Social accounting and responsibility-Two years after tsunami

Corporate frauds and the consequent failures in the developed world have dawned a new era in how companies are managed and their interaction with the society from whom they derive their economic benefits.

Thus the buzz words of corporate governance and Crporate Social Responsibility (CSR) have attained priority in the corporate glossary.

Though corporate failures are less common in Sri Lanka and corporate governance gets little attention CSR and sustainability have become very popular in the company annual reports.

Social responsibility was clearly demonstrated when the companies rallied round to rebuild devastated lives following the tsunami that caused heavy damage to the coastal belt almost two years ago.

Social reporting or accounting is the way how companies or such entities produce reports that monitor non – financial information relating to employees, social economic development, stakeholder involvement and social environmental performance. Companies pay an influencing role in the society more often going beyond the shareholders and affecting wider spectrum of stakeholders. Given the liberalization policies of the successive governments since the late seventies fuelled by privatization of large state entities such as telecommunications, plantations, passenger transport, port services, insurance, etc, companies have become major employment providers as well as providers of services and infrastructure. Given this vast exposure the way how private sector conducts its affairs has a major bearing on the economic development of the country. Today a major responsibility is cast on the Chief Financial officers on how they manage social accounting reporting.

Even though most companies report comprehensively on their achievements in social developments it is difficult to say that a clear understanding of the CSR objectives are yet present. Most seem to be targeting at short term benefits that also would enhance the brand promotion of the business entities and the image building. Perhaps Sri Lankan companies are going through a formative process and with maturity long term policies in capacity building could emerge.

The survival of business entities rely heavily on the healthy stakeholder management process. Business success is directly linked to the prosperity and the well being of the society in which it operates.

For Sri Lankans though CSR is a new buzz word the practice of CSR has been well embedded in our social system. Philanthropic exercises of building schools, hospitals places of religious worship and other such public places of social importance have been rather common and such practices take place even now without much publicity. Today owing to social and other developments and growing inequality, leading companies have given much priority to social development and it’s heartening to note that companies have created and financed separate legal bodies/activity centres to service such needs. This has been further fuelled by the focus on sustainability reporting.

Today there is a great need for companies to work in partnership with the state sector. Periodic flood damage, rampaging epidemics, destruction of environment creates untold damage to people. For example the tiny mosquito has emerged as a major destroyer of human lives creating a major social crisis. Pollution of waterways, unauthorized structures, overflowing drains, garbage piles and the polythene menace are common health hazards that cause an enormous threat to the human life.

The private sector can play a big role in contributing to eradicate this menace. For this the private sector goes beyond a few listed companies but includes a whole range of entities and individuals outside the state sector.

Given that leading companies have initiated CSR and sustainability it’s time to take this message out of the corporate board rooms and activate the other elements of the private sector. Small and medium scale enterprises comprise a vital sector of this segment. Sri Lanka’s recovery from the tsunami disaster has been satisfactory, and glancing through the southern coastline could vouch the emerging sights of promising new life though same cannot be said of conflict affected area.

This spirit should go beyond the natural disasters and the focus should move on to minimize the continuing man made disasters.
The private sector’s initiative in this area could be much more effective than the state regulations.

Sri Lanka is at the moment going through a transition period. According to the Central Bank we have now graduated from a lower income country (LIC) to a lower middle income country (LMIC) and the average per capita income is said to be in the rise. Sri Lanka is not an exception to the major demographic shift taking place in Europe as well as Asia and the elder dependency rate is rising. Urban migration is on the increase, unemployment among the educated is a time bomb. The private sector needs to take serious note of these social changes and their very business agendas should address these core issues. Widening inequalities will not only make growth stagnant but could give rise to more conflicts.