notes iii Internal W11 Sustinability Flashcards
types of sustainability
3
Economic element
• Giving people what they want without compromising quality of life, and reducing the financial burden and “red tape” of doing the right thing.
– Environmental (natural resource footprint)
• Protecting Our Natural Ecosystems
– Air quality (carbon emissions), water etc
– Focus on technology, recent government policy
– Social
• Access to basic resources and opportunities (food, water, health, wellness housing, education)
– Human Rights, gender ethnicity balance
– Society
– Product Responsibility, partners supply chain
– Anti-corruption
• Embracing social investment (various models)
» philanthropy … Core Business
» recent developments in social investment/finance
reasons 6
Business based
Self interest: Agency Theory
self interest: Broader stakeholder based arguments (stakeholder theory)
self interest:
Broader stakeholder based arguments (legitimacy theory)
Institution-based arguments
Signalling-based arguments
reasons
Business based
Reasons
Business based
A Number Of Incentives Are Commonly identified as motivating sustainability Practices:
• employee recruitment, motivation and retention
• learning and innovation
• reputation management
• risk management and risk profile
• competitiveness and market positioning
• operational efficiency (prepare for future regulations)
• investor relations, access to capital
– These factors assist the ‘business case’ for behavior and better reporting
reasons Self interest 3 types
Self interest
One popular view is based on the notion that individuals running organisations act in their own self interest and if it is in their interests to guide organisations toward this type of behaviour, then this is what will occur.
Self interest: Agency Theory
Agency Theory
Companies Typically Contract With Their executives to incentivise particular behaviour
– The contractual details mentioned above are often specified in terms of accounting numbers, but may also include sustainability targets.
– Other associated costs and benefits include incentives to:
• Minimise costs imposed
– e.g. fines, taxes, other regulations – ‘sugar tax’
• Maximise benefits
– e.g. environmental approvals for projects, tax concessions
self interest: Broader stakeholder based arguments (stakeholder theory)
Broader stakeholder based arguments (stakeholder theory)
Others argue that such behaviours can be understood as part of the organisation’s responsibility to broader stakeholders – beyond shareholders
Pressure
e.g. potential investors
self interest:
Broader stakeholder based arguments (legitimacy theory)
Broader stakeholder based arguments (legitimacy theory)
Continually strive to ensure they are seen to be legitimate
• legitimacy as crucial for survival
– acting for society, not just investors
• actual and perceived conduct
• The ‘social contract’ • explicit and implicit aspects • ‘licence to operate’ – contract may be revoked • the importance of communication e.g. UFC
Institution-based arguments
Institution-based arguments
Broad focus
– Explaining the setup and function of organisations
– Competition tight
– Organisations will strive to become like others that are seen to be ‘leading’
Signalling-based arguments
Signalling-based arguments
Information economics
– Signal a voluntary action of a firm
– Signal is an indicator of differential ‘quality’
• costly & hard to ‘fake’
– Costly to produce & assurance sustainability information, voluntarily audited also
– Rationally, marginal benefit must exceed marginal cost
Opportunities
Opportunities
Shared value business opportunities
The Link between Competitive Advantage and Corporate Social Responsibility.
business strategy designed to solve social issues profitably.
leveraging the resources and innovation of the private sector to create new solutions to some of society’s most pressing issues.
Companies are increasingly using social issues to develop innovative business and funding models
- Many of the issues we have discussed create significant opportunities for business and investment
- Some innovative business models
- Who gives a crap (give profits to parts of world w/o access)
- Thank You co
– There are also an increasing number of impact investment approaches based on intention and measurability that seek impact • DWH • Smallgiants – Other collective action • CoalitionforInclusiveCapitalism • Shared Value Initiative /Project
Issues
2
Issues
- Reporting of sustainability information is complex
– Accounting reports are governed by mandatory accounting standards
• Capital markets provide important controls
– largely voluntary, creating problems for benchmarking and assurance…
• Researchers continue to examine the drivers of the decision to voluntarily disclose information - Reliability
A challenge facing the reporting of sustainability information is the reliability of the information
Stakeholders Are Increasingly Sceptical About
The motivations for companies reporting sustainability information.
• This has given rise to Number Of Initiatives designed to alleviate that scepticism.
– Enhanced corporate governance embedding such behaviours in organisations
• Embedding within balanced scorecards, life cycle costing (recycle, biodegradable) , value chain analysis
– Pursuing such behaviours in a transparent and accountable way, creates multiple benefits for business and society
Issues
- Reporting of sustainability information is complex
Issues
- Reporting of sustainability information is complex
– Accounting reports are governed by mandatory accounting standards
• Capital markets provide important controls
– largely voluntary, creating problems for benchmarking and assurance…
• Researchers continue to examine the drivers of the decision to voluntarily disclose information
issues
- Reliability
issues
- Reliability
A challenge facing the reporting of sustainability information is the reliability of the information
Stakeholders Are Increasingly Sceptical About
The motivations for companies reporting sustainability information.
• This has given rise to Number Of Initiatives designed to alleviate that scepticism.
– Enhanced corporate governance embedding such behaviours in organisations
• Embedding within balanced scorecards, life cycle costing (recycle, biodegradable) , value chain analysis
– Pursuing such behaviours in a transparent and accountable way, creates multiple benefits for business and society
💙 Link to accounting story
Information & decision making
Information is crucial for decisions made by diverse stakeholders
• external to the entity (incl. policy)
• within the entity
– There is some indication that users are looking beyond financial numbers as a basis for making decisions
A core function of accounting is to classify and record disparate data relating to transactions and events and summarise and communicate useful information to inform decisions primarily relating to resource management
– Internal and external stakeholders
• Different decisions, different information needs
• Increasingly, financial information is not the only relevant type of information
• There is indication that key components of information are valued by users
• Transparency, reliability, attribution etc
