The current study has the intention to examine whether engagement in CSR (corporate social responsibilities) can exert an influence on overall financial performance of business enterprises. Prior research reveals indefinite outcomes of the association between CSR and monetary performance, and there is slight substantiation upholding that CSR and monetary performance are linked. Business enterprises appear to exert huge amounts of funds and attempt to engage in socially responsible actions, meaning that there are monetary benefits to achieve. Therefore, the primary purpose of the current study is to fill the existing gap in present research, to provide both firms and financiers a better approach into CSR works and present if and the way these efforts might perhaps add value to a specific business. Therefore, the outcomes can be considered to be important for both the identified parties, and diverse other stakeholders who acquire advantages from CSR work of the company.
This research study stresses upon corporate social responsibilities and financial performance (FP) of firms. The study at hand selects the company BHP Billiton for evaluating different facets namely corporate social responsibilities along with financial performance. Each and every business enterprise implements corporate social responsibility in a different way. Essentially, this is said to be carried out as per the business size, overall environment along with culture of the business where the corporation operates and intention of owner regarding CSR. Essentially, there are certain owners who concentrate on corporate social responsibility as core corporation values, part of strategic scheme and both administration plus employees are said to be dedicated to them. And stratagem needs to be aligned to particular corporate objectives of corporations and core competencies. As suggested by Saeidi et al., (2015), businesses enterprises are not said to be in a position to execute CSR the owner of majority of the firm primarily undertake the same for evasion of tax. This helps the owners to show all the expenditures borne as their admissible expenditure.
Flammer (2015) mentions that influence of corporate social responsibility on financial performance can be considered to be a spotless clause. Lins et al., (2017) reflect another opinion regarding sight that relate between CSR and FP is said to be strongly positive for business enterprises operating in industrial segment. In this case, these kinds of activities direct the way towards better financial performance. In essence, overall impact is seen to be weak for other business enterprises, since CSR is necessarily a costly notion leading to decline in overall decreasing marginal returns.
As suggested by Cheng et al., (2014), during the period of tough competition among diverse firms, the majority of the corporations are compelled to partake in social actions, in a bid to enhance their value. In essence, this premise of Corporate Social Responsibility (CSR) is essentially a very wide notion. Particularly, the supplementary cost borne with regard to CSR include charitable offerings, support for diverse progressive tactics, and beginning of business in diverse backward regions along with establishment of environmental safe methods of production (Nollet et al., 2016). All these can be considered to be an important part of Corporate Social Responsibility. Fundamentally, CSR seems to be a burden on profit level of firms. However, during the long run period, this provides a lot of advantage. The primary advantages include no labour trouble, augmentation of favour of customers to different products and attestation of word of mouth notion. Thus, on the whole the firm’s engagements in social actions augment the firms’ status and associations with stakeholders namely bankers, financiers and government administrators. This in due course brings development in financial situation and financial performance of the corporation. Ni et al., (2015) declare the financial performance of firms is influenced by CSR. However, from time to time customers intend to know whether the corporation is undertaking social responsibility. Therefore, appropriate advertising concerning CSR initiative, information regarding social concerns that the firm is resolving or intending to resolve and its influence on concern also influence the purchasing behaviour of consumers.
Mallin et al., (2014) assert that the majority of the corporations lag their participation in Corporate Social Responsibility, nevertheless the entrance of transnational firms owing to globalization and demonstration of CSR from different groups of rival firms have made the CSR obligatory. Diverse actions concerning CSR have been initiated such as building new schools, rest houses, place of worships, doling out items of relief the period of natural disasters and assisting the poor in the hour of need, delivering high quality products at reasonable rates, manufacturing products in ecological safe mode. Essentially, the loom of business towards corporate social responsibility has been vigorously accelerated or else decelerated performance of firms (Al?Hadi et al., 2017). In case of limited business enterprises are under consideration, with any kind of scandal or else bad representation regarding firm, its performance falls very badly. Subsequently, stakeholders lose assurance in performance of the firms, sales drop, shares price plunge, employee turnover increases, leading to a poor financial as well as non-financial performance
Kim et al., (2018) stated three different theories concerning CSR and financial performance of firms. Among these three theories, the first theory is essentially the “consumer inference making”, that mentions that in case if consumer make out that firms is accountable, then they will infer in a positive manner. However, this not only enhances satisfaction of customers but also insist for increases in the product, which subsequently positively exert influence on the sales return as well as financial performance of firms (Short et al., 2016).
Signaling Theory
The second theory on CSR is the “Signaling Theory”. The Signaling Theory mentions about the fact that consumer correlate superior quality of product with positive corporate citizenship and prospective jobseekers attach value to positive CSR trace of firms as an indication for attractiveness of organizations. Thereafter, the third theory of CSR is on “Social Identity”. Social Identity refers to the fact employees develop their self-image by means of their reputation in rendering requisite CSR services. Cornett et al., (2016) suggests that this kind of bonds of recognition inspire positive analysis of products of firms and hence can be said to be a justified cause for enhancement in revenues of firms, and positive influence of CSR on financial performance of firms. Petrenko et al., (2016) mention about the fact that association of CSR with regard to community and financial performance of firms. Typical engagement of business with the society is observed in different segments of education, health as well as income generation. Participation of firms towards social as well as economic development issues are providing outstanding outcomes in acquiring fame and eventually enhance sales revenues.
This assumption stresses the fact that the corporation has an association with its firm’s stakeholders and the procedures and results of these associations are of interest (Hasan et al., 2018). Stakeholder theory asserts the fact that since firms focus on becoming to appealing to both financial as well as non-financial stakeholder. Business concerns have the requirement to concentrate on participating in CSR activities that are actually important to different stakeholder groups from non-financial background. Principally, this is mainly because the business concern requires both of these groups to be sustainable during the long run period. Saeidi et al., (2015) acknowledged that there are two different groups of stakeholders. There are the ones that exert influence and the ones that can get affected by the activities of the business concern and that grant support to the business enterprises in form of firm’s resources.
Flammer (2015) postulated that a business enterprise have both formal as well as informal contracts with several stakeholders and are therefore legally responsible to respect all these kinds of contracts. Essentially, this assists the corporation to build up its reputation. Implicit agreements become self-governing by means of maintenance of this association and the cost related to these agreements also lessens (Ni & Van Wart, 2015). Furthermore, Al?Hadi et al., (2017) argued that it augments performance along with reputation of the corporation. Basically the purpose of administration is to balance existing stakeholders’ demand. Fundamentally, the stakeholder theory intends to present the fact that CSR is related positively with financial performance of corporate. Nevertheless, there are numerous critiques namely Short et al., (2016) who point out towards the fact that the theory defies the property privileges of different shareholders of firms. Furthermore, Cornett (2016) posits that the theme also weakens the character and responsibility of capitalism, downgrades the role of governing body and therefore negotiates overall system of the free market.
As rightly indicated by Hasan et al., (2018), slack resource is any kind of open or underused resources that can be reemployed for utilization by the business enterprise. This Slack Resource Theory proposes that corporations having slack resources/assets at their disposal get a chance to invest heavily on CSR undertakings. This in turn improves its corporate social performance (Kim et al., (2018). Cornett et al., (2016) observed that a firm acquires the capacity to carry out its CSR actions only when it has enhanced financial performance as a result of slack resources availability. Fundamentally, the implication of this specific approach is that corporate social responsibility is an added cost and social deeds by firms can only be carried out when the business enterprise has additional resources or else flows of cash (Dhaliwal et al., 2014). Appropriate use of slack resources augments overall efficacy and effectiveness and can add to attainment of goals of organizational. Cooper (2017) further argued that this facilitates a business concern to successfully adjust to inside troubles for adaptation or to outer burdens for changes in policy.
The Agency theory proposed by Ross defined it as the association between different owners and firm’s agents. Essentially, the owners appoint agents to carry out work. Here, the firm’s owners who are considered as the principals look forward to the agents to arrive at decisions and act as per interest of firm’s principal’s. In particular, the agency theory depends a great deal on the concept that the sole accountability of the company is maximization of value of firm’s owners. Chernev & Blair (2015) utilize the agency theory for explaining criticism of corporate social responsibility by means of arguing that firm’s managers are necessarily agents firm owners. Basically, their sole liability is to make use of their assets and join in in actions intended to optimise their returns that directs towards an augmentation in the wealth of the shareholders so long as they operate as per the rules as well as procedures that are laid down. Shaukat et al., (2016), argue that administrators of firms have the need to only accept projects that amplify wealth of shareholders and decline projects that do not add value. From the viewpoint of agency theory, CSR is an improper utilization of corporate resources and these kinds of resources can be utilized by firms to take on other profitable ventures. Essentially, the agency theory suggests an unfavourable relationship between
BHP Billiton concentrates on different segments of the communities across the world to attain its objectives for attainment of corporate social responsibilities (CSR). However, some of important sectors include education services, healthcare services, management of disaster relief along with economic development, that are stated in this particular segment of the current report
– Claims of CSR are said to be embedded in vision of BHP
The business stratagem of BHP Billiton is to help in the process of development of the community together with the manufacturing with distribution of superior quality products/services (Korschun et al., 2014).
– Investment in Community
In essence, the business tactical documents of the firm BHP Billiton assert that business model of the firm exerts a lot of effort on community investments with the intention of making the lives of different individuals better.
– Development of Economic
In essence, the business procedures of the firm have the intention of effectual development of the economic circumstance of the host nation through the business actions of the business. Again, the business model of firm BHP Billiton upholds the regional businesses for different business processes that in turn directs towards improvement of the economic situation of the regional market (Korschun et al., 2014).
-Education Level
The firm BHP Billiton has been dynamic in the area of development of education as well as training segment. Essentially, the business concern takes in the contributions to particularly educational foundation in the regional areas in the market in essentially its business model and trains different individuals in the parallel societies in different useful skills (Bhp.com 2018).
-Health
BHP Billiton also arranges a number of initiatives to enhance health of individuals there in the market of function (Bhp.com 2018). Essentially, ‘Swim and Survive’ is such an proposal initiated by BHP Billiton to permit the children in the parallel communities to partake in a variety of competition, that in turn permit the children to have better health (Saunders, 2015).
– Contribution of CSR actions on environmental circumstances
Essentially, this is another segment of the CSR actions undertaken by the firm BHP Billiton that permits the firm to add to the wellbeing along with betterment of the firm’s environment of market process (Saeidi et al., 2015)..
– Effect of CSR on emissions of greenhouse gas
The firm also concentrates on minimizing emissions of greenhouse gas together with energy utilization of the procedures of manufacturing firm’s products. In essence, the business concern has generated different initiatives as business scheme and line of attack to minimize emission of the greenhouse gases together with effective energy utilization (Saeidi et al., 2015).
-Quantification of CSR claims
The majority of these kinds of claims of the firm BHP Billiton can be enumerated to a specific extent founded on the kinds of contribution to the community. However, some of these dimensions of enumeration of CSR actions of the corporation are hereby stated below
-Economic growth and development
The support of BHP Billiton can necessarily be enumerated with respect to figures on sales as well as generation of revenue. As per reports of the firm, the BMA local buying program of the firm BHP Billiton permitted 372 businesses to be recorded in the specific program that in turn generated 1910 work chances in the regional market (Bhp.com 2018). This leads to $25 million of revenue regionally. In essence, The World-Class supplier initiative initiated by the firm BHP Billiton during the year 2012 in the region Chile had in excess of 5000 individuals creating more than $4000 million of sales that in turn directed towards strengthening of the entire Chilean economic situation (Korschun et al., 2014).
It can be seen that the educational in addition to training assistance of the firm BHP Billiton can be enumerated with respect to different facets. The firm BHP Billiton has necessarily been a division of developing academic affiliation to over 30 Universities in China (Bhp.com 2018). This opens up huge number of educational prospect. The firm BHP Billiton has been a division of the initiative ‘Chile before Chile’ to finance the actions of acquiring precious artefacts and sustaining the same them in Chilean museum of particularly pre-Columbian art to teach people regarding the indigenous culture along with Chilean history. The firm BHP Billiton also added around 10 USD to the “Australian Indigenous Education Foundation” for financing 90 different types of scholarships during the year 2014.
In essence, this declaration of the firm BHP Billiton can be enumerated with respect to the entire amount of gases emitted by different business procedures each and every year. In particular, the entire amount of emissions of greenhouse gas of the firm BHP Billiton was necessarily 38.3 million tons during 2015. Particularly, this count mainly recommends the fact that GHG emission decreased by around 6% from the year 2014, that subsequently establishes the vigorous contribution of the firm to CSR actions (Malik & Nadeem, 2014).
The claims of CSR embedded in the firm’s vision along with strategic documents of BHP Billiton were stated in the preceding segment. These CSR actions of the firm are undertaken in the course of an effectual execution of a CSR strategy that subsequently permits the firm to have different numbers of positive influences on the community (Harjoto et al., 2015). In particular, the involvement of the business concern to the economic circumstance of the regional market is directing towards strengthening of some of less-developed or else developing nations together with the augmentation of living standard of the individuals thriving in the corresponding community. Particularly, specific educational along with healthcare contributions of firms are also accountable for developing the lives of different individuals in the corresponding communities better in terms of living standard and quality of individual’s lives. Again, the optimization of emissions of GHG is also accountable for making the environment less contaminated, which subsequently is declining the worldwide warming concern (Ortas et al., 2015)
According to (Halkos & Skouloudis, 2016), due to economic alterations and intricate business framework, BHP Billiton has encountered the complicated CSR issues and problems in the CSR actions and carried out work program. There are certain concerns that are associated to CSR actions such as reduction of poverty, systems of free trade, specific property rights in different underdeveloped nations, transparent government exercises, inflows of capital as well as private segment founded transfer of technology, regulation of laws and shielding of assets and in primary actions concerns are associated to forestry, transparent as well as open market. Business Corporation has carried out these actions for the purpose of promoting environmental support program to strengthen outcomes in an effectual way. It is hereby reviewed that the firm BHP Billiton’s CSR actions can be observed from enhanced service costing for consumers. Also, it necessarily does not exert negative influence on return earned on capital applied and decreased return on assets possessed by the firm.
– High degree of financial leverage
-Greater cost of firm’s capital
– Low availability of finances to expand business
The association between Corporate Social Responsibility (CSR) and Financial Performance (FP) has been extensively studied by prior scholars, although there was no accord. A range of empirical studies have revealed different outcomes.
Globally, a study conducted by Cheng et al., (2014) on firms that are listed on New York Securities Exchange intended to institute the relationship between financial performance of corporate and CSR. In actual fact, the study used a sample of 101 firms and carried out analysis utilizing a model of regression. Particularly, the independent variable was selected to be CSR in the model while the dependent variable was selected to be financial performance. On the whole this study instituted the fact that CSR did not necessarily have any important impact on financial performance.
Cheng et al., (2014) assessed the association of CSR and FP of firms listed under stock exchange of Jakarta in Indonesia. In this study, secondary data was acquired from audited declarations of roughly 383 firms during the period 2002 to 2003. By means of the Regression model, it was found that the association between CSR and FP is unconvincing a full of loopholes. Also, this study consequently did not institute any important association between CSR and performance of firms. Nollet et al., (2016) mentioned that a study was undertaken the association between CSR and FP in California. For the purpose of the present study, specific data was amassed from a sample of around 422 corporations for a period of 5 years. By means of the regression model, the researcher of the study instituted a positive and at the same times an important association between CSR and firm’s financial performance. Mallin et al., (2014) intended to ascertain direction of the association between CSR and FP of business enterprises. For this purpose, Data was gathered from a selected sample of roughly 322 US business enterprises for a period of 1 year. However, after undertaking a series of regressions, the outcomes reflected subsistence of a considerably positive association between mainly CSR and firm’s FP.
A study was conducted for the examination of the association between CSR and FP of corporate. Data was acquired for the purpose of this study from three different firms that are listed under Bursia Malaysia for the period of 2007 to 2011. The study concluded by using regression analysis regarding the subsistence of a positive association between CSR and FP of corporate. A study was performed for examination of relation between CSR and FP in the banking segment (Kim et al., 2018). This study used a sample of approximately 189 commercial banks that were selected from roughly 45 nations. In essence, data till the period of 2008 was utilized for the current study. With the help of a regression analysis, this study concluded that there was no full proof evidence that banks that have higher degree of CSR activities are usually more lucrative than convention. Therefore there is no need of any kind of positive association between CSR and firm’s FP.
A study was undertaken locally by concentrating on analysis of the impact of CSR on FP different commercial banks operating in Kenya. This study measured two years in which CSR and measures of financial performance for 28 different banks were examined between the year 2007 and 2008. The study implemented ordinary least squares regression model for analyzing the data. Conclusion drawn from the study replicated that CSR had a considerable positive impact on financial performance of particularly the banks that were surveyed (Cornett et al., 2016). Based on categorization carried out on the basis of size, this study instituted that there was a considerable along with positive impact of CSR on financial performance of large sized corporate and medium sized banks. Nevertheless, this study instituted that CSR did not have a considerable influence on overall performance of different small sized banks.
Dhaliwal et al., (2014) undertook out a study concentrating on partnerships subsistent between NGOs and firms evaluating the effect of CSR on financial performance of firms. Also, this study concentrated on a targeted sample of roughly 30 corporations and observed that there was essentially a 48% association between CSR and financial performance of corporate. Particularly, this referred to the fact that firms with slightest ROA registered an index of roughly 48% whilst the greatest of essentially 89%. Average ROA was roughly 67.6% having a standard deviation of just about 96%. Particularly, this implies that ROA can contribute from average to both sides by approximately 9.6%. Lanis & Richardson (2015) inferred that CSR and FP of firms are positively associated. Furthermore, Cooper (2017) mentions that a research results showed the impact of CSR on financial performance and observed that CSR exerted a positive relationship with performance of portfolio. Malik & Nadeem (2014) recognized these results regarding corporate image that originates from firms participating in CSR actions. Financiers that are by and large attracted to firms have effective CSR activities that again make such firms have a good reputation. Harjoto et al., (2015) carried out a census survey carried out on 32 firms listed under NSE. By means of regression examination, he observed no association between CSR and financial performance of firms listed under NSE.
Therefore, in conclusion it can be said that the empirical study has reflected mixed reaction between particularly scholars both globally and globally on particularly CSR and financial performance association. Globally, Korschun et al., (2014) noted that financial performance of firms and CSR were positively associated. On the other hand Harjoto et al., (2015), instituted the fact that CSR and financial performance of firms were not positively associated. Regionally, positive association between financial performance and CSR in different studies, whilst no correlation between the two identified variables is also observed in different other studies. Although the majority of the research study has noted a positive association and finds that there are still the ones with mixed outcomes. Therefore, it is hereby reflected that there is need to do undertake more research on the subject matter under consideration.
The study aims to examine the effect of the corporate social responsibility on performance of firms with special reference to the operations of the firm BHP Billiton. In doing this, the study has examined key ratios and has enumerated the growth of EPS and revenue. The outcomes of the study indicate the fact that the liquidity condition of the enterprise have augmented considerably in 2016-2017. Besides this, profitability situation is also observed to have improved during the specified period as is evident from the registered figures of operating profit margin as well as the net profit margin of the business enterprise. In essence, it can be hereby witnessed from the enumerated figures that the operating margin has enhanced with enhancement in operating income as well as revenue. Also, the net profit margin of the corporation BHP Billiton has also augmented significantly. The analytical procedures such as correlation and regression analysis conducted for the study reveals the fact that there exists a weak negative association between costs borne for CSR and financial performance (reflected by ROA and ROE) of the firm BHP Billiton. However, results of the regression analysis reveal statistically insignificant outcome establishing no firm association between the defined statistics.
This study proposes to examine the relation between corporate social responsibility (CSR) programs and corporate financial performance (CFP). More specifically, I seek to examine whether the implementation of CSR programs is associated with increased sales and gross margin in the long-run. In 1970, Milton Friedman ignited a robust debate with the above quote in the New York Times that is still being disputed. On the surface of his argument, it appears that Friedman believes businesses should not adopt corporate social responsibility (CSR) programs because they are outside the profit-making scope and are unnecessary expenditures. Progressing deeper into his argument, it is revealed that Friedman supports the integration of CSR programs into business operations, but only if it positively impacts profitability in the long-run. John Mackey, like many critics of Friedman, believes Friedman’s view is too focused on investors and argues that corporations have a social responsibility to its other stakeholders, even if such responsibility entails a sacrifice in profits. This study serves to strip off these socialism and capitalism biases on social responsibility to show the objective, financial impacts of CSR programs.
The notion Corporate Social Responsibility (CSR), initially indicated as Social Responsibility (abbreviated as “SR”), was illustrated during the period 1930s (Li, Lin & Yang, 2016). Nevertheless, (Petrenko, Aime, Ridge & Hill, 2016) argues, that the concept was not very popular till the period of publication of Social Responsibilities of the Businessman by Bowen during 1953. Revelli and Viviani (2015) states that Bowen defined CSR as obligations of businessmen to undertake specific policies, to arrive at particular decisions, or else to follow specific lines of action that are favourable in terms of the aims and values of community. Based on this publication and thorough research undertaken later on, it can be hereby said that CSR elements are broadly debated. Nekhili et al. (2017) elucidates in detail the way the focal point of CSR has transformed from acknowledgement of various social interest to having a significant part of overall strategic approach of several firms.
The awareness regarding CSR is increasing globally and even though approach of different firms to the notion differs, large numbers of firms are undertaking voluntary initiatives that are necessarily aimed at lessening the negative influence on society as well as the environment (Muttakin et al., 2015). Out of world’s total 250 largest firms, around 93% of firms issue corporate sustainability pronouncements on or after 2013, in comparison to 71% during the period 2008. This fresh incline is not entirely founded on firms adopting a selfless model of business, but also for the reason that firms are under escalating pressure from their stakeholders to express responsibility and at the same time sustainability (Mishra & Modi, 2016). While guidelines on regulatory and legislative issues associated to CSR is not established worldwide, there are specific unions and nations that have begun executing this kind of alterations, as can be seen in the case of the European Union (EU). Again, a fresh guideline, effectual as of the year 2014, necessitates firms with 500 or more number of workers to reveal their management pronouncements on strategies, social as well as employee facets, risks along with outcomes as regards environmental matters. In addition to this, different member states of particularly the European Union were consequently provided two years to go by the new guidelines into national legislation (Mehralian et al., 2016).
Since the popularization of the concept of CSR, there have been different opinions as to what CSR is intended to accomplish for a firm. One of the first influential public figures to air his opinion in the matter was renowned economist and debater Milton Friedman (1970) who claimed that the sole social responsibility of a business is oblige to the wills of its shareholders and increase its profits within the boundaries of laws and business ethics. Brüggen et al. (2017) further argues that firms should not focus on CSR unless it acts as a value creator and adheres to the wishes of the company’s shareholders. Li et al. (2016) argues that CSR can strengthen the relationship with a company’s stakeholders and further adds that firms using CSR tend to lower its capital constraints through better access to bank loans which makes it easier to undertake strategic investments. Another factor which has been highlighted as a beneficial reason for corporations to work actively with CSR is the increased influence of various stakeholders (Cheng et al., 2014). Frederick (2016) discusses how the traditional division of stakeholders (customers, citizens, institutions and/or media which are classified as to being directly or indirectly affected by the corporation) is in need of revision, partly due to the digitalization of the world and increased flow and access to information.
As suggested by Halkos and Skouloudis (2016), corporate social responsibility (CSR) activities indicate towards the mechanism to align overall stakeholders’ interests with organization development. Is essence, corporate social responsibility notion thus takes into account customers’ interests, executives, stakeholders, communities together with ecological considerations in different aspects of business operations.
As mentioned by Kang et al. (2016), it is illustrated that there are certain actions that are associated to CSR actions under Corporations Act, different rules of listing as well as regulations. This can help in the process of strengthening CSR programs towards the community and strengthening pecuniary performance of firms.
Different actions that are linked to CSR actions are hereby mentioned below:
-The company concentrates on reinforcement of the fact that safety matters arise from productivity
-Concentration on in-field substantiation of varied materials along with fatal risks
-Enhancement of internal scrutiny procedure and extensively share a well as implement lessons
-Enabling supplementary field time to participate in the labour force (Shaukat et al., 2016)
The objective is zero fatalities and committed to attainment of effectual administration of safety risks. The assets are necessary to recognize, mitigate as well as control risks particular to the region. Over and above this, the company has a field leadership program that comprises of different programs such as layered audit, critical measures of control, planned observation of task and takes time talk.
Layered audit makes certain that an element of HSE Management System is operating as proposed, opportunities for enhancement and detects opportunities for enhancement and reinforcement of positive performance. Critical control as well as observation substantiates that a system of control is established and is effectual for management of risk of fatality. This permits leaders to partake in a specific conversation that encourages enhanced risk awareness and reinforcement of anticipated behaviours linked to fatal as well as material risks.
Planned observation of task analyses that a process or else works instruction is developed appropriately and personnel are implementing the same properly to a particular task. The programme of “Take Time Talk” aids executives to participate in the process of health as well as safety discussion, strengthening positive behaviours and dealing risk behaviours when witnessed.
The company actively upholds community and intends to build mutually effective associations by means of daily, open as well as honest dialogue with host societies. The BHP Billiton Foundation was instituted during the period 2013 to address some of the vital worldwide sustainable development threats facing the generation. The company BHP targets to have zero community incidences, identifying profound accountability to shield and augment health, safety as well as well being of host societies. The company also has the target of investing at least 1% of pre-tax profit in different community performance. In essence, this is supposed to enhance overall quality of life in different host societies and uphold the achievement of particularly SDGs. Also, the company is also committed towards implementation of indigenous Peoples Strategy all the way through different assets by delivery of national Indigenous Schemes.
For the purpose of delivering social investment structure, over and above 280 non-government business enterprises otherwise community based enterprises and about 970 small sized enterprises engaged in building of potential. BHP partnered with roughly 100 corporations for training on anti-corruption. The company spent about USD 1.6 million for enhancement of transparency as well as corruption along with and institutional reinforcement. Also, the company expended USD46 million for the purpose of advancement of human potential together with social inclusion. The business concern also spent more or less USD 10.5 million for improvement of environment. The management of the firm therefore takes into account costs as well as benefits for different CSR actions.
As mentioned by (Aigner, 2016), CSR expenses need to be acquired under Corporation Act and should not be deducted as per regulation mentioned under section 37(1) of particularly Income-tax Act of the year 1961. Nevertheless; expenses have the need to be adjusted and modified as per other stipulation of the Act. Again, it is hereby evaluated that at the time when it is based on contribution and feature of CSR expenses regarding donation, charitable institute as well as payment towards Relief Funds, NGO and some of the deductions are given to corporation to reduce their tax liabilities. There are several cases when BHP Billiton has carried out CSR activities to lower down its high tax liabilities in long run. According to (Lanis & Richardson, 2015) it is revealed that planning of tax of corporation is extremely founded on project based and feature of CSR expend is promoting social as well as economic welfare otherwise public and role towards PSU or a regional authority or to an society /institution accepted by the state committee. Thereafter, deduction can come out to be 100% of the sum disbursed or expenditure. There are certain advantages that BHP Billiton has acquired all the way through the time after pursuing appropriate “Code of conduct” and CSR regulations.
As mentioned by Ortas et al. (2015), programs on Corporate social responsibility (CSR) is executed by BHP Billiton’s credit union of employees to incorporate social as well as environmental accountabilities. The BHP Billiton has been functioning its operations in energy and mining segment. Total turnover of the firm stands at However, it can be hereby witnessed that liquidity ratio of the firm has reflected the way a firm has handled the liquidity position otherwise current assets to satisfy current otherwise liabilities of the future period. Furthermore, profitability ratio replicates profit earning competence of business and the way it is acquiring profit on turnover. The revenue figures of the firm BHP Billiton are registered to be AUD 31355000 in 2016, AUD 38665000 in 2017 and 43885000 in 2018. Thus, it can be said that with application of corporate social actions by the firm, there is gradual enhancement in revenue generation of the firm.e firm?
A?an et al. (2016) asserts that financial performance and its influence on CSR actions of the financial performance of the firm BHP could be enumerated by utilizing ratio analysis, top down approach as well as bottom up evaluation mechanisms. Essentially, use of financial ratio analysis can be considered as a mechanism to critically evaluate the way a firm is performing by establishing association between two different business factors. In essence, financial ratio include different sections namely, liquidity, solvency, profitability, efficiency as well as market dividend pay-out ratio.
It can be hereby mentioned that in a bid to enumerate financial performance of the firm BHP Billiton, financiers have the necessity to evaluate balance sheet, statement of flow of cash in addition to Profit/Loss Statement in a bid to ascertain the extent to which the firm has generated value from its invested. However, in order to ascertain the nature of association between financial performance and costs of corporate social actions, specific statistical (analytical) tools have been used for the purpose of thse current study. The statistical tools selected for analysing nature of association between the requisite variables hereby utilized include correlation and regression analysis.
For the purpose of the present study, the costs of corporate social responsibility actions (CSR) is considered to be independent variable and the level of financial performance indicated by the revenue earned by the firm can be considered to be the dependent variable of the firm. The independent variable can be regarded to be the variable that exerts impact on the dependent variable.
The study at hand makes use of secondary data collected from varied sources. In case financiers could employ these financial tools in an effectual way, then it can help them to generate value out of investments. According to Ortas et al. (2015), it is revealed that the key purpose of financiers is to generate value on firm’s investment by investing capital in a specific investment project.
Also, it can be evaluated that there are varied quantitative as well as qualitative mechanisms that could be utilized to acquire requisite data. Furthermore, it shall not only aid in the process of analysing financial performance of the firm BHP Billiton during the long run period but also help in the process of analysing the best possible results in ascertained approach. Furthermore, it is assessed that methodology of research stresses different techniques that are utilized to acquire necessary information on the subject matter under consideration. Korschun et al. (2014) asserts that it helps in acquiring vital information to arrive at effectual outcomes. Nonetheless, employment of secondary methods of research, appropriate authentication and presentation of research references need to be considered in an effectual manner. For the purpose of the current study, secondary data shall be utilized to acquire requisite data (Dang & Pheng, 2015). The annual reports for the last 10 years have been referred to for finding out financials of the company BHP Billiton. In addition to this, sustainability reports for the last 10 years has been referred to for acquiring data on CSR costs incurred by the company. The key information concerning the business enterprise and its influence on corporate social accountabilities on particularly firm’s financial performance can be thoroughly evaluated by comprehensive analysis of articles, reports, journals, online libraries, yearly statements of company as well as books (Flick, 2015). In addition to this, yearly declaration of the firm is associated to financial assertions along with books that could be employed to evaluate the way the business concern has undertaken with respect to financial facets (Brüggen et al. 2017).
Furthermore, frameworks for CSR reporting along with statements are also evaluated to ascertain sustainability of future period of the firm during the long run period. Nowadays during the closing period, it can be hereby said that in case if financiers can appropriately make use of pecuniary information as well as instruments in an effectual manner. Therefore, in this case, it can prove to be effective to undertake essential monetary decisions. As suggested by Ortas et al. (2015), instruments for financial analysis such as ratio analysis, can be regarded to be effective to ascertain primary limitations of financial framework and where corporations have the need to undertake enhancements to strengthen financial performance during long run. In this case, sponsors refer to individuals who invest their capital in business concerns with a view to generate value out of investment and in case if they utilize financial tools in appropriate manner (Mackey & Gass, 2015). They can help in ascertainment of whether firm can deliver anticipated advantages or else return out of invested capital.
For the purpose of analysing the current financial condition of the firm, the learner has employed the ratio analysis and analysis of financial statements.
Analysis of results of ratio:
|
Quick Ratio |
2017 |
2016 |
|
Quick Assets |
14153 |
10319 |
|
Current Liabilities |
21056 |
17714 |
|
Ratio |
0.67216 |
0.582534 |
Table 1: Calculations showing quick ratio for BHP Billiton
The quick ratio indicates towards short term liability and enumerates a firm’s capability to satisfy diverse short term obligations of the form. This ratio can reflect the way sponsors as well as creditors can repay debt for the short term period. The quick ratio registered for the firm BHP Billiton is said to be 0.58 in 2016 that increased to 0.67 in 2017. The higher ratio shows increase in liquidity of the business with greater amount of flow of cash. This reflects a favourable financial condition for the corporation and creditors normally have track quick ratio in order to evaluate whether the business concern has the potential to disburse long term debt as and when the same becomes due.
|
Current Ratio |
2017 |
2016 |
|
Current Asset |
21056 |
17714 |
|
Current Liability |
11366 |
12340 |
|
1.852543 |
1.435494 |
Table 2: Calculations showing current ratio for BHP Billiton
Current ratio indicates towards a liquidity as well as efficiency ratio that enumerates potency of a corporation to repay liabilities of the corporation during the short term period employing current assets. Essentially, current ratio indicates towards a significant dimension of liquidity as liabilities during the short term period are due within the following year. In particular, current ratio assists financiers as well as creditors to comprehend overall liquidity position of the enterprise and the way company can repay the current liabilities. Furthermore, this ratio presents current debt in terms of current assets. Current ratio is recorded to be $1.43 in 2016 while the same is registered to be $1.85 in 2017. The increase in current ration can be considered to be favourable than the low ratio as it reflects that enterprise can effortlessly make current debt disbursements.
|
Debt Equity Ratio |
2017 |
2016 |
|
Total Liabilities |
54280 |
58882 |
|
Shareholder’s Equity |
62726 |
60071 |
|
Ratio |
0.865351 |
0.980207 |
Table 3: Calculations showing debt equity ratio for BHP Billiton
Debt equity ratio indicates towards a liquidity ratio that compares total debt to total equity. (Luo et al., 2015) suggests that debt to equity represents percentage of funding that stems from creditors as well as financiers. The debt equity ratio registered for the firm BHP Billiton is observed to have declined from the level of 0.98 in 2016 to 0.86 in 2016. The low debt ratio normally reflects financial stability of the corporation. Business enterprises having a higher debt equity ratio can be considered to be risky to different creditors as well as investors than corporations with low ratio.
|
Receivable Turnover |
2017 |
2016 |
|
Revenue |
38285 |
30912 |
|
Accounts Receivable |
3639 |
4022 |
|
Ratio |
10.52075 |
7.685728 |
Table 4: Calculations showing receivable turnover ratio for BHP Billiton
Accounts receivable turnover can be considered to be an efficiency ratio that enumerates the total number of times an enterprise can turn accounts receivables into essentially cash during a specified period of time. Accounts receivables ratio reflects the total number of times an enterprise can amass receivables during the specified period of time.
Accounts receivables is recorded to be 7.68 during the financial year 2016 that increased to 10.50 during the financial year 2017. BHP Billiton with higher ratio reflects that credit sales have higher probability of being collected than ones with lower ratio. Higher efficiency can be considered to be desirable from the point of view of flow of cash. In case, if a business enterprise can amass cash from customers quicker and it will be able to utilize cash to disburse bills as well as other obligations sooner.
|
Operating Margin |
2017 |
2016 |
|
Operating Income |
11753 |
-6235 |
|
Revenue |
38285 |
30912 |
|
Ratio |
0.306987 |
-0.2017 |
Table 5: Calculations showing operating margin ratio for BHP Billiton
The operating margin indicates towards a profitability ration that enumerates overall percentage of total revenue that is created by operating income. Operating income ratio reflects the way revenues are left over by the variables otherwise operating costs. Fundamentally, this specific ratio reflects the proportion of revenue that is available with the firm for covering different non-operating costs such as interest expends.
The operating margin is registered to be -0.20 in the financial year 2016 and 0.30 in the financial year 2017. A higher operating margin can be considered to be relatively more desirable as this replicates that the business enterprise is generating adequate money from ongoing procedures to repay variable costs along with fixed costs.
|
Net Profit Margin |
2017 |
2016 |
|
Net Income |
9063 |
9227 |
|
Revenue |
23668 |
24578 |
|
Ratio |
0.382922 |
0.375417 |
Table 6: Calculations showing net profit margin ratio for BHP Billiton
Net profit margin necessarily enumerates total amount of net income that a business generates from firm’s sales. The net profit margin is registered to be 0.37 in 2016 while the same is registered to be 0.38 in the year 2017. This talk about the way revenue is created by the business concern is left for varied corporate actions. The net profit margin is said to have increased for the firm although insignificantly during the time period.
|
Return on Equity |
2017 |
2016 |
|
Net Profit |
6222 |
-6027 |
|
Shareholder Equity |
62726 |
60071 |
|
0.099193 |
-0.10033 |
Table 7: Calculations showing return on equity ratio for BHP Billiton
Return on equity indicates towards a profitability ratio that enumerates competence of a corporation to generate profits from investments of firms’ shareholders in the corporation. Financiers intend to get higher rate of return out of equity as this reflects that the firm is utilizing funds provided by investors in an effective way. Essentially, higher ratios are necessarily better than lower ratios, but need to be compared to ratios in the industry.
The return on equity is recorded to be -0.10 during the financial year 2016 while the same is recorded to be 0.09 during the financial year 2017. The recorded figures show that there is increase in return earned on equity reflecting favourable financial condition of the firm.
The bottom up approach used by the firm includes financial ratio evaluation, growth in earnings as well as sales, financial analysis of financial statements of the firm BHP.
Income statement analysis of the firm reveals that revenue of the firm has enhanced by approximately 23% and the gross profit by roughly 40%, reflecting a favourable financial condition of the firm BHP Billiton. However, net profit of the firm has declined, revealing an undesirable financial condition. Thorough analysis of the balance sheet statement shows that the total current assets of the firm have increased by approximately 18.86% during the year 2017 in comparison to the year 2016. On the other hand, total non-current assets of the firm have declined by around 5% during the financial year 2017 as compared to the year ago period. As a result, total assets of the firm have declined by roughly 1.63%, indicating an unfavourable financial condition for the firm. Again, total liabilities of the corporation have also decreased by around 7.81% when compared against the year ago period. Analysis of balance sheet also reveals the fact that total stockholder’s equity of the corporation have increased by around 5.4% during the financial year 2017 in comparison to the year ago period.
Analysis of association between corporate social responsibility and financial performance
The current study utilized correlation as well as regression analysis methods for the purpose of analysing overall degree along with nature of associations between the two specified variables (namely corporate social responsibility cost) and financial performance indicated by revenue. Fundamentally, correlation analysis is employed to comprehend overall nature of associations behind two identified individual variables. For instance, the current study aims to examine overall impact of corporate social responsibility on the level of firms’ performance for the past 10 years (2007-2017).
In practice, closer the value of correlation coefficient (indicated by r) is to 1, the greater is the positive influence of corporate social responsibility on financial performance. In the same way, in case if the value of correlation coefficient is lower than 0 otherwise closer to the value of -1, the higher is said to be the negative influence of CSR on financial performance. In this case, the correlation co-efficient is registered to be 0.38.
Therefore, there is said to be a negative correlation between CSR cost and ROA (-0.33). Variables CSR Cost and ROE are also observed to be negatively correlated (-0.35). This shows that as variable “CSR cost” decreases, ROA increases. Also, as the variable “CSR cost” decreases, variable ROE increases.
|
BHP Billiton- |
|||
|
Year |
CSR Cost ($ m) |
ROE (%) |
ROA (%) |
|
2007 |
103 |
46.09 |
24.40 |
|
2008 |
141 |
40.09 |
21.33 |
|
2009 |
197.8 |
27.95 |
15.08 |
|
2010 |
200.5 |
25.70 |
14.70 |
|
2011 |
195.5 |
38.20 |
21.83 |
|
2012 |
214 |
26.05 |
13.92 |
|
2013 |
245.8 |
16.70 |
9.41 |
|
2014 |
241.7 |
16.99 |
9.88 |
|
2015 |
225 |
11.43 |
6.64 |
|
2016 |
178.7 |
15.95 |
8.37 |
|
2017 |
80.1 |
12.38 |
7.34 |
|
Correlation |
|||
|
Column 1 |
Column 2 |
Column 3 |
|
|
Column 1 |
1 |
||
|
Column 2 |
-0.35469 |
1 |
|
|
Column 3 |
-0.33592 |
0.996565 |
1 |
Multiple R:
This refers to the correlation coefficient that illustrates the extent of strength of linear association. In this case, a value registered to be 1 indicates a perfect positive association and a specific value equal to 0 implies no association. Fundamentally, this indicates the square root of Multiple R.
In case of analysing the effect of CSR cost on ROA, it can be hereby observed that Multiple R is equal to 0.09. This shows that multiple R is not a proper fit. This reflects that there is a variation of 9%.
Again, for the variables ROE and CSR Cost, the Multiple R is equal to 0.08 that is 8%. This shows that multiple R is not an appropriate fit.
R squared: This indicates the coefficient of determination that reveals different points that fall on the line of regression. For the case of CSR and ROA, R squared is registered to be 0.009. This implies that .9% of the specific variation of values of y that is around the mean can be illustrated by the x values. This does not show a good fit. The closer the data would have been to 1, the better the regression line would have fitted in the data.
For the variables CSR cost and ROE, R squared is recorded to be 0.007. This too does not show a good fit.
Standard Error: This reflects an approximation of the standard deviation of the error represented by μ. In essence, the standard error of this regression can be considered to be the precision with which the regression coefficient is enumerated. In case, if the coefficient is observed to be large as compared to the error, then in that case the coefficient can be said to be different from zero.
The P value needs to be less than 0.05 in most of the case. In the case of CSR cost and ROA, P values are registered to be (0.79). As per the output presented here, it can be hereby observed that p values (0.79) are greater than the level of 0.05 that indicates that it is not statistically significant. Again, p value in case of CSR cost and ROE, is recorded to be 0.81 that is greater than 0.05. This is also said to be statistically insignificant.
|
SUMMARY OUTPUT |
|
|
Regression Statistics |
|
|
Multiple R |
0.095513923 |
|
R Square |
0.009122909 |
|
Adjusted R Square |
-0.114736727 |
|
Standard Error |
10.76810776 |
|
Observations |
10 |
|
ANOVA |
|||||
|
df |
SS |
MS |
F |
Significance F |
|
|
Regression |
1 |
8.540481365 |
8.540481365 |
0.073655 |
0.792958994 |
|
Residual |
8 |
927.6171586 |
115.9521448 |
||
|
Total |
9 |
936.15764 |
|
Coefficients |
Standard Error |
t Stat |
P-value |
Lower 95% |
Upper 95% |
Lower 95.0% |
Upper 95.0% |
|
|
Intercept |
26.89697822 |
14.24155581 |
1.888626396 |
0.095628 |
-5.944108335 |
59.73806477 |
-5.944108335 |
59.73806477 |
|
103 |
-0.019545744 |
0.072019552 |
-0.271394962 |
0.792959 |
-0.185623128 |
0.146531641 |
-0.185623128 |
0.146531641 |
|
SUMMARY OUTPUT |
|
|
Regression Statistics |
|
|
Multiple R |
0.085328072 |
|
R Square |
0.00728088 |
|
Adjusted R Square |
-0.11680901 |
|
Standard Error |
5.80691067 |
|
Observations |
10 |
|
ANOVA |
|||||
|
df |
SS |
MS |
F |
Significance F |
|
|
Regression |
1 |
1.978507766 |
1.978507766 |
0.058674 |
0.814697929 |
|
Residual |
8 |
269.7616922 |
33.72021153 |
||
|
Total |
9 |
271.7402 |
|
Coefficients |
Standard Error |
t Stat |
P-value |
Lower 95% |
Upper 95% |
Lower 95.0% |
Upper 95.0% |
|
|
Intercept |
14.65635767 |
7.6800348 |
1.908371258 |
0.092764 |
-3.053834318 |
32.36654967 |
-3.053834318 |
32.36654967 |
|
103 |
-0.009407623 |
0.038837938 |
-0.24222766 |
0.814698 |
-0.098968069 |
0.080152823 |
-0.098968069 |
0.080152823 |
Conclusion
Based on the enumerated figures of the firm, it can be hereby mentioned that the liquidity condition of the firm have improved considerably during the period 2016 and 2017. In addition to this, profitability condition is also seen to have improved during the specified period as is revealed from the operating profit margin and the net profit margin enumerated for the corporation. It can be observed from the calculated figures that the operating margin has improved considerably owing to increase in operating income and revenue. The net profit margin of the firm has also enhanced considerably. Nonetheless, the receivable turnover of the firm has declined signifying that the efficiency level of the firm has decreased substantially during the period. Also, the earnings growth rate of the firm have also declined although the revenue growth rate has enhanced considerable owing to augmentation in the revenue figure of the firm during 2017 in comparison to the year ago period. Thus, it can be hereby concluded that there have been positive impacts of the CSR policies of BHP Billiton on overall financial performance of the firm. The BHP Billiton Code of Conduct along with BHP Billiton Charter, CSR policies for improvement of confidence of different financiers, corporate image, customer loyalty and acquirement and retention of customers have positively affected the financial state of the firm. The company used up about USD 1.6 million for improvement of transparency as well as corruption along with and institutional strengthening.
The management of the firm therefore takes into account costs as well as benefits for different CSR actions. This positive influence of the CSR policies on financial condition of the firm is evident from the results obtained from the analysis of financial statements and favourable outcomes of key financial ratio. However, further scrutiny of the effects of the CSR actions on the level of financial performance of the firm has been carried out using the regression as well as correlation analysis. The results of the correlation analysis reveal the fact that there exists a negative linear association although there subsist an extremely weak association between the identified variables of the study. Again, outcomes of the regression analysis replicate a statistically insignificant association between CSR cost (independent variable) and the two identified dependent variables (ROA and ROE) signifying financial performance of the study.
Thus, it can be hereby inferred that CSR policies devised by the firm and investments made for the same has exerted a negative influence although insignificantly on financial performance of the firm.
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