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Research and Applications in Economics Volume 2, 2014
An Analysis of the Assurance of Social Responsibility Report of Listed Companies in China Qiulin Yang1, Ping Liu2 University of South China, Hengyang, Hunan, China 1074871855@qq.com; 2328598721@qq.com
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Abstract This article introduces the background of the assurance of social responsibility report , and takes those reports released by the listed company in China as the research sample, systematically analyses the present situation of the independent assurance of social responsibility report, explores the rule of its verification , finally comes to the conclusion and puts forward related suggestions. Keywords The Listed Company; Social Responsibility Report; The Assurance of Social Responsibility Report
Introduction Due to the development of economic globalization, China integrated into the world’s economic system, so the foreign advanced concept of social responsibility also brought a new direction to the development of China's social responsibility. KPMG said “the desire to enhance credibility is the most frequent driver for companies to seek assurance, along with improving the quality of reported information close behind (KPMG, 2011)”. GRI also said "While notable differences exist between countries and sectors, the global trend is toward increased assurance of sustainability report (Global Reporting Initiative, 2013)". But the assurance of social responsibility report in China has just been brought into the sight of the public, currently in voluntary assurance stage and its quantity is less than it should be. The research center of social responsibility about corporation in Chinese academy of social sciences has been committed to the preparation and ratings research of social responsibility report, and released its latest guide of the social responsibility report in January 2014, which will effectively promote China's voice in the society responsibility movement among international enterprises.
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Therefore, the development level of international assurance of social responsibility report and the domestic’s continuous attention of the corporation social responsibility report have a promoting effect on the study of Chinese assurance report of social responsibility. Sample selection The main study sample of this article derives from the social responsibility reports of listed companies in Shanghai stock exchange and Shenzhen stock exchange, whose statistics are in the year 2012 and 2013, plus the June 30, 2014 (from 2012 to June 30, 2014). More importantly, it focuses on analyzing the assurance date in 2014. Statistical analysis Social Responsibility Report and Assurance of Annual Distribution of Listed Company (See Table 1) As on June 30, 2014, A share in Shanghai and Shenzhen city issued 643 social responsibility reports in total, and as time goes on, the data will exceed the number of 2013. Compared to the amount of social responsibility report, the certification situation through third-party is not optimistic. It can be seen from the table that the proportion of the overall reports is very small although the number of assurance report through the third independent party has continuously growing in nearly three years. There are 31 after-assurance reports in the first six months in 2014, which is only 4.82% of the total. And according to the survey of the global reporting initiative, more than 46% of the listed companies in the world in 2012 released external assurance. It is not hard to see that the level of the assurance of social responsibility report in China is far below the world level.
Research and Applications in Economics Volume 2, 2014
TABLE 1 THE SOCIAL RESPONSIBILITY REPORTS AND ASSURANCE OF ANNUAL DISTRIBUTION OF LISTED COMPANY IN NEARLY 3 YEARS
The years Quantity of social responsibility report Quantity of the assurance of social responsibility report The annual growth rate of assurance The ratio of assurance
2012
2013
2014(As of June 30)
635
667
643
25
29
31
0
16.00%
6.90%
3.94%
4.35%
4.82%
The Assurance of Social Responsibility Report in the Distribution of Territory The verification of the enterprises are also more concentrated in Beijing, Shanghai and Guangdong and other economically developed provinces. In assurance report of 31 in 2014, Beijing was listed first and has released 12 assurance of responsibility reports and account for 38.71%, followed by Shanghai, which has released 11 (account for 35.48%) and Guangdong which has released 3 (account for 9.68%). Other provinces have only released 5 (account for 16.13%), such as Zhejiang province, Fujian province and Jiangsu province. This shows that company assurance the social responsibility report, which is closely related with its region economy. Some multinational company brought in foreign advanced concept of social responsibility in the economically developed coastal areas. In order to pursue the sustainable development of its own, these areas of the enterprise are more likely to assure their social responsibility report. The Assurance of Social Responsibility Report in Distribution of Industry According to the industry guidance classified by Shanghai stock exchange, the verification of responsibility report of 31 in 2014 shows that there are only seven industries to assure the social responsibility report. That is to say, most parts of the industries did not verify the social responsibility report. The development of the verification of social responsibility report is not balanced among the industry. In reporting the verification of the industry, the financial industry has the highest proportion reached at 41.94%, such as Agricultural Bank and Huaxia Bank. These two banks have been enclosed in its social responsibility report by third party independent organization for four years. We found that financial industry actively communicate with stakeholders and all work of the society. Then we can also find some polluting industries also pay attention to the assurance
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of social responsibility report, such as manufacturing (16.13%), mining (12.9%) and transportation (9.68%). This suggests that these sensitivity industries also have the courage to take the initiative to accept the third party inspection to social responsibility of enterprises. Although the number is small, but it is well worth to be encouraged. The Assurance of Social Responsibility Report in Enterprise Property It is obviously found that state-owned enterprises have absolute leading position from social responsibility report released in 2014. There are 24 companies to assure independently the social responsibility report and account for 77.42% of all reported authentication enterprises. And private enterprises have five and account for 16.13%while joint ventures and foreign-funded enterprises each have one. This indicates that compared with other ownership enterprises, state-owned capital holding enterprises are much more enthusiastic in the verification of social responsibility report. Because the state-owned enterprises are the representatives of a country and the people's interests, they should play a leading role in the construction of ecological civilization and insist on sustainable development strategies. The External Assurance Providers (See Table 2). TABLE 2 THE ASSURANCE PROVIDERS: AS THE ASSURANCE OF SOCIAL RESPONSIBILITY REPORT RELEASED IN 2014 AS AN EXAMPLE
The Assurance Providers
Number
Rate
The Big Four
12
38.71%
International certification organization
8
25.81%
Chinese certification organization
4
12.90%
Chinese accounting firm
7
22.58%
Total
31
100.00%
In selecting a provider, organizations should consider providers’ expertise and competency with sustainability management processes and disclosures2, and the external assurance providers must be independent from the enterprises to ensure the authenticity of the identification results. From the perspective of the data in 2014, the main assurance providers are the Big Four, a total of 12 (38.71%), for example, 5 copies of the reports are issued by PWC, Deloitte has 3, KPMG has 2 and Ernst & Young has 2; 8 copies of reports is issued by International
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Research and Applications in Economics Volume 2, 2014
certification organization (25.81%) with BV contributing 3, SGS 2, DNV 2, LRQA, only 1; 6 copies of reports is issued by Chinese certification organization (22.58%). Among all these reports, Shanghai Quality System Inspection Center has 3, Chinese Corporate Social Responsibility Report Rating Committee has 2, and other institutions has 2; Chinese accounting firm only has 4 (12.9%). Accountancy firms have expertise in financial and non-financial reporting .We found the companies will usually undertaking social assurance and annual audit reports in the same accounting firm. Compared with domestic accounting firms in China, the Big Four accounting firms enjoy both a high reputation and share market in the world, and this is why they have been selected to assure the social responsibility report for the most cases. International certification organizations are mainly to provide technical certification service, meanwhile the above four international certification organizations, which are very famous in the field of inspection and certification in the world, Corporate Social Responsibility Report Rating Committee is also the most authoritative rating organization of Corporate Social Responsibility Report in China. This shows that the verification of the listed company pay much attention to the quality of the social responsibility report in China. The Assurance Standard (See Table 3) TABLE 3 THE ASSURANCE STANDARD: AS THE ASSURANCE OF SOCIAL RESPONSIBILITY REPORT RELEASED IN 2014 AS AN EXAMPLE
The assurance standard
number
rate
ISAE3000
12
30.00%
AA1000
7
17.50%
Chinese corporate social responsibility guidelines
5
12.50%
GRI Guidelines
5
12.50%
Chinese certified public accountants other authentication business standards no. 3101
4
10.00%
BV authentication management procedure
3
7.50%
Validation rules of DNV sustainable development report
2
5.00%
Not mentioned
2
5.00%
From the perspective of the assurance standard, at present, there are 12 of these 31 reports using ISAE3000 standard, which is the largest proportion of 30%; followed by AA1000 with 7 (17.5%) ,GRI guidelines and "Chinese corporate social responsibility
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guidelines" account for 12.5% each; "Chinese certified public accountants other authentication business standards No. 3101" accounts for 10%, etc. We also noticed that some verification institutions use a variety of criteria when they assure those reports, for example, BV and DNV verification not only adopted own BV authentication management procedure and validation rules of DNV sustainable development report, but also adopted ISAE3000, AA1000 and GRI guidelines, etc. At present, the most commonly used on the international assurance standard are ISAE3000 and AA1000 (2008), the emphasis of the ISAE3000 is on a comprehensive program of data collection process, while the AA1000 is professional standard of the verification of social responsibility report and concentrate on whether the enterprise and the sustainable development report reflects the focus of the stakeholders. BV and DNV have its own verification program method. In January 2014, Chinese academy of social sciences issued the latest revision of "the rating standard of Chinese corporate social responsibility report (2014)", which promote Chinese companies’ disclosure levels of society responsibility information and provide the basis for rating the reports. Assurance Level and Scope Assurance level indicates the scope and depth of work by assurance providers. Auditors usually provide two levels, "reasonable assurance" (i.e. high but not absolutely) or "limited warranty" (moderate).The higher the level of verification is, the more rigorous verification process is. As a result of the limitation of cost and other reasons, companies will usually choose some key indicators of the social responsibility report for verification. As shown in the 31 assurance reports, more than half of the reports are independent and limited the scope of the implementation level of verification. As to the verification scope, there are 64.51% of the verification reports only assure the critical data on corporate social responsibility, for example, the social responsibility report for Shanghai Pudong Development Bank is verified by PWC in 2013, just implementing the verification procedures for the key data of the social responsibility report; DNV issued by the Pacific Insurance forensic report covers full social responsibility performance data in 2003; reports issued by the Pacific Insurance covering all social
Research and Applications in Economics Volume 2, 2014
responsibility performance data in 2013; the other 19.37% of the reports is not specified the scope of its verification. The Conclusion of Assurance Report Throughout these 31 copies of assurance reports, assurance providers indicated their positive opinions, and those reports can be divided into three forms. The first is the assurance opinions issued by Accounting firm and International certification organization. Their conclusions usually show that "noting has come to our attention to indicate that the reviewed statements within the scope of our verification are inaccurate and the information included therein is not fairly stated (Merchants Bank, 2013)". The second form is the assurance opinions issued by The Center of Shanghai Quality System Certification issued, their just disclosure the key information, data, and examples of social responsibility in line with the relevant requirements of social responsibility guidelines. Conclusions Seen from the analysis about the present situation of the assurance, we can get the following conclusions: 1) Although the number of the assurance of social responsibility report of the listed companies is small, the trend of the current situation is increasing year by year. Regardless of the voluntary principles that adopted by our country, the good is that the listed companies have begun to notice the verification will be the future trend of the development of social responsibility report, and willing to improve the quality and credibility of their social responsibility information. 2) According to the imbalances exist among the distribution of location, industry and enterprise nature, we can infer that the financial sector and some pollution industry of state-owned enterprises tend to report verification more actively in developed coastal areas. 3) In the assurance provider’s view, accounting firms provide most verification, especially the Big Four. 4) The assurance standards are not unified, and usually are the foreign standards. 5) The assurance level is general, not only doesn’t have legal effect, but also lack of the comprehension of the
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assurance, what’s more, just assurance the most key data of the social responsibility, no guarantee to all the data of social responsibility. 6) The assurance opinions or conclusions of ssocial responsibility report are positive. REFERENCES
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Decisions: An experimental research.” Journal of The Audit Research 04(2012): 97-104. Qiulin Yang was born in 1964 at Hunan Hengyang, China, graduated from Hunan University. Research interests include social responsibility accounting and auditing. She currently is professor of the college economic management, the director of the accounting research center at the University of South China, the master instructor, members of the Professional Committee of China Accounting Society of Environmental, executive director of China's Hunan Institute of Accounting. Mrs. Yang is the master instructor, members of the Professional Committee of China Accounting Society of Environmental, executive director of China's Hunan Institute of Accounting. Over the past five years, she presided over the national social science fund, social science fund of Hunan province and other issues more than 10. Ping Liu, born in 1990, Hengyang, Hunan, China, is a graduate student of accounting major at the economic management college in University of South China.
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