Corporate Social Responsibility and Sustainable Development - Literature review Example

rроrаtе Sосiаl Rеsроnsibility аnd Sustаinаblе Dеvеlорmеnt Name: Date: Introduction There has been an increased awareness of the consideration of the environment from natural and social accounting. There is a need for companies to use diverse methodologies to save the environment. The main question that has been raised for companies is whether they are ready to accept a lower return to safeguard the environment for the benefits of the society or not? Companies need to come up with good strategic, operational and management decisions with the involvement of accountants so as to safeguard the environment as posited by Gleeson-White (2014). Many companies are using monetization of natural and social capital so as to determine the impacts and dependencies of their firms on the environment as explained by Sukhdev (2012). Accountants can save the world by encouraging the use of natural and social capital in companies. Natural and social capital encourages identification and consideration of possible monetization on the impacts of a particular entity to the environment. Accountants have the duty to save the world by encouraging the various companies to take part in activities of Corporate Social Responsibility, which will ensure the environment is safeguarded. Companies should take part in activities that involve cleaning the air, water and ensuring strong community relations (Sukhdev, 2012). Quantification is done in the natural and social accounting aspects so as to determine physical units of the business affecting the environment. A good example is measuring the quantity of polluted water discharged by industry. Issues Raised i) Environment There are various issues that have been raised in the excerpts provided. One of the issues raised is the impact of business towards the environment in our society. The main issue coming up from this is whether business will accept lower profits for the sake of the society. Natural and social capital has been used so as to determine the impact a business have towards the environment. Various environmental impacts by businesses have been analysed worldwide by top accountants. However, the major environmental impact currently valued by companies and governments globally is the issue of carbon. According to Soh, D. S et al. (2015) Various techniques have been employed in areas concerning natural and social capitals so as to address the issue of pollution from carbon emissions from the industries. Consider an example where by EU countries have introduced taxes as a result of carbon emission to reach the targets of ensuring carbon reduction. Emissions trading schemes have been developed to facilitate this programme. A good example is the EU Emissions Trading Schemes. Governments and companies need to develop measures to safeguard the environment. ii) Integrated Reporting and the Six Capitals The second issue raised in the excerpts is the question of integrated reporting and the six Capitals. Accountants of big companies have encouraged them to use integrated reporting in their annual reports as claimed by Ray, (2014). Integrated Reporting not only involves combining the sustainability report, financial statements and the annual report but also considering the wider natural and social capital of an entity. Accountants are on the view that companies should opt using integrated reporting so as to be more successful according to Gleeson-White, (2014). Integrated reporting involves a broader set of capital other than the normal financial capital. It encourages accountants to work together other than working separately. Six capital models, on the other hand, involve integration of human, social, financial, manufacturing, and intellectual and relationship capitals. Natural capital is essential in the six capital models since it provides an excellent opportunity for the other capitals to rely on. Accountants have advised leading organizations to come up with good innovations while reporting. Top executives and stakeholders need to rethink and come up with new reporting methodologies that involve integrated reporting. According to Gleeson-White (2014), there is also the need for consideration of the environment so as to create capitals that will positively impact on the environment. Accountants need to understand that companies need to depend on all types of capitals not necessarily on financial capital so as to achieve their success. However, there is recognition of the effect of organization on the non-renewable capitals. According to Sullivan, S. (2014) their implications such as future cost, risk and long and short term successes need to be taken under consideration by the accountants. Organizations have to consider the availability of the overall strategies to give a well integrated report considering the organization’s impacts towards the environment. Risk management should also consider the environment indoor to ensure a safe and healthy society. Companies need to change the way they consider the interrelation is existing between the various capitals. Interrelation of the capitals by an organization will guarantee the company success and also the protection of the environment as claimed by Soh, et al. (2015). Role of accounting profession in CSR and Sustainable development The question whether accountant will save the world has been one of the most exciting questions raised in the world of business. My view is that the accounting profession has an important role to play in both Corporate Social Responsibility (CSR) and in ensuring sustainable development of both organizations and the environment. However the question whether accountants will save the world will need more time to answer, it shows the rising need for ensuring a sustainable businesses and environment in the society. Commitments by the accountants in coming up with good CSR policies have been welcomed in the wider business community. The financial sector can benefit with the involvement of accountants in accounting appropriately for nature. From my point of view, accountants have an important part to play in the demonstration of Corporate Social Responsibility and the sustainability of the development of companies in the business world. The following are the important roles they have to play. The first role is declaring the Natural Capital for firms. Accountants have the vital role to play in evaluating the natural capital for their companies for the business world to be more successful. However, the significant challenge about this is that major large financial institutions have not been involved in the declaration of their Natural Capitals as posited by Soh, et al. (2015). Most of the accountants from those institutions have problems since they are not concerned with where the information will come from or poor accounting standards in determination and valuation of natural capitals. For instance accountants of Corporate Eco Forum and the Nature Conservancy organizations have come up with a collaborative effort which has developed methodologies in order to give a value to the global freshwater, marine systems and fresh waters as natural capitals. The second role that accountants have participated in is the coming up with the project named “World business council for sustainable developments”. This project is aspiring to incorporate company’s effects on the ecosystems and biodiversity into the various global accounting systems. Accountants have the role of saving the world by developing the aspect of business reporting for organizations. Accountants are coming up with the integrated reporting system that includes the six capitals without necessarily concentrating on the financial capital only. The third role I think accountants are playing to demonstrate CSR and sustainable development is the renewal of corporate governance. Corporate governance has been renewed in many companies so as to focus on the compensation to ensure sustainable success for organizations. A good example is the Novozymes Company, which pays 25% of its annual bonus based on both long and short financial measures. The accountants of the company have also advised the top executives and the various stakeholders also to pay 25% for both their long and short term sustainable measures. The fourth role from my view which accountants are undertaking is promotion of long-term investments which are sustainable in the business markets. More than 4500 profit making organizations are coming up with policies that will ensure wide promotion of sustainable long-term markets for the companies. Accountants have taken the duty to advise companies to join the leading exchanges so as to transform their commitments for success in the business world. Finally, the other role accountants are playing according to my view is the continued advice and education to financial analysts. Accountants have participated widely in advising and educating financial analysts on issues involving the integration of environment, and governance in the society. Accountants are often taking part in advising and educating the financial analysts so as to systematically incorporate the social and governance aspects while giving out their reports (Gleeson-White, 2014). Accountants are in the view of integrated reporting which caters for all aspects of capitals (the six capital models). Accountants have persuaded financial analysts to ask the right question in their research on the socio economic impacts of companies (McElroy & Thomas, 2015). Accountants have emphasised financial analysts to deal with the right issues concerning impacts to environment in the business world. Consider an example of the amount of water needed so as to make jeans. Many financial analysts do not analyse critically the amount of water required for making jeans, but instead they are in the rush of analysing the revenue generated thus giving incomplete reports. There is a need for facilitation of collaborations that will deliver good complete reports for organizations to ensure sustainable development in the business world. Problems, challenges and opportunities encountered by accountants in the process of demonstrating CSR and Sustainable development Accountants have recently played an important role in demonstrating Corporate Social Responsibility and sustainable development in the world of business. However, various challenges have encountered them in this process. Problems The first major problem affecting accounting professionals in demonstrating CSR and sustainable development is that profits earned may not necessarily attain the standard a company has to constitute a sufficient Corporate Social Responsibility programme. This is a challenge which leaves the accountants in a dilemma whether to advocate for CSR or not since the company is lacking sufficient funds for both Corporate Social Responsibility and Sustainable Development programmes as found out by Sullivan (2014). The second problem facing accountants in demonstrating Corporate Social Responsibility and Sustainable Development of business and environment is the poor conditions of some societies. Some societies have very poor conditions of their environments which may make companies feel overburdened to transform them as found out by Sikka, (2008). In cases like this it is difficult for accountants to encourage strategic measures of exhibiting philanthropy towards the society. The third problem facing accountants in demonstrating CSR is the reluctance of profit, non-profit and government agencies in partnering according to Sullivan, (2014). Some companies shun their accountants from encouraging CSR and sustainable development activities since they are in the view that the activities are a liability to the companies. This makes accountants shun away from activities of promoting CSR and Sustainable development programmes. Finally, the other problem facing accountants in the process of demonstrating CSR and sustainable development is the high expectations of the stakeholders of the firms. Accountants are expected to meet high expectations of top executives and stakeholders to satisfy them to the extent of promoting CSR and sustainable development campaigns. Accountants have failed in advocating collaborative decision-making for the sustainable development of the society as found out by McElroy & Thomas (2015). Challenges There are various challenges that have affected the accounting profession in promoting CSR and sustainable development programmes in the business world. The first challenge is the high economic responsibility. Accountants have the challenge of meeting the acceptable return for a corporate to start the process of Corporate Social Responsibility and Sustainable development (Sikka, 2008). The other main challenge accounting professionals will have to face the legal responsibilities expected especially when undertaking the activities of CSR. Accountants are expected to meet the laws and act within the legal framework. The other challenge facing accountants is the ethical responsibility expected of them. According to McElroy & Thomas (2015) accounting professionals are expected to ensure they do not harm their stakeholders or even the environments they are operating within. The final challenge accountants will have to meet the philanthropic responsibility expected of them. Accountants are expected to exhibit high philanthropic aspects. They have to come up with strategic behaviours that will be advantageous to both the society and the company they are working in. Opportunities Regardless of the problems and challenges facing accountants in the process of promoting CSR and Sustainable development, there are various opportunities which are evident. The first major opportunity is the technological advancements making it possible for accountants to revolutionize their activities of promoting CSR and sustainable development. The other opportunity accountants have the opportunity of educating financial analysts on consideration of natural capital in their valuations. This will ensure sustainable development of the various profit making organizations in the world of business. Finally the opportunity to advocate for integrated reporting offers an excellent opportunity for accountants to promote sustainable development for their firms. Accountants are nowadays able to advance their skills and can use them in advocating for sustainable development for their companies. Conclusion Accounting profession can offer a corporate responsibility assurance in the world of business. There is a need for organizations to take the challenge and advocate for integrated reporting in their firms. There is a need for companies to change how they think on the interrelationship between the six capital models for the prosperity of Corporate Social Responsibility Activities and Sustainable Development activities as posited by Sikka, (2008). References Bishop, D. M. (2015). Public Diplomacy: Time to Debate Change, Continuity, and Doctrine. American Diplomacy, 1. Gleeson-White, J. (2014) Six Capitals, or Can Accountants Save the Planet?: Rethinking Capitalism for the Twenty-first Century, NY: WW Norton. Gleeson-White, J., & Harcourt, G. (2012). Double Entry Book Keeping: A Conversation. The Economic and Labour Relations Review, 23(3), 89-104. McElroy, M. W., & Thomas, M. P. (2015). The multicapital scorecard. Sustainability Accounting, Management and Policy Journal, 6(3). Ray, R. R. (2014). Internship report on an analysis of loans & advances of Rupali bank limited (Dhanmondi Branch), Dhaka. Sikka, P. 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