ENHANCING CORPORATE IMAGE AND CREDIBILITY THROUGH CORPORATE REPORTING

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Enhancing Corporate Image and credibility through Corporate Reporting

The main motivation of Corporate Reporting (CR), that is Corporate Social Reporting (CRS) and corporate Environmental Reporting (CER), is agreeably to enhance the corporate image and credibility of stakeholders. The term Corporate Reporting (CR) refers to a type of media which is in a separated integrated document form that contains the organizations’ annual reports. The report includes the organizations social, economic and environmental responsibilities as explained by EPSTEIN & REJC (2014).CR mainly has management content on positioning and performance in the daily corporation management. The CR provides environmental content used for the attribution and recognition towards environmental protection. It also provides for social content to allow for communication and engagement with the corporate stakeholders. CR has become significantly important to businesses organization communities. As a result, there has been a perception change towards this practice. Many organizations have now adopted CR practices in their operations. This is to mainly enhance the organizations’ image and credibility mostly to its stakeholders. The driving forces of CR are no longer just about the reactive actions or risk management activity events. Most organizations are now motivated by factors such as relationship with their stakeholders (social factors) and ethical considerations (environmental factors). Also, EPSTEIN & REJC (2014) provide that some of the most important motivations of CR are increased value of shareholders, brand-reputation management and transparency. The reporting practice of CR has its information origins based in the CSR (corporate social reporting) and CER (corporate environmental reporting) as explained by ADKINS (2013).

CSR (corporate social reporting) provides reports through report examination to the stakeholders (NIZAM MOHD ALI, 2007). The examination report is important because it can conclusively tell stakeholders the results of the report content. The concerned content of the report is to provide a reflection on the principles of reliability, materiality, completeness, balance and accuracy. These principles contained in CSR explain the influences on stakeholders in the process of organizations’ management. The stakeholders are increasingly recognizing that effective external forensic examinations in organizations are important methods towards improving the CSR credibility.

As stated in Abstracts from the Society for Clinical Trials Annual Meeting (2012). The CR motivation through CSR enhances the image and credibility with the stakeholders of the organizations for and through a number of reasons and ways respectively. The reporting process improves the report’s trust by the stakeholders. The quality and amount of CSR has increased rapidly in the recent years. But the public (stakeholders) trust to the corporations has not increased. In this situation of low trust, the CSR report’s to the stakeholders is therefore considered as an effective way to bridge the credibility gap. Through the CSR and its examination, it improves the credibility of the report to the stakeholders and also makes the stakeholders to achieve CSR report information which are reliable. The top managers are as well advised on how to supervise the corporations’ non-financial disclosure of information (KOUZES & POSNER, 2012).

The CSR also enhances the image and credibility with stakeholders by satisfying stakeholders’ expectation. The release of more CSR reports concerning the corporation’s social and environmental performances has been of a huge positive impact. Stakeholders usually pay attention to the reliability and consistency of the reports. The stakeholders of the corporations have clearly agreed and recognized that strong external examination reporting can improve the reliability of the report. This will in turn improve the business corporations’ performance. Stakeholders are therefore able to derive and get the desired satisfactions based on their expectations from the corporation. For instance, according to the United States 2005 national survey, most stakeholders approximated at 59% expect professional CRS examination to be conducted by corporations (PHILLIPS, 2013).

Finally, CSR serves the purpose of reporting important and essential information content by corporations needed by stakeholders. It has been proved that corporations learned the model and framework of financial report through the increased CSR reports. The framework and model serves the key essential purpose of reporting the needed information to stakeholders. 29% of the report in 2007 was independent CSR examination report. In the KPMG’s 2005 survey, 20 nations and the world’s top 100 corporations used the financial report model in reporting of the sustainable social developments. The use of independent examination reporting had an account of 30% and 33% respectively (DOWLING, 2012).

CER (Corporate Environmental Reporting), within the context of business corporation performance, provides that businesses do not operate in vacuum. They are rather subjected to operate in an environment from which they draw their labor force and resources (SEITEL, 2011). It is from this nature of operating in an environment with different resources, practices and requirements that CER of corporations is divided into three (3) categories. The categories are CEMA (Corporate Environmental Management Accounting), CEFA (Corporate Environmental Financial Accounting), and CEFA (Corporate Environmental Financial Audit). The techniques in these three CER are motivated to ensure image and credibility enhancement with stakeholders. This is done in a number of ways of their operations, nature and characteristic requirements as discussed below.

CEMA is one of the environmental tools that corporations use to address the challenges impacted to them by the environment. The challenges imposed by the environment within which corporations operate include the need to access an operation license. The license must be gotten from both the authorities and all the stakeholders involved. These environmental requirements formed the basis of challenges that are needed and must be addressed for a sustainable business (the TBL concept). CEMA states that for an organization to have a proper corporate environmental reporting, it must make business sense (International hotels environment initiative, 2011).This is done by having the required resources for operation especially at the corporation’s initial stages. Some of the resources include labor personnel and raw materials. The corporations, in acquiring their needed resources, must therefore weigh up the costs and benefits in their operations. CEMA provides that corporations must however be careful in not to only focus in the financial benefits desired. But must rather also consider the incurrence of the costs needed to realize such benefits as potted by HOUSER & OMAN (2011).

CEFA (Corporate Environmental Financial Accounting) is an environmental reporting system that aims to ensure that the environmental costs and revenues are reflected clearly on the corporation’s financial statement. The statements must be prepared in accordance with the applicable standards and applications of accounting principle. CEFA is primarily driven by the international accounting standards in its preparation requirement and reflection. The corporations stakeholders like the regulating authorities, shareholders, and investors are the main users of the corporation’s financial statements. The others users are multitude stakeholders such as creditors, suppliers, customers, employees, environmental interest groups and communities (BRATTON & GOLD, 2012). CEFA most assist in identifying the environmentally related costs, revenues, liabilities and assets. This helps in enabling the corporation to comply with the legislation of IFRSs (International Financial Reporting Standards) and GAAP (Generally Accepted Accounting Principle) as argued by NOE (2013).

CEFA (Corporate Environmental Financial Audit) focuses on the aspects of environment that are contained in the financial statements (QUICK, TURLEY & WILLEKENS, 2008). CEFA should not be confused with the CEMSA (corporate environmental management systems audit). The differences between the two systems are provided in the IAPS (International Audit Practice Statement). CEFA objectively checks the corporation’s financial statements to ensure compliance with the law, the best corporate governance environmental practices and generally accepted principles. The major contribution is considered to be that of identifying potential risks in the environment. The risks are specifically identified in the areas with the potential of jeopardizing the ongoing continued existence of corporations. Some of the possible environmental factors that are likely to jeopardize the operations of the business include excessive costs, irreparable damage of reputation or the government sanctions (TIMES, 2013). The system requires that sufficient provisions be made for any kind of environmental liabilities. This ensures that the corporations are prevented from going bust by allowing for timely identification of environmental liabilities. It has been proven that some evidence appears that credibility is attributed by stakeholders to the environment information provided in the financial statements. The benefits of CEFA have therefore been identified to lie in ensuring corporation compliance, risk identification and lending credibility (HOEFFLER and KEVIN, 2012).

There exist varieties of accounting theories that respond to the Adam’s statement, that CR is aimed at enhancing corporate credibility and image with the stakeholders. The theories are as discussed below.

The first theory is the stakeholder theory. This theory was formulated by Freeman as recorded in his book established in 1984. The theory provides that the stakeholder’s involvement and feedback has proved to be of a much huge value to many corporation business companies. It illustrates that companies that were regarded as controversial scapegoats have the possibility of being turned around and becoming corporate model citizenship (GREYSER, 2009). This is done by ensuring that cooperation exists between the companies and their respective stakeholders. The environment management is explained as being of an integral in the environmental accounting. The impact of such proper environmental management provides positive image on the company. The stakeholders’ relations are therefore improved two ways. By enhancing the benefits that they can receive from the companies’ improved performances. Also, the relations can be enhanced by reducing the environmental negative impacts that might occur to them (Pollach, 2009).

The other theory responding to Adam’s statement is the Legitimacy theory. The theory explains the undertakings that take place during the corporate environmental management reporting process. It provides that during this process, all the environmental issues which are major are identified and analyzed. The issues are in the nature of operational processes inputs and the various risks to stakeholders. Such major issues are therefore to be reported in the CER. In doing so, the business companies ensure that their activities and actions are in congruence with the needed environmental norms (WALLOGA, 2011).

Finally, according to LAWRENCE and ABRAMSON (2012) the theory that responds to the statement of Adam is the Porter’s hypothesis. Porter’s theory responds about the many benefits that companies are able to identify and experience under the varying environmental circumstances. It provides that CEMA improves the efficiency of businesses in a definite manner. The businesses’ compliance with the environmental and social needs of the stakeholders leads to reduction of cost and improves the process of decision making. The overall effect of such impacts improves the image of the company and ensures increased customers (stakeholders) relations.

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