Analysis Of National Australia Bank's CSR Disclosure And Reporting Practice In Essay. (70 Characters)

Question 1

Provide a descriptive analysis of company’s CSR disclosure and reporting practice.

Question 2

Present a comparative analysis of the company’s reporting practice and CSR reporting guidelines (i.e. Global Initiative Reporting).

Question 3

Critically analyse the company’s CSR reporting motivation and practice using the concept of legitimacy and stakeholder theories.

Question 4

Prepare a report comprehensively summarising your research findings from answers to questions 1 – 3 above.

The increasing emphasis placed by the businesses to promote transparency and accountability in their operational activities has caused them to develop and publish the information related to their Corporate Social Responsibility (CSR) practices. CSR practices can be regarded as the measures implemented by a company for being responsible towards society and environment. This is essential for providing an insight into the initiatives that are undertaken by a business entity to support the growth and development of communities and protecting the environment in which it conducts its overall activities. This has caused the need among the business entities to develop and disclose the information about their social, economic and environment performance through voluntary disclosures. This is also known as Triple Bottom Line (TBL) approach used by businesses to evaluate their performance in a broader perspective for assessing the value created for stakeholders. The development of international reporting guidelines such as GRI (Global Reporting Initiative) to develop and publish the CSR performances is largely promoting the business to develop sustainability reports for achieving trust of its stakeholders.

In this context, this report is prepared for gaining an insight into the CSR disclosure practices adopted by an ASX listed entity. The selected entity in this respect is National Australia Bank (NAB) Limited, one of the largest financial institutions in Australia. The report specifically provides a detailed discussion in relation to its CSR disclosure practices, compliance with GRI framework and motivation derived from stakeholder and legitimacy theory to report the information about its sustainability practices. At last, it has summarized the major findings derived from the overall report to give the readers a brief about the overall analysis carried out.

National Australia Bank (NAB) Limited, is recognized to be a leading banking institution within Australia involved in providing specific expertise to the institutional market. The major financial services provided by the banking institution include internet banking, accounts, insurance, credit cards and home loans. The banking institution has recognized CSR as its core strategy to positively influence the lives of all its relevant stakeholders such as customers, people, shareholders, communities and the environment. The strategic vision of the institution is to develop strong relations with its customers, people and broader community for ensuring its sustainable growth. This is leading the bank to become one of the most reputated and responsible banking institution among Australia and New Zealand. The sustainable strategies of the bank are directed towards realizing its vision of remaining strong and sustainable by the help of social innovation. The banking institution is highly dedicated towards supporting the customers and communities by utilizing the skills, resources and expertise of its huge number of employee base for generating a positive societal change (About US: NAB Bank, 2018).

Question 2

The banking institutions, as such, develop and publish its sustainability reports for disclosing the information in relation to social, economic and environmental challenges and opportunities. The report is specifically developed for providing detail about the corporate responsibility (CR) strategy and performance of the company over the past financial year. The outcomes derived from the CSR disclosure report enables the bank largely in assessing the value created for its stakeholders and future strategies to be undertaken for promoting the sustainable development (NAB Bank: Sustainability Report, 2017).. The approach adopted by the bank that its strategy, vision, goal of the bank that drives it towards adopted the sustainability practices. The approach has focused on discussion the key issues that are materialistic to the bank and the strategy adopted by it for promoting its core business. Thus, the section of the sustainability report of the bank aims to provide a clear description regarding its strategic objectives that has adopted sustainability to be adopted in all its business operations (About US: NAB Bank, 2018).

The bank has also developed and implemented a risk management framework for addressing its social, economic and environmental performance. The framework is developed primarily for integrating the different aspects of its ESG (Environment, social and governance) issues in its daily operational activities. The ESG risks are integrated into the material risk by the bank for their regular monitoring and control. It has also developed and stated information about its ESG risk principles that are environmental responsibility, social responsibility and governance responsibility. The report has also stated the information about its stakeholder engagement that helps in assessing the importance placed by the bank on adopting relevant practices for maintaining supportive relations with all its identified stakeholders. The regular engagement with stakeholders is achieved by the bank through sharing information to them by developing a special team for the purpose and by the establishment of a formal indigenous Advisory Group (Thomson, 2006).

The material risk faced by the bank on account of its varying operations is discussed in detail within its sustainability report. The bank conducts a formal materiality assessment program for understanding its ESG risk and developing adequate strategies for resolving them. The key materiality themes that are stated within the report that are important for aligning with the stakeholders are value-aligned culture, positive customer outcomes, information management, environmental and social risk assessment, governance, improved customer satisfaction and promoting transparency and disclosure (NAB Bank: Sustainability Report, 2017). These material themes are designed for measuring the sustainability performance of the bank through indentifying the stakeholder views and providing a discussion in relation to the approaches adopted by it for resolving the stated concerns. This has enabled the bank to promote transparency and accountability within its business operations by ensuring that all the activities are directed towards creating maximum value for the stakeholders (Foo, 2017).

Question 3

The Global Reporting Initiative is an international set of independent standards developed mainly for the purpose of providing support to the business entities for reporting the information about its sustainability performance. It has provides a recognized set of globally accepted standards that should be applied in the form of guidelines by organization for reporting their performance towards the CSR strategies. The motivation for development of such a globally accepted framework has resulted from the lack of any framework to be implemented by large organizations worldwide to publish their information about their sustainability performance (Ligteringen, 2014). The voluntary disclosures adopted by the business entities results in developing sustainability reports that lack comparability and reliability in the mind of stakeholders. As such, to overcome these issues the GRI framework was developed so that investors can easily review and compare the sustainability performance and significantly identify the issues in context. In addition to this, it will also promote uniformly among the sustainability reports developed by business across the world (Foo, 2017).

The ASX listed entities are placing large emphasis on developing their sustainability reports as per the GRI index. In this context, it has been reported that the Australian Council of Superannuation Investors (ACSI) that Australian business entities have improved their sustainability reports quality by complying with the international reporting framework. NAB has approach towards development of its sustainability reports as per the GRI guidelines from the year 2013 and it has largely helped the bank in effectively meeting the needs and interests of its stakeholders. In this context, it has been identified that as per the GRI G4 standards which have stated that reporting entity need to provide a statement form a senior-decision maker regarding its approach towards sustainability. This has been fully complied with the NAB by providing a chairman message initially in its sustainability report (Adhikari, 2013). The GR guidelines has also stated a business entity to provide a key description of the key irks and opportunities that the business is facing. The bank in compliance with the standards has provided relevant information about the material issues that can have a negative impact on its financial performance in the future context. The key risk and opportunities has identified includes responsible lending, diversity, transparency and disclosure, customer service, value-aligned culture development, responsible credit practices, customers security, ethical business, financial crime and transparency of products and services (Global Reporting Initiatives, 2013).

Question 4

This is followed by reporting a complete description regarding the organizational profile that defines its operational structure, ownership, market served and awards received during a reporting period. The banking institutions in context of this reporting standard have presented detailed information about its complete profile including defining its vision, goal. Business strategies, shareholder information and other matters have provided information about the key awards received during a significant accounting period. However, it has been analyzed that NBA need to disclose more information in this section for providing disclosure in relation to the market served, organizational scale and significant changes that have occurred in relation to its size and structure during the reporting period. The GRI guidelines have stated that organization needs to identify the material issues and disclose them in the sustainability report to facilitate the decision-making process of investors. The materiality assessment section of the sustainability report has discussed in detail about the material issues that the bank is facing and improvement in its performance in each of the identified section (National Australia Bank GRI Index, 2014).

The stakeholder engagement section of the report as per the GRI guidelines need to identify the list of stakeholders engaged by the bank and approaches implemented for promoting long-term growth of these stakeholders. The stakeholder engagement section of the bank has adequately provided information about these issues as per the GRI standard. The key issues faced and the measures adopted by the bank towards promoting the welfare of all its stakeholders are discussed in the report in the section of customers, people, shareholders and communities. The standard also requires a business entity to report the information about its governance structure that details out its strategy for addressing any governance risk. In this context, the sustainability report of the bank has provided information about ESG risk management and development of a framework for addressing its corporate responsibility governance. However, in context of this the banking institution need to provide more relevant information about its governance structure as analyzed from its sustainability report (Omran, 2015).

There is also adequate information in relation to its ethical culture and environmental performance as per the GRI guidelines. There is also increased dissemination of information about its environmental performance in relation to its greenhouse gas policy and climate related policies as ore the Climate-related Financial Disclosure (TCFD) framework. Also, the report has addressed the specific section of its website that contains adequate information in relation to its different sustainability aspects. The bank has also obtained assurance over its sustainability report from Ernst & Young for developing high level of confidence among its stakeholders. KPMG has assured by analysis of its sustainability report that it is taking adequate step towards minimizing its GHG emissions, renewable energy generation and environmental management. Thus, it can be said that NAB has integrated and complied with the GRI framework guidelines for developing a strong corporate governance system to maintain the trust of its stakeholders (NAB Bank: Sustainability Report, 2017).

Answer 1

The application of corporate social theories is very important while drafting the corporate social report by any Australian Stock Exchange listed company. The issues related to the corporate social responsibility critically impacts the social economic landscape that requires company with responsibility of corporate social reporting should follow the legitimacy theory and stakeholder’s theory while reporting on CSR practices and motivation. The legitimacy theory is defined as generalized perception or set of assumptions that provides that actions of an entity are appropriate, desirable, proper, and within the socially constructed norms, beliefs, definitions and values.

It has been reported by Deegan and Unerman (2011) that theory of legitimacy mainly based on the notion that there exists a strong social contract between the entity and society in which it operates in. It means that entity should communicate their corporate actions through engaging in the CSR reporting in order to get the approval from the society. It helps in ensuring the entity continuing existence in the society they provide the services (Deegan, 2013). There exists a strong relationship between social contract and legitimacy. In this regard the social contract is defined as myriad of expectations that society develops in relation working condition of an entity. So, legitimacy theory critically provides that entity must deliver their promises through the act that does not violate the society thoughts, beliefs, norms and definitions. Through exploring the CSR report of NAB, it has been found company has provided enough disclosures on the acts they deliver to the society within which they operate. So legitimacy theory provides that company should report on all their actions including any act that has violated the act of social contract. Theory of legitimacy provides that if society is not satisfied on the operating condition of an organization than society can revoke the organization contract to continue its operations.

Branco and Rodrigues (2008), has argued that through use of CSR reporting companies can integrate the CSR activities with the risk management activities that will maximise the impact of CSR activities (Branco & Rodrigues, 2008). It has been found that NAB has successfully disclosed all their operating activities and their impact on the society. Information about the corporate failure has also been disclosed in order to make society aware about it. NAB has successfully disclosed information about the losses that was occurred due to use of unauthorized norms to trade on stock exchange in relation to the foreign currency options. NAB has not able to identify the operation risks while trading in foreign currency options and this is why company has faced the huge losses. This type of deliberate act impacts the society norms, thus, affecting the legitimacy theory. The practice of CSR reporting by NAB helps to achieve the legitimacy within the entity and help to motivate the society to have better relation with the company. So it can be said that CSR disclosures plays a significant role in uplifting the corporate image of company providing an indication of improved social conduct. So it can be argued that NAB has been successfully utilized the legitimacy theory to promote their CSR duties and responsibilities to make society aware about the actions of company.

Answer 2

According to Deegan (2013), stakeholder theory provides that company is not only accountable to their shareholders but it is duty of management to protect the interest of stakeholders that are affected by the achievement in the organization objectives. It means stakeholder theory aims to analyse the only those group to which entity is responsible. So it is important company should work in such a manner that it provides benefit to all those that has stake in the firm. In this context it can be said that shareholders invest their funds, customers give trust in company, employees their valuable time, and government provide platform to make business operate in peaceful environment. So it is important, CSR report prepared by the company must supply the information on how companies protect the interest of various shareholders (Deegan, 2013).

National Australian Bank has prepared its CS report to provide all the information on its operating activities, values provided to different class of stakeholders and how any significant activity has impacted the interest of shareholders. NAB has provided the letter of stakeholder engagement in the CSR report that reflects the management policies towards each stakeholder. NAB has prepared its CSR report in very creative manner through providing information on what company delivers, get and planned to/for each stakeholder. It means that CSR reporting practices by the NAB is in accordance with the stakeholder’s theory.

Overall it can be determined by the CSR practices and reporting motivation by NAB is in the best interest of stakeholders and also satisfies the application of legitimacy theory. However there are many concerns that need to be address by the NAB such as while presenting the information in relation to practices of CSR it should give extra value to the resources they derive from the society and what they deliver in return including any factor that hinders such reporting criteria.

It can be sated form the overall discussion held in overall sections of the report that The sustainability report has included the detailed information about the initiatives that are taken by the bank for promoting the welfare of its stakeholders such as customers, people, community, supply chain and its environment. NAB sustainability reports has disclosed  its approach towards CSR by providing detailed description about the significant challenges it is facing for promoting the development of its shareholders, customers, employees, communities and the government. Also, the main motive behind the development of the GRI standards is to provide help to the businesses worldwide in developing an understanding towards the impacts of their activities on the society, economy and the environment. NBA has completely adopted and implemented GRI framework principle for reporting its sustainability performance. The comparative analysis of NAB CSR disclosure practices and GRI framework has identified that bank is approaching towards improving its sustainability performance by complying with the international guidelines. This is largely facilitating the bank to realize its strategic vision of becoming a leader in social innovation and have a positive influence on all its stakeholders through the way it operates its busies. The legitimacy and stakeholder theories are largely helpful for the corporate managers to develop an understanding of the need for the bank to address social and environmental challenges.

Conclusion

It can be concluded in context of the overall analysis that businesses need to disclose their CSR practices and approaches in the form of developing sustainability reports for achieving trust among its stakeholders. This is largely helpful for gaining support from the stakeholders and in order to promote an entity sustainable growth. NAB, in this context has integrated CSR as its core strategy and is recognized to be a leader in the social innovation. It has placed its stakeholders concerns into each of its day-to-day operations which have enabled it to become a sustainability leader. The bank has effectively followed the GRI framework that has largely helped to make its sustainability reports internationally comparable and gaining recognition among its stakeholders at a global level. The sustainability reports are developed as per the views expressed in legitimacy and stakeholder theories.

References

About US: NAB Bank. (2018). Corporate Responsibility. Retrieved 1 October, 2018, from https://www.nab.com.au/about-us/corporate-responsibility

Adhikari, S. (2013). Corporate Social Responsibility of Commercial Banks In Nepal: Manager’s Perception and Bank’s Real Performance. Retrieved 1 October, 2018, from https://brage.bibsys.no/xmlui/bitstream/handle/11250/187949/CSR%20thesis.pdf?sequence=1

Branco, M.C., & Rodrigues, L.L. (2008). Factors influencing social responsibility disclosure by Portuguese companies. Journal of Business Ethics, 83(4), pp. 685-701.

Deegan, C., & Unerman, J. (2011). Financial accounting theory, McGraw-Hill.

Deegan, C. (2013). Financial accounting theory. McGraw Hill Book Company.

Foo, M. (2017). A Review of Socially Responsible Investing In Australia. Retrieved 1 October, 2018, from https://business.nab.com.au/wp-content/uploads/2017/06/socially-responsible-investing-in-australia.pdf

Global Reporting Initiatives. (2013). GRI and the Sustainability Reporting Guidelines. Retrieved 1 October, 2018, from https://www.globalreporting.org/resourcelibrary/GRIG4-Part1-Reporting-Principles-and-Standard-Disclosures.pdf

Ligteringen, G. (2014). The Future of Corporate Responsibility Codes, Standards and Frameworks. Retrieved 1 October, 2018, from https://www.greenbiz.com/sites/default/files/document/CustomO16C45F63376.pdf

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Omran, A. (2015). Theoretical Perspectives on Corporate Social Responsibility Disclosure: A Critical Review. International Journal of Accounting and Financial Reporting 5(2), pp. 39-47.

Thomson, D. (2006). Corporate Governance Failure And Its Impact On National Australia Bank's Performance. Journal of Business Case Studies 6(1), pp. 41-60.