The disclosure of social and environmental activities in financial statements and non-financial reports of selected manufacturing firms among the top 500 corporations in the Philippines
Abstract/Summary
Abstract. Corporate social responsibility recognizes that business firms have different kinds of responsibility - economic, legal and social. Business firms should not only be responsible to owners or stockholders but also to the different stakeholders. The study attempted to determine the social and environmental activities engaged by selected manufacturing firms in the Top 500 Corporations and how they were disclosed in financial statements and non-financial reports. Results of the study showed that disclosure of social and environmental activities is more qualitative rather than quantitative in nature. Sample firms disclosed their involvement in social and environmental activities in company website and non-financial reports like newsletter, social report, environmental report and the like. They called the social report by different names.
Very little disclosure was made in the annual reports. Social and environmental involvements were included in the message to stockholders and were included in a separate body within the annual report. Disclosure was never found in the body of audited financial statements but in Notes to Financial Statements. Only disclosure about the retirement benefits of employees and stock option plan was shown.
There were ten different types of involvement in social responsibility where sample firms are involved in. Giving donations and charitable contributions providing community development programs and providing medical, dental and healthcare to non-employees were the social activities they engaged most. They had the least involvement in providing sports and recreation programs to outsiders or non-employees.
There were five different types of involvement in environmental concern. Most involvement was in the form of waste management environmental protection, preservation and rehabilitation and environmental awareness campaign. They had the least involvement in energy conservation.
Sample firms engaged in social and environmental activities even when they incurred losses or when they had a negative capital. They also engaged in social and environmental activities no matter what amount of revenue earned and amout of assets owned. The involvement of firms in social activities was significantly different with their involvement in environmental activities. Among the independent variables, gross revenue was found to have the most significant positive correlation with social activities and environmental activities based on the statistical tests done and therefore had the most explanatory influence on both activities. Total assets, on the other hand, showed no significant positive relationship both to social and environmental activities and therefore did not have an explanatory power to predict them.
Business firms were aware that they have responsibility to the different stakeholders. It is important that these activities are disclosed and the cost of doing these activities are recorded because they are very much part of the business operations.
In order to encourage corporate social responsibility and environmental concern among firms, the following are recommended: (1) to disclose and include social and environmental activities in the audited financial statements in quantitative and narrative form (2) to show the cost incurred in doing social and environmental activities in the Income Statement as one of the operating expenses and use a distinctive account title like Cost of social activities. Cost of environmental activities and the like (3) to show the cash outflow of doing social and environmental activities in the Statement of Cash Flow more particularly among the cash flows from operating expenses (4) to include the social and environmental activities among the Notes Accompanying Financial Statements in quantitative and narrative form (5) to design a supplementary report depicting the social and environmental activities and call the report by a common name like Social Report (6) to include social responsibility accounting in the statement of management's responsibility for financial statement (7) to use gross revenue as a basis in the preparation of the budget since it is the independent variable that is most closely correlated to social and environmental activities and (8) to undertake a research using another type of industry to determine if findings will be the same across industries.
