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Discuss the stance and initiatives of the Australian accounting profession on corporate social responsibility (CSR) and sustainability. Include your views on the role of accounting and the professional accountants on CSR and sustainability.
In the current business world sustainability plays a very important role. (Langfield-Smith, Thorne, & Hilton, 2012) Sustainability is based on the definition given by the United States which is as follows:
“sustainable development implies meeting the needs of the present without compromising the ability of future generations to meet their own needs, should become a central guiding principle of the United Nations, Governments and private institutions, organizations and enterprises” (United Nations, 1987).
Organisation’s impact on the planet, people and the future is one of the factors involved in the concept of the sustainability. (ICAEW, 2004) All the businesses and societies are affected and also the organisations are challenged by sustainability to think in different ways and act more responsibly.
Accounting profession plays a greater role in supporting sustainability and Corporate Social Responsibility (CSR). Global Reporting Initiative (GRI) which is a not for profit organisation has developed a structure that is widely cast-off around the world so that it can be measured and present a report on four key areas (Global Reporting Initiative, 2013):
- Sustainable Economy;
- Sustainable Environment;
- Sustainable Society; and
- Corporate Governance.
In the past ten years, there has been increase in the awareness about sustainability among the stakeholders in the businesses. Nevertheless, achieving sustainability has to bear some environmental and social costs. Often businesses face complications in determining the costs and benefits related with sustainability. Accountants have taken significant steps in accounting and reporting process in order to solve social and environmental issues.
Stance and Initiative of the Australian Accounting Profession on CSR and sustainability
The ongoing commitment and awareness of the Institute of Chartered Accountants in Australia (ICCA), CPA Australia and the Accounting profession in general has influenced and persuaded others to place importance on CSR and Sustainability.
The GRI was introduced to ensure consisting reporting and to offer global guidelines for the reporting of social and environmental information. In Australia, GRI was developed in 2003 by Environment Australia to guide triple bottom line. (Adams & Frost, 2007) Organisations are able to understand the bigger pictures regarding sustainability and they are also aware about the fact that the small changes can go long way in helping protect and sustain the environment for future generations. GRI is considered as the most successful attempt till now for balancing the reporting of social and environmental information worldwide. (Adams & Frost, 2007) In 2008, CPA Australia became the first professional body to provide a sustainability report using the GRI guidelines.
CPA Australia had issued on their website, database of more than 160 companies throughout the world that delivered the financial as well as sustainability reports. This databases were created in order to raise awareness regarding the issues of CSR and Sustainability and also to provide a better knowledge of the application of sustainability principles within Australia and also worldwide. (Barrett, 2005) The importance of this types of reports and the values that can establish the reputation of organisations are shown by the CPA Australia by engaging in the sustainability principles.
ICCA has also played essential role in increasing awareness to issues of Sustainability. Organisations have switched to low level carbon economy using carbon mechanism implemented by government. (ICCA, 1972) Moreover, initiation by ICCA in ’20 Issues on building a sustainable business’ is the resource that is provided to the members to help improve the sustainability of organisations. (ICCA, 2012) This resource goes through the steps involved in enforcing a sustainability plan and suggests how to best implant these ideas into an organisations’ business strategy.
In addition to the professional accounting associations, most international public accounting firms have also now created a sustainability division to deliver accounting services to clients pursuing to commence CSR reporting. For an instance, Ernst and Young have established a Climate Change and Sustainability Services section, and Price Waterhouse Coopers (PWC) lists a Sustainable Business Solutions team as part of client services. Another example could be for KPMG, as stated on their international website, that they are committed to CSR, categorising it into four main categories – people, clients, communities and efficiency. KPMG specifically offer services in this area, and have a trademarked ‘Global Sustainability Services’, which defines CSR as ‘incorporating environmental, social, ethical and economic issues in the strategy development processes. (Tilt, 2009)
Role of Accounting and Accountants on CSR and Sustainability
Many reporters believe that accounting related professional service firms are offered with substantial opportunities and challenges by sustainability. Companies are introducing new methods and practices in their financial statements as to publish reports about main activities and their effect on economic and social environment. Due to which all the stakeholders, suppliers and government bodies have a better knowledge of the companies are managing their capitals to acquire sustainable development.
Thus, accounting and accountants develop tools and techniques such as Environmental Management Accounting (EMA) to achieve its sustainable goals. (IFAC, 2005). EMA comprises life cycle costing, environmental cost accounting, environmental performance measures, assessment of environmental benefits and strategic planning for environmental management. Financially-Oriented EMA and Physically-Oriented EMA are the two types of techniques used by EMA. Accountants play an important part in the effective application of EMA systems. These skills include measuring, recording, monitoring and verifying financial information.
Also, according to ICAEW, accounting profession helps the business to communicate to internal and external stakeholders about their values of sustainable strategies and activities. It also provides assurance to the clients that their sustainability activities are assessable and verifying. (ICAEW, 2004)
The major role of Accounting in CSR and Sustainability is promoting sustainable report which is a business report that provides the information about the triple bottom line (Social, Economic and Environmental factors). Organisations must ensure a healthy system for sustainability management and reporting with regard to: Transparency, Traceability and Compliance.
Accountants have links with a wide range of industry and economic activities to make sure that the management accounting and reporting has an immediate impact on sustainability. (Martin & Steele, 2010) Furthermore, due to their right to use to organisation’s monetary information, they have the ability to advance and legalize the quality of such information and practice their skills in using that information to help make complete business decision in areas such as investment appraisal, budgeting and strategic planning.
Likewise, the role of the accountants can be categorized into three areas: financial accountant, management accountant and auditor. But, there is a current view that the interest of accountants is very extensive due to the new level of importance placed on CSR and Sustainability Accounting. Not only this, the role of accountants is helping to improve social justice and contributing to social and environmental benefits. (Reynolds, 2007). There is no denying the fact that Accountants are well equipped to play a strong role in formulating company policies, developing business cases for action and managing the impacts of sustainability issues in an integrated way. This is likely to extend to identifying; measuring and managing business risk and helping companies navigate the new world of increased transparency.
Hence, Sustainability presents some key challenges and chances for accountants and Accounting. Accountants are considered drivers of change and therefore, they need to engage more in issues of sustainability if they want to broaden their involvement and role in sustainability accounting. Sustainability requires an ongoing process of learning which supports adaptive governance and leadership for sustainability thinking in organisations. (Martin & Steele, 2010). Accountants will need to engage in professional development and direct their learning and application to increasing their knowledge and skills in the areas of CSR and Sustainability.
Hence, Sustainability presents some key challenges and opportunities for accountants and Accounting. Accounting has played important role by developing tools and techniques such as EMA to support the organisations in achieving sustainability objectives. It has incorporated social and environmental factors in the decision making process of the organisations. Furthermore,one of the major achievements in sustainability reporting is the introduction of integrated reporting framework. Thus, accounting bodies always encourages the organisations to have sustainability reports. Both CPA Australia and ICAA are working for promoting sustainability and providing assistance regarding sustainability reporting.
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