Role of Management Accounting in Sustainability - Research Paper Example

Introduction

Sustainability is a trend in the current century and the definition differs from different fields and industries. Sustainable development however remains same in all the fields. Accounting is considered an important tool in the measurement of business activities. This increases the pressure on the accountants to include sustainability in their activities and in the decision making of their organizations (Özsözgün Çalişkan, 2014). The role of professional accountants have been crucial mostly in the current era when there is increased inadequate in production resources and the increased problems of social issues.

In the roles that accountants play, sustainability needs to be measured, assured and reported at the right time. The report aims at illustrating the responsibilities of management accountant and accounting in sustainability through showing evidence through literature review. The areas of expertise fall naturally in the limits that the accountants are expected to play. The accountants are expected to give quality information that is properly targeted and properly managed for sustainable development. The role that is played by the accountants needs them to serve the public with increased sustainability. The research done in the 1990s have focused on the issues of accountants and how they have contributed to sustainable development (Unerman, Bebbington, & O'Dwyer, 2007). The research have focused on the practices of the accountants and they have found that the accountants have a crucial part to play in environment matters together with the old roles they have of reporting and recording financial data and the part they play as organization managers. The researches have defined the roles that how the jobs and the environments that the accountants operate will change as a significance of environment organization factors that need to be carried out.

The demand in areas of management accounting has increased in the recognition of environmental and social challenges that always present opportunities. The factors that arise in the management accounting areas present challenges that need capable people and a rich supply of information on how the challenges can be managed. One response that can be given towards the challenges is development of research and new accounting tools.

The report aims at enhancing the understanding about the roles management accounting have in making sustainable reports and also capturing non-financial information. The findings from the report shows the opportunities for the management accounting to have a more active role in maintaining sustainability in their actions and also the role that are expected to play in guiding the strategies of their organizations. The report is particularly aimed at illustrating a divide that is between organizations that are embracing sustainable practices by accountants and those that are not embracing accounting concepts.

Literature review

Sustainability has different definition in relation to community, organizations and corporations. With regard to organizations, sustainability can be defined as the ability of an organization to keep its presence for a long period while staying in line with the shareholders of the company. When referring to the society, sustainability involves extracting the few resources minus risking the existence chances of the future groups with the main goal of productive and efficient usage of the assets. There is a clear opportunities in organization today for accountants to establish and develop sustainable reporting. The opportunities make the accountants utilize the skills, the knowledge and the experiences that they have to develop a sustainable accounting in different environments. This is vital as the public rely ion sustainability reporting.

There are organizations that have realized the ways through which they are able to benefit from sustainable accounting while there are also organizations that have not figured out well the profits. Scholars and researchers argue that issues dealing with sustainability usually enact fundamental changes for organizations in the same manner that information technology and globalization usually does. The scholars and researchers argue that the companies that will not adapt to sustainability will not be able to survive the environmental strategies. The interviews that were conducted in 2011 were a chance to hear from the organizations on how the economic depression affected the strategic sustainability adoptions that the companies made (Mistry, Sharma, & Low, 2014). From the interviews the main point was sustainability was required to be fixed in the organizations which meant that sustainability had to have a connection with the main business.

According to the report by Brundtland in 1987, sustainability has developed since its introduction when it was defined as an improvement that satisfies the current requirements without considering possibility of the future generation to achieve their requirements. Gray in 2010 says that sustainability is a challenged idea while he retains the definition by Brundtland that sustainability is a good thing in a development. He points out that sustainable improvement involves the maintenance of a crucial and determinate environment which acquires some social justice duties among and within generations. He also argues that when considered in a world scale, the sustainability subject has evolved into a contested territory of world environmental defilement, of both the humanoid and other classes’ misery and of community integrity administered by the language sustainability, commerce and sustainable growth.

The current position of sustainable growth concept views the appearance of different classifications, tools and practices that are applicable into organizations. The application of ecological system is a sample of a deliberate guarantee organization derived from International Organization for Standardization on environmental management with the ISO 14000 (Özsözgün Çalişkan, 2014). Agreement with standards put in place indicates that an organization is committed on environmental issues while striving to acquire the sustainable environment.

Sustainability in all environments involves the incorporation of multilateral perspectives that are in different environmental settings, share the same planets and this makes them related to each other. The relationships between the different settings are signified by the understanding that is provided through creation connections amongst organizations and individuals and the mechanisms of national and the international society for instance the industry, the market and the economy (Mistry, Sharma, & Low, 2014). The network created calls for sustainable development that emphasizes on the responsibility in the community and the natural resources that are available. In the situation of sustainable development, the limits that are in the social, economic and environmental resources are considered to contribute much to the coming and the generation that exist.

The role played by accountants depends on the responsibilities which range from the involvement in ecological reviews within the internal and external audits to evaluating the asset offers with a focus to the environmental advantages. The roles the accountants play also considers the analysis on energy and waste control to increase the productions that they make. In history, the role that the accountants play has been has been covered by the known roles that they play of financial reporting, auditing and taxation. The roles that the management accountants play were considered to directly contribute to the control and planning of organizations. The management accounting has also been considered to perform a significant part in decision making procedure of organizations. In this perspective, the economy, the environment and the organization are components of sustainable development and this requires increased provision of economic growth and protection of the environment (Unerman, Bebbington, & O'Dwyer, 2007). The report released by different researchers have stated and increased the awareness relating to the link between the economy and the sustainability needs in organizations. Management accounting performs a significant purpose in increasing the sustainability of organizations and also increasing the benefits that the organizations have.

As earlier stated sustainable development has been in a growing trend since it was introduced in 1887 in a report by Brundland. There are different reasons that have been given why management accounting should include sustainability in their operations. The first reason for the situation is that there is emerging jurisdictional needs which require sustainable development for the organizations (Unerman, Bebbington, & O'Dwyer, 2007). The second reasons that have been given being the call that the sovereign had that organization need a better attentiveness of sustainable growth. The other motive that has been given for sustainable development is that there are social changes by sustainability that affect the society. The last reason for sustainability being the calls that accountants have had in engaging in sustainable development practices.

Objectives of the study

The main objective of the research is to find out the purpose of management accountant as the provider of the information that supports business strategy in relation to stability. The research will base the findings on the sustainable business practices that were conducted early in 2010. The research also aims at investigating how various firms and organizations develop strategy in sustainability when focusing on the major role that is played by management accountant.

The research will collect the data and report the finding s with the explanations on the impacts of the study. The research will also try to find out the range of engagements of the accounts from the unfilled information potential and show how they contribute to sustainable change in the organizations.

Theoretical framework and hypothesis

The choice that is given to legitimacy theory used in the study is established on the fact that accountability for sustainability and sustainable expansion is used as an informer to different activities in an organization. legitimacy theory that is utilized in the study have provided theoretical motivation in the role that accountants play in providing the necessary information needed in making decisions in organizations. The theory holds that firms have attempted to conduct operations within the norms and the bounds of the corresponding citizens.

The hypothesis in the study is that when an organization has no ability of justifying the continued operations then the society can revoke the contract that it had in its operations. This can lead to factors such as reduced demands for the goods that are produced by the organization or elimination of labor and supply of resources.

Research method

The research used the mail survey technique to determine the roles that accountants play in sustainability in the reporting processes of their organizations. Through the application of mail survey technique, the research was able to reach a wider geographical area and a broad cross-sectional area of the organizations where research was conducted. The survey tool was sent to different organization in the country. The organizations that were targeted where the government authorities. The mail was sent to a total of 380 organization that are situated I different parts of the country. Since the study dealt with general sustainability in accounting, it was felt that reporting would achieve the aims of the research rather than having focus on a given role within the authorities.

Before the survey tools were sent to the organizations, there was a pilot test that was conducted within different departments in one organization selected through random sampling. The rate of response in the pilot study was 20% without major changes from the pilot study. The survey was conducted and the questions that were to be answered were 40 in total. The questions explored the role of accountants in maintaining sustainability in their organizations, key factors that can be considered to increase sustainability in the organizations and the extent of sustainability in the organizations (Mistry, Sharma, & Low, 2014). The results that were obtained are discussed below with the main point of focus being the role of accountants in maintaining sustainability in their organizations and in their practices. There was also inclusion of a covering letter in the mails that explained the aim of the research project. There was also a guarantee of confidentiality that was given to the respondents. The confidentiality assurance was used to encourage the participants complete the survey they were given and return for analysis.

After the mail surveys were received, they were opened, each dated and stamped and also numbered. All the surveys were then examined to determine the ones that could be accepted for analysis. The ones that were relevant to the analysis process were sorted and manually coded to allow for feeding the data into the spreadsheet in the computers.

The analysis method considered the different departments that the mail were sent. The data that was received was analyzed to determine the departments that played important role in the sustainability reporting. The responses were also placed in different categories and in the categories, it was determined that the environmental department played an important role in sustainable information in organizations. In the analysis, there was also consideration on the accountants and the methods that were used in the preparation of external sustainability reports which showed that the role was distributed evenly across departments.

The analysis considered the regions that the sustainability in accounting was achieved and the areas where there was no sustainability. The findings compared the organizations that were in the rural and the urban environments. The analysis was conducted to determine the department that mostly used the accounting techniques and the ones that did not. As it was expected, the financial departments were found to utilize accounting in most of their activities such as preparing and also assisting as part of the sustainability team preparing for sustainability. ANOVA analysis was also used to compare the use and the non-use of accountants departments. The analysis also utilized and asked the departments why they utilized accountants in their operations. This was used to asses why the accountants are used in the reporting process sustainability. T-test was also applied ion the analysis process. The t-test was used to differentiate the difference between the social focus reporting and environmental focus. The t-test examined the difference between the two teams. In examination of the difference, it was found that the local authorities that reported from the environmental focus considered the reasons more important than the one who used the social approach.

Discussion and conclusion

The study was important as it showed the evidence to why there is use of accountants in sustainability reporting by different organizations. The report also gives the understanding on the important role that accountants play in sustainability reporting in organizations. The results show that accountants are the people that are involved in sustainability reporting in all organization despite the location of the organizations and the departments (Schaltegger, Bennett, & Burritt, 2006). The accountants were found to be used in different activities and functions in organizations such as provision of assistance in financial costing, financial information provider and playing the advisory role.

When the accountants are to engage in a vital part in the improvement of sustainability in responding to their organizations, there is need to consider their roles. This was determined to have started in different sectors as 60 % of the responses indicated that accountants have important roles to play in sustainability reporting of their organizations.

It was also determined that the accountants themselves need to engage more in sustainability issues if they are to increase the involvement that they have in sustainability (Schaltegger, Bennett, & Burritt, 2006). This is only possible when the accountants are aware of the roles that they play in accounting sustainability.

This is also possible hen the accountants are aware and fully understand the value of sustainability accounting and also the role of reporting in business sustainability. Lack of understanding of the roles that the accountants should play in the management process was evident in 30.9% of the respondents that were interviewed showing that the accountants are not good at sustainability reporting as a result of lack of expertise. The reports also showed that 205 of the organizations that were surveyed had not considered the use of accountants in sustainability reporting of their organizations (Schaltegger, Bennett, & Burritt, 2006). This shows the gap that exists in the accounting profession. Lack of understanding sends a signal to the education system and the accounting profession to re-educate and retrain the accountants so that they become aware of the roles that they are expected to play in achieving sustainability.

The study also calls for future research. The further research can be conducted on the preliminary exploration to increase the understanding of whey there is diversity in organization in terms of sustainable accounting. The further research also can be conducted to show the role that the accountants play in the sustainable development of accounting process in different environments. When the understandings are increased, the accountants will be better situated to substitute a superior acknowledgment of the roles that accountants perform in the process. The further research could also make qualitative method through exploiting detailed interviews to complement and strengthen the results. Further research could also be conducted to examine the part that accountants perform in supportable improvement of organization in other countries.