PART C

ACCOUNTING FOR
TRIPLE BOTTOM LINE (TBL)

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 Overview

Lecture 8
 An introduction to sustainable reporting

Lecture 9
 Sustainable reporting

Lecture 10
 Sustainability Reporting Guidelines
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 LECTURE 8
An Introduction to
Sustainability Reporting

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 LEARNING OBJECTIVES

At the end of this lecture, the student will

understand :
1. The changing role of accounting
2. The factors that motivate the change
3. The impact of the change on the role of
accountant

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LEARNING OBJECTIVE 1

The changing role

of
accounting/financial
reporting

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 Traditional Accounting

Focus on the accounting entities

Economic events
financially measured
For a set of users
usually owners & finance providers

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 Accounting today…
 Role of accounting is changing
 Expected to go beyond reporting of
financial success
 Raising the following issues
 Accountability An obligation to a wider range of
 Transparency entities than to just the
traditional users of accounting
 Responsibility information

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LEARNING OBJECTIVE 2

The factors that motivate

the change

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 What motivates the change ?

 Demand for greater disclosure and accountability

 Growing importance of intangibles
 Attracting talents
 Supply chain pressures
 Support and encouragement from regulators
 Increasing influence from non-governmental
organisations (NGOs)
 Advances in communications technology
 Financial Market Interest
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 Demand for greater disclosure
and accountability
 Disclosure on social, environmental and
financial performances
 Transparent and accountable for decision
made, operations, products and services
 Demand from various stakeholder groups

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 Growing importance of
intangibles

 Emphasis on image and brands

 Avoid events that brings harm or decline in
reputation
 Eg
 Body Shop – Against animal testing
 Microsoft – Partner in Learning

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Attracting talents
 Higher ability to recruit and retain the
best and brightest workforce
 If have genuine interest in investing in
long-term human capital
 Workers desire to work for companies
which contributes positively to the
society

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Supply chain pressures
 Customer demands for higher standards
is carried throughout product
distribution line
 Eg
 Boycott of Nike products for mistreatment
of labour in its Indonesia plant

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Support and encouragement
from regulators
 Acknowledge the importance of
sustainable development
 Push companies to be aware of their
social responsibility

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 Increasing influence from non-
governmental organisations
(NGOs)

 Companies are
being exposed of
their wrongdoings
and lackadaisical
attitude
 Growth of civil
society

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Advances in communications
technology
 Rapid dissemination information
 To wide group of people

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 Financial Market Interest

 Growing demand for social and ethical

funds
 Sustainability rating of companies
 Sustainability reporting forms (non-
financial disclosures) part of analytical
toolkit of investor
 Used in in predicting in value of company
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 Why should companies be
concerned about the change ?
 Milton Friedman
 Said :the business of business is business”
 The only social responsibility is to increase profit
 increase shareholder’s returns
 Expenditure on social matter is defrauding
investors
 It’s government duties
 Companies do not have political mandate and/or
resources
 Possibility of interlinking politics and business

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Consequences of being
irresponsible
 Companies loses its
 “licenses to operate”
 Mandate given by stakeholders to
companies to continue its operation
 How ?
 Customers  boycott product
 Employee  refusal to work
 Investors  withdraw investment
 Regulation  limitation of freedom
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Shell ships use water cannons against Greenpeace activists on board the
rig
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http://news.bbc.co.uk/onthisday/hi/dates/stories/june/20/newsid_4509000/4509527.stm
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 What should business do ?
 Show its social responsibility by:
 Provision of products and services by customers in a
legal manner
 Creation of sufficient capital surplus commiserating
the risk borne by providers
 Sufficient fund to engage in R&D activities
 Upgrade current human and intellectual capital
 Obey the law of the land
 Employment
 Health, Safety and Environment
 Product Liability
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 The change …. In brief
 Traditional…  New…
 Management  Governance
 Revenue growth  Community
 Earnings per share growth involvement &
investment
 EBIT
 Mission & values
 Return on invested capital
 Cooperation with
 Dividends government
 Trust &
transparency
 Ethical behavior 24
LEARNING OBJECTIVE 3

The impact of change on

the role of accountant

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 The change and accountant
 Accountant
 the best person to demonstrate business’s commitment to
sustainability
 Why ?
 Able to capture, analyse and interpret information on
environment and social performance that is consistent with
corporate reporting principles
 Updated with development over reporting guidelines and best
practices
 Able to make business more accountable to investors and
regulators
 The implication of company’s actions
 Able to understand the impact of regulation
 Capable of verifying environmental and social criteria by working
with NGOs and auditors 26
The change and accountant
The best way to demonstrate company’s commitment
to sustainability

Reporting

Accountant

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End of Lecture 8

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