THEORIES IN ACCOUNTING

Integrating stakeholder
theory and sustainability
accounting: A conceptual
synthesis.
Presenters:

Muhammad Shaqif Azfar bin Afandi

Roslizawati binti Muhammad Yusof
Amrina Rasyada binti Azmi
Nik Rubiah Adhawiyah binti Salleh @ Faudzi
Abstract
The aims at integrating the bodies of literature on stakeholder
theory and sustainability accounting.
The conceptual methodological is theory synthesis and
stakeholder theory is employed as a method theory
Focus on:
- Sustainability topics
- Stakeholders to consider in accounting for a given
organization
- How the inclusion of additional stakeholders
- Topics can contribute to creating value for stakeholders.

The inclusion of stakeholder groups and sustainability topics

can be replaced
The concept prevents disconnecting sustainability accounting
from conventional accounting
 The concept of sustainability has experienced a
growing interest in accounting for several
decades, which has led to the emergence of the
field of accounting for sustainability, often called
‘sustainability accounting
Sustainability accounting deals with tracking,
tracing, aggregating and reporting environmental
and social information, often linked to economic
information.
The conventional accounting, the debate on
sustainability accounting is largely uninformed by
stakeholder theory.

Introduction
Introduction
'cont..

The innovativeness and contributions of this

article are rooted in three areas:
1. The newly developed concept of ‘Accounting
for Sustainability and Stakeholders provides
guidance on how to select relevant topics and
stakeholders in accounting
2. The concept applies stakeholder theory, not
the mere notion of stakeholders, in the domain
of sustainability accounting
3. Accounting for Sustainability and
Stakeholders’ facilitates the generation of
accounting information which enhances value
creation for stakeholders
Literature Review
Sustainability Different kind of reporting on sustainability:
Focus on one dimension of sustainability e,g financial reports,
Accounting social reports, environmental reports (Jones, 2010)
Integrated Reports (Wulf et.al.,2014)

Global Reporting Initiative (GRI) has issued a set of sustainability

reporting guidelines, which are now widely applied by corporations
all over the world

To extend conventional reporting to broader range of social and

environmental topics (Burritt and Schaltegger, 2010; Schaltegger
and Wagner, 2006) e.g energy efficiency, biodiversity, worker’s
health and safety
 Conventional accounting
Not capturing environmental and social topics
Accounting and Mono-focused on financial stakeholders

Stakeholders Stakeholders deem current sustainability performance

measurement and assessment approaches insufficient for their
needs

Involvement of stakeholders in the accounting and reporting

process enables organizations to identify and incorporate their
material concerns, issues, perceptions, needs and expectations

Providing different stakeholders with specific reports

Generic reports -key points which all target groups accept
Specialized reports -which address all requirements of a
specific target group.
Stakeholder theory and Accounting
Stakeholders are defined as any group or individual who can affect or be
affected by an organization (Freeman, 1984)
Stakeholder Theory is characterized by the 4 key ideas:
companies consist of networks of relationships between different
stakeholders, which constitute the organization
the key task of managers is to create value for stakeholders
Integration thesis, which implies that most business decisions also have an
ethical content and vice versa
companies are built around a specific purpose based on
which stakeholders cooperate, which goes beyond profitmaking
Which stakeholders should be considered in sustainability
accounting?

Criteria
power
urgency
legitimacy
proximity
contracts exist between
the firm and its stakeholders
How can sustainability accounting support both value creation for
different stakeholders as well as the creation of mutual interests
between stakeholders?

Meek and Gray (1988) introduce the idea of value added statements,
which document the wealth created by companies for a wide range of
stakeholders.

Hall et al. (2015) argue that if a company fails to include information

on how its activities create value for stakeholders in its
reporting activities, these stakeholders might withdraw
their stakes and contributions
What kind of value is accounted and reported for and should financial
value be accounted for separately from other kinds of value (such as
contributions to the solution of environmental or social problems)?

different stakeholders might have different demands regarding what

kinds of values need to be considered in reporting (Brown and Dillard,
2015)
the role of non-financial forms of value creation as only those
aspects of such information are considered, which can be monetized
(Harrison and van der Laan Smith (2015)
How can sustainability accounting support the creation of
contributions to sustainable development based on the
company’s purpose?

More and quite basic research and theorizing are needed on

how stakeholder theory can inform accounting in general and
sustainability accounting in particular
 Accounting
for
Sustainability
and
Stakeholders
3.1
Selectively including more
stakeholders
in accounting for sustainability
 Elkington, 2002 criticized as "carpet-bombing" which
1 aiming to cover all possible sustainability topics and
actors.

The issue of powerless and vulnerable stakeholders, such

2 as employees of suppliers in less developed countries call
for considering different stakeholder selection criteria.

Corporate unsustainability comes along with numerous

3 kinds of risks for various stakeholders, including social
and environmental impacts.
3.2
including additional sustainability
topics and kinds of value creation in
accounting for stakeholders
 concept of 'Accounting for Sustainability and Stakeholders'
1 argues for including forms of non-financial value creation in
accounting, related to environmental and social topics.

stakeholder theory can provide a rationale for deciding

2 which environmental, social and economic topics a
company should account and report for.

suggest a focused extension of accounting to a

3 systematic choice of additional stakeholders and
additional sustainability topics.
3.3
how can 'accounting for
sustainability and stakeholders'
be implemented ?
 Realizing 'Accounting for Sustainability and Stakeholders' can be supported
by the following steps :

STEP 1
It requires that companies sensitize
and activate their stakeholders, as
'Accounting for Sustainability and
Stakeholders' goes beyond passive
forms of accounting
STEP 2
To report sustainability related
information to the relevant
stakeholders, focusing on those
sustainability topics relevant for the
specific firm.
 STEP 3
the concept can be supported by
regulators and standard setters, if
these actors set incentives for
companies to focus on enhancing
value creation in a broader sense that
goes beyond monetary value creation
for shareholders.
STEP 4
new responsibilities of stakeholders is
that it can help in implementing the
concept, as accountant can build on
the information provided by
stakeholders and on their
competencies.

STEP 5
educational bodies such as
universities can help to nudge
managers to move from conventional
accounting towards "Accounting for
Sustainability and Stakeholders
3.4
how can 'accounting for
sustainability and stakeholders'
contributes to value creation for
stakeholders
1 key benefits - its ability to contribute to value
creation

a stronger active involvement of stakeholders does not

2 only come along with additional rights for stakeholders,
but also with new responsibilities.

another source for value creation coming along with the

3 concept is that can be identifying and strengthening
mutual interests among stakeholders.
 can assist value creation as including additional
4 stakeholders helps to recognize and prevent additional
types of risks.

the application of sustainability accounting tools

5 constitutes another potential source of value creation
through the concept
Discussions
Explains why the criteria of shared risks and applied
contracts should be used from sustainability
standpoint
These criteria are more likely to increase
sustainability-oriented value generation for
stakeholders
Differs from GRI 4 guidelines’ materiality matrix as it is
guided by sustainability science and the concept of
planetary boundaries
Underpins all aspects of sustainability accounting, not
only reporting
Conclusion

The concept of 'Accounting for Sustainability

and Stakeholders' provides the basis for new
avenues of research.
GRI 4 guidelines can be viewed as a first
attempt to take stakeholder needs as a starting
point in accounting.
Future research could address how the
sustainability impact can be assessed for
stakeholders.
 Horisch, J., Schaltegger, S., & Freeman, E.

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THANK YOU!