gain political acceptance for the social
goals to be implemented by way of legislations Stigler‟s private interest theory identifies that
egulatory agencies serve the interest of the producers. In the dynamic business environment it is
difficult to assess the social responsibility fulfillment by the companies. Global Reporting
Initiative (GRI) supports this cause by providing a sustainability reporting framework to all the
companies and organizations around the world. GRI promotes economic, environmental and
social sustainability by means of the reporting framework.
CORPORATE SOCIAL RESPONSIBILITY 3
Introduction
Business organizations are an important component of the society. They utilize the
esources of the society for the purpose of manufacturing their goods and services and derive
their revenues from the society by selling the goods and services. Corporate social responsibility
efers to the responsibilities of the business towards the society in which it operates.
Business organizations have started by paying attention to their responsibility towards the
society and have started taking important initiatives for the betterment of the society. JP Morgan
Chase distributes more than US$ 100 million to selected charities across the globe. It has also
started education programs in Australia and New Zealand to serve the local community (J.P.
Morgan, 2013).
A number of organizations are working to promote socially desirable business practices.
Global Reporting Initiative (GRI) is a non-profit organization that promotes economic,
environmental and social sustainability by providing a sustainability reporting framework. It
issues sustainability reporting guidelines which allows companies to report sustainability
information in the same manner as that of financial reporting.
There are many views expressed over corporate social responsibility of the business.
According to one group of society business has a social obligation towards the society while the
other group rejects the opinion and asserts that business has the primary responsibility of earning
profits for its investors.
Over a period of time business organizations have started realizing their responsibilities
towards the environment and society. Business organizations are adopting practices that are
socially desirable and environmental friendly. As a result the organizations are trying to achieve
their economic objectives while balancing the social and environmental objectives.
CORPORATE SOCIAL RESPONSIBILITY 4
A
Corporate social responsibility is the management concept wherein companies integrate
the social and environmental issues in their business operations and interactions with their
stakeholders. By means of corporate social responsibility companies try to achieve a balance
etween their economic, social and environmental objectives (United Nations Industrial
Development Organization, 2013).
According to Milton Friedman the social responsibility of the business is to increase the
profits of the business. According to him businesses do have a social conscience that executes its
esponsibility towards the society by means of providing employment, eliminating
discrimination, avoiding pollution etc. However the primary purpose of the business entities is to
make profit for the owners. He argues that there are limitations to the actions of the companies
set by the social purpose because business is not acting in the interests of the owners if it is using
owner‟s money for the social purpose. Moreover he believes that business does not possess the
expertise related to the macroeconomic policy and the environmental policy and it is not always
feasible to act in the interest of the society as a whole. Friedman does not argue against social
goals rather ask for the political acceptance of the social goals in the form of the legislation.
(Wells, 2011).
While Milton Friedman asks for the need to gain political acceptance for the social goals
to be implemented by way of legislations Stigler‟s private interest theory identifies that
egulatory agencies serve the interest of the producers. He argues that the regulatory bodies
including the accounting standard setters comprise of the self-interested individuals and they
issue regulations to serve their own interest. The various interest groups influence the outcome of
the regulatory process as a result the regulations are likely to serve the interests of the groups
CORPORATE SOCIAL RESPONSIBILITY 5
who are likely to be affected by the legislation and the social goals are not likely to be framed a s
legislations. (Stigler, 1971).
Milton Friedman‟s views about corporate social responsibility and Stigler‟s private
interest theory suggests that it is very difficult for the social goals to be accepted politically and
formed as legislations because the regulatory bodies are likely to serve the interests of the
usiness. While Friedman asks for the political acceptance of the social goals by the regulatory
odies, the regulators bodies themselves serve the interest of the groups that support these bodies
(Wells, 2011).
While the accounting profession in Australia has been fairly silent on developing the
eporting guidelines a number of industry and government bodies have developed a range of
eporting guidance documents, listings of potential sustainability performance indicators, social
and environmental ratings indices. The mining industry in Australia has led the way in the
production of social and environmental reports. The banking and the utilities sector have also
een very active in producing the sustainability reports (Deegan, 2012).
CORPORATE SOCIAL RESPONSIBILITY 6
B
Global Reporting Initiative (GRI)
Global Reporting Initiative (GRI) is a non-profit organization that promotes economic,
environmental and social sustainability. GRI provides a sustainability reporting framework to all
the companies and organizations around the world (Global Reporting Initiative, 2013).
Sustainability Reporting Guidelines, G4
The sustainability reporting guidelines, G4, provided by the GRI is primarily divided...