Environmental Corporate Social Responsibility

Question: Discuss about the Environmental Corporate Social Responsibility. Answer: Introduction The report herein revolves around the Australias leading chain of retailer, Wesfarmers. It is an Australian conglomerate formed in 1914 having its headquarters in Perth, Western Australia. The companys interests lie predominately in serving Australia and New Zealand retail sector and also in chemicals, coal mining, fertilizers and industrial along with its safety products. Soon after it transformed into a public company, Wesfarmers diversified its interests by acquiring other businesses like purchase of Coles Group retail business, home improvement and office supplies and restructure of its departments stores (Garrow, Ford and Valentine, 2012). Target Australia Pty Ltd is one of the departmental store chain in Australia owned by Wesfarmers. It operates 183 Target stores and has about 125 Target country stores employing approximately 24,000 staff members. The ensuing paragraphs discuss the Wesfarmers Target scandal that took the retail world by storm and has had an impact on the companys CSR accountability. Furthermore, a descriptive analysis is done to reveal the effect of scandal on Wesfarmers. Business Accountability is reflected through firms actions towards CSR and overall sustainability operations Accountability is the onus borne either by an individual or a department for specific performance of function in an organization. Accountability is answerability to ones action and encompassing the obligation to report, explaining and being answerable to the consequences. Industries are accountable to a much wider group of stakeholders and taking actions that meet the expectations of stakeholders, and the company is answerable for its actions. Wherein such actions are associated with environmental or social needs then such accountability results in creation of value for CSR. CSR (Corporate Social Responsibility) Corporate Social Responsibility is a concept that is gaining dominance in business reporting aspect. CSR is a running concept wherein the companies integrate between social-environmental concept and its business operations along-with its interactions with its stakeholders on a voluntary basis (Kerr, 2000). As per the International Organization for Standardizations guidance Standard on Social Responsibility, ISO 26000 proclaims that the relationship with the society and environment in which it operates holds critical significance for functioning effectively. It is of paramount importance because of the fact that it helps in measuring the overall performance. It emphasizes the transparency and ethical behaviour, which further: Takes into consideration the value of stakeholders. Contributes to the sustainable development to incorporate the concerns of health and welfare of society. It abides and complies with the relevant laws and is in consistency with the international behavioural norms (Richardson, 2009). It is grasped across the organizations and being practiced in its relationships. Wesfarmers CSR policy states, ensuring long term creation of value further committing proactively towards managing its community and reducing the environmental impact. The creation of value for the stakeholders has been followed by Wesfarmers over a century. The company establishes long-term creation of value as it has played a positive role in serving its communities the right way (Naude and et.al., 2014). They are able to operate their business in accordance to the 10 community and environment principles that are associated with the five areas i.e.: people, community, sourcing, governance and environmental. The company aims at fulfilling the needs of its customers by offering different goods and services in a more competitive and professional manner. It also proactively responds to the attitudes and expectations of the communities wherein the company operates. Furthermore, a strong emphasize is placed by the company on safeguarding and minimizing environmental impact. In regards to its corporate governance the company aims at maintaining a robust corporate governance policy for its entire business (Cacioppe, Forster and Fox, 2008). The following graph shows the business CSR rating that are on the basis of its activities: Wesfarmers has diverse business operations spread across Australia and New Zealand having the largest base of employers with approximately 220,000 and 530,000 shareholders in private sector. The company has been incorporated and dwelling in Australia with its successful listing on Australian Securities Exchange. The basic objective pursued by Wesfarmers is to deliver satisfactory returns to its shareholders. CSR Scandal The retailing Giant Wesfarmers was alarmed to find an accounting probe, which indicated towards Targets income that had been inflated by Australian $21 million in last 6 months of 2015. The Perth-based Conglomerate set forth an investigation along with its auditors revealing the $18.1 million worth of solicited rebates in past activities and subsequently enhancing the base of its product through negotiation with its 31 suppliers that just did not go in tune with the companys overall accounting policies or its operational standards (Sujan and Abeysekera, 2007). Wesfarmers Richard Goyder, the Managing Director of the company, sought out the issue disclosing that $18.1 million worth of supplier rebates had been artificially inflated in Targets half-year earnings and over 10 staff member were a part of this collusion. Target had reported before-tax earnings equalling to $75million for six years, which was 5.7% higher than the previous year earnings. However, in the detailed investigation it was revealed that Target EBIT would amount to $53 million if it had not come into rebate arrangement resulting in $21 million inflation. The company as well as the Auditors are also held responsible for not undertaking their job role in a more serious manner. Apart from the Accounting scam, the various allegations have the potential to damage the companys reputation and standing of a blue-chip organization and holding their corporate culture sincerely (Gustavson, 2008). The allegations proved right goes onto reflecting the companys own operating model. The industry observers saw that the poor management decision and a lack in undertaking leadership roles in the business led to the culmination of the blow turning out into a scandal (Tait and Loosemore, 2012). Mindblowingly stupid is the phrase that is used by Richard Goyder to describe the actions of employees involved in the accounting scandal. Wesfarmers led to a swift and comprehensive investigation to disclose the facts against the scandal. Wesfarmers investigation, conducted alongside its external auditors Ernst Young examining over 10,000 emails and interviewing the employees, revealed that one of its subsidiaries Target staff augmented its chains earnings by getting into false arrangements with its suppliers to reserve extra rebates (Kerr, 2000). Letters evidencing the offering of price hike had been concealed by Target from Wesfarmers and their auditors. Though the company has undertaken major steps towards maintaining its accountability still one of its subsidiaries Target got caught for inflating the store earnings resulting into a dreadful scandal. Though the scandal draws minimal impact on the figures of Wesfarmers, the scandal indeed brought shocking waves among stockholders. At the group level it can be seen that the financial impact has not been so relevant as the EAT (Earning after tax) assessed at $15 million or overall lowering of 1.1% than what is reported and is in line with corresponding previous year. However, there is a serious concern for the company as amount holds no material importance but the actions as well as the reputational damage do. The story headline has resulted increation of a due impact towards damaging the companies share prices and also towards the cost executive regarding the bonuses as well as job responsibilities (Naude and et.al., 2014). The companys shareholders as well as the analysts have stated that the accounting scandal at Target has highlighted the poor performance of mid-market retailer due to which the earnings shall get affected over the coming years. Thus, a greater moral is reflected through the entire scandal that showcases the fundamental significance of accounting and that it plays a pivotal role in safeguarding corporate reputation. The implications drawn out by the company as a consequence to the results of the investigation revealing its scandal are: Soon after the investigation results were presented Stuart Machin who was the Managing director and Graeme Jenkins who was the finance director resigned from their respective posts. Targets another director Mr. Richard Jones had also announced its resignation before Easter (Garrow, Ford and Valentine, 2012). 10 people were allegedly claimed to be involved within the arrangements that were conducted with the suppliers. Target is currently working with its supplier to unwind the arrangements. Mr. Goyder had indicated towards the damage to the corporate reputation of Wesfarmers. Mr. Geoff Dart, the retail analyst, was given the then control of Target to deliver value propositions. Further new management team led by Guy Russo Kmart boss (another department of Wesfarmers) overtook the actions reinforcing the complied accounting rules and the companys authentic governance policies (Akbar and Ahsan, 2014). By relocating Target head office in nearby West of Melbourne to attract people, it intends to get in tune with its business. Shares of Wesfarmers at the close were presented from 31 cents to $40.02. Further, the step of appointing Russo to oversee its brand is the most worthy decision as this will lead towards establishment of changes in senior personnel of Wesfarmers, Target along with the formulation of new strategies that will lead towards combating the consequences of scam. The introduction of new revenue standards that are due to come into effect from 2018 is likely to be more prescriptive on how and when the revenues are gained it is to be reserved (Kent and Zunker, 2013). Recommendations The dire needs for stating the disciplinary actions have not yet been specified by Wesfarmers so far. Though they have declared that appropriate action shall be taken but a clear mentioning of the same has not been made which leaves a question of doubt among its shareholders that whether or not the company will abide by its stringent policies and governance practices (Cacioppe, Forster and Fox, 2008). Thus, I recommend the company to state in clear the actions it is likely to take against those involved in the scandal. Wesfarmers is required to encourage and adhere to the strong culture of managing which assures a long-term sustainable growth in a short span gain that needs to be reinforced by the companys board guiding their behaviours in right direction. In respect of this, I suggest that the pressure must be imposed upon the company to tighten their rules and regulations over the autonomy provided to its executives and its accounting team, who hold the responsibility across the businesses. Moreover, a larger responsibility flows down to the external auditors who are required to check onto their clients figures more meticulously (Richardson, 2009). The Managing director Richard Goyder, must undertake serious steps to reassure that its investors as well as the regulators that the act of stupidity was a solitary event and is not in any manner reflecting the cultural and compliance problems at the Australias Largest retailing chain. Conclusion It can be articulated from this report that the scandal endured by Wesfarmers showcases the poor performance and lack of exhibiting its leadership roles in correct manner. 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