Many executives are under intense scrutiny to understand the risks associated with their company strategies because unforeseen risks can drastically affect a company’s stock price and financial viability. Since the inception of the Sarbanes-Oxley Act of 2002 (SOX) companies have had to demonstrate through business reporting that the company not only understands the connection of strategy to risks, but must also be able to quantify the impact of risks, as well as demonstrate plans of action to deal with risks as they occur. Reporting risks are specifically important because they are the company’s most complete display of its performance and can directly changes how investors determine the stock price of the company – a key factor for all publicly traded companies.
One way companies can quantify and report its risk is through Corporate Social Responsibility (CSR) reporting. AEP created the 2010 Corporate Accountability Report to demonstrate to stakeholders that the company is being a positive force in society and in the world. Yet some companies, like BP, have created CSR reports that do not align reality with what the company is reporting. The impact of poor CSR reporting is that some companies produce quality information for stakeholders while others greenwash its reports to look good for stakeholders, making CSR reports difficult for readers to believe and compare against other companies and across time periods.
This report assesses the accountability and comparability of AEP’s 2010 Corporate Accountability Report to demonstrate that the company still has room for improvement in how it reports. This was accomplished by utilizing AEP’s Integrated Enterprise Risk Model (ERM) to understand the company’s environmental and safety strategy, the associated risks and stakeholders, and how AEP reports on these issues to determine the strengths and weaknesses of the report. Then AEP’s organization model and risk management strategies were used to lay ground for assessment. After the groundwork was laid out, this report focused on the environmental, safety, and health (ESH) reporting group to identify the risks in the Corporate Accountability Report in conjunction with the two challenges of reporting – accountability and comparability. Through this assessment it was shown that the CSR report received a “satisfactory” in terms of meeting the reporting challenges because the report correctly assessed the assumptions and attempted to be accountable, but lacked strong comparability and omitted some risks that could be critical to the business’ long-term sustainability.