Role of accountancy in achieving sustainability
1.How does Accountancy Contribute to Sustainable Development?
2.The Importance of Integrated reporting in Australia.
In achievement of sustainability, accountancy plays an important role. It offers the business with the guidance of how to assure that the accountancy services in the organization are reliable, through connecting the challenges to the strategy and agenda of the business (Bebbington, Unerman and O’Dwyer 2014). 8 different manners in which the accountants can fulfil their responsibilities and create a difference are:
Connect and identify the crucial impacts and trends with the performance, business model and strategy of the organization
Integrate the considerable social and capital issues throughout the process of decision-making
Communicate in a clear way to assure the transparency
Offer credibility to the data and information that are produced through efficient governance and oversight (Unerman and Chapman 2014).
Analyse the advantages of handling the social and environmental issues for instances, revenue recognition and reduction of cost
Organise the internal processes and strategies to assure that the significant matters are being managed and measured.
Link the resources with the strategy for creating the value to the customers
Achieve the efficiency through minimization of wastes and controlling the costs (Bebbington and Larrinaga 2014).
Sustainability represents the focus for the profession. With the increase in the importance of social responsibility and environmental protection, various issues that are raised for the sustainable development are the issues related to the business risk, an area which is the concern area of the accountants. The accountants those are associated with the significant social and environmental segments are involved with the interpretation, recording and measurement of sustainability issues. Future management control and information systems require social and environmental data that emphasise on the advantages from the joined-up approach. The accountants are placed in a position to deliver the required integration and coordination. It is important for the profession of accountancy to consider the the contribution, indirectly or directly to achieve the target. The accountancy will be advantageous from a continuing and open dialogue on how they collectively can contribute for achieving the targets. The accountancy profession is contributing through the following –
Through meeting the international demands for the accountants with wide range of technical skills and at the same time through enhancement of the skills related to entrepreneurship, business and leadership.
Offering relevant skills and education related to the profession at the centre of the profession.
Through providing the continuous development to the accountancy profession throughout their careers and assisting them in maintaining the positive contribution and relevance for sustainable outcomes
Different ways accountants can create a difference
Through enabling the accountants to assist in achieving the sustainable outcomes through incorporating the sustainable developments into the accountancy education and providing regular support to facilitate the participation of accountants in the practice of sustainable business (Atkinson et al. 2014).
Creating the opportunities for the people to take-up the profession of accountants that will provide direct support to develop the local, national and regional economies.
Accountants facilitate and enable investment in the infrastructure segment through providing the key services in corporate and financial analysis or reporting, money laundering activities, anti-corruption activities and business advices.
The role of accountancy in supporting and developing the internationally accepted standards for the reporting of the financial statements for both the private and public sectors, ethics, auditing and also assist in carrying out the cross-border transactions and investments through assuring the general practices around the globe.
The accountancy profession has been proved as proactive in emphasizing the considerable contribution that accountants make in assisting the organizations, capital markets and government to implement their plans for changes in accounting policies and mitigation of risks associated with the changes.
Accountancy supports the highest professional, governance and ethical standards, which in turn, influence the organization in private as well as public sectors though their actions and behaviour and thereby assists in performing various roles.
Therefore, the accountancy plays an important role in facing the global challenge that is the sustainable development and they are also relevant to the developed economies as they are most disadvantaged and least developed. The role that are played by the business are equally important and critical as important are the role played by the civil society, non-governmental organizations, philanthropies and government. Apart from this, the challenges of sustainable developments that include the ethical challenges like corruption that arise from the failures of capital market and political issues can only be managed by accountancy only (Ball, Grubnic and Birchall 2014).
The main objective of integrating reporting is to explain the impacts of governance, social and organizations environmental factors on the financial performance and the way in which these flow from the internal and strategic management procedure. It states the extent to which the environmental, social and financial management systems are sustaining and generating values over the long-term, short-term and medium-term period. Integrated reporting assists in the following –
Summarize the company’s significant economic, environmental and social risks and the opportunities associated with that and in how from the holistic and forward-looking perspective that have been integrated by the companies into the strategy and core-vision over the long-term, short-term and medium-term period.
Importance of accountancy profession to consider the contribution
Sets-out the non-financial as well as financial key performance indicators for assessing the material opportunities and risks and explains how the performance level against each factor is managed for providing the value in short and long term period.
Recognizes the available resources and the ways in which that resources is to be used to maximize the output
Provides broad explanations regarding the prospective as well as the past performance of the organization
Improves the information quality that is available to the shareholders and enables them to take informed and judgemental actions (de Villiers, Rinaldi and Unerman 2014).
Integrated reporting needs the strategies to guide the activities of the company and states the interdependencies among the financial performance and the ESG (environmental, social and governance). Implementation of ESG within the corporate strategy and organization value delivers a signal to the employees at all the levels that the non-financial concerns of the organization does not comply with the purposes of the organization and are therefore are are reflected among the operational policies and strategies, day-to-day dealings and programmes. The degree to which the organizations are progressing towards integration of ESG within the core strategies and purposes significantly varies among the 50 companies of ASX (Sierra?García, Zorio?Grima and García?Benau 2015). The organizations that have poorest performance only scored 25% against the criteria as shown below:
Figure 1: Adoption of integrated reporting
(Source: Accglobal.com 2017)
Through implementing the ESG within the core business of the organization, the integrated reporting requires that the responsibility of the management through the organization includes the non-financial issues. In other words, the significant non-financial matters shall be the standing agenda at the board committee and board meetings. Alignment of incentive structure and performance appraisal with the non-financial items can assist to assure that the staffs and the board are responsible for the issues related to non-financial items and therefore provide for the implementation of integration. Regular communication from the senior executives regarding how the staff members can contribute to the benefits of integrated reporting approach is also crucial (Stubbs and Higgins 2014).
The integrated reporting requires changes in which the business is conducted and requires long-term and strong planning. Effective management of risk assures that the company is active in managing and anticipating the emerging opportunities and risks. Managing, prioritising and defining the ESG related risks are not as simple as the management of conventional risks. Recognizing the risks through the application of financial threshold limit is not sufficient. It needs a wider consideration of time frames and impacts that are informed by the determination of transparent materiality and the process of prioritisation. As per the present scenario, there is considerable variation within the ASX 50 organizations with regard to the level of ESG integration with the core business. Public disclosures regarding the non-financial risk and the practices associated with the management is not practiced well by majority of ASX 50 (Lodhia 2015). Further, only few companies report clearly regarding the engagement practices of the shareholders. As the integrated reporting requires high level of transparency, the engagement of the shareholders is becoming more crucial. The disclosures of the organization regarding the engagement of the shareholders detail the raised issues and consultation practices. Therefore, the integrated reporting has significant importance in Australia as it will assist in achieving the corporate social responsibility and analysing the extent to which the environmental, social and financial management systems are sustaining and generating values over the long-term, short-term and medium-term period (Feng et al. 2017)
References:
Atkinson, G., Dietz, S., Neumayer, E. and Agarwala, M. eds., 2014. Handbook of sustainable development. Edward Elgar Publishing.
Ball, A., Grubnic, S. and Birchall, J., 2014. 11 Sustainability accounting and accountability in the public sector. Sustainability accounting and accountability, p.176.
Bebbington, J. and Larrinaga, C., 2014. Accounting and sustainable development: An exploration. Accounting, Organizations and Society, 39(6), pp.395-413.
Bebbington, J., Unerman, J. and O’Dwyer, B., 2014. Sustainability accounting and accountability. Routledge.
de Villiers, C., Rinaldi, L. and Unerman, J., 2014. Integrated Reporting: Insights, gaps and an agenda for future research. Accounting, Auditing & Accountability Journal, 27(7), pp.1042-1067.
Feng, T., Feng, T., Cummings, L., Cummings, L., Tweedie, D. and Tweedie, D., 2017. Exploring integrated thinking in integrated reporting–an exploratory study in Australia. Journal of Intellectual Capital, 18(2), pp.330-353.
Lodhia, S., 2015. Exploring the transition to integrated reporting through a practice lens: an Australian customer owned bank perspective. Journal of Business Ethics, 129(3), pp.585-598.
Sierra?García, L., Zorio?Grima, A. and García?Benau, M.A., 2015. Stakeholder engagement, corporate social responsibility and integrated reporting: an exploratory study. Corporate Social Responsibility and Environmental Management, 22(5), pp.286-304.
Stubbs, W. and Higgins, C., 2014. Integrated reporting and internal mechanisms of change. Accounting, Auditing & Accountability Journal, 27(7), pp.1068-1089.
Unerman, J. and Chapman, C., 2014. Academic contributions to enhancing accounting for sustainable development. Accounting, Organizations and Society.
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