The purpose of this paper is to identify the impacts, and issues, weighing up the benefits against the costs to foster a recommendation and conclusion on whether Coolworths should adopt an approach to sustainability, sustainability reporting and ultimately integrated reporting. In this research paper, Woolworths, our major competitor will be used as an example to give rise and shed light on the outcomes of their recent endeavor towards this new and innovative strategy.
In order to fully understand the context of this paper we must first understand what it means to be sustainable, the related impacts, benefits, challenges and associated costs with implementing such an approach. A further expansion on the above definition of sustainability, to be sustainable company, the company must be able to carry out day-to-day operations that do not detriment the future operating life of the entity.
Therefore, if Coolworths were to adopt a sustainability strategy, factors that must be considered include the use of energy and greenhouse gas emissions, use of fuel, use of water, packaging processes, waste management, waste generation from activities and store development. For example, Woolworths, already has in place a number of programs that promote and represent their ‘green and clean’ image; such programs include animal welfare, ethical sourcing, genetically modified goods, green stores and others.
On the specific topic of sustainability itself energy use in air-conditioning, lighting, and refrigeration is made eco-friendly as well as water use. The reasoning behind their move towards sustainable business practices is the changing needs of their customers, and the society around them including how they feel. In changing the direction and strategy of the company the CEO feels that he can re-align the business and build loyalty from customers and effort from employees
The decision of whether or not to engage in sustainable business practices is one thing, but implementation of the entire strategy and the success in which we are able to implement it is all down to how we as a company engage our stakeholders as the change/move towards a sustainable company is not only a decision based, but also behavioral. Woolworths, in implementing their sustainability program ‘Doing the Right Thing: Sustainability Strategy 2007-2015’ have outlined a number of different ways they have engaged in their stakeholders to inform them about their targets and goals along with their plan.
There are four main stakeholders in Woolworths, customers, employees, shareholders and suppliers. Woolworths has established a customer insights department that plays a key role in identifying customer needs and then taking action in attempt to greater satisfy the ever changing needs of their customers. Customer immersion programs also allow management to view the company from a customer’s point of view to further feedback on the company’s performance. Employees are given incentives and benefits to perform to their very best.
Woolworths employs a retention strategy that conducts engagement surveys to identify and evaluate employee difficulties or issues. For shareholders, engagement is governed by the Corporations Act 2011; financial statements and other reporting information is released to the general public and shareholders in accordance to the law. Furthermore an annual general meeting takes place for shareholders to voice opinions and ask any questions they may have. Finally, suppliers are also given an annual general meeting situated in each capital city to discuss and relay Woolworths’ business strategy.
A quarterly newsletter is issued to suppliers, ‘Trading Partner News’. Furthermore, Woolworths already offers a $100,000 grant to a supplier for their sustainable product, process, or packaging. STRATEGY IMPLEMENTATION In implementing the strategy itself, a number of issues arise, in particular the public and private interest theories. Through the implementation of any new, innovative strategy any entity must weigh up the costs against the benefits, and the feasibility or overcoming challenges involved in reaching he end goal. Any one of the above theories could be followed; if the sustainability strategy was implemented in accordance to public interest theory all reporting information that stakeholders require would be released and Woolworth’s day-to-day operations would be in the best interest of stakeholders and society. In contrast if the strategy was implemented in accordance to private interest theory, Woolworths would seek the best benefit to cost ratio available and only seek for returns on any investments made.
Woolworths in the adoption of a sustainability approach has attempted to satisfy both the public’s interest with its self-acclaimed ‘customer-centric’ business ethic whilst maintaining vigil for a return on investment. By satisfying the public’s interest Woolworths have a number of systems in place to satisfy ever-changing consumer needs. In Woolworths Corporate Responsibility Report of 2009, Woolworths welcomed the ACCC to ‘hold a public inquiry into the competitiveness of retail prices for standard groceries’ to reassure consumers that Woolworths offers the lowest prices possible.
Other issues addressed in the report include the Global Financial Crisis (GFC) and Woolworths’ Carbon Pollution Reduction Scheme as well as plastic bags. In addition to this, call-centers for shareholders, the customer insights department for consumers and the annual general meeting for suppliers all allow for the public’s interest to be voiced and met. On the other end of the spectrum, one could argue that at the end of the day Woolworths is a company that solely seeks to generate profit from its day-to-day activities.
By implementing sustainability strategies and enforcing sustainable practices Woolworths looks for the investments to pay for themselves and then after that benefit from any cost-saving the implemented change has resulted in. Furthermore, Woolworths’ main driver of the sustainability strategy is the Sustainability Executive Committee (SEC) which comprises of the CEO, CFO and Group Manager Sustainability; all of which are internally sourced and may have biased opinions towards the profitability of the company against the sustainability strategy mplementation. Taking into account Woolworth’s approach at implementing sustainability into it’s operations, I would also attempt at following such an approach of satisfying both the public’s interest and private interest of Coolworths. In implementing sustainability into our company and producing sustainability reports we must also consider the idea of integrated reporting.
Integrated reporting is a recent initiative to enhance and improve the quality of sustainability reports; this is done by integrated these sustainability reports more closely with financial and governance report. This allows for a more transparent view of the entire company illustrating the overall performance. As with all initiatives there are benefits to be weighed against the costs and challenges associated with adopting such a technique of reporting.
By adopting the use of integrated reporting companies are able to provide more informative information that allows for a clearer, more transparent view of the company. Performance is no longer only limited to financial data, but also economically, environmentally and socially as well. Post GFC, investors; shareholders have been requesting ‘a new economic model that can protect business, investors, employees, and society from a cycle of successive and increasingly debilitating crises’ (Evans, Mala, 2012, p. 461).
By providing these reports there are no longer any gray areas where potential investors cannot evaluate risk and decide whether or not to invest. However, in any report preparation there carries an associated cost. Integrated reporting is a new initiative and thus reporting standards and methods in preparing these new reports must be compliant to these standards before they can be published and released. Resources used in the preparation for these reports may sometimes outweigh the associated benefits of increased investor loyalty and new investors into the company.
Furthermore, being a new initiative methods and standards are likely to change rapidly due to the discovery of new knowledge, and customer/stakeholder needs. Referring back to our example, Woolworths, they have yet to adopt an integrated reporting approach to their reports as they are only mid-way through their sustainability strategy and are beginning to finally identify key items required in the report alongside creation of a Global Reporting Initiative (GRI) compliant sustainability report.
Having mentioned the above in reference to integrated reporting and the status of Woolworths in it’s progress of implementing sustainability and adopting integrated reports, I believe that the initial focus of integrated reporting should be on larger companies such as Woolworths and ourselves, Coolworths. Using the same reasons mentioned above, companies of larger nature tend to have the required knowledge, and resources necessary to adopt such a new and innovative technique of reporting.
By trialing new reporting methods, reporting standards can be amended to reflect the success of larger companies and their move to integrated reporting initiatives. Furthermore, as smaller companies realize the benefits associated with integrated reporting, the investor loyalty and the transparency it allows the company to portray it becomes easier for integrated reporting to become compulsory and implemented across the board of all companies affected. Ultimately this will allow for more informed investment decisions satisfying the public’s need for a ‘new economic model’.
CONCLUSION In conclusion, after close scrutiny of what it means to be sustainable, how sustainability reporting works, what benefits the new initiative of integrated reporting brings and by using Woolworths as an example of implementation I strongly believe that looking into more sustainable business practices will not only benefit Coolworths in the longer term in terms of cost-saving but also customer loyalty and higher societal appreciation by introducing strategies that work to reduce our carbon footprint and preserve the very environment, economy and society that we perate in. REFERENCES United Nations World Commission on Environment and Development 1987, Our common future – The Brundlandt Report, University of Oxford Press, Oxford Evans, ELAINE, Mala, RAJNI 2012, Intermediate Financial Accounting, John Wiley & Sons Australia, Ltd Bebbington, J & Larrinaga-Gonzalex, C 2008, Carbon trading: Accounting and reporting issues’, European Accounting Review, vol. 17, no. 4, p. 697 – 717