Cost information for corporate social responsibility performance

Abstract

The main objective of this study is to develop an accounting and reporting system for the costs of corporate social responsibility performance. Secondary objectives of the study are: (1) to review the current issues of corporate social responsibility to be measured and reported; (2) to provide some guide-lines to help a company's management in selecting the socially relevant activities; (3) to investigate the rationale for corporate social involvement; (4) to indicate the legal minimum requirements in the major areas of corporate social performance; (5) to determine the concept of accounting for corporate social performance and the appropriate method for measuring and reporting the costs of such performance; and (6) to ascertain the current state of corporate social reporting practice in the United Kingdom. To achieve these objectives, the study begins by discussing the social activities to be covered in corporate social reporting. The rationale for initiating corporate social activities is also discussed and some guide-lines are offered. Moreover, the social actions which should be taken by all British companies, as they are legally required, are examined. Thereafter, the current development of accounting for corporate social responsibility is reviewed and it is concluded that this sort of accounting is still in its infancy. The reasons for which accountants should be concerned with corporate social responsibility accounting are then presented. The concept of accounting for corporate social performance is discussed and the scope of the concept determined. Several approaches for measuring and reporting corporate social performance are examined and it is indicated that the cost approach is the proper method to be employed in this study. Then, the cost concepts of accounting for corporate social performance are discussed from both accounting and economic points of view, and a method for measuring the social costs of a company's economic activities is presented. After reviewing the literature, an attempt is made to develop a framework for accounting and reporting of corporate social performance costs. The identification and classification of such costs are presented and the accounting treatment of these costs is discussed. Separate disclosures of such costs in the traditional financial statements are suggested and illustrated in this study. Finally, a survey of the current state of corporate' social reporting practice in the United Kingdom is given. This survey involved the analysis of corporate social responsibility disclosures in the annual reports and accounts of 207 companies extracted from the top 265 of the 1000 largest U. K. industrial companies. The results of the survey and examples of corporate social responsibility disclosures are presented. The detailed analysis is provided in an Appendix.