BUACC 2614 – Management Accounting 2

Group Assignment

“Are accountants the last hope for the world’s ecosystems?” (Watts, 2010)

Accountants might not be the last hope for the world’s ecosystems but they contribute significantly towards their conservation. This is mainly achieved through sustainability reporting, which enables organizations to monitor the impact of their economic activities on the environment. A notable step towards sustainability reporting is the adoption of the Global Reporting Initiative (GRI), which provides a comprehensive sustainability reporting framework that facilitates greater organizational transparency. The framework, which includes Sustainability Reporting Guidelines prescribes the Standard Disclosures and Principles that organizations can use to report their economic, social, and environmental performance and impacts (GRI, 2015). Because they are required to produce a sustainability report at the end of each financial year, organizations are prompted to engage in sustainable supply chain management, which entails the pursuit of sustainability objectives through the purchasing and supply process, incorporating social, economic and environmental elements.

Sustainability reporting is a broad term synonymous with other terms such as corporate responsibility reporting and triple bottom line that generally refer to reporting on social, economic and environmental impacts of an organization (GRI, 2011). This practice has been in existence for at least two decades now, only it has not received adequate attention from several stakeholders who cannot fathom that accountants are also capable of engaging in environmental conservation. The truth of the matter is that many accountants are currently making deliberate efforts to ensure that they provide a balanced and reasonable representation of the sustainability performance of their organizations. The individual contribution of the accounting body towards environmental conservation is invaluable because accountants are in a unique position to curb environmental pollution at its roots. It is worth noting that large multinational corporations in the mining industry are perhaps the major contributors of environmental pollution owing to the scale of their operations. If accountants can significantly reduce rate at which these corporations are polluting the environment, then there is a very high likelihood that they are indeed the last hope for the world’s ecosystems.

Basing on the GRI reporting framework, sustainability reports help organizations to disclose results and outcomes that took place within a given reporting period in relation to the organization’s strategy, commitments and management approach (GRI, 2013). These reports serve a myriad of purposes including, benchmarking and assessing the sustainability performance of the organization, demonstrating how the organization affects and is affected by expectations about sustainable development and facilitating a comparison of the performance of different sections within an organization and the organization as a whole in relation to other organizations. In essence, the GRI Guidelines offer Standard Disclosures, Reporting Principles and an Implementation Manual to assist organizations in preparing sustainability reports irrespective of their size, sector or geographical location. The guidelines also provide an international reference for organizations that intend to disclose their governance approach and the social, economic and environmental impacts of their operations.

 

According to Transparency International (2010), accounting plays a critical role in reducing the overexploitation of natural resources by unscrupulous business practitioners and corrupt government officials who only seek to amass individual wealth at the expense of societal welfare. Accounting particularly helps in ensuring that all government revenues arising from the extraction of natural resources are disclosed hence discouraging the abuse of power and illegal exploitation of natural resources. Moreover, the accounting practice is governed by the International Accounting Standards Board (IASB), which sets accounting standards for at least 110 countries across the globe. As such, this body has the capacity to reduce environmental pollution on a global scale and promote socially responsible management of natural resource wealth.

On the other end of the spectrum, some critics believe that accounting professionals still have a long way to go before they can claim to have made any significant contributions towards environmental conservation. Watts (2010) discussion revolves around the various efforts that have been made by the United Nations and other stakeholders in order to attach an economic value to nature, which is referred to as eco-accounting. For this reason, critics have argued that the article mainly deals with environmental economics as opposed to accounting. The Centre for Social and Environmental Accounting Research (CSEAR) (2010) argued that the mere attachment of an economic value to nature does not hold any water because there is a lot more to accounting that finance, economics, or numbers. To the contrary commodification of nature could result in undesirable consequences. If anything, attaching a value to nature is only effective as far as publicity is concerned. CSEAR further postulated that accountants might be in a position to transform people’s understanding of nature but they will require to apply more efforts toward environmental conservation for them to achieve any tangible results. Notwithstanding, it is evident that accountants as strategically positioned to reduce the rate of pollution by most organization where their services are required and as such, they will ultimately play a pivotal role toward environmental conservation.

According to Gleeson-White (2014, p.281), “The six capitals model is a powerful way of asking corporations to consider their impact on their social and natural environments only so recently accepted as being inextricably linked to their commerce after all. So it does give business the option of responding to the problem of externalities, and within this frame the pioneering work of Puma’s environmental profit and loss account has made a start on accounting for nature. Integrated reporting is, as its advocates say, an idea whose time has come.

 

But there is a logical inconsistency at the heart of the six capitals model which will prevent it alone from saving the planet: it seeks to account for nonfinancial value but can see it only in terms of financial value. This is because the entity it seeks to govern, the corporation as we know it, is legally bound to make decisions in favour of financial capital”.

 

( c) According to Sikka (2008, p.291), “The burgeoning corporate social responsibility literature rarely focuses on the anti-social practices of accounting firms…Accountancy firms are on a collision course with civil society”.

As aforementioned most sustainability reports are governed by GRI Guidelines, which are prepared after rigorous consultations with several stakeholders including business representatives, labor and financial markets, the civil society, auditors and experts from different fields. Regulators and government agencies from different countries are also consulted to ensure that the guidelines are consistent with internationally recognized reporting standards. As such

 

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(a)http://www.theguardian.com/environment/2010/oct/28/accountants-hope-ecosystems.

(b) (Gleeson-White, 2014)(c) (Sikka, 2008)

Required:

 

Discuss the issues raised in the above excerpts. Include your views on the role that the accounting profession can play in the demonstration of Corporate Social Responsibility and Sustainable Development. Also, identify any problems that the profession may encounter in this process.

References

[GRI] Global Reporting Initiative. (2015, May 18). Reporting Framework Overview. Retrieved from globalreporting.org: https://www.globalreporting.org/reporting/reporting-framework-overview/Pages/default.aspx

Centre for Social and Environmental Accounting Research. (2010, November 8). News, events, thoughts and musings on sustainability accounting and accountability. Retrieved from csearweb.blogspot.com: http://csearweb.blogspot.com/2010/11/are-accountants-last-hope-for-worlds.html

Gleeson-White, J. (2014). Six Capitals, or Can Accountants Save the Planet?: Rethinking Capitalism for the Twenty-first Century. New York: WW Norton.

GRI. (2011, September 26). Sustainability Reporting Guidelines. Retrieved from Global Reporting Initiative: https://www.globalreporting.org/resourcelibrary/G3.1-Guidelines-Incl-Technical-Protocol.pdf

GRI. (2013, May 14). Sustainability Reporting Guidelines. Retrieved from Global Reporting Initiative: https://www.globalreporting.org/resourcelibrary/GRIG4-Part1-Reporting-Principles-and-Standard-Disclosures.pdf

Sikka, P. (. (2008). Enterprise culture and accountancy firms: new masters of the universe. Accounting, Auditing & Accountability Journal, 21(2), 268-95.

Transparency International. (2010, May 18). Accounting can change the world. Retrieved from blog.transparency.org: https://blog.transparency.org/2010/08/06/accounting-can-change-the-world/

Watts, J. (2010, October 28). Are accountants the last hope for the world’s ecosystems? Retrieved from The Guardian: http://www.theguardian.com/environment/2010/oct/28/accountants-hope-ecosystems

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