Sustainability Accounting and Reporting - Research Paper Example

Sustainability Accounting and Reporting Contents Contents 2 Introduction 3 Aims and objectives 4 Literature Review 5 Overview 5 Need for sustainable management 7 Trends in sustainable management 8 Regulatory Trends in Sustainability Management 9 Sustainable management challenges 11 Research methodology 12 Research findings 15 Conclusions 17 References 19 Introduction Sustainability is a key issue that is being faced by businesses in the global scenario. Irrespective of whether the bushiness are local or international, profit or nonprofit, private or public limited, all companies are facing the intense need of ensuring sustainability and continuity of their operations. Sustainable management refers mostly to environmental and ecological compliance. The negative impacts of the operations of companies are increasing continuously and it has been anticipated that the planet can absorb these impacts to a certain limit after which these impacts can act as highly derogatory for the whole ecosystem as well as the living beings. This will put the current and the future generations of living beings on the earth under immense threat. . Environmentalists, governments as well as consumers are becoming more aware of the negative impacts of the operations of these businesses and thus, a high degree of market pressure is built on the businesses to take up suitable sustainable management practices to ensure continued success and sustainability. Also, sustainable management is identified to be critical for competitive advantage and differentiation in the respective industries. As such, the research is carried out to evaluate the sustainable management practices that are currently being practiced by companies across the globe. The research is expected to add value to the existing literary works and researches that have been prepared and presented by different researchers and scholars till date. The research is aimed at evaluating and discussing the sustainable management practices of companies and public sector entities. The research work is started by explain the scope of the research followed by a reference made to the existing literary works done by scholars and practitioners across the globe in the field of sustainable management. Suitable research objectives are identified and formulated which are to be attained by the analysis of the collected data. The findings of the research indicate that sustainable management is critical for all types of businesses, irrespective of the size or type of the business. Also, sustainable management encompasses different dimensions and is a multilayered and multifunctional concept. The findings indicate that it is necessary to incorporate sustainability management practices in all aspects of a business including the financial, operational and management aspects. This helps to increase the competitive advantage of the business as well as helps it to become more adaptive to the changing market conditions and demands of the consumers. Also, the sustainability management practices are to be adopted by companies in order to be complaint to the existing regulatory policies and frameworks because most countries across the globe have established pre-defined frameworks of sustainability management and sustainability reporting. Aims and objectives The main aim of this report is to discuss and evaluate the sustainable management practices of companies and public sector entities from different perspectives. Also, the report aims at taking a holistic and macro view of the sustainable management of different public sector entities and companies by considering the statutory sustainable accounting and sustainable management practices followed by the companies. The research is carried out to attain another objective of establishing the need of sustainable management for different companies pertaining to the global business environment. The different regulatory frameworks and international standards of sustainable management and sustainable reporting and accounting are considered in the research to attain the main objectives. Thus the main objectives of the research are as follows To identify, discuss and evaluate the sustainable management practices followed by different companies and public sector entities across the globe. To identify and establish the importance of sustainable management in the evolving business environment. To evaluate the sustainable reporting and accounting processes as a part of sustainable management practices in various companies and organizations. To identify the challenges for sustainable management in different companies. To evaluate the existing sustainable management practices and their effectiveness in different companies. To find out the most suitable methods of sustainable management for different companies. Literature Review A number of literary works have been prepared and presented by various academicians, scholars and researchers in the field of sustainable management and relevant areas of business. Overview Sustainable management has emerged as an important concept for both public sector as well as private sector entities. Sustainable management has become an important dimension of business economics throughput the globe. Sustainable management in businesses would ideally include different social, environmental and governance issues that when managed suitably adds value to the business and minimizes the negative impacts of the business on the external environment. Thus, appropriate sustainable management is necessary to manage the stakeholders and create more value for all the stakeholders of a company. Sustainable management encompasses different concepts of sustainability and combines and synthesizes these with key concepts of management with the aim of making the business operations, processes as well as reporting and accounting more sustainable and adhering to the environmental and social requirements. The companies operating in the modern day business world have become increasingly focused on sustainability issues. As discussed by Guthrie and Broadbent (1999), the main sustainability issues for different local and international companies can be divided into three major branches (Guthrie and Broadbent, 1999). These are the environment, the economy and the needs of the existing and the future generation of people. Sustainable management is significant to ensure the operations and practices in different categories of society, business, and environment to have positive impacts on each other. The main aim of sustainability management practices is to ensure that these practices benefit the existing and future generations of the global society is a positive manner. Sustainable management practices have been considered necessary because it is essential to maintain the quality of life in our planet, especially in the present business environment where the negative impacts of different business entities on the planet and ecosystem are being highlighted with every passing day. Sustainable management practices are multidimensional and can be incorporated in various aspects of a business including leadership, business processes, technology, innovation, culture and overall management. (Source: Guthrie and Broadbent, 1999) Need for sustainable management Sustainable management in businesses is the incorporation of economic, social and environmental factors in the business decisions. This is aimed at putting an emphasis on the long term goals of a business rather than on the short term objectives of the business so that the business can operate on a continuous basis by being environmentally and ecologically complaint and sustainable. According to Bellringer, Ball and Craig (2011), this means that the companies have to focus on the Triple Bottom Line concept and on the three key aspects of a business which are People, Profit and Planet (Bellringer, Ball and Craig, 2011). The sustainable management practices of a company not only create a positive scope for the business but also make the business more capable of growing and adapting with the changing market scenario and the evolving external environment. Sustainable management often makes a business more competitive and differentiated from its competitors. It also helps in managing risks in the business and avoids future costs which may be associated with unsustainable business strategies and practices. Cooper and Pearce (2011) have argued that the companies operating in the modem business world have taken up sustainable management through risk management, environmental compliance and social compliance by implementing suitable waste management policies, energy conservation systems, waster preservation processes as well as through giving back to the society and protecting the environment (Cooper and Pearce, 2011). The market pressures from environmentalists, consumers and regulators have made the business across the globe to sit up and take notice of the positive as well as negative impacts of their business processes on the environment. Sustainable management creates a responsible and positive image for the companies as well. Trends in sustainable management Sustainability reporting practices by different public and private limited companies is an important part of sustainable management. Bevir, Rhodes and Weller (2003) have identified in their work that companies, governments, stock exchanges and other types of organizations have recognized the importance and value of incorporating the sustainability factors in the core business practices and strategies so as to make the business more environment compliant and sustainable in its long term operations (Bevir, Rhodes and Weller, 2003). The sustainability reporting practices are being embraced by different companies because the disclosures of the corporate, economic, social and environmental performances of a business have become exceedingly mandatory in the global business environment. Currently, more than ninety five percent of the Fortune 250 companies publish sustainability and corporate social responsibility reports. As per the work of Bebbington and O’Dwyer (2007), the roles and responsibilities of different corporations and entities in the public sector are much diversified and multidimensional (Bebbington and O’Dwyer, 2007). The operations of the public sector entities also vary to a high extent depending on the size and function of each of these entities. However, irrespective of the size, nature and type of operations of the public sector entities, most of the public sector operations encompass the consumption of natural resources like water; fossil fuels etc. and their operations often lead to the generation of huge volumes of waste products like greenhouse gas emissions which are detrimental for the environment and the planet. The governments of different countries are giving much focus on the environmental impacts of the operations of the public sector entities and as such, have established suitable environmental management frameworks which are regulated by legislative and policy requirements to support and guide the public sector entities in sustainable management and sustainable reporting. The elements of these frameworks are evaluated and reviewed on a regular basis by the governments to ensure that the public section companies are compliant with these frameworks in their sustainability management practices. Regulatory Trends in Sustainability Management As identified by Clark and Corbett (1999), sustainable management frameworks and legal policies have been established in various countries and legislations across the globe (Clark and Corbett, 1999). In the year 2012, the United Nations Environment Program (UNEP), GRI, the Stellenbosch University and KPMG conducted an extensive review of the voluntary as well as mandatory sustainability reporting policies and legislations that have been established in 30 different countries in all corners of the globe. According to this review, both the national and international standards of the sustainability management frameworks, codes, guidelines etc. are evolving on a rapid basis. The need and demand of sustainability management and reporting is increasing across the globe which has boosted and necessitated the establishment of the regulations, guidelines and policies framed for sustainability reporting practices. According to the work of Cavalluzzo and Ittner (2004), more than 142 countries in the world have specific laws and policies pertaining to address the sustainable management and reporting requirements (Cavalluzzo and Ittner, 2004). All these countries have specific guidelines provided for the public as well as the private limited entities to prepare and publish their corporate sustainability and corporate responsibility reports. Almost two third of these standards have been identified typo be mandatory while the rest one third standards are identified to be voluntary in nature. Also, there are a total of 16 assurance standards related to sustainability management and sustainability reporting practices. There are more than 15 standards which are formulated for the reporting requirements at both the regional and international level of sustainability reporting and sustainability management. Furthermore, a high rate of increase in the sustainability reporting practices of different companies and public sector entities has been noted in the last 10 years. Most of these companies and public agencies issue their sustainability reports in compliance with the GRI G3 Guidelines of sustainability reporting as published in the year 2006. This increase has been caused by the governments from ten different countries collaborating in order to formally use GRI as the reference guideline for the governmental corporate sustainability and corporate responsibility guidance policies. These countries are the United States of America, India, The European Union, Denmark, Spain, Sweden, South Africa, France, Chinas and Canada, all of which have included mandate sustainability reporting practices in their corporate and governmental systems. Sustainable management challenges According to the work of Ball and Bebbington (2008), sustainability management practices in companies and public entities encompass different entrepreneurial tasks which are aimed at meeting the four main challenges of a business (Ball and Bebbington, 2008). These four challenges are social challenges, economic challenges, ecological challenges and integration challenges. Ecological challenges: The ecological challenges are becoming more evident for the public and private limited companies due to the high recognition of the negative impacts of the operations of companies on the eco system of the planet. As per the environmentalists, the eco system can bear the burden of the negative impacts till a limit after which it will crumble due to these impacts. Therefore, the companies are focusing on conducting their operations in a sustainable manner so as to minimize their effects on the environment. The companies are conducting their operations in a sustainable manner so that the impacts like wastage, emissions, pollution and use of natural resources are reduced and the companies can function in a sustainable way. The companies are also trying to benefit the environment in a positive manner through different environmental strategies and practices incorporated in their corporate social responsibility activities. Social challenges: Sustainable management practices by different companies and organizations are also aimed at improving the social impacts of the operations of the business. Businesses are part of the social structure and are much dependent on the social acceptance. Therefore, they have to take into account the benefits and impacts of their activities on the society as a whole. Therefore, more companies are moving towards implementing socially compliant practices and towards safeguarding the social legitimation in order to ensure sustainability. Economic challenges to environmental management: The companies operate with the aim of making profits and generating economic benefits. The economic aspects of businesses are dependent on improving the ecological as well as the social efficiencies of the business. Therefore, the companies are trying to add value to the ecological aspects and to the social equity so as to reduce the impact added and increase the value added for the businesses. Integration challenge: Integration challenges are derived from the major objectives which lead to sustainable management. Meeting the integration challenges by companies requires the fulfillment of all the three challenges mentioned earlier i.e. social challenges, economic challenges and ecological challenges. Another main objective is to methodologically integrate the sustainable management practices with the instruments and concepts of sustainability in the business. According to Adams and Frost (2007), sustainability management of companies and public sector entities include implementing sustainability in its financial, operational and managerial aspects as well as in risk management and other functionalities of the business (Adams and Frost, 2007). Sustainable management of a business is identified to be an important part of securing the future of a business as well as for creating a positive image for the business on the minds of the global consumers. Research methodology Sustainability Management is a concept that is used by management to manage the environment, economy and future & present needs of generations. It helps a system to run in an effective and efficient way without destroying or misusing the resources. It is involved to maintain the economic stability and nourish the present & future needs of generations. Sustainability Management is ideal for those professionals who are working in managerial position or in regulatory authority, facilities management, environmental and operational leadership. In case of public sector entity maintaining relations with public is very much important. Private organization will seek benefits in their operational activities but a public sector organization always give preference about the interest of general people in the society. Several new tools and techniques are invented to research on the sustainability management in the public sector organization (McElroy and Engelen, 2011). Semi structured interview should be the primary research methodology. Objective of this research will be successfully incorporation of economic, social and environmental factors into the decisions of businesses. Choice of research method should be dependent on the findings and question of the research. Interview should be conducted on group of public sector organizations. This group should be involved in federal department, local government organization, state department, state public organization etc. Sustainability report should be prepared within organization. The interview questions should be depended on this report. What is the nature of organization, for which sector the organization is working, how many employees are involved in that particular organization, how much benefit the organization can provide to the general public, how the society is benefitted from its activities, is its work will affect the environment in any way, what are the future planning of this organization, how much value added benefit it can provide to the people of the society in near future these will be certain questions of interview (Quaddus and Siddique, 2011). Employees within the organization are satisfied or not that is another matter of concern because they are also a small part of the society. If they will not be satisfied then their work will be hampered and as a result the quality work of the organization towards society will be decreased. Research methodology also includes the interaction between environment and human society. Critical and systematic review should be established in methodological approaches. Various methods or tools should be applied at the time of investigation of asking questions regarding sustainability. Some significant scale should be developed to obtain the level of sustainability measurement and effort (Müller-Christ, 2011). The key challenges of that organization should be examined and focus should be on the disciplinary actions. Research should be done on the attitude and behavior of the individuals within and outside of the organization. Researcher should be focused on the comparative analysis among different level if the organization will be the socio cultural organization and such kind of comparative analysis should be done across cities, nations, regions and state basis. Suppose a nationalized bank of any country which is also known as public sector entity has different branches at more than one state within that particular country. Now there are so many differences of standard of living, socio cultural activities, financial activities etc. so naturally the activities of this nationalized bank will be different from one state to another state (Cohen, 2014). A critical assessment should be done by the researcher to analyze the future and present trends and also to get data about the sustainability management of that organization. Sustainability accounting is one major part of the sustainability management and it is also a sub category of financial accounting. It is generally focused on the non-financial information about a firm’s performance. A public sector organization should always disclosed all the important and related financial information to external parties like stakeholders, creditors, capital holders and other related authorities. This is generally cover three major areas. These are environment, economy (profit) and society (people). Researcher also should focus on the sustainability development initiative taken by that particular organization (Toit, 2007). A proper survey can be the part of research methodology which will able to find out financial strategies of that organization which will help to achieve the sustainability goals. If organization is going to transform some of its traditional role to modern developmental role then that can be covered and highlighted through this survey. Some analytical frame works also can be developed to get data about the pressure, response, impact and force from the society. Theses analytical frameworks will indicate the environmental, social and economic dimensions for further improvement of sustainable development. It also helps to clarify relationships among different policies and indicators. This will provide key information to the researcher about the soundness of the measurements which are used in sustainable developments. Accounting framework also can be developed to measure the interrelationship between economic, social and environmental factors. This is used to know the preservation of wealth by that organization and this is the base of managing sustainability within the organization. Analyzing stakeholder’s interest will also indicate the sustainability management and research work should be focus on this part also. Research findings From the research work it is found that sustainability management is focused more than one area in a public sector organization. It helps to build an atmosphere with creative organizational culture. This is conscious about the employee’s health and their safety within and outside the organization. It helps to enhance the integrity of management. It is trying to increase social contribution. It maintains the activities of the organization with the energy and climate change. Mutual growth of the organization, corporate social responsibility, interest of suppliers and stake holders all these fields can be controlled by sustainability management. Financial and non-financial data can be gathered through research and then it can be analyzed that the organization is in which position in the world market context (White, 2009). Sustainable strategies of the organization are reflected from the research methodology. Environmental ethics, environmental and social policies can be found through this methodology. Public sector organization often works as a development authority or regulatory body. So sustainability report of such organization will show the social, economic and environmental impacts which are raised through every day’s activities of that organization. This report will focus on the link between commitment of a company or an organization towards society, social economy and organization’s strategy. Research methodology on sustainability will find the governance model and organization’s values. In the present days number of companies or organizations are increased who are much more involved to prepare sustainability report to understand, communicate and measure their social, environmental, economic and governance performance (Brady, Ebbage and Lunn, 2013). These four key areas are very much important and required to manage changes, set goals of the company and maintain a systematic sustainability. To prepare a regular sustainability report, the organization has to be set up a reporting cycle. Program of data collection, response and communication are the three major part of this reporting cycle. Data collection process is required to collect data for management and senior managers who will make organization’s policies and strategies. These will also improve the performance level of that organization. Through the sustainability report the performance of employees can be monitored and measured. Every big companies and reputed public sector organizations are preferred sustainability reporting as this is a combination of environmental care, social justice and ethical behavior. As per the E & Y report this can be said that efficiency has significantly increased in organizations in case of decision making process and reduce the % of wasting natural resources. Efficiency increased and reduce wastage is 88% as per global survey reports in the year 2012. From the research work it is also found that capital constraints will be removed and organizations can easily access capital or seek investments from the shareholders. Maintain a proper sustainability report will increase the present and future reputation of that company. In the year 2013 E & Y surveyed and found that at least 50% reputation of the organizations is increased only for the sustainability report. It is more required for the public sector organizations as this report provides transparency and gives a positive impact towards the society. It will also meet the expectations of employees and increase their loyalty towards their work as well as the organization. As an example it can be said that Tesco Company publish their sustainability report on regular basis or each and every year to maintain a positive and transparent image in the society and business market. As per their latest report [which was published in the year 2013] this can be said that management of that company was able to reduce carbon emission by 4.9% before 2006 but after 2006 the amount of % in increased and now it is 33.4%. They are also capable to reduce the % of wasting food over the last few decades. The amount of % is approximate 70% in this case. 65% respondents in UK are agreed that their health is improving after consuming this company’s food product and these food products are produced by using good stuffs. So this can be said that this will increase the reputation, trust and dependency of customers on this company’s product and the company itself. The company also creates the job opportunity and meets the employee’s expectation in a successful way. Conclusions At the part of conclusion this can be said that sustainability management is a wide area and people of the society, shareholders, and suppliers all are included in it. The relationship among these different entities will help to build the social and economic stability. Sustainability management is required especially in public sector organizations to maintain the quality of work and culture of the organization. If any public sector organization wish to stay in the market and want to run their activities for the betterment of the society then this kind of management is very much needed. If any organization will be unsustainable then it will not be able to stay in the competitive market. Generally public sector entities are working with the community and if there sustainable management will not present then interest of common people as well as future generation will be affected. It will help to create an environment or a surrounding where employee emotions and work can be done in a successful way. Mangers of these organizations will be benefitted by using this concept. But they have to do proper planning for it. At first they will analyze the problems, and then set some goals according to problems. After that they will plan about which skill will be applied. Then they will create new ways to implement their plans and needs. In this sector they have to think out of the box idea. After that they will take action as and when required. They have to teach and train employees of the organization and make themselves aware about the present and future scenario of the market and working strategy. Here organizational skills should be applied. They have to keep track records of progress along with all the financial results. In a public sector organization people will look after the proper utilization of resources. So this will be an important point where managers will take corrective steps. Generally people rely on the public sector organization. So here managers should keep and maintain this trustworthiness and the value which is getting from the public. Various urban planning can be done by using sustainability management. Public sector organization can increase the mode of transport and its frequency. Many roads, bridges, damps etc. can be built through such kind of organization which is very much helpful for improved urban life. It also tries to reduce from wasting water, energy etc. It increases the productivity of work and it has the ability to project present plans, ideas and issues for the benefit of future. Financially the organization will also be strong as the activities are done after following ideal and proper planning. Financial strength will bring the success and growth can be observed from all aspects of the organization. References Adams, C. A. & Frost, G. R. 2007. Managing social and environmental performance: do companies have adequate information? Australian Accounting Review. Vol. 17(43). Ball, A. & Bebbington, J. 2008. Editorial: accounting and reporting for sustainable development in public sector organizations. 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