Chapter 5

Question 1

what is Corporate Social Responsibility (CSR)

Answer 1

a concept that considers all stakeholders when making decisions and goes beyond just making profit while complying with laws and regulations. Companies that implement CSR consider all stakeholders they interact with, give back to the communities in which they operate and consider social, and environmental issues while doing business.

Question 2

what are the parts of Caroll’s pyramid

Answer 2

(bottom-up):
- economic responsibility: the responsibility of business to be profitable, survive, and benefit society in the long-term
- legal responsibility: responsibility to obey laws and other regulations
- ethical responsibility: responsibility to act morally and ethically; go beyond narrow requirements of the law
- philanthropic responsibility: responsibility to give back to society

Question 3

what is the Triple Bottom Line?

Answer 3

model that was created in 1994 by John Elkington, a British management consultant outlining that companies “should commit to focusing as much on social and environmental concerns as they do on profits and instead of one bottom line (profit or net income), there should be three: profit, people, and the planet.”

Question 4

what is “Environmental, Social, and Governance” (ESG)

Answer 4

refers to the three key factors when measuring the sustainability and ethical impact of business. Companies that implement ESG measure their sustainability performance through quantifiable metrics that can be monitored over time.

Question 5

why is ESG important today? (5)

Answer 5

1. Climate change is a real world-wide problem that must be addressed – governments and businesses are making commitments to reduce negative impacts on the environment.
2. Shareholders and corporate investors expect companies to achieve long-term sustainability and expect transparent reporting relating to ESG performance.
3. Customers are demanding sustainable products and services.
4. Talented employees are seeking employment from purpose-driven companies.
5. Sustainability reporting will be a requirement for public companies in the future.

Question 6

How does ESG create value for customers?

Answer 6

1. Achieves stronger revenue growth by offering customers more sustainable products and services and achieving better access to resources
2. Drives cost reduction through lower energy consumption, reduction in waste and resources required within a company’s value chain
3. Earns subsidies and support from the government
4. Increases employee productivity and attracts top talent
5. Enhances returns by allocating capital to investments that will be more sustainable in the long term (we will learn more about allocating capital later)

Question 7

what is climate change

Answer 7

is a long-term shift in global or regional climate patterns. Climate change often refers specifically to the rise in global temperatures from the mid-20th century to the present.

Question 8

what is net-zero

Answer 8

refers to a state in which the greenhouse gases going into the atmosphere are balanced by removal out of the atmosphere. To ‘go net zero’ is to reduce greenhouse gas emissions and/or to ensure that any ongoing emissions are balanced by equal amounts of emission removals from the atmosphere.

Question 9

what is greenwashing

Answer 9

when a company spends resources to market themselves as environmentally friendly rather than actually minimizing their environmental impact.

Question 10

what is a provision

Answer 10

a liability with uncertainty about the timing of amount of future expenditure required.

Ex. warranty

Question 11

when is a provision recognized

Answer 11

1) an entity has a present obligation as a result of a past event;

2) it is probable that an outflow of resources (e.g. cash) will be required to settle the obligation; and

3) a reliable estimate can be made to understand the amount of the obligation.

Question 12

what is a contingent Liability

Answer 12

possible obligation that arises from past events and whose existence will be confirmed by the occurrence or non-occurrence of uncertain future events, which are outside of management’s control. Contingent liabilities are disclosed in the notes to financial statements but not recognized as liabilities on the company’s financial statements.

ex. pending lawsuits

Question 13

what is a decommissioning provision

Answer 13

is the present value of future cash outflows that will be incurred to close mines at the end of their life and restore the environment to its original condition before mining operations commenced.

Question 14

what is organizational culture

Answer 14

is the collection of values, expectations, and practices that guide and inform the actions of all team members. Culture is one of the key ways many companies differentiate themselves from their competitors.

Question 15

what are some examples of the S in ESG

Answer 15

• diversity and inclusion
• mental health

Question 16

what is the Global Reporting Initiative?

Answer 16

“independent, international organization that helps businesses and other organizations take responsibility for their impacts, by providing them with the global common language to communicate those impacts.”1

Question 17

what is the Climate Disclosure Standards Board

Answer 17

“an international consortium of business and environmental non-governmental organizations. CDSB is committed to advancing and aligning the global mainstream corporate reporting model to equate natural capital with financial capital by offering companies a framework for reporting environmental information with the same rigour as financial information.