Literature review
This report contains data related to sustainability accounting and organizations reporting frameworks. Each and every organization should be inclined towards using efficient use of their resources in determined approach. This report provides how sustainability accounting would provide great impact on society and business functioning of organizations. Organization performs its business functions in society and has to return backs what it takes while running its business in society. It is evaluated that Sustainability accounting can also be said as environment accounting or corporate social responsibility reporting which represents financial accounting related to performance of a firm to external parties such as stakeholders. The main focus is on activities which have straight impact on the environment or the society. Organisation uses sustainability accounting as an instrument to become more sustainable. Internal decision is made by the management and policies are created that will have effect on organisation, society and economy of the country. Its main focus is on triple bottom line which is economic, social and environment or the triple P’s that is people, planet and profit or triple bottom line consist of economic viability, social responsibility and environmental responsibility. This is the way organisation improve transparency by it. Sustainability accounting adds values to the organisation and the services, which may create a good image in the market. Not only to the organisation but to the environment and the ecosystem also it is beneficial. This report also represents organisation’s governance model and strategy towards sustainable global economy (Ioannou and Serafeim, 2016)
As per the Bebbington, Unerman, and O’Dwyer, 2014 it is reflected that since over a past few years there has been increasing pressure on the organisations to report on social and ecological impact of their activities. Sustainability reporting is a voluntary process, which haven’t considered so important by the organisations. The importance of sustainability among the companies has blown up in the recent times. The idea behind the social responsibility is to meet the present needs without sacrificing the ability of future generation. Corporate responsibility creates a balance between economic growth and natural environment. The lack of sustainable accountability is to become insufficient to fulfil the needs of stakeholders. Public bodies and firms are now more conscious about sustainability. The main motive of this report is to marginalizing social and environmental reporting frameworks and describes how sustainability reporting can strengthened the business function of organizations. Social responsibility is integrated of both social and environmental values in the business and CSR considered as voluntary activity. The main focus of sustainability reporting is on triple bottom line which is economic, social and environment or the triple P’s that is people, planet and profit or triple bottom line consist of economic viability, social responsibility and environmental responsibility. It also include several other factors such as business ethics which is related to application of ethical ideas in business, help in corporate governance, cost saving, image of the company, increasing reputation, performance criteria etc. sustainability and environment reporting focuses on three main areas that is CSR, sustainability reporting and triple bottom line. There are several other factors which could be used. As per the OCED sustainability means ‘linking the 3 factors economic, social and environmental objectives in equilibrium way by keeping long term perspective in mind. According to global reporting initiative (GRI) should create a factual and balanced representation of sustainability reporting of an organisation by involving both negative and positive contribution. Proper monitoring system must be adopted to make organisation more sustainable by supporting corporation to ascertain, indicate, monitor and report their sustainability activity. Monitoring system should be exact, balanced in performance accounting, easy to compare and understandable (Bebbingto Unerman, and O’Dwyer, 2014)
- To ensure the need for social and environmental reporting.
- Gives alternative approaches for social and environmental reporting.
- Disclosure of information creates transparency among the stakeholders
- To sustain the interest of the stakeholders in the organisation.
- To satisfy the needs of present without compromising the needs of future natural resources (Hahn and Kühnen, 2013).
Research Objectives
Firstly, organisation may decide to adopt sustainability reporting because of legitimacy theory. Legitimacy is most popular theory in SEA. If an organisation operates successfully than it must comply with society’s expectations and company should create transparency among the society to attract more resources to continue its operations. Legitimacy is deriving if society perceives that the firm is acting responsibly. Legitimacy generalized assumption is that entities are more prone within socially constructed system of norms, values, beliefs and definitions. It is perceived that if organisation has breached its social contract then it automatically affects the organisation’s image. Secondly, stakeholders’ theory, in which organisation needs to fulfil the needs of its powerful stakeholders. If they will fail to fulfil the needs of stakeholders it will result into bad publicity or loss of capital. It focuses on maximising stakeholder’s interest rather than maximising stakeholder’s profit.
Third is economic interest theory. Managers main motive is to increase its personal wealth, hypothesis made in terms of economic interest theory is that the corporate bodies will voluntarily disclose social and environmental report if manager’s personal wealth tends to increase (Milne and Gray, 2007).
- Economic performance
The main motive of every business is to earn profit. Therefore, better environmental performance or environmental disclosure will ultimately results in better economic performance (Herzig and Schaltegger, 2011).
- Cost savings
Companies in their sustainability reporting have to assess environmental performance. Through this process management can the areas of inefficiencies and can work on them.
- Maintain good reputation
Sustainability reporting improves the company’s image and goodwill.
- Increase competitive advantages
Reporting of firm are able to present their commitment towards the environment and gain advantages over a market share over competitors.
- Attract ethical investors
Companies with positive reputations attract more ethical investors (Schaltegger Bennett and Burritt, 2006).
- Better corporate governance
Corporate governance is the core part for any organisation. If there is proper and full disclosure of the information regarding social responsibility it will improve the corporate governance also. Complete transparency will leads to better governance.
Different areas of social and environmental accounting (SEA)
Social and environment accounting define the area of preparation for an organisation to perform social, environmental, customers and stakeholders activity. It is classified into 3 main area i.e.; corporate social responsibility, sustainability reporting and triple bottom line.
CSR involves performing activities ethically and organisation is pleased to explain its social actions. It focuses mainly on non-financial societal activities that company add. Across the globe governments are also taking initiative to encourage business to implement the concept of CSR (Junior Best and Cotter, 2014).
Reasons why organization adopts sustainability reporting
The Australian government describes the sustainability as brad strategies and practices that objective is to satisfy the need of stakeholders today while keeping in mind the needs of future natural resources. It focuses on both, what is the impact of environment on the company and what will be the impact of organisation on environment. Sustainability reporting is required to focus on sustainability issues and focus on the development. Creating transparency to the stakeholders by the organisation in regards with sustainability activity (Bonilla-Priego, et al. 2014).
The triple bottom line is categorized in three parameters that are economic, social and environmental and because of this it is widely known as triple bottom line. TBL contain information not only till the companies’ market performance but about non-financial activities of the company. It gives a new and brad way to represents its corporate responsibility to the organisation (Fonseca McAllister and Fitzpatrick, 2014).
Conclusion
In the conclusion, it is difficult to pinpoint the sustainability responsibility. After analyzing all the above factors it is evaluated that sustainability reporting is a voluntary process and this reporting has been largely misleading the users by showing only the good aspects in the annual reporting and ignoring the negative aspects. Thus the main motive of the sustainability reporting is to satisfy the present needs and desires of the stakeholders without compromising the needs for future natural resources. It helps to make aware about the sustainability development and to solve issues regarding sustainability. It also helps the organisation to ensure the proper and good utilisation of resources without wasting the available resources (Ghosh, 2016).
References
Bebbington, J., Unerman, J. and O’Dwyer, B., 2014. Sustainability accounting and accountability. Routledge.
Bonilla-Priego, M.J., Font, X. and del Rosario Pacheco-Olivares, M., 2014. Corporate sustainability reporting index and baseline data for the cruise industry. Tourism Management, 44, pp.149-160.
Fonseca, A., McAllister, M.L. and Fitzpatrick, P., 2014. Sustainability reporting among mining corporations: a constructive critique of the GRI approach. Journal of Cleaner Production, 84, pp.70-83.
Ghosh, C., 2016. Corporate governance and sustainability reporting disclosure of environmental information by Indian companies (Doctoral dissertation, Indian Institute of Management Bangalore).
Hahn, R. and Kühnen, M., 2013. Determinants of sustainability reporting: a review of results, trends, theory, and opportunities in an expanding field of research. Journal of Cleaner Production, 59, pp.5-21.
Herzig, C. and Schaltegger, S., 2011. Corporate sustainability reporting. In Sustainability communication (pp. 151-169). Springer Netherlands.
Ioannou, I. and Serafeim, G., 2016. The consequences of mandatory corporate sustainability reporting: evidence from four countries.
Junior, R.M., Best, P.J. and Cotter, J., 2014. Sustainability reporting and assurance: a historical analysis on a world-wide phenomenon. Journal of Business Ethics, 120(1), pp.1-11.
Milne, M.J. and Gray, R., 2007. Future prospects for corporate sustainability reporting. Sustainability accounting and accountability, 1, pp.184-207.
Schaltegger, S., Bennett, M. and Burritt, R. eds., 2006. Sustainability accounting and reporting (Vol. 21). Springer Science & Business Media.
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