Week 12 - Measuring and Reporting Sustainability

Question 1

What are the 3 interrelated outcomes that a business needs to achieve?

Answer 1

• A sustainable economy
• A sustainable society
• A sustainable environment

Question 2

True or False: The primary purpose of making an organisation sustainable is to
make sure the organisation survives in the long-term.

Answer 2

False

Question 3

True or False: Traditional profits measures can measure sustainability; the
information just has to be rearranged.

Answer 3

False

Question 4

How can management accounting support sustainability?

Answer 4

• Facilitate control: Measure and report sustainability
• Facilitate decisions: Incorporate costs and performance
  measures into decision contexts

Question 5

What are the 3 performance indicators when measuring sustainability?

Answer 5

• Economic performance (focuses on financial measures and the impact on broader economy)
• Social performance (a firm’s activities influence on society)
• Environmental performance (A firm’s activities influence on the environment)

Question 6

What are some examples of economic performance measures?

Answer 6

• Economic performance: e.g., profits, costs, and revenues
  for the organization’s activities due to climate changes
• Market presence: e.g., purchasing from local suppliers
• Indirect economic impacts: e.g., investments for public
  benefits through commercial engagement

Question 7

What are some examples of social performance measures?

Answer 7

• E.g., Employment: total number and rate of new employee
  hires; employee turnover by age group, gender and region
• E.g., Labour/Management relations: percentage of
  employees covered by collective bargaining agreements
• E.g., Occupational health and safety: rates of injury,
  occupational diseases, lost days, and absenteeism and
  number of work-related fatalities by region and by gender
• E.g., Customer health and safety: percentage of significant
  products that improve health and safety

Question 8

What are some examples of environmental performance measures?

Answer 8

• Materials: percentage of materials used that are
  recycled input materials
• Energy: direct energy consumption by primary energy
  source.
• Water: percentage and total volume of water recycled
  and reused
• Emissions: Total weight of waste by type and disposal
  method.
• Biodiversity: description of impact on biodiversity

Question 9

The best way to make businesses take into account the external costs of their activities is by:
A) fines
B) penalties
C) internalising those costs
D) None of the above

Answer 9

C) internalising those costs

Question 10

The externalised cost of electricity generation is:
A) the cost of purchasing water to cool the plant
B) the cost of constructing the plant
C) the cost of buying coal
D) None of the above are externalised costs.

Answer 10

D) None of the above are externalised costs.

Question 11

True or False: Environmental management accounting provides only nonfinancial measures of environmental-related performance.

Answer 11

False

Question 12

True or False: One benefit of integrating social and environmental performance
into a traditional balanced scorecard is to show the strategy map
for the four aspects.

Answer 12

False, because it is a benefit of separating the social and environmental performance. With the 4 separated, we can link all 4 together.

Question 13

What are the 2 approaches to using BSC to support sustainability?

Answer 13

1. Integrate social and environmental performance into a
   traditional balanced scorecard
2. Capture social and environmental performance in a separate
   BSC

Question 14

What are the 2 advantages to integrating social and environmental performance into a
traditional balanced scorecard?

Answer 14

• communicates the links among social, environmental and
  economic performance
• communicates a higher level of organizational commitment
  to these dimensions of performance

Question 15

What are the 2 advantages of capturing social and environmental performance in a separate BSC?

Answer 15

• Show the strategy map for the four aspects
• Show the leading factors that must be invested in order to
  achieve social and environmental performance

Question 16

What are the 3 difficulties of measuring sustainability?

Answer 16

• Future ecological and social issues are not always known - Difficult to predict future value and the impact on ecology
  and society
• Many costs and benefits are external to the organization - Difficult to identify and measure costs and benefits; Externality
• Many costs and benefits are difficult to measure in financial
  terms (E.g., difficult to measure the costs arising from injury.)

Question 17

What are the consequences of externalities?

Answer 17

Optimal outcomes for society will not be achieved if the cost is not incorporated into the pricing mechanism. People may overuse it.

Question 18

How should you resolve the consequence of externalities?

Answer 18

• Internalize into an organisation’s cost structure
• Identify and allocate all the cost of producing and
  distributing the products to the individual firms whose
  actions cause them.

Question 19

What is the environmental management system?

Answer 19

An EMS is the organisation’s formal and systematic process
for guiding, measuring and benchmarking their
environmental impact.

Question 20

What is environmental management accounting?

Answer 20

EMA supplements the cost accounting system by providing
information about the environmental impact of the organization’s
activities

Question 21

How is ABC used to support sustainability in the case of EMA?

Answer 21

ABC separates out the costs associated with
environmental impacts to manage environmental
performance.