key drivers of sustainability
- Competition for resources:
- Climate change: fossil-fuel based economy
- Economic globalisation
- Connectivity and communication: rep of companies
reasons for CSR reporting
- a benefit to an entity’s profits.
- limit gov interference
- morals
agency theory
Managers act on behalf of shareholders and controls are required to ensure that managers act in the best interests of shareholders.
Stewardship theory
- Directors act in the interest of a group(s) of stakeholders and not shareholder value.
- Contributes to the rise of independent non-executive directors.
Legitimacy theory
- Theory that entities must conduct operations in accordance with societal expectations.
- Society allows the entity to operate (pursue its objectives and rewards) so long as the entity agrees to act in a socially acceptable manner.
Global Reporting Initiative (GRI)
- Reporting Principles and Standard Disclosures
- Implementation Manual.
- They suggest suitable measurements (metrics) and disclosures
GRI reporting principles
content (stakeholder inclusiveness, sustainability context, materiality and completeness)
quality (balance, comparability, accuracy, timeliness, clarity and reliability).
triple bottom line
economic performance
environmental performance
social performance.
The concept of abundance encourages businesses to think about using resources to embrace both:
- literal abundance (what nature provides ‘in abundance’)
2. functional abundance (where scarce material is cycled endlessly via redesigned industrial models).
the 3 roles of accountants in sustainability
- reporting
* Report the entities sustainability performance, includes environmental and social information. - Cost analysis:
* Include economic, environmental and social information in decision making processes. - Audit and assurance:
Internal controls to ensure the integrity of the information
entity’s goals are usually expressed in the …
mission statement
external evaluation of performance
key data are compared with benchmark data to assess good or bad performance framework.
internal evaluation of performance
- internal or external to the entity, accounting or non-accounting, or financial (quantitative) or non-financial (qualitative).
Balanced scorecard
Provides a set of performance measures that reflect entity’s goals and strategies from 4 perspectives
the 4 perspectives of a balanced scorecard
- Financial — How do we create value for our shareholders?
- Customer — What do new and existing customers value from us?
- Internal operations — What processes must we excel at to achieve our financial and customer objectives?
- Innovation and improvement activities — How can we continue to improve and create value?
KPI
are performance measures that are critical for the success of the entity.
criticisms of balanced scorecard
Focuses on shareholders.
Does not give proper attention to employees and suppliers.
Does not address adequately the selection of specific measures or the role of performance targets.
Eco-efficiency
‘expresses the efficiency with which ecological resources are used to meet human needs’.
- The purpose is to integrate ecological impact with economic information.
- The result will show the environmental impact added per chosen unit of economic performance.
Greenhouse gas accounting:
- Many companies and countries report on their performance in relation to their CO2 emissions.
- The objective of placing a price on carbon is to promote lower carbon ways of living, either pay the price or invest in lower carbon emitting processes.
Integrated report
coalition of regulators, companies, investors, the accounting profession, the standard setter and other interested groups.
non-financial performance advantages
More user friendly and relevant to non-management employees.
More likely to lead to long term performance gains.
Identify problems in a more timely fashion.
Can be easily structured to suit an organisation’s goals.
Can be benchmarked easily.
