In the recent times, there has been an increase in the disclosures made by companies with regards to corporate social responsibility (CSR) initiatives (Deegan, 2015). In this backdrop, the objective of the given report is to highlight the disclosures made by Medibank, a private health insurance company in Australia. The company was founded in 1975 as a government enterprise but was privatised in 2014. Currently, the company is the second largest health insurer in Australia and has been listed at ASX. The Federal government continues to hold a significant amount of stake in the company. The company in the past has invested significantly in CSR activities owing to the not for profit status till 2009 (Medibank, 2017).
The key objective of this section is to highlight the various reporting related initiatives by the company with regards to social reporting and environmental reporting. Considering the focus of the company is towards the health of the patients, hence the social initiatives of the company are also aimed at bettering the health of the community at large by getting involved in various community projects (Medibank, 2017). In relation to environment, the main focus of the company is on reducing the carbon footprint of the underlying business activities. With regards to reporting in these aspects, it is noteworthy that the company does not have a dedicated CSR report unlike some other companies which tend to release the same on an annual basis. The company instead reports the social initiatives on the company website where there is a dedicated section on corporate social responsibility which lists down the broad approach adopted by the company towards CSR along with details of various social initiatives that the company has undertaken in this regards (Medibank, nd).
Another source used by the company for reporting CSR related information is the annual report. However, only a very small portion of the annual report is used for the reporting of CSR related initiatives. In FY2018 annual report, the company only dedicated 5 pages out of the total 136 pages towards highlighted CSR related information and respective performance in quantitative terms. This essentially was covered under sustainability section where besides the internal stakeholders, environment and community were also earmarked. With regards to community, the report highlights the various projects that the company is involved along with the total quantum of investment made by the company. Further, the company also highlights the distribution of the funds into various aspects of community related projects. With regards to environment, a brief strategy is stated along with the various initiatives. Also, the greenhouse gas impact for the year associated with various activities is also highlighted which can allow for some quantitative comparison of performance in this regards (Medibank, 2018).
From the above discussion, it is evident that Medibank has taken a minimal approach to CSR reporting since the company is not undertaking any significant effort to highlight the same (Deegan, 2015). Infact most of the information regarding CSR initiatives is descriptive and qualitative in nature and quantitative aspects related to the projects in which the company is involved are found missing. Unlike some other companies, the company does not have a dedicated CSR report. Thus, the company is engaging in CSR reporting in order to fulfil the mandatory disclosure requirements and does not make disclosures or reporting initiatives beyond these requirements (Dunn, 2014).
It is imperative to note that CSR reporting is essentially not mandatory and therefore the underlying motivations for the company in this regards need to be brought out. One of the explanations in this regards can be provided by the legitimacy theory. This theory is based on the notion that a social contract tends to exit between the firm and the society. As a result, CSR disclosures are carried by the company as a means to establish their legitimacy and confirmation with the social norms and hence ensure their sustainable existence. The basic underlying premise is that confirmation with social norms and expectations is necessary for the existence of the firm (Bayoud, Kavanagh and Slaughter, 2012). As per Waddock et. al. (2002), increasingly the CSR reporting is used to attract employees by highlighting the sustainable and social aspect of the business which can influence the employment choices made by employees. Typically, it has been observed that firms which tend to be engaged in activities where the adverse impact on society and environment is higher, tend to engage in more CSR disclosures as a means to manage their image and establish legitimacy by indicating the various activities undertaken to positively impact the life of those who are adversely impacted (Huang and Watson, 2015). The mining industry is an example in this regards (Deegan, 2015).
Another alternative theoretical explanation for CSR reporting and related disclosures is provided by the stakeholder theory where the underlying assumption is that the accountability of the firm is not limited to the shareholders but to a wider set of stakeholders who might have their own specific interests. Based on this theory, it is pivotal that an active role in society must be played by the company whose objective should not be limited to profit maximisation. As a result, the CSR disclosures acts a mechanism to indicate that the company is playing a role with regards to the underlying commitment towards the society and not being limited to only profit maximisation (Omron and Ramdhony, 2015).
A third explanation with regards to CSR reporting could be offered by institutional theory. As per this theory, it is essential that the organisational processes, priorities and actions are modified in accordance with the environment and other social pressures which surround the organisation (Omran and El-Galfy, 2014). The organisation does not tend to function is isolation and hence it is imperative that they respond to the changing landscape. In this regards, the CSR disclosures are gaining importance as there is increased awareness on social and environmental issues in the society and also businesses are increasingly making more non-mandatory disclosures in this regards (Holder-Webb et. al., 2009).
With regards to Medibank, it is imperative to consider that for more than three decades from its founding in 1975, the company was run as a not for profit organisation. It was only after 2009 that there was a change in this status and the company turned to a for profit organisation. Further, even now a significant amount of shares of the company lies with the Federal government. Besides, over the years the company has built a sound reputation of helping patients all across Australia and hence there is not much need to establish legitimacy through CSR disclosures. This is evident in the disclosures discussed in the above section whereby the company seems to adhere to the basic disclosures and does not undertake any major non-mandatory disclosures regards CSR (Dunn, 2014).
The institutional theory also does not seem applicable for the company as the involvement of the company in CSR activities and basic disclosures regarding the same has been prevalent over the last three decades considering the non-profit status of the organisation. Thus, there is no recent shift with regards to indulging in CSR or disclosing the same. The best explanation for the motivation of the company to make CSR disclosures is provided by the stakeholder theory which gels well with the previous background of the company where it was not driven by profits and hence has focused extensively on working with varied stakeholder (Deegan, 2015). The ownership structure with government as one of the main shareholders also would ensure that the company would have a wider and broader perspective with regards to stakeholders. The limited disclosures by the company in terms of CSR is also because the company over the years has been actively involved in a host of CSR activities and does not need to actively disclosure the same to establish either legitimacy (which already exists) or highlight the shift in institutional factors (as the company had a CSR focus owing to non-profit status).
The CSR reporting components tends to have a significant impact on the local community. This is primarily because the disclosures made with regards to CSR tend to highlight the various issues that tend to exist and the actions taken by the company in this regards. Also, it is possible that driven by the disclosures made by the company in this regards, it is possible that other stakeholders may also want to contribute to the causes of the local community and therefore ensure greater support for the communities (Dunn, 2014).
This is especially important for the given company owing to the involvement with the indigenous people. This is apparent from the Reconciliation Action Plan (RAP) that the company has initiated with regards to improving the differential health outcomes witnessed amongst the aboriginal people. These plans are updated frequency and highlight the various actions that the company plans to take for these people. Clearly, reporting of initiatives such as these go a long way in highlighting the issues currently plaguing the local community and ensuring the people along with other stakeholders including government take actions (Medibank, nd).
Further, the company has initiatives for the local community such as “MediBank Feel Good Program” which is aimed at improving the wellbeing and health of individual community and is free for all. The reporting of these initiatives through various public communication means ensures that participation of the local community in such events increases (Medibank, nd). Also, this may ensure that such programs are also arranged by the competitors since CSR reporting tends to earn goodwill and hence in the process the local community would be benefitted. Thus, it is apparent that the reporting of CSR measures enables greater support, better participation and more programs for the local community (Deegan, 2015).
Conclusion
From the above analysis, it may be concluded that Medibank does not indulge in a dedicated CSR activities report but tends to include information about CSR activities as part of the annual report with focus on highlighting the various associations and initiatives coupled with limited quantitative measures. The underlying CSR disclosure theory which motivates the company behaviour in this regards is stakeholder theory which is ingrained in the company owing to more than three decades of existence as non-profit organisation. The disclosures made by the company regarding CSR activities tends to have positive influence on the local community owing to the greater awareness amongst the local community members about the initiatives that the company is running along with drawing support from other stakeholders including peer group companies.
References
Bayoud N. S., Kavanagh M., and Slaughter G. (2012). Factors influencing levels of corporate social responsibility disclosure by Libyan firms: A mixed study. International Journal of Economics and Finance, 4, 13-29.
Deegan, C. (2015). Financial Accounting Theory, 4th ed. Sydney: McGraw-Hill
Dunn, J. (2014) Financial Reporting and Analysis. 3rd ed. London: John Wiley and Sons.
Holder-Webb, L., Cohen, J., Nath, L., and Wood, D. (2009), The supply of corporate social responsibility disclosures among U.S. firms. Journal of Business Ethics, 84(4), 497-527.
Huang, X.B., and Watson, L. (2015), Corporate social responsibility research in accounting. Journal of Accounting Literature, 34, 1-16.
Medibank (2018) Annual Report FY2018, [Online] Available at https://www.medibank.com.au/content/dam/medibank/About-Us/pdfs/Medibank_Annual_Report_2018.pdf [Assessed November 23, 2018]
Medibank (n.d.) Company Overview, [Online] Available at https://www.medibank.com.au/about/company/overview/ [Assessed November 23, 2018]
Medibank (n.d.) Corporate Responsibility, [Online] Available at https://www.medibank.com.au/about/corporate-responsibility/sponsorships/ [Assessed November 23, 2018]
Omran, M. and Ramdhony, D. (2015) Theoretical Perspectives on Corporate Social Responsibility Disclosure: A Critical Review, International Journal of Accounting and Financial Reporting, 5(2), 38-55
Omran, M.A., and El-Galfy, A.M. (2014). Theoretical perspectives on corporate disclosure: a critical evaluation and literature survey. Asian Review of Accounting, 22(3), 257–286.
Waddock, S., Bodwell, C. and Graves, S. (2002). Responsibility: The new business imperative. Academy of Management Executive, 16(2), 132-149.
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