Lecture 11: Sustainability and Accounting

Question 1

Sustainability

Answer 1

Means considering all of the financial, social and environemntal impacts of business’ activites.

Question 2

Issue(s) with sustainability reporting

Answer 2

As it is voluntary to report on, there may be suspicion amongst stakeholdrs why a business is going out of their way to report on it and thus, we must make this information reliable to increase stakeholder confidence

Question 3

Incentives to report their sustainability

(5)

Answer 3

1. Agency theory - individuals act in their own self-interest.
2. Legitimacy theory - the business strives to show they are operating within moral boundaries in order to make people like them and to make future operations easier.
3. Stakeholder theory - businesses should want to satisfy the needs of all their stakeholders.
4. Institutional theory - business want to be sen like their more sustainable competitors so they can copy their good aspects and become more like them over time.
5. Signalling theory - a business wants to be seen as a leader, so they disclose more information than necessary in order to show initiative.

Question 4

Techniques thar enable sustainable business practices

Answer 4

• Value chain analysis - analysing how sustainability could be incorporated into each of the business’ areas.
• Life cycle costing - understanding how sustainabilitiy is incorporated into each stage of the devekopment, distribution and disposal of goods/services sold, as well as minimising any negative impacts