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CSR Reporting and Its Impact on Firms Earning Per Share

Bachelor of Business / Bachelor of Accounting

AFNR315 Advanced Financial Reporting

Assessment purpose: 

ASSESSMENT DESCRIPTION:

Students are required to work in a group of 3  4 students to prepare this written report. Students must register for their group with the lecturer within the first three weeks of the trimester and will not be allowed to change group members afterwards.

The students from each group are required to choose two or three International or Australian stock exchange listed companies/businesses. Students are required to examine the Corporate Social Responsibility projects and CSR reporting that the selected firms have started and gather information on what kind of CSR reporting is performed. Students are also required to produce graphs on Company Data on CSR reporting and the changes in EPS during the last five years. Students are required to download annual financial statements and use the data for the report.

Students are required to provide evidence that whether CSR reporting has led to an increase in the ESP or not. If the data does not support the hypothesis, and they conclude that the EPS has not increased, students are required to provide possible reasons in the report. The reasons can involve any other accounting related issues, for example, substantial loss, equity or debt issues or overall global financial crises etc. The students are required to read the information carefully on the firms website to prepare a sound report.

Students will have to be prudent and pragmatic in selecting the appropriate companies. Some research is required to select a company who has started CSR reporting in recent years. It is also beneficial to compare the performance of the firm before and after CSR disclosure. Some information on companies CSR activities and reporting should also be included in the report. 

Answer

Voluntary Corporate Social Responsibilities (CSR) reporting and its impact on firms Earning per Share



Executive Summary

Woolworths Limited is the Australian retailing company and the largest takeaway of liquor retailer with revenue of 55.66 billion Australian dollars. BHP Billiton is the Anglo-Australian multinational mining, petroleum and metal company with revenue of 43.63 billion dollars. Woolworths Limited launch the corporate social responsibility strategy 2020. BHP is responsible for the 2/3 of the Global Greenhouse Gas emission. In the year 2014, the organisation launched the Lead Project in Mozambique. They also have provided the CSR and sustainability performance target to be achieved by 2018. Earnings per share of Woolworths limited for the year 2014, 2015, 2016, 2017 and 2018 are 1.97, 1.71, -0.98, 1.19 and 1.33 respectively. For this company, the CSR has an essential impact on the business in term of their balance sheet and the income statement of the firm. Earnings per share of BHP Billiton for the year 2014, 2015, 2016, 2017 and 2018 was 5.2, 0.72, -2.4, 2.21 and 1.39 respectively. The organisation also face the decline in earnings per share for the year 2018 due to one of the major facts that the greenhouse emission of the company increased by 1% rather than decreasing as their primary target of CSR and sustainability activity. 

Introduction

The purpose of the paper is to provide an effective view on the corporate social activity of the firm and its impact on the earnings per share for consecutive five years. To effectively discuss the facts the organisations Woolworths Limited and BHP Billiton has been selected.

Woolworths Limited 

Woolworths Limited is the Australian retailing company that is spread all over the country and also in New Zealand. The organisation was founded in the year 1924, and it is the second largest company in Australia in term of revenue. They are also the largest takeaway of liquor retailer in Australia (Woolworthsgroup, 2019). The revenue of the firm in 2017 was 55.66 billion Australian dollar, and they have almost 205,000 employees. The organisation has numerous division like the supermarkets then petrol, liquor, general merchandise, home improvement, and hotel and gaming. The organisation also play a vital role in the development of corporate social responsibility and sustainability in the field.

BHP Billiton 

BHP Billiton is the Anglo-Australian multinational mining, petroleum, and metal company. This organisation was founded in the year 1885, and they service the area of worldwide. The organisation has been ranked as the largest mining company in the world based on their market capitalisation. In term of revenue, they are the third largest company in Melbourne (Bhp.com, 2019). The revenue of the firm for 2018 was 43.63 billion dollar, and also they have more than 62000 employees. BHP play a vital role in corporate social responsibility, and even sustainability is the core value of the firm for maintaining their position. 

Corporate social responsibility projects and CSR reporting

Woolworths Limited 

The recent project of Woolworths Limited in the corporate social responsibility is the launch of the corporate social responsibility strategy 2020 (Pulker, Trapp, Scott, and Pollard, 2018). In this strategy the organisation outline the 20 commitments that they are going to fulfil by the end of 2020 which is eventually based on the people, prosperity, and planet (Woolworthsgroup.com.au, 2019). The company in the year 2015 have also introduced this strategy where they have tried to fulfil the commitment for the betterment of the world. The commitments for the corporate social responsibility introduced by the firm are as follows;

Commitment based on the people is to encourage the diversity by;

  • Maintaining the gender equity within the workplace where women will hold 40% of the executives as well as the senior manager position (Woolworthsgroup.com.au, 2019).
  • There will be no salary wage gap among the female and male.
  • Enhance the diversity by improving the Indigenous team members within the business.

Commitment based on the planet is for making Australia healthy by;

  • Working in the process of zero food waste.
  • Reducing the carbon emission by the company to 10% below the level of 2015 (Woolworthsgroup.com.au, 2019).

Commitment based on the prosperity is founded on a trusted relationship by;

  • Achieving the top quartile ranking for engaging the business with the fairly as well as equitable supplier of the firm.
  • It is inspiring the consumers regarding the Woolworths product in the healthiest as well as sustainable way.
  • Investment of almost 1% of the 3 years rolling average regarding the total Group Earnings Before Interest and Tax within the community partners as well as a program (Woolworthsgroup.com.au, 2019). 

The company is in the process for the development of the people, prosperity and the planet and for that they also maintain a suitable report for the development. The organisation is also in the process of driving their cultural diversity, and presently there is almost 2200 workforce that declares to be Indigenous (Woolworthsgroup.com.au, 2019). 

BHP Billiton 

BHP is the one of the 90 fossil fuel extraction as well as marketing companies that are responsible for the 2/3 of the Global Greenhouse Gas emission. In the year 2014, the organisation launched the Lead Project in Mozambique (Writer, 2015). This project was regarding the new agricultural initiatives for the benefit of the farmers in the three districts of the area. In this project, it is promising for the benefit of more than 8.8 million dollars. The LEAD project deal with the Livelihoods Empowerment and Development of the farmers. This project eventually aims to work with 50 producer organisation or above that primarily represent the farm for the increment of income as well as the business opportunities. Corporate social responsibility policy of the firm state the zero tolerance for the various area of misconduct like; child labour, compulsory labour, treatment of the workforce, living wages, freedom of association and corruption (Bhp.com, 2019). In the year 2017, the organisation also had a suitable and effective partnership in the coal community for the enhancement of working function and also to maintain the carbon emission. It is the fact that sustainability is the core part of the firm to maintain their activity effectively within the field and also to perform social responsibility. The sustainability performance for the year 2018 are as follows;

People 

  • Zero-work related fatalities
  • Improvement in total recordable injury frequency
  • 50% reduction on the potential exposure number of employees (Bhp.com, 2019).

Society

  • Zo significant community events
  • Investment in the community program to improve the quality of life (Bhp.com, 2019).
  • Implement of the indigenous people in the working function

Climate change

  • Maintain the emission of greenhouse gas in the country

Protecting the environment

  • Zero significant environmental events
  • Reduce the freshwater withdrawal by 15% from the level of 2017 (Bhp.com, 2019).
  • Improve the marine as well as the terrestrial biodiversity outcomes
  • Earnings per share and method of calculation

Earnings per share are the vital financial measure that eventually indicates the profitability of the organisation (The Economic Times, 2019). It primarily serves as the indicator for the profitability ratio of the firm within the market. The simple EPS is generally calculated as;

EPS=Net Income-Preferred Dividends / Weighted Average common shares 

To effectively calculate the EPS of the firm it is essential to use the balance sheet and the income statement for getting the common share, net income or dividends paid information. The EPS are calculated in term of the basic and the diluted for the firm to access their profitability in the market. 

Comparison of EPS value of last five years any change of trend detected after CSR reporting

Woolworths Limited 

The earning per share for the company Woolworths Limited have the suitable value within the field which can be effectively valued from the income statement and the balance sheet of the firm (Mialon, Swinburn, Allender, and Sacks, 2016). Earnings per share in term of basic along with the dilute provide the suitable activity in the field. 

Table 1: Earnings per share of Woolworths Limited

Earnings per share20142015201620172018
Basic1.971.7-0.981.191.33
Diluted1.951.7-0.981.191.32


Basic Earnings per share for 2014 and 2015

Graph 1: Basic Earnings per share (Source: http://financials.morningstar.com)

The graph clearly shows that the basic earnings per share of the company for the year 2014 and 2015 was 1.97 and 1.71 respectively. It shows that the organisation profitability faces a decline for the financial year 2015 as compared to that with 2014. For the year 2016, it can be seen that the company face a loss as their earnings per share were almost -0.98 (Woolworths Group Ltd, 2019). During this time the company faces some of the huge loss in the market despite the corporate social responsibilities that are being developed by the firm. In the year 2017, the firm with the help of their sustainable and corporate social responsibilities strategies allow the firm to achieve their profitability ration as 1.19. This was the vast difference in the profitability ratio from the year 2016 to 2017. It is a primary fact where the organisation with their sustainability and corporate social responsibility maintain the share of the firm within the market. The basic earnings per share of the firm for the year 2018 were considered to be 1.33. The ratio eventually shows that the business with their effective strategy is developing the profitability ration within the market.

Diluted Earnings per share for 2014 and 2015

Graph 2: Diluted Earnings per share (Source: http://financials.morningstar.com)

The diluted earnings per share of the company show that the ratio is almost the same as compared to that with the basic earnings per share. The information provides that for the year 2014 the company had EPS of 1.96 ration and for the year 2015 it is considered to be 1.70 ratios. Furthermore, the ratio for the year 2016 was -0.98 and that for 2017 was 1.19 and for 2018 it was 1.32. All the information regarding the earning per share of the company effectively shows that the CSR has the vital impact over the business in term of their balance sheet and the income statement of the firm. The net income of the firm for the year 2014 show almost 2452, and for the year 2015, it was 2146 (Woolworths Group Ltd, 2019). For the year 2016, the net income come in the negative term that is -1235. For the year 2017 it was 1534, and for 2018 it was 1724 (Woolworths Group Ltd, 2019). This information effectively shows the vast change in the net income of the firm along with the earnings per share for the implementation of corporate social responsibility strategy of 2020 and working on the process of development.

BHP Billiton 

BHP Billiton is the mining firm that has a suitable value and position within the market with their sustainability activity. But at the same time, they are also considered to be one of the most effective companies that contribute to the emission of greenhouse gas in the world (Blowfield, Karam, and Jamali, 2017). Earnings per share of the firm show the valuable profitability ratio of the business within the market over the years. 

Table 2: Earnings per share of BHP Billiton

Earnings per share20142015201620172018
Basic5.20.71-2.42.211.39
Diluted5.180.71-2.42.211.38


Basic Earnings per share for 2017 and 2018

Graph 3: Basic Earnings per share (Source: http://financials.morningstar.com)

The basic earnings per share of the firm for the year 2014 were considered to be 5.2, and for the year 2015, it was 0.72 ratio. This eventually shows the huge decline in profitability ratio in term of the earnings per share of the company within one financial year. Furthermore, for the year 2016, the company face the loss as their earning per share was considered to be -2.4 (BHP Group Ltd, 2019). The situation eventually increased with time by the sustainability activity of the firm. It clearly shows that in the year 2017 the basic EPS was 2.21 but again for the year 2018 it declines to 1.39. This information shows the variation in the ratio and also the net income of the firm. The corporate social responsibility activity also did not have a huge impact on business development. It is the fact that the business needs to be effectively improved within the market by the help of valuable and suitable working function that is associated with the sustainability and CSR activity (Bice, 2017). 

Diluted Earnings per share for 2017 and 2018

Graph 2: Diluted Earnings per share (Source: http://financials.morningstar.com)

The diluted and basic earnings per share of the firm are same for the years 2015, 2016, 2017 and 2018. It helps the investors and the other shareholders of the firm to have a clear and suitable understanding regarding the profitability ratio of the business over the years. The sustainability and CSR have played little impact over the company as it can be seen that the target of sustainability performed 2018 done by BHP Billiton did not meet the target entirely (BHP Group Ltd, 2019). The primary target in term of the people was to reduce 50% in occupational exposure, but only 31% can be achieved (BHP Group Ltd, 2019). They also have the target of zero work-related fatalities, but by the year 2018, it was 2. All this effectively show that the CSR and the sustainability activity of the firm did not have any vital impact on the earnings per share of the business. The organisation also face the decline in earnings per share for the year 2018 due to one of the major facts that the greenhouse emission of the company increased by 1% rather than decreasing as their primary target of CSR and sustainability activity (Bair, and Palpacuer, 2015). 

Conclusion 

The organisation Woolworths Limited and BHP Billiton both have the vital role to play in the CSR and the sustainability activity to maintain their EPS and the market value. In comparing both the company, it can be evaluated that Woolworths Limited is quite dedicated towards their CSR activity as this can be seen on the consistency of EPS for the year 2017 and 2018. For the company BHP Billiton, it is depicted that their EPS fluctuate heavily as they are unable to maintain the CSR activity of the firm.

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