Corporate Social Reporting: The Case of British Airways
Corporate social responsibility has been recognized as one of the most fundamental issues in the contemporary business environment. The term refers to a company-adopted policy that operates as an in-built self regulating mechanism where the business entity monitors, as well as ensures that it actively complies with the ethical standards, spirit of the rule of law, and international regulations and norms[1]. It revolves around a process where the company strives to embrace its actions, as well as encourage or have a positive influence via its activities pertaining to the environment, employees, consumers, stakeholders, communities and all people in the public arena who are considered to be stakeholders.
There are varied reasons as to why corporations incorporate corporate social responsibility in their operations. It comes as one of the ways of showing or exhibiting true commitment in a certain cause, not to mentions that it enhances their social media visibility[2]. In addition, it comes as one of the most effective techniques of establishing a positive and enviable workplace environment, thereby enhancing the productivity of employees[3]. On the same note, corporate social responsibility comes with immense public relations benefits, not to mention that it enhances the relationship between the corporations and government agencies[4].
In the contemporary world, the manner in which corporations behave has been subjected to intense scrutiny. This is especially due to the dramatic increase in the public awareness of the economic, social, and environmental impacts of a business in the last few years and decades. In essence, corporations are now faced by intense pressure from governments, investors, customers, as well as other stakeholders even in the public arena to demonstrate the effort that they have undertaken to manage and alleviate the negative effects that their operations may have on the society and the environment in general[5].
Scholars, however, note that accounting, which is essentially a set of socially conditioned processes and practices that have different but significant effects on the societal operations, has been called upon to help in outlining the integrity and accountability pertaining to business actions. Corporate social reporting has resulted from combination of the intense pressures that companies in the contemporary world face daily. It has been developed in an effort to address the intense need for information emanating from the key stakeholders of the company with regard to the company’s environmental and social performance.
Recent times have seen an increase in the cases of Corporate Social Disclosures. While varied reasons may be used in explaining this, researchers acknowledge that corporate social disclosures are mainly used when the legitimacy of an organization or business entity is threatened, then business entities face intense media exposure or pressure from the general public, or in instances where the corporations fails to comply with the requirements pertaining to an implicit social contract[6]. This may also be seen when corporations are facing immense threats to their image and reputation.
Extensive research has been carried out with regard to legitimacy theory as the key driver for corporations to report environmental and social information. Legitimacy theory has been defined as a supposition that a business entity undertakes constant attempts at functioning or operating within varied accepted customs and norms pertaining to the society within which they operate. The legitimacy of the operations of a corporation are conferred by the constituents who, essentially are the external and external actors making decisions pertaining to the legitimacy of a business entity.
Researchers have always underlined the problems emanating from the legitimacy gap existing between the expectations of the constituent and the behaviors of the firm and underlined the fact that the deficiency of legitimacy would result in the withdrawal of the social contract that exists between the society and the business entity[7]. Research shows that companies tend to modify policies pertaining to their disclosure especially around the time when there occurs fundamental industry or company related social events. This statement underlines the strategic nature pertaining to voluntary social disclosures, and affirms the view that the management of varied business entities considers social disclosures in annual reports as a useful and effective device in alleviating the effects of an event that is seen as unfavorable or unattractive to the image of the business entity[8].
The contract of the organization to continue operating in the society may be revoked in instances where the social expectations pertaining to its operations’ legitimacy are unmet[9]. It is noteworthy, however, that the event must have taken place, thereby having detrimental effects on the legitimacy and reputation of the organization[10]. This causes the organization to have a perception on how the society sees it with regards to whether it carried out its duties in an acceptable manner. With perception and pressure from varied sources, the organization’s effort to gain legitimacy would result in strategic tactics that aim at convincing the general public as to its legitimacy[11]. A large number of these tactics aim at controlling or concentrating the perception of the public to an organization as a response to threats to the organization’s legitimacy emanating from social pressure. This was the case for British Airways in 2000.
The Event
The accident occurred on 25th July 2000, when the Concorde had its first fatal accident 10 miles north-east of Paris after departing from Charles de Gaulle Airport in Paris on a non-scheduled service heading to New York. The accident took place after close to 25 years of offering the only sustained supersonic passenger service. All the 109 passengers aboard the Concorde including the 9 crew members and an additional four on the ground died in the accident, while another six people suffered serious injuries. The Concorde was chartered by a tour company from Germany and was ferrying individuals who were to take a transatlantic trip using a Caribbean cruise. On the fateful day, Air France Concorde started its take-off on Runway 26-Right. On attaining a speed of about 320 Kmh, one of its tyres ran over a strip of metal that was lying on the pavement. This resulted in a fire on the Concorde’s left side. The aircraft, nonetheless, lifted off and was airborne for almost a minute but was incapable of maintaining altitude or speed, in which case it struck a hotel and exploded about 5.5 km from the runway’s end.
One day prior to the accident, British Airways had been forced to admit to having safety issues after stating that all the planes in the Concorde fleet incorporated some hairline cracks in the wings. This resulted in serious concerns pertaining to safety among the aviation industry and the general public[12].
Consequently, Concorde’s certificate for airworthiness was revoked by the British and French Civil Aviation Authority. While varied changes were made with the Concorde returning to regular service as at November 2001, British Airways and Air France, the only two operators of Concorde announced the termination of the Concorde’s service by the end of the year thereby eliminating the other aircrafts from use. They cited low passenger loads, general slowdown of the airline industry and high cost of maintenance.
[1] Bansal, Pratima. and Clelland, Iain. (2004). Talking trash: legitimacy, impression management, and unsystematic risk in the context of the natural environment. Academy of Management Journal, 47, 93-103. 2004
[2] Lehman, Glen. Social and Environmental Accounting: Trends and Thoughts for the Future‟, Accounting Forum, 28, pp. 1-5. 2004
[3] Perrini, Francesco and Tencati, Antonio. Sustainability and stakeholder management: the need for new corporate performance evaluation and reporting systems. Business Strategy and the Environment, 15(5), 296-308. 2006
[4] O’Dwyer, Brendan. Conceptions of corporate social responsibility: the nature of managerial capture. Accounting, Auditing & Accountability Journal, 16(4), 523-557. 2003
[5] Bansal, Pratima. and Clelland, Iain. (2004). Talking trash: legitimacy, impression management, and unsystematic risk in the context of the natural environment. Academy of Management Journal, 47, 93-103. 2004
[6] O’Dwyer, Brendan. Conceptions of corporate social responsibility: the nature of managerial capture. Accounting, Auditing & Accountability Journal, 16(4), 523-557. 2003
[7] Frandsen, Finn. and Johansen, Winni. ‘Rhetoric, climate change, and corporate identity management ‘, Management Communication Quarterly, vol. XX, no. X, pp. 1-20, 2011
[8] Mobus, Janet Luft. Mandatory Environmental Disclosures in a Legitimacy Theory Context‟, Accounting, Auditing and Accountability Journal, 18 (4), pp. 492-517. 2005
[9] O’Dwyer, Brendan. Conceptions of corporate social responsibility: the nature of managerial capture. Accounting, Auditing & Accountability Journal, 16(4), 523-557. 2003
[10] Perrini, Francesco and Tencati, Antonio. Sustainability and stakeholder management: the need for new corporate performance evaluation and reporting systems. Business Strategy and the Environment, 15(5), 296-308. 2006
[11] Frandsen, Finn. and Johansen, Winni. ‘Rhetoric, climate change, and corporate identity management ‘, Management Communication Quarterly, vol. XX, no. X, pp. 1-20, 2011
[12] Paterson, C and Woodward, D G. (2006) Levels of Corporate Disclosure Following Three Major UK Transport Accidents: An Illustration of Legitimacy Theory, Draft Working Paper, University of Southampton