Acca p1 chap 15 social & env issuesPresentation Transcript
Chapter 15 Social & environmental issues
Sustainability Meet present need without compromising future needs Long term mtce of systems according to env, eco, social concerns. Sustainability is an attempt to provide the best outcome for human beings and env. Both now and for the indefinite future.
Importance of Sustainability Gain awareness of org’s actions on the env Nowadays co’s feel more responsible and accountable to limit damage caused to the env A.k.a: Environmental footprints Sustainable development implies intergenerational equity CSR reports give details of env & sustainability actions Sustainability – includes economic & social concern Sustainability also include the concept of Triple bottom line developed by John Elkington TBL shows full cost of development, i.e , Economic, Social & environmental. Sustainability relates to the org i.r.oplannnig for LT growth, thus ensuring that the org will still operate in the foreseeable future.
Effects of economic activity
Environmental footprint Org operates at a cost to the Env- negative externalities. E.F – Attempt to evaluate the size of a co’s impact on the env in 3 aspects 1)resource consumption 2)harm to the env- eg pollution, emissions 3)resource consumption &pollution emissions – qualitative and quatitative evaluations.
Quotient Approach Objective Approach. Sustainability measured : Amt of resource available v/s actual use of resource. - Has quantifiable measures of social & env footprints.- same as Tri Bottom line. Progress towards sustainability can be measured by analysing , e.g , water usage over time… Sustainability = usage < production
Subjective approach Measures intentions of org to achieve goals & objectives. Progress achieved is not easy to quantify Progress can be made , eg waste reduction But org cant determine the exact amount and effect of this waste reduction.
Social footprint Evaluation in 3 areas: 1) social capital 2) human capital 3) constructed capital Eco activities must be sustainable in all 3 areas. Sustainability achieved when social needs of org are met. Social capital- Social networks & mutually held knowledge to take effective actions. Human capital – Personal health , knowledge , skills , human rights , ethics Constructed capital – Physical infrastructures in society ; e.g roads Anthro capital
Accounting for Sustainability - 2 methods to account for sustainability : Full cost accounting and Triple bottom line .
Full cost accounting Calculate total cost of Co’s activities , incl : env, eco & social costs. Aim of FCA- include all costs , even those incurred outside the org. Include all the costs of an action/ decision , into the costing system. So now the product costing will contain both financial and non financial data. Look for other examples
TripleBottomLine accounting Expands traditional reporting framework Includes env & social perf over and above traditional eco & financial perf. Consider Triple P’s : People, Planet , Profit. Org need proper tools to measure success and monitor progress. People- these are stakeholders of the Co. Actions of the co from the viewpoint of different user groups Planet- Attempt to reduce ecological footprint. Limit env damage. Co wont be involved in resource depletion. Profit- Normal , traditional bottom line. Aim is to maximise profit to maximise shareholders’ return. A TBL org will balance/synergise profit objective with 2 other objectives.
Internal management systems EMAS- economic management & audit software. Focus on disclosure of env systems Help to improve co’s env perf Co need to produce a regular public env stmt Accuracy & reliability of info is checked by independent verifier – to ensure credibility & recognition ISO 14000 is a pre-requisite before implementation of EMAS. EMAS require org to implement an Env mgmt system( ems) 4 important elements in EMAS scheme: 1) Legal requirement 2) Dialogue/ reporting 3) Improved environmental performance 4) employee involvement
Internal management systems ISO 14000 Focus on compliance with internal environmental systems Series of stds dealing with env mgmt, supported by audit programme ISO14000 provides a basis for EMAS ISO14000 focus in internal control systems, but provide stakeholders with assurance of good environmental mgmt There are a Number of required to be fullfilled before obtaining iso accreditation
Benefits of compliance with ISO or EMAS Reduced cost in waste mgmt Savings in consumption of energy & materials Lower distribution costs Improved supply chain Improved corporate image/ integrity/ image/accountability in front of stakeholders A framework for continuous improvement of co’s environmental performance
Social & environmental audits Social audit - process where org assess & demonstrate social , eco, env – benefits & limitations. - measure how much org achieve shared values set in mission stmt. A process for env audit S.A provides info , over and above traditional fin reporting S.A links TBL with FCA An important factor in S.A is the involvement of external stakeholders. S.A evaluates org’s footprint within a given accounting period from the external perspective.
Elements of Social audit Stmt of purpose External view - external stakeholders’ view to form opinion on the org’s position- outside/in approach. Internal view – views of directors, staff.. To assess ways of working and rewards . Also to ensure mgmt & i.c.s can achieve stated purpose & objectives. Review & planning- audit team manages social audit. Also the performance will be measured to be included in next year’s audit planning.
Social audit report Overview of the co Salient features of the fs Overview of products with negative env impacts Co’s stance wrt: salaries, job security , policies on discrimination . Social impact of the Co in terms of the community, social work env impact from co’s activities/ operations
Environmental auditing AIM assess org’s impact on the env Help to implement env stds – emas & iso14000 It provides basic data for env accounting Integrate env perf measures into core financial processes to generate cost savings Reduce env impact through improved mgmt of resources
Environmental auditing 3 elements to consider: 1) agreed metrics- what should be measured? 2) performance measured against the metrics 3) reporting on the levels of compliance / variance. Env audit leads to env action plan Main areas in env audit: waste mgmt, emissions, ground/water protection, surface water protection, energy consumption, protection of env sensitive areas(ozone layer), mgmt of contracts.
Environmental accounting Supports integration of env perf measures Social & env auditing provide meta data / empirical evidence of the achievement of social & env objectives Social & env auditing makes env accounting possible.
Benefits of Env accounting Cost savings Environmental preservation Good corporate governance
Examples of measuring impact on env Env accounting – monitor water usage Social footprints – choose suppliers using sustainable sources of raw mats, following adequate social & env practices Env footprints – reduce waste , eg co2 emissions