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Sethi: Big Four have blatant conflicts of interest
- EC Newsdesk, 29 January 2010
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Opinion:
Corporate sustainability reporting: Tackling credibility and conflicts of interest
It's time to inject a dose of reality and integrity into corporate social responsibility and sustainability reports, argues Prakash Sethi
For example, in a database generated by SICCA and containing over 1200 companies from around the world, in 2008 there were 490 companies that had published corporate social responsibility/sustainability (CSR-S) reports including 13 companies that had created web-based CSR-S reports.
All available evidence suggests that the trend toward publishing CSR-S reports will increase as companies are confronted by public demand, and peer group pressure, to provide greater information about social and environmental impact of their business practices in all parts of the world.
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Comments:
Puffery - Peter Knight, 2 Feb 2010
It is difficult to disagree with Prakash Sethi. We at Context have been helping global companies with their reporting (not verification) since 1997. Given that such reporting is entirely voluntary, I have always been surprised at how much companies are willing to disclose. Yes, there are those who spin stories and publish pictures of smiley children and happy bunny rabbits, but many take the job very seriously indeed. Ironically, big business is far better at disclosure than NGOs, many of whom are masters of puffery.
We do a lot of stakeholder consulting on behalf our clients. The vast majority of stakeholders find the over-legalistic verification statements of financial auditors a total waste of time. As Sethi’s research discovered, most corporate reporters tend to agree.
Peter T Knight
President
Context America
www.contextamerica.com
What conflict? - Clayton Ford, 5 Feb 2010
Interesting post, and raises some legitimate concerns about raising the standard of CSR reporting. However, it seems that assurance, transparency and globally agreed measures/standards are some of the strongest mechanisms to raising the standard and level of trust, yet the post calls into question any assurance done by a third party that has an existing relationship with the company, but doesn't offer any evidence or reason as to why this is a conflict of interest?
I've not heard the argument in reverse by the investor community, that if a company uses the same auditor for its CSR as well as its financial report, that there's an inherent conflict of interest, and potentially a lower standard of scrutiny and assurance.
Arguably a company that has the level of access required to professionally audit the company's financial statements is in a reasonable position to audit/assure other reporting activities of the company, particularly as CSR becomes more built-in to the day-to-day business, and not just bolted on.
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