Introduction
Financial statement evaluation analyzes a corporation’s financial data to make business choices. The tool is used by various parties to evaluate an institution’s overall health. CSR uses it as a monitoring tool to assess the responsibility, transparency and accountability of firms (Wang et al., 2020). Enhancing transparency, accountability, and stakeholder confidence through incorporating CSR into financial statements leads to promoting ethical and sustainable company practices.
Income Statement
The Gross Profit Margin (GPM) is one of Patagonia’s financial statement KPIs. GPM reveals if a business can cover its costs and continue to make money from every transaction, which solidifies a business’s financial sustainability (Houston, 2021). The GPM of the company shows that it is seeing revenue increase year over year after switching to sustainable growth for long-term viability. When comparing the GPM of the organization, it was different since sales had grown; in 2017, the GPM was 41.33%, while in 2018, it was 46.57%. The company kept $0.52 of every dollar of revenue as gross profit (Appendix A). This expansion proved that the company’s CSR and TBL accounting approach considers factors other than a business’s bottom line. Thus, Patagonia guaranteed the TBL fostred its long-term viability.
Cash Flow (CF) Statement
When a company’s operational cash flow or liquid assets are greater than the cash required to keep it afloat, it is said to have a positive cash flow. Regarding Patagonia, the company had a favorable change in its cash flow from operating operations from $7449 in 2017 to $11919 in 2017 (Appendix B). As a result, the cash flow statement shows that despite a positive CF, the firm prioritizes CSR by allocating $925 in 2018 and $16 in 2017 to prepaid project expenses. These contributions demonstrate Patagonia’s concern for societal well-being.
Balance Sheet (BS)
A balance sheet summarises a company’s financial status at a specific period. One KPI used by Patagonia to demonstrate its involvement in CSR is goodwill. Since the funds have remained constant at $8000 for three years (2016, 2017 and 2018) (Appendix C), the company has only made modest CSR efforts in BS. The company does not provide a great atmosphere for employee learning and growth.
Executive Summary
The executive summary received negative feedback for underplaying the CSR activities. In particular, the value of community-based incentives would depend on how many customers signed up for a specific community-based CSR program. In contrast, the distribution of incentives could be decided by the consumer or based on the purchase (Executive Summary, n.d.). In particular, purchases at the grocery store can count toward a charity’s point total.
Vision, Mission, and Values Statements
The expressions of Patagonia’s vision, purpose, and values significantly prioritize CSR. For instance, maintaining people’s health is emphasized in its goal. Additionally, a little increase in profit margins has demonstrated the success of their objective to deliver great customer service. As the business has maintained a constant market niche for three years, the values of creating shareholder value and long-term growth have supported the CSR idea.
CSR Activism and Strategy
A company’s commitment to tackling social and environmental challenges outside of its primary commercial goals is demonstrated by its participation in CSR activism. This proactive approach can improve the company’s reputation and establish it as a moral and ethical business. An edge in the marketplace can result from greater market share, financial investments, and top talent that a company’s good reputation can attract. Therefore, it is essential to explicitly express the specific social or environmental challenges that the firm seeks to address through its CSR activity to satisfy the KPI. On the strategy, the firm should establish quantifiable goals that align with the values of the business, the sector, and stakeholder expectations.
Conclusion
Basically, organizations’ CSR plans are crucial for their sustained viability. The performance and prospects of businesses are indicated by some indicators, including the income statement, cash flow statement, executive summary of the balance sheet, and mission and vision statements. As a resut, employees must support the organization’s CSR activities to do so decisively. Additionally, Patagonia’s good reputation and neutrality depend on CSR action and strategy.
References
Executive Summary. Sales and marketing proposal to increase rewards memberships in low-income markets [Lecture notes on resource allocation] (n.d.). Web.
Houston, M. (2021). Profit margin is an essential KPI to monitor in your business. Forbes. Web.
Wang, F., Zhang, Z., & Xu, L. (2020). Corporate social responsibility and financial statement comparability: Evidence from China. Corporate Social Responsibility and Environmental Management, 27(3), 1375–1394. Web.
Appendices
Appendix A
Appendix B
Appendix C
