This report is prepared for Qantas Airways evaluating a news article published recently that highlights the issues faced by the organization related to corporate social responsibility. This report evaluates the current sustainability reporting practices of the company and the perspective adopted by it for this purpose. The news article published in June 2020 outlines the decision of Qantas Airways to cut down 6,000 jobs in the wake of the coronavirus pandemic. The organization made an announcement that this would help them reduce the cost of operations by billions of dollars and also enable the entity to raise fresh capital for the continuity of the operations and for the growth of the business. Qantas Airways is a consumer brand and therefore, it acknowledges the need for a strong commitment to social welfare for the continued support of the general population. The announcement made by the organization is rationalized and compared by making use of the stakeholder theory and the triple bottom line theory of social responsibility and sustainability reporting. Followed by this, the motive of the communication carried out by the organization, its effectiveness and its impact is evaluated in the report.
Qantas Airways Limited is the largest airline in Australia in terms of the size of the fleet, the number of international destinations covered and the number of international flights. Founded in the year 1920 in Queensland, it was named Qantas as an acronym of the Queensland and Northern Territory Aerial Services Limited. The main business of the organization is customer transportation with the help of the two complementary brands of the organization namely Jetstar and Qantas. Along with this, the broad portfolio of the Qantas group includes the frequent flyer program, goods transportation and the management of freight enterprises(Qantas Airways Limited, 2020). Qantas Airways has an open-source and transparent approach to corporate reporting and the disclosure of any material information about the operations and the performance of the company. The details related to the financial and non-financial performance of the entity are presented in complete compliance with the global reporting standards, ASX rules and the ASIC regulations(Qantas Airways, 2021). This report is prepared to assess a corporate social responsibility issue for Qantas Airways and rationalize the measures taken by the organization and communication carried out by it on the basis of the theories and principles. The article selected for this analysis was published in the Economic Times in June 2020. The report evaluates the effectiveness of the disclosure made by the organization, the motive, the impact and effectiveness of the same and the recommendations on the basis of this analysis.
Corporate social responsibility is a self-regulating concept for business organizations making them socially accountable not just to its stakeholders but also to itself and to the general public. It is a strategic initiative that can contribute to the reputation of a brand and there are more and more business organizations that are coming up with social responsibility initiatives that are aligned with their business model and integrated within the business strategy itself helping them go beyond the regulatory and the mandatory compliance requirements.
The news article published in June 2020 outlines the decision of Qantas Airways to cut down 6,000 jobs in the wake of the coronavirus pandemic(The Economic Times, 2020). The organization made an announcement that this would help themreduce the cost of operations by billions of dollars and also enable the entity to raise fresh capital for the continuity of the operations and for the growth of the business. Along with this, the organization also made an announcement that 15,000 employees of contest would be given extended furloughs because of the poor economic position. This decision was taken to ensure that the organization is able to survive the pandemic and even though the decision was expected to have a huge impact on thousands of households, it was necessary so that the organization could continue operating as a going concern.
From the corporate social responsibility perspective, the covid-19 pandemic has come as a defining moment. While there are several entities boasting off hair social purpose and the set of values that are central to the business strategy and decision making, the pandemic has proved that it can become challenging for the organizations to make good on the commitment of caring for the employees and ensuring their welfare as a key stakeholder group of the business. Qantas Airways is a consumer brand and therefore, the organization often discusses the strong commitment to social welfare for the continued support of the general population and the social license to operate. The organization maintains very high operational standards and believes in being completely transparent when it comes to communicating with the stakeholders while also acting responsibly. The three principles guiding the corporate social responsibility initiatives of Qantas Airways as outlined by the organization in their official website are presented in the figure below.
Figure 1: Qantas sustainability principles (Qantas Airways Limited, 2021)
Every member of quarters is considered to be a custodian of the reputation of the business and the organization work towards creating an environment that is resilient, inclusive and diverse for maximizing the performance and the engagement of each of its members. The beliefs shared across the Qantas Group for creating a healthy working environment for its members include the creation of an environment where all the employees can work in an inclusive manner and derive output that is optimal for the entire group. The organization also outlines how every member deserves good leadership, respect and trust and therefore, Qantas Airways take its role of a corporate citizen very seriously encouraging the employees and developing a reward and recognition system that is fair and built around the values and beliefs of the company(Qantas, 2021).
Despite all these values and principles followed and outlined across the organization, the covid-19 pandemic give rise to an agency problem which is defined as a conflict of interest that is inherent in any relationship where one party is expected to make the decisions that are in the best interest of another party. In this situation, the managers and the decision-makers at Qantas Airways are appointed as the agents for the shareholders of the company. It is their responsibility to maximize the wealth of the shareholders and ensure your continued operations of the organization, even though the managers and the decision-makers may face some situations where maximizing their own wealth and their benefits is in their best interests(Boshkoska, 2015).The agency problem is faced when there are situations or incentives where the agent appointed for decision making cannot act in the best interest of the principal who has appointed the agent. Because of this principal-agent relationship, the agent may be motivated to make decisions that may not be favorable for the principal but provides some incentive to the agent(Jerzemowska, 2006). In the given case, cutting down the jobs is not beneficial for the employees of the company who will lose their livelihood, but it is a decision that the organization needs to make to continue its operations and to ensure the protection of the wealth of the stakeholders.
A lot of management practitioners and scholars believe that the stakeholder theory is an excellent narrative that provides an understanding of the interconnected business problems of creating the maximum possible value by the company and drawing a connection between capitalism and ethics. The stakeholder theory presents the idea that the business organization is not only accountable to the shareholders but also to the other stakeholders of the company(Odeh & Abu-Assab, 2015). This is very different from the traditional shareholder theory which claims that the managers of a corporation only need to fulfil the duty of maximizing the shareholder returns. The stakeholder theory highlights the ethical duty of the business managers not only to the corporate shareholders, but also to the members of the community in which the organization operates making sure that the activities that are beneficial for the organization and its profitability are not harming the community. The stakeholder perspective of an organization considers the owners, management and the employees as the internal stakeholders of the company and the suppliers, customers, shareholders, predators, government and the society as the external stakeholders(Kochan & Rubinstein, 2000).
Figure 2: Stakeholder perspective
Among these, the employees of a business organization are the primary internal stakeholders because they make a significant investment of the time and finances in the company. Along with this, the employees also play a significant role in defining the organizational tactics, strategy and performance. Therefore, the decision of Qantas Airways to downsize the business operation and cut down 6,000 jobs would adversely affect this stakeholder group of the company. It can be challenging for a business organization to navigate during the uncertain times and it becomes even more challenging to make the decisions that ensure that all the stakeholders benefit from them. Considering employees as the stakeholders of the company can be beneficial in various ways and taking the decision of downsizing can have an adverse impact on the performance on the morale of the employees(Stavrou et al., 2007).
Triple bottom line (TBL) is an emerging and popular theory in economics that posits that the business organizations should focus as much on the environmental and the social concerns as they do on maximizing the profits. The TBL theory supports the idea that there is not just a single bottom line for the organization but three bottom lines concerning the profit, planet and people(Arowoshegbe et al., 2018). TBL is popularly used for evaluating the level of commitment of the organizations demonstrate towards corporate social responsibility and the impact of its operations on the environment over time. The term triple bottom line was coined by John Elkington in the year 1994 as a new approach to measuring the corporate performance of the business organizations. The idea behind presenting this theory was that the organizations can be managed in a way that not only helps them in maximizing the money that they earn but also improving the planet and the lives of the people(Lee, 2007).
According to the TBL theory, profit is the traditional measure of the corporate performance of the organization evaluated with the help of the financial statements. The people aspect of the performance measures the social responsibility of the organization and the planet aspect of the performance is a measure of the environmental responsibility of the entity. Even though this theory has been widely supported throughout the world, the challenges in quantifying the environmental and social bottom lines make it very difficult to implement. The inherent quantitative nature of the profitability of the organization makes it the easiest measure for the business. The decision taken by Qantas Airways that resulted in at least 6,000 employees losing their job was made by focusing on the bottom line determining the profitability of the business, however, the people aspect of the triple bottom line was overlooked by the company when adopting this strategy. The motive of the organization behind this disclosure and announcement was to ensure that the wealth of the stakeholders is protected. This decision was also made to ensure the continuity of the operations of the organization in the long run without any interruption and the sustainability of the business despite the ongoing crisis and the loss of revenue faced by the entire air transportation sector(Qantas Airways Limited, 2021).
Qantas acknowledges that the responsible reporting and disclosure practices are essential for the long-term success of the brand and the organization. Qantas is working towards protecting this value and carries out regular disclosure of the responsible practices adopted by the organization to ensure that its social licence of operating in the society remains intact. After evaluating the news piece related to the corporate social responsibility issues being faced by Qantas Airways because of the recent decision of cutting down 6,000 jobs, there are certain recommendations presented in the report that can be applied at the corporation level and also at the regulatory level. These recommendations can help in improving the effectiveness of the CSR disclosures made by the organizations and also enhance the quality of these disclosures(KPMG, 2019).
The CSR reporting by the organization should not just be a tick mark activity and the organization should actually and sure that the efforts made by the entity are bringing about a positive change. This will ensure the organization continues to receive public support and position itself as an ethical business group that is conscious of the impact of its activities on the environment and that is good to its employees. For this, it is recommended that the organization should prepare a checklist that covers all the key components of a strong format for CSR reporting beginning with summarising the recent performance of the company and the details of the operations. Followed by this, the CSR report of the organization should use this opportunity for building trust among stakeholders by promoting transparency and communicating the same in the report. The information included in the CSR report of the organization should be authentic and the organization should honestly acknowledge both good and bad influence of the business organization on the environment, the society and the people. It is also recommended that the organization should set sustainability goals that are not overly ambitious but still challenging and achievable. These goals should be clearly identified and communicated in the CSR report of the company and these goals should also be linked with the environmental standards that are widely accepted across Australia(Freundlieb & Teuteberg, 2013).
Another recommendation for Qantas Airways to practice effective CSR reporting is to include a summary of the target performance that the organization is willing to achieve and also provide a description of the progress that it has made towards the previous goals and the changes that are being made by the entity for accelerating this progress. Including the research conducted by third parties on specific issues highlighted in the previous CSR reports can provide authenticity and relevance to the report presented by the party(Wood, 2010). The CSR report for the organization should be able to identify and also address the specific ways through which it is planning to improve the CSR contribution that it is making. Finally, it is also recommended that Qantas must include references from both internal and external sources for any claims made by the entity and the data included in the CSR report for enhancing its credibility. This would ensure that the organization is preparing a holistic report and the data provided in it can be verified by the readers from the sources provided by the company(Hohnen & Potts, 2007).
Sustainability reporting allows the regulatory bodies to hold the business organizations accountable for the impact that they are having on the environment and on society. It also helps in initiating a dialogue between the regulatory bodies and the corporations on how they can contribute to the national efforts for sustainable development. In order to enhance the efficiency of the sustainability reporting by the business organizations, the regulatory bodies need to come up with a globally accepted and uniform Framework that defines the rules and regulations for sustainability reporting and also helps in increasing the compare ability of the reports published by the different organizations. Currently, there are several different standards and regulations that the organizations follow for sustainability reporting and the lack of any uniformity in the regulation of this reporting results in inconsistencies, variability and lack of credibility to the reports published by the entities(Jose, 2018).
The organizations presenting the sustainability report that includes the environmental, government and social activities carried out by the business do not present an accurate picture of their investment decisions. Just like the financial disclosures, there should be shared standards for business organizations when they make the sustainability disclosures for addressing this challenging and unusual situation. There are numerous major reporting frameworks and standards and the business organizations are allowed to select any of these standards at their discretion. Along with this, the application of these standards is also left up to the organizations which makes it very challenging for the investors and other users of this information to reconcile the disparate corporate sustainability disclosures made by the entities and draw a comparison between the disclosures made by two different organizations(Manoa, 2020). The proliferation of different standards and frameworks has provided the business organizations with even more freedom to make the decisions for themselves and choose among them. Typically, the organizations carries out this decision making in a unilateral manner without involving any of the members of the different stakeholder groups. It is recommended that the regulatory body should make it mandatory for the business organizations to consult and encourage the participation of the representatives belonging to the stakeholder groups of consumers, employees, local communities, regulatory bodies, government and investors to evaluate and select an appropriate sustainability reporting framework so that the needs and expectations of each of these stakeholder groups are balanced(Mynhardt et al., 2017).
This report is prepared for Qantas Airways evaluating a news article published recently that highlights the issues faced by the organization related to corporate social responsibility. This report evaluates the current sustainability reporting practices of the company and the perspective adopted by it for this purpose. These practices are rationalized and compared by making use of the stakeholder theory and the triple bottom line theory of social responsibility and sustainability reporting. Followed by this, the motive of the communication carried out by the organization, its effectiveness and its impact is evaluated with the help of these theories. On the basis of this case analysis, the report has presented recommendations for improving the functionality and effectiveness of CSR reporting at the corporation level and at the regulatory level to enhance the quality of reporting by the entities. These recommendations will ensure that the organization is preparing a holistic report and the data provided in it can be verified by the readers from the sources provided by the company. They will also help in the harmonisation of the sustainability reporting practices and also ensure that the expectations and the perspectives of different stakeholder groups are taken into consideration by the organizations when carrying out the CSR reporting.
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