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This report is to evaluate CSR in terms of ethical issues and the share price history with regard to an ethical investment. It provides the definitions of ethical investing and environmental ethics and investigates CSR's performance of ethical behavior and share price history.
The findings on CSR:
CSR Building Products Limited was found an escape of a flammable substance into the Parramatta River in 2006.
After this incident, CSR made a lot of measures to take its environmental responsibility.
The share price history of CSR performed disappointingly in the recent five years.
This report recommends that CSR is not a good company to invest in with regard to an ethical investment. However, the report also suggests the client may collect more information of CSR besides ethical issues and the share price history.
A critical evaluation should be done before an ethical investment is carried out. Ethical investing also can be called social responsible investing which is defined as 'an investment practice that includes the evaluation of social, environment, and/or ethical issues in the analysis and selection of financial products and in communications between investors and the issuers of these products' (Visser et al. 2007, p. 424).
The purpose of this report is to evaluate CSR concerning ethical issues and share price history for the client who is interesting in ethical investing. CSR Limited is a company listed on the Australian Securities Exchange which mainly operates in three segments: Building Products, Aluminium and Property. The Building Products segment includes bricks and roofing, lightweight systems and Viridian glass.
After giving some background of CSR, this report will evaluate CSR from two aspects: ethical issues and share price history. Finally, a recommendation will be provided whether CSR is good company to invest in. It is noticed that the limitation of this report that it investigates only two aspects of CSR which include ethical issues and share price history for recent five years.
Evaluation of an ethical issue
Definition of environmental ethics
This report will evaluate ethical issues of CSR concerning environmental ethics. Environmental ethics has been presented as an ethical responsibility of human beings towards the natural environment, and it brings out the fact that all the life forms in the world have the right to live(Oak 2011, paras.1-7). The major areas of environmental regulation may involve air pollution, water pollution, land pollution and cross-media pollution (Post, Lawrence & Weber 2002, pp. 260-267).
Evaluation of CSR in terms of environmental ethics
CSR Building Products Limited which is wholly owned by CSR limited was found to pollute the Parramatta River, which was caused by the escape of a flammable substance into Parramatta River in 2006 (Martin 2008, para. 1-2).
Following the incident, CSR conducted an extensive review into this incident and pleaded guilty in the NSW Land & Environment Court for this spill. CSR had to pay $430,000 for this spill as a penalty and cleaning cost.
As a consequence of this incident, CSR took three measures to prevent the same incident from happening again. The first one was reinforcing its standard operating procedures. The second measure is strengthening the training for all factory employees. The third measure is changing the coating, which contains the spilt substance, to a water base coating.
Besides the above, in order to achieve its ethical responsibility, CSR set its main sustainability goals. According to Elijido-Ten and Tjan (2011, pp. 16-17), CSR used the following sustainability strategies to achieve its sustainability responsibility:
Participating in Carbon Disclosure Project
Establishing a sustainability board committee which provides advice to the full board about environmental sustainability
Conducting a lot of Reactive & Defensive Projects
Rebuilding of the Viridian Dandenong float glass plant which results in providing 37% increase in plant capacity and delivering 15% more energy efficiency
Providing sustainability training to all employees
Establishing a Safe, Health and Environment management system
In summary, CSR is an ethical company in terms of environmental ethics thought it had an environment incident in 2006. CSR behaved responsibility in the incident, and after it, CSR took action to reinforce the operation procedure, provide training to all factory employees and innovate the coating. In addition, CSR conducted a series of activities to achieve its sustainability goals. Some activities have helped CSR to reduce energy consumption really.
Evaluation of share price history
The trends of share price of CSR for recent five years
Source: ASX Limited, viewed 1 January 2013, <http://hfgapps.hubb.com/asxtools/Charts.aspx?asxCode=CSR&compare=comp_index&indicies=0&pma1=0&pma2=0&volumeInd=9&vma=0&TimeFrame=M5>
The above chart illustrates the share price history of CSR for recent five years, which can be divided into five stages.
The first stage is from the beginning of 2008 to February 2009, that there was a plunge in share price of CSR. The share price of CSR started at 6.5 and then fell by 4.5. The main reason for this plunge was the Global Financial Crisis (GFC). The Australian financial market was hit by the GFC in late 2007, followed by a sharply drop in the S&P/ASX 200. The share price of CSR began to fell because of the depression of market and the fear of investors.
After the share price decreased to 2, it rallied largely to 4.2 together with the recovery of Australian share market during the second stage that was from February to August 2009. It was caused by two main factors. The first one is that G20 nations decided to take action to improve their economies which made investors regain the confidence largely. The other factor is Australian economies recovered, which owing to the prices of iron ore and coal reaching historic highs.
The graph shows the share price fluctuated from August 2009 to September 2010. According to CSR annual report 2010 (p. 2), there was an apparent growth of EBIT and net profit one year ended 31 March 2010. However, these numbers were still below year 2008. This performance restricted a further increase in share price.
From September 2010, the share price continued to go down significantly and hit the bottom of 1.2 in July 2012. This decrease was caused by the under-performance in trading revenue. According to CSR annual report 2012 (p. 5), trading revenues of 2011 and 2012 were $1,913.6 million and $1,801.9 million respectively, while the trading revenue of 2010 was $3,754.9 million. There were three reasons may explain this under-performance. The first one was the downward pressure on the Australian dollar price for Aluminium which is one of main business of CSR. The second one was that the performance of Viridian glass, which was acquired by CSR in 2007, continued to being extremely disappointing. The last important reason was that CSR sold its sugar and ethanol business which once contributed almost one-third of trading revenue of CSR in December 2010.
From late July 2012, the share price of CSR entered into a new stage. It ascended gradually to 2 and then levelled off. The reason of this slight recovery might be that it was oversold and investors were tempted to buy into.
Evaluation of share price history of CSR
The share price of CSR dropped 67.21% in the recent five years, while the decrease of the S&P/ASX 200 was 15.71% and the decrease of BLD, which is a building material manufacturer in the same area with CSR, was 18.51%. This performance adequately shows CSR's insufficient profitability and wrong decisions on business.
Consequently, CSR is not a good choice for an ethical investment in terms of share price, being based on the poor performance of the share price in the past five years and unexpected profitability.
In terms of ethical issues, CSR behaved responsibly in 2006 escape incident. Otherwise, CSR paid much attention to its sustainability responsibility by a series of activities recently. In terms of the share price history, a 67.21% decrease in past five years shows CSR is a company without good earnings growth and profitability. In conclusion, CSR is not a good company with regard to an ethical investment.
The client should also note that the report only investigates into two aspects of CSR. The other essential factors for ethical investing are not considered. Otherwise, changes of share price can be foreseen accurately in share market, which can be impacted by some outside factors. The client may know much more about CSR on other aspects.