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As the economy grows rapidly and the public grows more concerned about ethical, social and environmental development, the issue of "sustainability" is becoming more and more prevalent. According to Our Common Future (Brundtland 1987), sustainability is defined as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs". Since 1985, a range of companies has voluntarily established corporate reports on "sustainability" issues, covering business responsibilities and performance results not only in terms of financial position, but also non-financial aspects about the influence of ethic, environment and the society.
Large, global companies like Alpha commonly have more globally significant influence, and drawing more media attention under the exposure and supervision. However, Alpha only discloses limited ethical, social and environmental performance due to the release of information under its voluntary initiative without mandatory legislation requirements on its ethical reporting. Alpha's stakeholders have an impression of the company's greater accountability, but independent outside measurements have found non-disclosure in Alpha's reports in the areas of animal testing, political activities and arms trading, which prove that this is not the case. Additionally, Adams (2004) found that the incompleteness of Alpha's ethical reports resulted from Alpha's seldom consulting its stakeholders and weak governance structures.
Therefore, with a case study about Alpha, Adams (2004) demonstrates that there is a "portrayal gap" between corporation ethical, social as well as environmental results in company reports and the true performance measured by the external. In order to explore the "reporting-performance" disparity, Adam (2004, p. 731) assesses the degree to which Alpha's reports are consistent with business real performance based on the analysis of Alpha ethical reports in 1993 and 1999. In addition, the possibility of standards set by the Global Reporting Initiative (GRI) and the Institute of Social and Ethical AccountAbility (AccountAbility) to improve corporate performance is also evaluated by Adam (2004, p. 731).
Theoretical concepts and hypothesis
As referred before, "sustainability" is defined as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs" (Brundtland 1987). In this report, we will specifically focus on three issues: ethical, environmental and the societal.
The analysis of Alpha corporation performances on sustainability issues are based on its ethical reports. "Ethical reporting" involves elements that "are used by ethical investment funds to form an opinion on the appropriateness of an organization's business practices", which includes some aspects in general "social reporting" and almost all the aspects of "environmental reporting" (Adams 2004, p. 731).
AccountAbility is aimed at promoting corporate sustainable practices and enhancing business accountability (AccountAbility 2012). Through developing a series of AA1000 standards, AccountAbility provides companies with effective auditing principles as well as responsible management tools.
In Alpha reports, some of the products and processes are not widely supported by the external source consulted since there are some key factors missing which are required by the AA1000: "inclusivity" "completeness" and "embeddedness" standards (Adams 2004, p. 750). These three main standards are explained in details as follows:
According to the "inclusivity" principle, Alpha doesn't refer to corporate governance structures and never includes overall negative influence on its stakeholders in ethical reports either.
Under "completeness" rules, the range of business practices with the reasons for missing disclosure, and the modification of company activities with relevant effects are required in corporate reports. However, Alpha doesn't obey these norms.
In terms of "embeddedness" requirements, corporations should connect their sustainable activities with company targets. Meanwhile, details about how the department of environment, health and safety operate need to be present to the public, for the purpose of examining whether they comply with the corporate management structure.
GRI has established a systematic framework about corporate sustainability reports, contributing a lot to business transparency (International Trade Centre 2011). Unlike AA1000, the GRI focuses more on the contents of corporate reports. GRI involves four principles for inputs and three related to outputs. Among them, three output standards can be applied to the analysis of Alpha's reports (Adams 2004, p. 751):
Firstly, in the "profile of reporting organizations" section, Alpha doesn't include every report for each specific area and products.
Secondly, within the rules about "policies, organizations and management systems", in issues falling under the scope of the main stakeholders, the way in which Alpha communicates with its stakeholders as well as their feedbacks are deficient in Alpha's reports.
Thirdly, for the "performance" aspect, most potential problems are indicated in Alpha's reports. For instance, Alpha excludes those economic indexes out of financial reports. Moreover, the indicators about general social issues and integrated activities can not find in Alpha ethical reports, which are actually requested by GRI.
Findings and implications
By comparing Alpha's ethical reports with its performance descriptions from external sources, Adams (2004) concludes that the Alpha's level of responsibility is low. Adams (2004, p. 749) also points out that a major defect in Alpha's reports is incompleteness. Some information which is absolutely crucial to Alpha's major stakeholders is in fact not omitted in corporate reports, which is requested by either AccountAbility or GRI.
Specifically, some shortages appear when Alpha's reporting of 1993 is compared with current guidelines, as listed below (Adams 2004, p. 744):
First, any management structure which shows guarantee to environmental values is not provided in Alpha's reports.
Second, there is a lack of quantitative objectives and practical results in Alpha's reports.
Third, ethical reporting of Alpha includes less information about the background to and adverse effects on employee displacement and pollutions.
Finally, there is no recording about communication or consultant Alpha has made with its stakeholders.
Compared with reports from the year of 1993, Alpha disclosed more business performance in outcomes and ways in which activities were proceeding on sustainability issues in the ethics report for 1999 (Adams 2004, p. 748). However, Alpha's performance concerning sustainable development was still not satisfying (Adams 2004, p. 749).
Based on the findings about Alpha's sustainable performance and reports, several implications about the reasons why "reporting-performance" gap exists and recommendations about solving such problems could be concluded:
In addition to internal causes of Alpha, the limitations of standards from AA1000 and GRI also contribute partly to the differences between Alpha's reports and performance examined by the external. The main limitation lies in no mandatory requirements about corporate reports and maintenance of governance structure.
In addition, Adams (2004, p. 751) asserts that the evaluations from outsiders cannot guarantee the authenticity of the company's performance in ethical, social and environmental issues, due to the deficiency of comprehensive guidelines about auditing processes.
As a result, since the voluntary nature of the company's reporting makes little differences on sustainability issues, some compulsory standards developed by AccountAbility and GRI are needed in terms of businesses' impacts on ethic, environment and the society (Adams 2004, p. 752). In addition, in order to raise corporate responsibility, standardizing reporting processes and building robust management structure is essential not only to the society's sustainable development but also to company's own growth in the long run (Adams 2004, p. 752). Last but not the least, the supervision of auditing from the external sources should be enhanced, which will increase justice and reduce the "reporting-performance" gap resulting from outsider prejudice and unfairness.