Advanced Issues in Accounting

Social and Environmental
Accounting; Corporate Social

Responsibility and Sustainability
Semester 2, 2022
Advanced Issues in Accounting

Understanding the terminlogy
 What is meant by Corporate Social
Responsibility? Sustainability?
 What is the role of accountants in Social

and Environmental Accounting?
 Are we trained to do this?

Chartered Accountants: UK Study
 ‘Corporate Responsibility is an important
topic, high up on the corporate agenda with
companies recognising it as a major
business driver. We believe that the
accountancy profession has a central role to
play in CR and cannot afford to ignore it.’
ICAEW (2007)

Defining CSR
 No set definition:
 Defined as “a concept whereby
organisations consider the interests of
society by taking responsibility for the
impact of their activities on customers,
suppliers, employees, shareholders,
communities and other stakeholders, as well
as the environment” (Ismail, 2009, p. 199).
CHALLENGES FOR ACCOUNTING

Financial Reporting vs CSR
 Traditional focus on reporting financial
performance to shareholders (due to
principal-agent separation) and creditors.
 CSR seeks taking responsibility for

performance to stakeholders
 (Revise an organisations stakeholders).

Financial Reporting vs CSR
 Financial costs vs environmental costs vs
social cost.
 How does one conduct business?

Stakeholders and Accounting
 The wider stakeholder view is not accounting
driven (ie. IFRS).
 The increased stakeholder view has been largely

legislatively driven.

ARGUMENTS FOR AND
AGAINST CSR/SEA

Who should benefit from CSR?
 Business benefits from CSR:
 Recruitment and Human Resources
 Managing Risk
 Branding – differentiation
 Minimise Regulation
 Evidence of Voluntary Disclosures
 Is that all? Are these missing the point?

 There is a strong organisational-centric bias to
this literature
Arguments against CSR?
 Hiding ‘true’ business practice, eg. BP ‘car washes’
 Self-interest eg. Rio Tinto or Fisher & Paykel
 Corporations care little for social and
environmental welfare.
 With the right incentives, companies move
production to less-regulated countries.

 Companies do not pay the full costs of their
impact.
 Positive Accounting Theory
 Friedman – only individuals have responsibilities
 Firms role is to maximise profits . CSR = theft

SUSTAINABILITY?

Sustainability: Brundtland Report
 "Sustainable development is development that meets the
needs of the present without compromising the ability of
future generations to meet their own needs.
 It contains within it two key concepts:

 the concept of needs, in particular the essential needs
of the world's poor, to which overriding priority

should be given; and
 the idea of limitations imposed by the state of
technology and social organization on the

environment's ability to meet present and future
needs”.
 (Brundtland Report, UN, 1987, p. 44)
Approaches and Perspectives on Social and Environmental Accounting
Brown and Fraser (2006)
HEURISTICS FOR SEA

SEA: The Business Case
 What’s the benefit for business and

shareholders
 CSR behaviour has significant financial
payback for firms
 Mantra – what’s good for business is good
for society.

CSR: The Business Case
 Deloitte (2002, p. 2)
 “Business leaders are increasingly acting
upon this responsibility [to report]

because it makes good business sense. It
helps companies to mitigate risk, protect
corporate brand, and gain competitive
advantage”.

CSR: Stakeholder-Accountability
 Companies are quasi-public institutions
 Companies recognise and respond to a
multiplicity of constituencies
 May mean respond in different ways.
 Interaction
 Participatory corporate governance

CSR: Stakeholder-Accountability
 Boyce, 2000, p. 53
 “… any form of social and environmental
accounting (and much financial accounting)

will produce outputs which are contestable and
open to debate. The utility of such accounting is
not in its representation of ‘infallible truth’ but
in its creation of a range of environmental and
social visibilities and exposure of values and
priorities that become inputs to wider
democratic processes of discourse and decision
making’.

CSR: Critical Theory
 Greenwashing
 That organisations will use the CSR debate to take

advantage of consumers.
 Eg. Starbucks and Fair Trade coffee

Advanced Issues in Accounting - CSR_SEA - Week 9 (1)

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Social and Environmental

Accounting; Corporate Social

 What is the role of accountants in Social

 Are we trained to do this?