Management Accounting: Sustainability Reporting - Essay Example

?REPORT ON SUSTAINABILITY REPORTING Contents Introduction 3 Difference between sustainability reporting and traditional reporting 3 The sorts of information that they will need to include in a sustainability report of why they should be included 4 What benefits they should expect from preparing sustainability reports 5 My opinion on the future of sustainability reporting and how what they might report now, may change in the foreseeable future 6 Conclusion 6 REFERENCES 7 Board of directors ABC Company United Kingdom Today’s world is facing many challenges especially with regards to economy. Recession has it nearly all the world and no economy has managed to have seem recovering from it. People have a lot to blame, some blame the financial crisis alone, others may be having concerns about distribution of wealth’s, you may even over hear some blaming the social and environmental aspects as a cause of all this imbalance. Well whatever the reason is, it is surely time that we sit down, assess and analyse the system as a whole and try coming out with both, a reason and a solution for all this happening. Arguably the main reason of reaching such a unpleasant situation is that, major stakeholders, whether it’s the big companies or the government, they have mainly focussed on short term achievement and plans rather than analysing, assessing and planning for longer term success. Hence before we consider entering in a developing country for investment purposes I would like to reflect some light on different aspect of sustainability reporting, the differences between sustainability reporting and traditional reporting and the benefits of sustainability reporting. Introduction A sustainability report mainly focuses, in fact constitutes, three elements or dimension, namely, social, economic and environmental. Due to this fact is often known as triple bottom line or 3BL. Some even regards is as a planet, profit, people principle. While discussing this aspect, sustainability reporting is often substituted for environmental social and governance reporting and corporate social responsibility as the whole idea is almost the same. The framework of sustainability is set up by GRI (Global Reporting initiative), a non-profit organisation. Difference between sustainability reporting and traditional reporting Sustainability reports differs from traditional reporting in a few important ways. Sustainability reports stress on the fact of maximising stakeholder value rather than only shareholder value. Stakeholder in this context refers to someone in fact anyone that is affected by the organisations actions whether it be directly or indirectly. Customers, civil societies, employees, financers and the community as a whole are all included in the list of stakeholders. Another crucial difference is that sustainability reports do not require each aspect to be in monetary term. That is some indicators may just be included as a comparison as the previous years to help analyse how the company is performing. In traditional reporting all reported data is produced in monetary terms. Sustainability reports produce comparison data due to the fact that some performance indicators may not be valued accurately in monetary terms, thus, are better off used as a mean of comparison. An example may be that of the pollution waste produce by the organisation. This may be reported as number of tons of wastage produced or even waste per unit of production. Both can be compared with that of other organisations depending on what indicator the other organisation has preferred. The sorts of information that they will need to include in a sustainability report of why they should be included The main reason to produce a sustainability report is to provide a true representation of the sustainable performance of an entity, that is, a reasonable and balanced presentation of the entity performance that includes both its positive contributions and negative contributions. Sustainability reporting helps organisations produce sustainable information of an organisation in almost the same to tradition reporting. It gives comparable data with specified metrics and disclosures. It gives an understanding on the governance, social, economic and environmental aspects of the organisation. Sustainability reporting helps management set goals and performance measures and also helps in managing change. In an effort to produce regular sustainable reports organisations set up a regular method of obtaining data that is monitored with respect to sustainable performance regularly. This data is also used by the top management for planning, decision making and policy making purposes. According to the GRI Reporting framework these reports should be able to use for the following purposes. Benchmarking-with respect to law, performance standards and norms, A demonstration on how the organisation is influenced by and influences sustainable development Helps in comparing an organisation with other organisation over time. Standard disclosures include The profile and strategy of the organisation, which will help in understanding the organisation as a whole. Management approach, to understand how to management addresses a situation or a problem A set of performance indicators to compare social, economic and environmental aspects of the entity. Performance indicators include: Reporting on the trends that is in comparison with previous years Use of protocols for basic guidance on interpretation and compilation of information Presentation of data may be in terms of ratios Determination of the appropriate level of data aggregation Metrics to be used preferably international metrics so a fair comparison can be made. Management Approach includes: The economic performance of the management The economic impacts (indirect) The goals and objective so the management The policies of the management And finally their market presence What benefits they should expect from preparing sustainability reports Sustainability reporting has many positive effects on all reporting organisations hence many benefits are reaped. Sustainability has both internal and external benefits to the organisation. Internal benefits The internal benefits for organisation with respect to sustainability reporting are as follows It helps the organisation and company in understanding its opportunities and possible risks it’s may face more efficiently. Hence it leads to a better performance of the organisation It stresses on the link between non-financial and financial measure, thus enhancing the understanding and improving the planning aspects of an organisation. It propels the organisation to go for a long term strategy rather than a short term one, hence all plans and policies are made for the long term future. We have already seen the effects of short term planning, a perfect example being today’s global economic situation. It helps an organisation assessing and analysing its processes closely which leads to cutting down of costs and increasing its efficiency. Its helps in avoiding any kind of bad publicity which may lead to a major loss of goodwill and even going concern problems. It also helps in reducing the probability of any environmental or governmental fine or cancellation of grant. It helps in comparing an organisation performance not only between other organisations and sectors but also internally. External benefits are as follows: It shall help in increases the organisations goodwill and reputation, which shall in return increase the profits of the organisation It also helps other stakeholders, especially the external ones, to have the information about the tangible and intangible assets of the company, hence understanding the true value of the organisation. Its reduces any negative social, environmental and economic effects. It also reflects of on the importance of sustainability reporting to those organisation who are yet to follow or implement the guidelines of sustainability reporting. My opinion on the future of sustainability reporting and how what they might report now, may change in the foreseeable future Sustainability reporting has gained ground over time. From almost being ignored it has gained a lot of importance in today’s world and most organisation are preferring to produce sustainability reports even though it’s not a requirement in legislation or related accounting standards. I see sustainability reporting becoming a requirement for every company and organisation in future but at the same time I personally suggest and think that the quality and quantity of material contained in a sustainability report shall increase highly. Thus leading to a better understanding and comparison of the organisation between other organisations. Conclusion The concept of this kind of reporting, that is , sustainability reporting is a very old one. Its runs back to the early 90’s. Even about a decade ago most organisations were least interested in such kind of reporting and didn’t even consider bothering it. It should be understood that to improve and contribute to a green economy the social and environmental performances are of utmost importance. All of the stakeholders whether it is the government, organisations or the wider community are to contribute in this regard. This practice should be made common practice for all public agencies, companies and civil society.   REFERENCES Gazdar, K. (2007). Reporting nonfinancials. Chichester, England, Wiley. Global Reporting Initiative. (2002). Sustainability reporting guidelines. Boston, Global Reporting Initiative. Global Reporting Initiative. (2007). The GRI sustainability reporting guidelines: for small and not-so-small organizations. Amsterdam, Netherlands, Global Reporting Initiative. Global Reporting Initiative. (2000). Sustainability reporting guidelines on economic environmental, and social performance. Boston, Mass, GRI]. Schaltegger, S., Bennett, M., & Burritt, R. (2006). Sustainability accounting and reporting. Dordrecht, Springer. http://site.ebrary.com/id/10140811. Schulz, W. F., Burschel, C., & Losen, D. (2001). Corporate sustainability reporting. Witten, Univ., Fak. fu?r Wirtschaftswiss. Stratos INC, & Canada. (2005). Gaining momentum corporate sustainability reporting in Canada. [Ottawa, Ont.], Stratos. Unerman, J., Bebbington, J., & O'Dwyer, B. (2007). Sustainability accounting and accountability. London, Routledge. Read More