Sustainability Accounting: Sustainable Development - Essay Example

Name: Tutor: Title: Sustainability Accounting Sustainable development Institution: Date of Submission: Abstract Organization commitment to sustainable development can realize the environmental protection. This is essential in developing environmental limits to create a strong but health the public. It remains evident that a global community is achieving either ecological or social sustainability. Over the years ecosystems have faced an increased pressured driven from a common collective yearning in consumption of either goods or services (Schaltegger, 2000). The most pressing among all factors is the increased concentration of greenhouse gases to the atmosphere, as it remains a major problem facing humanity. If we are to obtain a comprehensive information in concern to sustainability of the organizations in our economy proves to be crucial. On this, management accounting play a critical role in developing vital information for decision making, essential for sustainable development. Introduction Operating in an environmental that is socially and economically sustainable is one of the most urgent test facing organizations in today’s world. Issues such as climate change, overconsumption of finite natural resources and rapidly increasing destruction of the earth’s ecosystems, these has a lasting impact on global society and economy. According to Wolters (1998),these has increased concerns of the civil society and the general public in regard to companies’ impact on the environment creates an increased demand for organizations to measure, monitor, screen and introduce benchmarking the environmental performance of these companies. Many firms have begun reviewing and making necessary modification in their managerial process and internal decision making processes. This is aimed to improve management accounting systems in addressing increasing issues of ecological surrounding and communal concerns. While management accounting remains a matter of internal concern and responsibility, the potential economic, social and environmental benefits, issues that remains external to the business venture, all these aspects accounting process a funder mental role of analyzing organizational activities for decision making. Issues of sustainable progress in accounting, often handles factors that play an influential role in company decision making. These include economic competiveness and environmental administration. It may also include adoption of best practices in environmental management. For many governments considering best options in promoting environmental accounting has seen introduction of organization departments for instance, the United Nation department of economics and social affairs initiated a series of expert meetings. This is basically to handle issues of Environmental Managerial Accounting and formation of an expert working team on EMA. It is therefore important for organizations managers to understand and respond both to the manner in which these issues will influence organizational continuity and long-term success, and how they can be part of key contributors in meeting environmental challenges. Accounting processes and requirement remains responsible in playing a helping organizations develop more sustainable operations that are a necessary part of this response. Such practices enable establishment of a systematic identification and interlinking of economic, social and ecological costs and benefits of organizational strategies and actions. Accounting can either hinder or help in these drive in these considerations into business decision building processes. In order to fulfill its main roles in sustainable development, accounting concepts needs to extend from its traditional focus on to the economic and also include the social and environmental scope of the organizational strategies and actions. Environmental Management Accounting A relatively simple application of EMA that yields large cost saving is the waste management. Costs of handing disposal of waste are relatively easy to define and allocated to specified products (Bartelmus, 1994). Other environmental costs, including costs of regulatory fulfillment, authorized costs, damage to business image among other environmental liabilities and risks are difficult to assess. However the large part of this lies in the material purchase value of non-product out-put and come up to ten times when compared to the cost of disposal depending on the business sector. Financial accounts more often will include these costs. However, they are aggregated in a manner that does not effectively identify specific environmental costs. There exist evidence that part of these environmental liabilities and risks that are in principle covered by reporting requirements are often neglected, for example liabilities for cleaning up impure land. To effectively recorded these part of information for an improved decision making and sustainable development, EMA systems are established to promote the entire financial records in such cases. Still, future costs and tangible costs are hardly found in the existing accounting records. Less tangible costs like possible liability claims and business image costs from deprived environmental performance is considered when comparing environmental options. Over the years, there have been an inherent problem in producing publication that is both generic across some countries, and which is specific enough to be used immediately. The generic version has stimulated national discussion and comments as well as implementing and support the development of a tailored national guidelines and pilot projects. The EMA has a well defined principles and procedures that are of great potential value to any type of corporation firms across all division (Schaltegger, 2000). As part of a long-standing commitment to sustainable development, management accounting offers to establish economic development and human prosperity are reliant and funder mentally connected to enhance continued health of the world’s ecosystems (Bartelmus, 1994). In these, the accounting plays a critical role in ensuring that economic development is sustainable and that is not achieved at the cost of long-term severe degradation of the environment. This is occasionally achieved through frequent check on the social structures and cohesion which, if unchecked will undermine economic progress. This calls for increased initiatives for organizations to develop an appropriate sustainable accounting processes and practices. Measuring Economic Performance The right way to judge the economic performance of a given country or any economic unit for instance, village or households is based on the studying movement of its productive base. Evidently, productive base will usually compose of institutions and its capital assets. The social value of an economy’s industrious base is considered to be its general wealth. Accounting plays a critical role in establishing the economic base of a given entity ultimately measuring the influence contributed to the environment. This form of information is critically used to establish an improved strategy, which important for management in sustainable development and ultimately for decision making (Bartelmus, 1994). In addressing issues of sustainable development, accounting practices have recognized the importance of integrating sustainable information into a ordinary financial management methods. This has influenced the way business is managed in a more systematic and connecting sustainability considerations to management decision making and organization action. This move creates the possibility, of organizations planning on embedding sustainable consideration within its strategic, operational decision making processes. In addition the firms are able to report all features of organization performance in relation, concise and consistent manner in reflection to the organization’s strategy and in the way in which it is managed (Bebbington, 2001). Technical Costing Changes It is argued that conventional accounting systems inhabit environmentally oriented actions and expenditures. Often investment appraisal focus on immediate direct costs process ignoring level of costs, the accounting structures also fall short to evaluate the potential benefits derived from communal decisions. Change is need in the approach for firms to move from end clean up solutions to a more preventive design (Hopwood, 2010). Conventional accounting systems and evaluation measures fail to trace these costs thus rendering information unreliable for conclusion making. However, with an improved technology there available tools providing information on the physical exchanges between the economy and the natural environment. Existence of these accounting systems has made it possible for organization to trace the origin and end process of the substance. Climate Change Implication The most significant and urgent link between three faces of sustainability flows from environmental sustainability in particular, climate change, borrowing from Schaltegger (2000), the economic cost of reducing greenhouse gas emissions to the environmentally sustainable levels remains high, while the cost of dealing with increased negative effects of global warming if emissions are not reduced to meet sustainable levels will rise to a higher level. Ultimately these costs will be imposed directly to the business, for instance this might be achieved through higher costs of raw materials and energy, building obsolescence, damage to fixed assets an event that can be witnessed due to changing whether pertains, and changing pertains of consumer demand. Other costs can be imposed indirectly through necessity of taxation in funding increased government expenditure on justifying the social and environmentally unsustainable practices will produce a significant negative social impact across the world’s population. The concentration of greenhouse gases in the atmosphere is widely accepted as a key factor in determining average global temperatures, and to day these gases a re rapidly becoming concentrated. This may lead to an irreversible negative climate change. In an effort to reduce this significant risk to economic, social and environmental sustainability from climate change, it is therefore necessary to significantly reduce current levels of the annual greenhouse gas released (Wolters, 1998). The role and significance of sustainability for organizations Drawing on to interconnected impacts discussed earlier, the only motivation for organizations to operate in a sustainable manner is through organization leadership establishing ethical responsibilities in contributing towards creation of a sustainable society and not to harm others. This could also be measured through tracking organizations negative impact on the environmental and social sustainability (Bebbington, 2001). True measures aimed at making environmental and social sustainability a moral necessity, business leaders increasingly need to recognize that it is in the organization‘s own economic self- interest to operate in an environmentally and socially sustainable manner. Accounting concepts can be used, especially taxation measure to regulate organizational activities. This in it self creates an environment that indeed will remain sustainable for the future generation. Acting Responsibly The governmental policy on sustainable development, regard sustainability in the environment and social spheres as key outcomes that have to be targeted by government policies, with a sustainable economy being one of three key enablers for social and environmental sustainability. With sustainable economic being one of the important identified, not only the potential positive and negative impacts, it is important in each phase, but also the significance or materiality of each impact both to the society and to the organization. This normally, a highly complex process as every action taken by individual business or corporate organization can have numerous and more often conflict with economic, environmental and social requirements (Organisation for Economic Co-operation and Development, 2004). The initial steps in developing a sustainable management information system is aimed at investigating the relationship between management accounting and aspects of sustainability, which is explored in general aspects of functions of management accounting and how they are dealt with. The management accounting techniques are designed to react to changes in information needs based on the growing competition for both useful to integrated sustainable considerations into decision making. Due to the growing attention for quality, non-financial aspects, activities and long-term perspective, managerial techniques are generated to support decision making and control activities. Information needs such as environmental legislation, changing consumer behavior and organizational responsibility are among other factors that influence the increased need for environmental information. Managerial accounting helps in generating analysis and use of financial and non-financial information in order to improve corporate environmental and economic performance (Hopwood, 2010). Hopwood (2010), expounds on their sentiments while revealing possible environmental analysis from management accounting point of view, this include a) Energy and materials accounting, tracks and analyze all flows of energy and substances into, through and out the organization b) Environmental related financial management, this involves the generation, and analysis process used monetized information in order to improve corporate environmental and economic performance. c) Life cycle assessment, management accounting concepts are designed to capture holistic approach in identifying the environmental consequences of any given product or service all through its entire lifecycle and identifying opportunities in achieving environmental improvements (Schaltegger, 2000). The process contain a systematic process which measures the lifecycle costs of either the product or service by identifying environmental consequences and assigning measures of monitory value to those identified consequences. d) Environmental externalities costing, this is a general concept of analyzing and use of environmental damage or benefits created by the organization project activities. Within this structure, environmental related administration accounting is in practice primarily concerned with information needed to steer the internal organization practices. Conclusion The role of accounting in sustainable development seeks to develop prosperous inclusive concepts of sustainability. To any organization accounting concepts seeks to integrate financial reporting systems, develop tools that can support this integration while sharing best practice in support of environmental sustainability. This is achieved through use of analyzing the impact of methodologies and tools for integrated sustainability reporting and decision making across the organization’s activities (Schaltegger, 2000). Bibliography Bartelmus, P. (1994). Environment, growth, and development: the concepts and strategies of sustainability. London: Routledge. Bebbington, J. (2007). Accounting for Sustainable Development Performance. London: Elsevier Science & Technology. Bebbington, J . (2001). Financial accounting: practice and principles. London: Cengage Learning EMEA. Lawn, P. A. (2006). Sustainable development indicators in ecological economics. New York: Edward Elgar Publishing,. Hopwood, A (2010). Accounting for Sustainability: Practical Insights. New York: Earthscan. Organisation for Economic Co-operation and Development. (2004). Measuring sustainable development: integrated economic, environmental and social frameworks. London: OECD Publishing. Schaltegger, S (2000). Contemporary environmental accounting: issues, concepts, and practice. New York: Greenleaf Publishing. Wolters, C. I. (1998). Factors of unsustainability: identification, links and hierarchy. Factors of unsustainability: identification, links and hierarchy , Vol.7, pp. 32-42. Read More