Corporate Social and Environmental Accounting - Research Paper Example

? Corporate Social and Environmental Accounting Report Number Due Introduction The concept of Corporate Social Responsibility Reporting (CSR) is a very fundamental concern in the present global business environment where competition and the need for social responsiveness has become some of the greatest concerns for most business executives. In the present world, the economic and financial behavior of organizations normally determines the social responsibility performance of the organization. In this regard, the process of monitoring and managing CSR activities creates the need for proper measuring, monitoring and reporting of the performance of the organization. This research paper therefore seeks to elucidate the social accounting measures put into place by ANZ Bank in Australia and Citibank in the United States. In its basic connotation, social accounting refers to the process of relaying the information regarding the economic effect of the social and environmental activities of the organization. This is analyzed in the context of particular interest groups and social units within the society. The essence of social accounting is normally the concept of corporate accountability. According to Crowther (2000), social accounting is an approach used in reporting the activities of an organization in a manner that stresses the importance of socially relevant behavior while also stressing the fact that a firm should always be accountable for its social performance. In this regard, very appropriate reporting techniques become imperative as measures of the social responsiveness of the organization. It is imperative to realize that banks constitute the largest players in the Australian Stock Exchange (ASE). Over 18 percent of the listed companies in the ASE are mostly banks while other financial institutions make up a larger portion of the top 20 companies listed on the exchange. This powerful presence presents the need for the banks to be socially accountable for their operations in the industry and society at large. Literature Review Despite the concept of Corporate Social Reporting being a topical aspect for more than two decades now, much analysis of the subject has always revolved around comparisons between the different CSR practices exhibited by different organizations across the world (Adams, 2004). In this regard, it is realized that differences in culture and national values normally account for differences exhibited in accounting practices between countries. Much literature existing on the topic basically focuses on the social disclosures of mainly firms from industrialized economies with little focus on the developing or recently industrialized economies (Hilmi, 2008). The idea behind social accounting presents much challenge to the concepts of conventional accounting regarding the limited image often portrayed as existing between organization and the society at large. As a normative concept, social accounting presents a more elucidative approach to the whole idea about social accountability in the sense that organizations should always extend their social accountability beyond mere economic events (Anderson, 2005). Social accounting advances the view that corporate responsibility should not simply be addressed in financial terms like it is often the case. Conventional practice has always dictated that society is the only recipient of the social responsiveness of organizations. However, in the modern setup, the stakeholders in this regard extend beyond the society and include entirely all the participants in the social world. In a way, it appears that social accounting seems to expose the emerging tension between the realization of economic profits and the pursuit of environmental and social objectives. The idea behind social accounting is often geared toward two purposes, i.e. accountability purposes and management control. As a demonstration of accountability on the part of the organization, social accounting is designed to support and enhance the pursuit of the goals and objectives of the society. Often, these objectives are manifold but are explained in the context of social and environmental sustainability or desirability. In order to create room for informed decision making, the flow of information from the organizations to the society has to be conducted in a manner that enhances the very idea behind objectivity and democratic decision making. According to Gray (2001), the flow of information should demonstrate the fact that those in control of the resources are more accountable to the society on the proper use of those particular resources. In the accountability respect, the society is seen as the greatest beneficiary in the process of implementing a more social and environmental approach to the concept of social accountability. The rights often directed to the society include: honoring the need to provide stakeholders with information, creating a balance between corporate responsibility and corporate power, eliminating the opacity of corporate activity and clearly identifying the cost of economic success on the society and environment (Cronin, 2001). For the purpose of management, social accounting is normally designed to enhance the achievement of the goals and objectives of the organization. Given that social accounting is concerned much with reporting the activities of the organization, in the context of management control, reports on performance are often regarded as social audits. Organizations often benefit greatly from the implementation of social accounting measures. Some of the benefits often derived include: improved decision making as a result of the increased information, more accurate costing of products and services, enhanced public relations and the identification of opportunities for growth and development (Hoffman & Schwartz, 2010). In the banking industry, most players have recognized their social and environmental obligations given the pressure always piled upon them. However, the greatest concern is how well these banks are able to communicate their progress regarding the social and environmental responsiveness. It has always been felt that banks have a much lesser impact on the natural environment and should, therefore, be less accountable compared to other organizations like chemical manufacturers or the mining industry. However, it must be remembered that in economies such as Australia, banks are actually the largest employers and hold the largest proportion of the economy. As such, a socially responsible banking sector is bound to benefit a much wider pool than most sectors. Information from the Australian Banking sector reveals a sense of limited social accountability from most of the largest banks in the country (Wartick & Cochran, 2011). Indeed, the concept of social accounting and corporate social accountability draws a much wider spectrum in the banking industry today. Anderson (2005) elucidated the effect of increased pressure by US multinationals on the concept of global competition and the eventual impact of this pressure on the banking industry across the world. In that regard, Anderson suggested a complete framework for increasing risk management measures and aspects of corporate governance in the face of the growing need for social accounting and CSR. Wood (1991) presented the idea behind corporate social performance and offered a model that creates a proper link between the business pursuit of profits and the need for social accountability. Indeed, the framework of social responsibility is based at the organizational and individual levels. Social responsiveness is, therefore, seen as a product of environmental assessment. Going by Wood, it would be expected that banks would disclose their social responsibility affairs in the more elaborate areas of social impacts, environmental concerns and stakeholder interests. On the need for organizational conscience and ethical governance, Hoffman, Fredrick and Schwartz (2001) stress the importance of corporate morality in the context of an organization. In this view, a firm’s social accounting disclosures are examined to determine whether a sense of ethical behavior and corporate governance is propagated. Theoretical Framework Positive accounting Positive accounting is a section of academic research that seeks to elucidate and actually predict the practices in the accounting profession. It comes into contrast with the concept of normative accounting which promotes and highlights optimal accounting standards and procedures. The concept behind positive accounting was developed and organized by Rose Watts and Jerold Zimmerman. Though substantially accepted in the accounting profession, the articles received considerable criticisms from several quarters. Positive accounting presents the contractual perception in looking at the organization. The firm is regarded as a “nexus of contracts” where accounting is one implement that is used to facilitate and enhance the execution of these contracts. In this regard, positive accounting is seen to eliminate the cost of contracting as it helps in establishing agreements amongst the various contracting parties. In seeking to study the social accounting in the context of the banking sector, positive accounting becomes very fundamental in creating the important link between the various parties that come to play. Corporate social reporting brings on board several players like the firm, society, government and the stakeholders. In this respect, a proper working mechanism has to be drawn to enhance the realization of the various relationships that have to be established between these different parties. In its contractual view, positive accounting comes under much tension with the studies on value relevance. Value relevance proposes that the role of accounting is purely about the value of the firm and places much focus on accounting as an important tool for equity investors and not really useful in contracting activities (Varley, 1998). In the context of efficiency, positive accounting can be used by mangers to bring a picture of the true value of the firm while clearly laying bare the performance of the firm. Such a formula for action becomes very imperative in the analysis of social accounting in the banking industry. Indeed, the banking industries of most countries make up a very major component of these economies. However, much of their performance is normally understated in order to evade much tax and receive benefits. Positive accounting, therefore, presents a clear framework for bringing into focus the operations of the banking industry in order to create a more illuminating picture that can serve to reveal the true state of the industry (May, 2003). In view of the legitimacy theory, an analysis of the concept of social accounting becomes much exhaustive. The theory puts forward the view that organizations are normally in the constant need to operate within the rules and regulations defined by the society. The idea of bounds and norms comes under much focus for these organizations as they seek to operate within the limits that society perceives to be legitimate. In the context of social responsibility, such a thought translates into much concern especially in the banking sector where players have for a long time regarded social responsibility as an unnecessary burden on them. The theory therefore presents a proper theoretical framework for digging into the topic in order to unravel all the relevant information therein. CSR reporting in the United Stated and Australia In the United States, conventional social accounting reports are the avenues through which information on CSR is relayed to the interested parties. Recent trends indicate an increase in the number of companies disclosing their reports to the public unlike in the past where much of that information was always kept out of reach. However, there is still no regulation requiring the organizations to disclose their CSR reports to the public. Most organizations in the US have realized the imperative role of social and environmental accounting and are therefore on the constant practice of publishing their CSR reports on yearly basis (Trebing, 1999). Citibank as an operator in the US system employs much of the existing parameters that characterize the US’ CSR. In this regard, the bank is normally very responsive on the social and environmental needs of the society as can be evidenced in its report which demonstrates a sense of social accountability on the part of the management. As a strong participant in the competitive US financial environment, Citibank is compelled to regard the concept of social accounting with a lot of concern (Hoover, 2007). In that regard, the bank, through its activities throughout the world, is always on the move to improve the welfare of humanity through social and environmental programs that impact the masses. While social and environmental responsibility has become synonymous with most Australian corporations, most of these strategies have only been realized in the recent past. In comparison to the US system, the Australian market developed slowly in terms of CSR as most organizations had not realized the importance of reporting the impact of their activities on the social fabric and the general environment. However, the present case demonstrates that most of the organizations are reporting the effects of their activities on the public and becoming more socially responsible to the needs of the society in which they operate. The ANZ bank operates in the Australian business environment and normally discloses the effect of its activities on the environment. These disclosures are contained in the CSR reports which clearly demonstrate that the organization is always at the forefront in pushing for the welfare of the society through programs that benefit society at large (Dovers, 2010). Methodology Much of the information will be gathered from the CSR reports of the ANZ bank in Australia and Citibank in the United States in order to make the comparison between these two reports and arrive at an understanding of the state of affairs in the two countries regarding the state of social accounting. The following questions will guide the research process: a) What are the differences in the CSR measures of the two companies?; b) Do any regulations influence the conducts of these organizations’s CSR?; c) What measures are the companies taking to improve the welfare of the society? The research shall utilize both qualitative and quantitative methods of data collection but is more grounded on a qualitative sense that puts much focus on the imperatives of the matters under concern. Data collection methods will include primary methods like surveys and interviews as well as secondary means like company reports, journal articles, and books. A qualitative approach shall be applied in the research through the use of such methods like interviews and observations in order to collect relevant and substantive data. Upon the collection of data, analysis will be done in order to bring into focus the relevant aspects like SWOT analysis which will eventually assist in giving the needed information. Conclusion The information relating to the social accounting of the two organizations serve to demonstrate very fundamental concerns regarding the state of social and environmental accountability as exhibited by organizations across the world. The information stresses the need for organizations to focus on becoming much responsible and responsive to the needs of the society within which they operate. In such a way, it helps to create a society that appreciates the role of organizations in bringing order and improving the welfare of the people. In conclusion, it is realized that CSR reporting has become a very fundamental concern for organizations today. Though costly, the efforts are normally socially rewarded in the manner the society comes to recognize the role of the organizations. References Adams, C. A. (2004). The ethical, social and environmental reporting-performance portrayal gap. Accounting, Auditing and Accountability Journal. 17(5) p. 731- 757 Anderson, D. (2005). Corporate Survival: The Critical Importance of Sustainability Risk Governance. iUniverse, Inc Cronin, C. (2001). Corporate Social Responsibility in Australia: A select Review of the Literature. Camperdown, N.S.W.: The Smith Family. Crowther, D. (2000). 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M. (1999). The Corporation in the American Economy. Chicago: Quadrangle Books. Varley, P. (1998). The Sweatshop Quandary: Corporate Responsibility on the Global Frontier. Washington, DC: Investor Responsibility Research Center. Wartick, S. & Cochran, P. (2011). The evolution of the corporate social performance model. Academy of Governance Review. 10(4). Wood, D. (1991). Corporate social performance Rrvisited. Academy of Governance Review.16(4). Read More