Topic 7 Social and Environmental Accounting

Question 1

Why report social and environmental information?

Answer 1

It is generally accepted that organisations do have a responsibility for their social and environmental performance. The reporting could be part of a process to ‘manage’ various stakeholders.

Question 2

How sustainability reporting provides value

Answer 2

Improved reputation

Increased employee loyalty

Increased customer loyalty

Led to waste reduction

Improved relationships with regulatory bodies

Question 3

To whom are we reporting

Answer 3

This will be dependent upon judgements about who are the ‘stakeholders’ of the organisation, particularly as that assessment relates to the social and environmental impacts of an organisation. Some form of ‘stakeholder mapping’ exercise would be required. Managers need to make judgements about to whom they owe a responsibility/accountability to and whether it includes both those stakeholders who can impact the organisation (those with power) as well as those that are impacted by the organisation.

Question 4

What are we reporting

Answer 4

Some prioritisation needs to be given to identifying, managing, and reporting specific aspects of the organisation’s social and environmental performance. Much of the information being reported will be influenced by the responsibilities and accountabilities that are accepted by managers. Stakeholder engagement exercises will also identify some information that stakeholders need/expect.

Social reporting and environmental reporting

Question 5

Is social and environmental reporting accounting

Answer 5

This is ‘accounting’ despite the absence of measurements in financial terms.

Question 6

Social reporting

Answer 6

Social reporting provides information about an organisation’s impacts upon particular people/societies.

Question 7

Environmental reporting

Answer 7

Environmental reporting provides information about an organisations impacts upon living and non-living natural systems, including land, air, water and ecosystems.

Question 8

CSR

Answer 8

Corporate social responsibility (CSR) generally refers to the responsibilities an organisation accepts over and above the law and the way in which it focuses its attention on the well-being of various stakeholders and the environment. CSR reporting provides information about how an organisation has addressed its social and environmental responsibilities.

Question 9

Sustainable development

Answer 9

Sustainable Development is the development that meets the needs of the present world without compromising the ability of future generations to meet their own needs. Sustainability reporting provides insights into how organisations are performing in relation to the goal of ‘sustainable development’.

Question 10

How/where are we reporting

Answer 10

This form of reporting is largely voluntary. There are a number of reporting frameworks available to use such as GRI and the integrated reporting framework

Question 11

GRI Mission

Answer 11

The Global Reporting Initiative’s mission is to empower decision makers everywhere, through our sustainability standards and multi-stakeholder network, to take action towards a more sustainable economy and world.

Question 12

Integrated reporting framework

Answer 12

The primary purpose of an integrated report is to explain to providers of financial capital how an organization creates value over time. An integrated report benefits all stakeholders interested in an organization’s ability to create value over time, including employees, customers, suppliers, business partners, local communities, legislators, regulators and policy-makers.

Question 13

Innovative reporting approach

Answer 13

There is a general absence of regulation requiring organisations to publicly produce CSR/Sustainability Reports. As such, there is much variation, and some level of experimentation with different reporting approaches.

Question 14

Management use of social and environmental information

Answer 14

Management need to collect and review information about social and environmental performance to ensure it is operating in the manner it should be. If you don’t manage the use of certain scarce resources, problems will arise for an organisation.

Question 15

Climate change

Answer 15

It is a change in the pattern of weather, and related changes in oceans, land surfaces and ice sheets, occurring over time scales of decades or longer. Climate change is one specific issue of great relevance to current and future generations.

Question 16

Personal social responsibility

Answer 16

Businesses have an accountability to their stakeholders we should be accountable to ourselves for our own actions. We can all make choices that will either increase, or decrease, our own contribution to various social and environmental outcomes. We must accept an accountability for our own actions and test ourselves in terms of whether our actions are actually consistent with our own values or ‘ethics’.

Question 17

Conclusion

Answer 17

Social and environmental accounting is a key tool to enable you to move your organisation forward into a successful sustained future. Sustainability requires ‘the community’ – that is, us - also to embrace the need for change and not simply to rely upon (or blame) organisations for all of the necessary improvements.

Question 18

Dangers of a failure to report

Answer 18

A failure to report could undermine the ‘legitimacy’ of the organisation.

Question 19

Why report - internal view

Answer 19

For internal management purposes, managers will need to have information about various aspects of an organisation’s social and environmental performance.

Question 20

Why report - external view

Answer 20

Various stakeholders external to the organisation will also expect to receive information about the social and environmental performance of an organisation. This might impact various decisions they make, such as whether they will invest in the organisation, buy the organisation’s products, work for the organisation, lobby government against the organisation, and so forth.
In a sense, the reporting could be part of a process to ‘manage’ various stakeholders.

Question 21

Water example

Answer 21

For example, because water might be scarce we might report water use and water saving initiatives (this would be environmental information).

Question 22

Climate change example

Answer 22

Because of concerns about climate change, an energy intensive organisation might disclose information about its carbon emissions and plans to reduce such emissions (this would be environmental information).

Question 23

Treatment of employees in supply chain example

Answer 23

Because of concerns about treatment of employees in our supply chain, we might provide information derived from factory audits about the safety of the buildings, the health and safety policies in place, or use of child labour (this would be social information).

Question 24

GRI Guidelines

Answer 24

A major source of guidance in relation to social and environmental (and sustainability) reporting is the GRI’s Sustainability Reporting Guidelines. Many companies throughout the world note compliance with the GRI guidelines.

Question 25

3 Examples of innovative reporting

Answer 25

Measurement
Format
Attractiveness

Question 26

Measurement example

Answer 26

The innovative strategy can be the way to measure social and environmental impacts. For example, Puma and Kering report environmental profit and loss by placing a monetary value on their environmental impacts.

Question 27

Format example

Answer 27

The innovative strategy can be the format of reporting. For example, CVS Health and Cisco provide their corporate social responsibility report in a video. Moreover, Cisco uses YouTube rather than its own website to publish their CSR report video.

Question 28

Attractiveness example

Answer 28

The innovative strategy can be how to make the report more attractive and more easily understood by the readers. For example, Hang Lung Properties report its social and environmental impact in a way that an animation tells a story about the company. In this way, the report looks more interesting and is easy to follow.