Accounting for Society and the Environment: The Role of

School: Royal Melbourne Institute of Technology - Course: ACCOUNTING ECON1010 - Subject: Accounting

Accounting in Organisations and Society Topic 2 - Accounting for Society and our Environment.Sustainable Development Goals (SDGs) The evolving focus of organisations: Organisations and managers are expected to focus on much more than just financial performance: • Social and environmental performance and accountability • Climate change • Value creation • Externalities Accounting and Accountability: Accountability is the duty to provide an account of the actions for which one is held responsible. Gray et al.,1997, p. 334. Accountability involves two responsibilities or duties, namely: 1. to undertake certain actions to meet stakeholders' expectations 2. to provide a reckoning or 'account' of those actions to the stakeholders Accountants have a significant role to play in both these duties via the information they provide to both internal and external stakeholders Corporate Social Responsibility (CSR) "Social responsibility is the responsibility of an organisation for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour..." Examples: Avoid: using scarce natural resources; generating greenhouse gas emissions; creating noise from operations; exploitation of labour; discrimination ... Social and environmental accounting • Social accounting provides information about an organisation's impacts upon particular people/societies. • Environmental accounting provides information about an organisation's impacts upon living and non-living natural systems, including land, air, water and ecosystems. Requires: financial costs/revenue information and other non-financial information such as: • compliance with regulations; waste and emission impacts; public relations; health and safety; externalities

Externalities Impacts that an entity has on parties external to the organisation where such parties did not agree to or take part in the activities causing the externality • Externalities can be positive (benefits) or negative (costs) • Example - Video on Heathrow Click here to view Organisations have to make decisions about the externalities they create • Measured and managed (internally) reported (externally) • Now part of the role of an 'accountant' How to better measure through the value chain • A value chain consists of the key activities engaged in by an organisation or industry • At the organisational level, the value chain is usually viewed as a combination of primary activities and support activities • The value chain domain provides a suitable framework for measuring and monitoring every business activity and potential externalities