Discuss about the Sustainable Reporting in Accounting.
A report that is prepared by the companies to show what effect it has on the environment and the economy because of its regular activities is known as Sustainability report (Anderson, 2005). A sustainability reporting can also be known as corporate social responsibility or non-financial reporting .In accounting sense, Sustainability reporting helps the company to measure and analyse the contributions it has made to the environment, economy and govern their performances which helps them to act effectively and determine future targets. We know that it is very important for a company to disclose its financial performance but it is also equally important to tell about its non financial performance also (Benn and Bolton, 2011). The tool which is mostly used to measure it is corporate social responsibility and the triple bottom line accounting. All types of companies whether big or small, or of any nature has to make a sustainability report. This report should be such that it depicts that it has created greater values of its stakeholders other than maximising profits.
It is very important for a company to fulfil its social responsibilities in order to maintain trust in the market and survive in the long run (Brockett and Rezaee, 2013). The corporate social responsibility can be defined as any contribution that a company has made towards the economy which is beneficial to them out of the profits earned .CSR is not only important for an economy’s growth but it is equally important for a company’s success. It helps to gain the trust of the customers and the stakeholders which helps the company to increase its profitability.
Another tool that is used to measure the non financial performance of a company is triple bottom line accounting. The triple bottom line accounting can be further divided into three parts: social, environmental and financial. It helps a company to evaluate its financial and non financial performances (Chandler, 2017). This method is far better than the traditional approach as it has helped in analysing the drawbacks and rectifying it. The tool used for the measurement of non financial performance is the 3P’s. They are: People, Planet and Profit. It helps in ascertaining the ways in which it has satisfied the needs of the people, the certain ways in which it has contributed to the environment to make the planet a better place for living and take steps to protect it from any harmful substance which may degrade it. It has also helped the companies to increase its profitability which is one of the major objectives.
The report which is prepared should be drafted with proper collection of data and information only then it will be beneficial for the company (Hopkins, 2007). An efficient and true report is very important not only for the company but also for the stakeholders. The sustainability reporting has both internal as well as external benefits. Externally, it has helps the stakeholders to know the status of the company and have a knowledge about the tangible as well as intangible assets of the company. The transparency of the non financial activities helps the shareholders to know the true and fair picture of the company in which they have invested. It builds trusts and reduces the risk of loss of reputation. It helps the company to increase its brand loyalty and also improve its goodwill. This goodwill will help them to achieve their financial targets also. It has helped in converting the negative social and environmental effects into a positive one (Hopwood, Unerman and Fries, 2010). The organisations know that the economy demands some social contributions and so they get influenced because of these expectations. So this report helps us in demonstrating the affects of the expectations on the company.
As we know that the sustainability report creates a link between the financial and non financial results of the company. However it has also helped in comparing and assessing its performance within the organisation, between the organisations or also between the sector and the organisation. This helps the employees to have a better understanding of the risks and opportunities that may arise in the future. This makes them alert and takes certain preventive steps which may help them in avoiding difficult situations (Savitz and Weber, 2013). It has also served a purpose of improving business plans and systems. The process of decision making in business has become more efficient which has led to reduction of cost and solving certain other issues such as excessive consumption of energy, use of material and the waste generation. It helps to analyse and examine the strengths and weakness which guides them to make possible changes in their strategies to show greater improvements. The reports also have a competitive advantage (Schaltegger and Burritt, 2000).
Time has a great value in the business world. The compilation of these reports requires lot of effort and time of the various employees of the organisation which sometimes is not regarded equally important by the preparer (Tolhurst, 2010). This thought may lead to negligence and therefore the report may not depict the activities performed by the company clearly. The reports prepared sometimes are so long that it does not fulfil the purpose to the stakeholders. Many times it has been noticed that the reports are unreliable and has a complete false representation which misleads the stakeholders and results in wrong decision making (Unerman, Bebbington and O’Dwyer, 2007). There are many times when the company claims that the product or service they produce or the technologies the companies uses is completely eco friendly but the actual scenario is completely different. These false and misleading claims the company helps the company to appear more eco friendly than it really is. The report requires a lot of commitment, time and effort.
The business world is dynamic and full of competitions so in order to survive in the long run the company should have a strong impact of its sustainable report. The Sustainable reporting is believed to be one of the ways in which the company is able to attain competitive advantage in the global market. A company enhances its green initiatives and helps in maintaining a healthy relationship between the investors and the clients. It creates a positive image in the minds of the stakeholders by informing them about the sustainability success and the ways in which they are handling the issues related to the environment. A sustainability report is one which highlights the transparency, performance and the accountability of the company. This also acts as a guideline for the companies as it helps them in identifying the areas in which there is a scope of improvement.
The concept of sustainability reporting will become widespread in the future. It is expected that sustainable reporting will be of such great importance that it will become mandatory by law to make a report for the progress of the economy (White, 2009). The number of mediums to convey the acts performed by the companies and to spread the reports of the company will considerably increase. The stakeholders will always be keen to know the performance so that they can compare it with the past trends and measure the progress of the company.
The future sustainability report is expected to have three new features which are responsible, digital and interactive. The company will reveal the actual responsibility it has undertook and the commitments it has made to solve a critical issue that the society is trying to resolve. The information will be available digitally and will be easily accessible to the users in the format they want it to be. Communication plays a key role in the business. So if there is a proper interaction between the company and the investors then the company can achieve more than what is expected. This will help the company in knowing its drawbacks and also provide the investors to express their opinions on the workings of the organisation.
The Suncorn Group is an Australian company which carries out financial services. There was a huge volatility in the global markets in 2015-2016 but this could not affect the company’s performance. It earned profits of $1038 million in the year 2015-2016 when the value of the Australian dollar was extremely low. The general insurance company also earned $ 624 million in spite of the terrible market conditions. So, we can say that the corporate social responsibilities of the company paid off. The social responsibilities were clearly reflected in the financial reports of the company. The company has always shown an upward trend in the markets. The company contributed approximately $8.8 million towards the betterment of the community.
Some of the social responsibilities that could help them achieve such success even in such adverse situations were-
This sustainability report could be the best example as it is not possible for a company to earn such high profits in such adverse situations and reflects the major role that it has played in the financial performance.
Conclusion
The sustainable reporting is a very crucial part as it identifies and measures the contributions made to fulfil the social desires and needs of the investors. Economic growth and development both should be a matter of concern for all the organisations. The reporting is done to identify the sustainable development which includes certain elements such as no discrimination on the basis of gender, reducing poverty, and also the protection of human rights along with the protection of environment. The aim should be to make an improvement in the quality of corporate sustainability leadership. However, it should always be kept in mind that any misleading or false statement present in the report can lead to lose of trust. It is very necessary to keep the report true. All the organisations who prepare this report show that they are well informed of the fulfilment of the social obligations. This entirely has a positive impact on the economy and its adoption is one of the major steps an organisation can take in order to maximise profits. A good reputation in the market helps a company to achieve more than its targets. It has been helpful for the company as well as the society.
References:
Anderson, D. (2005). Corporate survival. 1st ed. Lincoln, NE: iUniverse.
Benn, S. and Bolton, D. (2011). Key concepts in corporate social responsibility. 1st ed. Los Angeles: SAGE.
Brockett, A. and Rezaee, Z. (2013). Corporate sustainability. 1st ed. Hoboken, N.J.: Wiley.
Chandler, D. (2017). Strategic corporate social responsibility. 1st ed. Los Angeles [etc.]: Sage.
Hopkins, M. (2007). Corporate social responsibility and international development. 1st ed. London: Earthscan.
Hopwood, A., Unerman, J. and Fries, J. (2010). Accounting for sustainability. 1st ed. London: Earthscan.
Murlis, H. (1978). Employee benefits. 1st ed. London: Research and Publications Division, British Institute of Management Foundation.
Savitz, A. and Weber, K. (2013). Triple Bottom Line, The : How Today’s Best-Run Companies Are Achieving Economic, Social and Environmental Success – and How You Can Too. 1st ed. Wiley.
Schaltegger, S. and Burritt, R. (2000). Contemporary environmental accounting. 1st ed. Sheffield: Greenleaf.
Tolhurst, N. (2010). The A-Z of corporate social responsibility. 1st ed. Hoboken, N.J.: Wiley.
Unerman, J., Bebbington, J. and O’Dwyer, B. (2007). Sustainability accounting and accountability. 1st ed. London: Routledge.
White, G. (2009). Sustainability reporting. 1st ed. [New York, N.Y.] (222 East 46th Street, New York, NY 10017): Business Expert Press.
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