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Corporate social responsibility (CSR) is a term used to describe an organization's awareness of its operations' impact on economic, social, environmental, and governance concerns, as well as the steps it takes to communicate and address those concerns. CSR activities focus on a company's long-term value by enhancing strategic operations and improving its reputation and risk management. CSR typically results in a concerted effort to improve the community and workplace, as well as to decrease the organization's consumption of natural resources.
Skeptics might question whether these sustainability initiatives are beneficial to shareholders, because resources diverted to sustainability initiatives (e.g., the development of environmentally friendly products or the provision of higher, "living" wages) could make companies less competitive. A study published by Harvard Business School in July 2013, however, found that companies that embraced a long-term corporate culture of sustainability outperform their peers in terms of reputation, net income, and stock price (Robert G. Eccles, Ioannis Ioannou, and George Serafeim, "The Impact of Corporate Sustainability on Organizational Processes and Performance"). Investors and other stakeholders are increasingly relying on nonfinancial data to make investment, credit, and other decisions. Furthermore, they are placing more pressure on management to promote CSR, rather than focus solely on maximizing short-term profits.
According to the Global Reporting Initiative (GRI), a nonprofit that promotes corporate sustainability activities and reporting-
Many organizations find that financial reporting alone no longer satisfies the needs of shareholders, customers, communities, and other stakeholders for information about overall organizational performance.
Sustainability reporting is one method for companies to publicly communicate information about their CSR activities and initiatives. In "Integrating Sustainability into the Reporting Process and Elsewhere: Obstacles and Best Practices for CPAs," Jill D'Aquila discussed the challenges faced by CPAs with respect to sustainability reporting, as well as the opportunities available to them (The CPA Journal, April 2012, pp. 16-24). Because accountants are typically involved in measuring and reporting business risks, opportunities, and performance, they are highly suited to analyzing returns on CSR investments and reporting that information to stake- holders. There is a growing need for accountants to become more involved with measuring and managing sustainability initiatives and integrating socially responsible investments into financial disclosures.
Companies around the world have chosen to engage in significant sustainability initiatives; however, there...