Corporate Social Responsibility and Disclosure of Socioenvironmental Risks by Credit Unions

Corporate Social Responsibility and Disclosure of Socioenvironmental Risks by Credit Unions

Rodrigo Gaspar de Almeida (Universidade Estadual de Maringá, Brazil), Marguit Neumann (Universidade Estadual de Maringá, Brazil), Simone Leticia Raimundini Sanches (Universidade Estadual de Maringá, Brazil) and Valéria Gama Fully Bressan (Universidade Federal de Minas Gerais, Brazil)
DOI: 10.4018/978-1-7998-2128-1.ch006

Abstract

This study aimed to investigate which groups of stakeholders Sicredi has included in its assessment of socioenvironmental risks. To that end, the content analysis technique was applied for primary sources, interviews with Sicredi's superintendent and the supervisor of Brazil's Central Bank, and secondary sources e.g. organizational reports. Results evidenced that stakeholders—credit union members, employees, government, community and the media—were included in Sicredi's socioenvironmental risk disclosure. As theoretical contributions, this study provides discussions around corporate social responsibility and socioenvironmental risks at credit unions. The target audience of this study can be those in academia, practitioners, business managers, professionals from the financial industry, and corporate social responsibility researchers.
Chapter Preview
Top

Introduction

Corporate Social Responsibility prescribes that credit unions (Financial Institutions) shall operate under the Triple Bottom Line (TBL) of Sustainable Development, which entails equitably fulfilling economic growth, environmental quality and social equality, including transparency when disclosing information to stakeholders (positive and negative impacts). It is identified by the establishment of organizational policies that seek the wellbeing of society and must comprise: preservation of environmental and cultural resources for future generations, respect for biodiversity, fight against social inequalities, and inclusion of socioenvironmental information in accounting reports (Carroll, 2015; Clarkson, 1995; Deegan, 2017; Elkington, 2012; Freeman & Evan, 1990; Gray, 2001).

Within the scope of credit unions, socioenvironmental risk is defined as the possibility that an event related to environmental or social aspects may unfavorably impact their objectives. This risk may be direct or indirect. Direct socioenvironmental risks of credit unions result from the impact caused by the use of natural resources such as water, paper and electricity to render services, as well as from employee relations. Indirect socioenvironmental risks arise from the impacts from financed projects; therefore, they are related to financial intermediation services, which are the main business of credit unions (Federação Brasileira dos Bancos, 2015; Nogueira, Conceição & Imbroisi, 2015; Sanchéz, 2011).

It should be noted that joint and several (legal) liability of credit unions has already existed with regard to socioenvironmental damages arising from the projects they finance (article 3) since the enactment of Law no. 6,938, of August 31, 1981. Furthermore, the Central Bank of Brazil (BACEN) enacted Resolution 4.327, of April 25th, 2014, making it compulsory for Financial Institutions to disclose their socioenvironmental policy, including socioenvironmental risks (BACEN, 2014; Brasil, 1981; Nogueira et al., 2015; Ribeiro & Martins, 1993).

The manifestation of socioenvironmental risks can result in financial and socioenvironmental losses for the credit union and its stakeholders. Therefore, Corporate Social Responsibility embraces the need to develop mechanisms for these financial institutions to identify and mitigate socioenvironmental risks, by seeking to provide liquidity to the credit union, promoting socioenvironmental wellbeing, and acting under the Triple Bottom Line (Carroll, 2015; Elkington, 2012; FEBRABAN, 2015; Nogueira et al., 2015; Sanchéz, 2011).

The process of disclosing socioenvironmental risks demands that credit unions identify who their stakeholders are and how they are affected (Clarkson, 1995; Gray, 2001). Barakat, Boaventura & Polo (2017) argue that Financial Institutions expose themselves to these risks due to their client portfolio. For this reason, the identification of stakeholders affected by the activities of credit unions and the profile of member portfolios reinforce the need to disclose socioenvironmental risks.

From this perspective, Stakeholder Theory (normative view) seeks to identify who the stakeholders are in order to help an organization disclose how it understands and treats their demands or needs. Additionally, communication that aims to serve stakeholders is a CSR practice (Freeman & Evan, 1990).

In that regard, highlight is given to the operation in Brazil by the Sicredi, which structured a plan (2016-2020) with 3 main goals: 1) relationship and cooperativism; 2) responsible solutions (socioenvironmental risk management); and 3) local development (Sustainability Report-RS, 2017). This planning contributed to the investigation on the socioenvironmental risks of credit unions, as well as stakeholder engagement and CSR.

Key Terms in this Chapter

Stakeholders: All groups or people that affect and are influenced by the activities of organizations. Examples of stakeholders: union members, owners, investors, employees, government, society, media and suppliers.

Socioenvironmental Risk: It refers to the possibility of an event related to environmental or social aspects occurring and preventing an organization from reaching its goals. It causes adverse (undesired) effects on health (human life), the environment and material goods, has a macroeconomic and microeconomic nature, is intrinsic of any enterprise and involves Corporate Social Responsibility practices and stakeholder engagement.

Corporate Social Responsibility: It is about how an organization operates in the economic, environmental and social spheres with its value chain, including compliance with legal requirements on (compulsory) disclosure and voluntary disclosure to stakeholders, which involves socioenvironmental risks. Besides, it is identified by short, mid- and long-term organizational policies compatible with Sustainable Development.

Disclosure: Practice through which an organization provides its users with relevant information to guide decisions.

Credit Unions: Financial Institutions whose objective is to provide financial services to their members and develop the community of which they are a part; to do so, they need to engage with their stakeholders by disclosing socioenvironmental risks.

Stakeholder Engagement: It refers to an organization’s capacity to understand and meet the demands of the audience that affects and is influenced by its activities.

Solidary Responsibility: Sharing of legal responsibility with a third party (person or organization), concerning a certain act – for instance, debt or legal agreement. When one of the parties violates laws, both may be prosecuted.

Complete Chapter List

Search this Book:
Reset