Discuss about the Good Guys Sustainability Reporting in Accounting.
Sustainability reporting provides an organization’s information related to economic, social environmental and governance related performance (Brown, de Jong & Levy, 2009). Through sustainable reporting an organization is able provide an improvised organizational commitment of its internal as well as external stakeholders. Organization can enhance sustainability sustainable performance by measurement, monitoring and then reporting related to it. It allows understanding related to positive impacts generated by the organization on economy, society for building of a sustainable future. Global Reporting Initiative (GRI) provides sustainability reporting guidelines for understanding related to organization’s worldwide sustainability related performances (Junior, Best & Cotter, 2014). The scope of the current analysis deals with current issues arising from sustainability related reporting and implications related to various stakeholders on financial decisions.
Sustainability reporting provides an organization with an extended image for corporate accountability (Adams & Frost, 2008). Certain scholars argue that sustainability reporting allows extension of a corporate brand image to a being a better brand. As majority consumers of services or products of an organization comprises of the society, it becomes integral that the organization provides a better corporate image to the society. Sustainability reporting has become an integral procedure for most firms within Australia due to implications from Australian Centre for Corporate Social Responsibility (Manetti, 2011). The ACCSR team is aimed at creating greater value and managing impact related to corporate social responsibilities of companies. Through sustainability performance an organization is able to develop accountability on its sustainable performances and hence become accountable. Through such reporting means an organization is able to address new emerging environmental and social issues hence overcoming of sustainability related challenges. There is a great demand for sustainability related reporting with increasing influx of information. An organization has opportunity to improvise performance and strengthen sustainability contribution towards society by overall enhancing environmental, economic and social impacts of the organization. Moreover, there is a reputational benefit that is associated with sustainability reporting that can help balancing honesty of reporting standards. Technology has an unhindered role in the future of sustainability reporting by being able to provide adequate measures towards furnishing of the same. Trust is an integral component of business that is needs to achieve for sustainability. Regular business decisions made by business have direct impacts on its stakeholders comprising of civil society, labour organizations, financial institutions and citizens. These business decisions are focussed on evaluation of immediate and future issues, therefore through sustainability reporting such issues are considered in broader spectrum to understand their impacts on sustainability.
Organizations need to take special considerations for undertaking steps to adhere to CSR by means of proper sustainability reporting. However, currently there are numerous challenges faced in such reporting a major amongst them being deciding on the audience, who will be consuming the report (Kolk, 2008). While some organizations focus on the value of the reporting standards others are focussed on simply generating the report. Though the end product, which comprises of the report, is integral, it is also essential that the report itself is able to reflect on the several values and steps that the organization incorporates. Reports generally describe the company’s approach and performance towards social, environmental and governance impact on stakeholders (Schaltegger & Burritt, 2010). As for example Telstra that is present across Australia and has approximately 35,000 employees and 1.4 million stakeholders along with millions of customers, it often becomes difficult to prepare reports catering to all.
Another major challenge faced while developing sustainability reporting is embedded within Global Reporting Initiatives (GRI) along with assurance standards. While these frameworks provide appropriate guidance they can lead to formation of inaccessible and long reports. Moreover, while abiding by ‘best practices’ claims can result in ‘green washing’ or developing reports that does not reflect the true efforts made by the organization (Burritt & Schaltegger, 2010). The ACCSR provides organizations with trainings in sustainability reporting by means of stakeholder relationships and business strategies in New Zealand and Australia. An understanding with the organization provides developing a balanced and comprehensive account of sustainability which can meet diverse interests of stakeholder group. An understanding with the organization will further allow developing of comprehensive and balanced sustainability performance as well as impacts for company’s good deeds and not only generating a promotion document (Unerman, Bebbington & O’Dwyer, 2010). Third most integral challenge that is faced for compiling of sustainability reporting standards relates to collecting reliable performance data from various parts of the organization. Organizations often are facing challenges related to interrogating performance drive for data collection systems that provides fragmented and immature data (Herzig & Schaltegger, 2011). There are several benefits arising from sustainability reporting therefore, organizations need to adhere to adequate steps that are able to deliver appropriate sustainability reporting.
Delivering appropriate sustainability reporting standards will allow adhering to corporate social responsibilities for the organization hence meeting various stakeholder group needs. Issues and practices that have recently arisen in sustainability reporting procedure has several implications for stakeholder group especially relating to their financial decision making (Farneti & Guthrie, 2009). Financial metrics are able to provide greater insights into economic performance or financial health of a firm. The issues that arise related to sustainability reporting practices might implement several implications on stakeholders pertaining to financial decision making. While deciding upon target audience in sustainability reporting stakeholders often prioritise allocating greater amounts of funds towards social and environmental impacts generation. Allocating greater amounts of funds for creating sustainability might lead to disproportionate allocation of funds creating negative impact on the firm’s performance (Lozano & Huisingh, 2011). Therefore, the issue might have implications on financial decision making by demanding greater appropriate of funds.
Forming long and inaccessible report that needs to be developed by GRI initiatives might need to include greater details of financial performance of the firm. Format and standards that are provided by GRI and ACCSR needs firms to furnish a great deal of information related to the firm’s financial performance. Stakeholders while furnishing such information for sustainability reporting might want to hide some losses, loans and leases from getting disclosed to public. This might hinder overall transparency of financial reporting and alter certain financial figures that might otherwise have been reported (Isaksson & Steimle, 2009). Falsification of financial reports is one of the biggest challenges faced in financial decision making by stakeholder group.
It is often impossible for firms to collect reliable performance data that is able to deliver appropriate sustainability reports. Organizations often do not apply appropriate techniques for formation of reports that can allow collection of appropriate information and data related to the same. Therefore, when final consideration for preparing such reports arises it is possible that stakeholders take financial decisions that are not healthy for the firm only for the sake of furnishing appropriate information (Ioannou & Serafeim, 2017). There can arise issues related to validity and reliability of data that has been collected and analysed accordingly. This is one of the biggest implications on financial decisions that stakeholder might adopt for the sake of simplifying the procedures and just reporting for sustainability without accomplishing steps in general.
Conclusion & Recommendations
While analysing issues and challenges faced in practices of sustainability reporting there have been highlighted various practices that need to be altered. Altering traditional practices and overcoming challenges will provide organization to deliver appropriate sustainability reporting that can attend to all relevant stakeholder groups. Organization along with their accounting advisors need to proceed in the light of analysis to adopt the following recommendations through which they can overcome their challenges faced.
Reference Lists
Adams, C.A. and Frost, G.R., 2008, December. Integrating sustainability reporting into management practices. In Accounting Forum (Vol. 32, No. 4, pp. 288-302). Elsevier.
Brown, H.S., de Jong, M. and Levy, D.L., 2009. Building institutions based on information disclosure: lessons from GRI’s sustainability reporting. Journal of cleaner production, 17(6), pp.571-580.
Burritt, R.L. and Schaltegger, S., 2010. Sustainability accounting and reporting: fad or trend?. Accounting, Auditing & Accountability Journal, 23(7), pp.829-846.
Farneti, F. and Guthrie, J., 2009, June. Sustainability reporting by Australian public sector organisations: Why they report. In Accounting forum (Vol. 33, No. 2, pp. 89-98). Elsevier.
Herzig, C. and Schaltegger, S., 2011. Corporate sustainability reporting. In Sustainability communication(pp. 151-169). Springer Netherlands.
Junior, R.M., Best, P.J. and Cotter, J., 2014. Sustainability reporting and assurance: A historical analysis on a world-wide phenomenon. Journal of Business Ethics, 120(1), pp.1-11.
Kolk, A., 2008. Sustainability, accountability and corporate governance: exploring multinationals’ reporting practices. Business Strategy and the Environment, 17(1), pp.1-15.
Ioannou, I. and Serafeim, G., 2017. The consequences of mandatory corporate sustainability reporting.
Isaksson, R. and Steimle, U., 2009. What does GRI-reporting tell us about corporate sustainability?. The TQM Journal, 21(2), pp.168-181.
Lozano, R. and Huisingh, D., 2011. Inter-linking issues and dimensions in sustainability reporting. Journal of cleaner production, 19(2), pp.99-107.
Manetti, G., 2011. The quality of stakeholder engagement in sustainability reporting: empirical evidence and critical points. Corporate Social Responsibility and Environmental Management, 18(2), pp.110-122.
Schaltegger, S. and Burritt, R.L., 2010. Sustainability accounting for companies: Catchphrase or decision support for business leaders?. Journal of World Business, 45(4), pp.375-384.
Unerman, J., Bebbington, J. and O’Dwyer, B., 2010. Introduction to sustainability accounting and accountability. In Sustainability accounting and accountability (pp. 20-35). Routledge
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