The accountants role in organizations sustainability

European Journal of Scientific Research
ISSN 1450-216X Vol.59 No.3 (2011), pp.396-402
© EuroJournals Publishing, Inc. 2011
http://www.eurojournals.com/ejsr.htm

The Accountants' Role in Organizations' Sustainability
(Regarding Sustainability Framework of the International
Federation of Accountants (IFAC))

Mehdi Moradzadehfard
Corresponding Author, Assistant Professor of Islamic Azad University
Faculty of Management and Accounting, Karaj, Iran
E-mail: moradzadehfard@yahoo.com
Tel: +98-912-1791429

Mohammad Moshashaei
M.A Student Accounting of Tarbiat Modares University (TMU)
Faculty of Management and Economic, Tehran, Iran
E-mail: Mohammad.moshashaee@gmail.com
Tel: +98-2182883656

Abstract

In recent years, organizations’ awareness and attention regarding the importance of
sustainable business activities has increased; and this claim is corroborated by recent
academic researches. In one such researches conducted by Ans Kolk in 213 selected
companies from nine countries, 52% in 2002, and 69% in 2005 delivered voluntarily
sustainable reporting [1]. Sustainability provides accountants with opportunities as well as
challenges, urging them to identify and assess that individuals, societies, and governments
are increasingly being influenced by organizations’ economic, social, and environmental
activities. As a result, due to the increased attention regarding the issue of sustainability,
accountants are expected to play a more influential role in benefiting from sustainability
issues to achieve the organizations’ and the stakeholders’ goals. Having considered the
sustainability framework of the International Federation of Accountants (IFAC), the
present paper pursues to investigate accountants’ role in organizations’ sustainability.

Keywords: Sustainability, Sustainability Framework, IFAC, Sustainable Development.

Introduction
Paying attention to the subject of the environmental and social effect of the organizational activities in
the international level is growing. The traditional accounting and financial reporting cannot meet
adequately the needs of the measurement of these effects. Therefore, the need for the more extensive
reporting in the organizations is felt [12]. The term “sustainability of the organization” has been
formed from the more extensive concept under the title of the sustainable development. There exists
various definitions for the concept of the “sustainable development”, but the definition which has been
agreed by the majority is a definition that has been expressed by the “United Nations World

The Accountants' Role in Organizations' Sustainability (Regarding
Sustainability Framework of the International Federation of Accountants (IFAC) 397

Commission on Environment and Development (1987)”1. This commission defines the “sustainable
development as follows: (A development which meets the needs of the present without compromising
the ability of future generation to meet their own needs). The following cases can be referred to from
this definition:
1. Considering of the impact of the economic decisions on the natural environment, economic
development and the social situations in which the people are living and doing the business.
2. Making sure that the productive capacity of these resources is not irrecoverably damaged, and
that resources are not depleted faster than their replenishment.
In the conference of the “Earth Charter” of the United Nations held in 1992, the subject of the
sustainable development was entered in to the main current/ event and the plans of the stability become
customary in many parts of the world [9]. The World Business Council of the Sustainable
Development (WBCSD) describes in such a way:
“The sustainable development is a simultaneous activity for the economic prosperity,
environmental quality and the social justice”. This definition suggests that the mission of the
organizations and companies is beyond the gaining of the profit and increasing of the wealth of the
shareholders.
Today, the companies not only must attract the satisfaction of their own shareholders, but also
they must pay special attention to other stakeholders, including the social groups, institutions
supporting the environment and … etc. Gilbert et al. in 1996 consider the sustainability to mean the
“sustaining and increasing of the economic, social and natural resources in order to supply the needs of
the current and future generation”.
This definition expresses that the sustainability differs very much from the development; that is,
in addition to the preserve of the resources and the sustainability of the organizations, the development
of the resources must be paid attention as well in order to use and attract the satisfaction of the future
generation (stakeholders).
The identification and appearance of the governments and organizations which have led to the
sustainability and sustainable development are changing the environment and culture of the commerce.
In this case, the global challenge is to make sure of that the sustainable development of the
organizations can: 1- Send back the previous erosion of the natural resources, and 2- improve the
economic, environmental and social performance.
The sustainability has three basic dimensions: 1) Economic Viability 2) Social responsibility, 3)
Environmental responsibility.
Although the balance, uniformity and homogeneity may be existed among these dimensions,
the social responsibility and environmental responsibility generally lead to the increase of the trust in
the organization and thus the creation of the desirable sense for the commerce and doing business.
However, the social and environmental responsibility cannot be considered separated from the
economic viability.
The growth and profitability create the wealth and occupation, and the organizations must
continue to produce the commodities and services required by the people, and in order to continue an
economic activity, the organizations must pay attention to the environmental and social aspects as a
part of the assuring activity regarding the increase of the value of the organization and the wealth of its
stakeholders. Understanding of the landscape of the sustainability and the sustainable development is
the first step in the capability of how to use this awareness in benefiting the organizations and their
stakeholders. Today, the importance of the concept of the sustainability considering its various
dimensions is in a quantity or degree that many organizations and institutions all over the world pay
attention to this subject. Also, International Federation of the Accountants (IFAC) has paid a special
attention of this subject in the meetings of its members, and even, has defined the framework for the

1
World commission on environment and development

398 Mehdi Moradzadehfard and Mohammad Moshashaei

concept of the sustainability. The following concepts were formed in the financial and accounting
literature followed by developing the concept of the sustainability.
Sustainability Accounting: Consists of the designed methods in order to quantify, record and
analyze the impact of the economic activities on the environment and the social stakeholder
community.
Sustainability Reporting: Consists of the effort to notify the importance of the impact of the
sustainability on the stakeholder through the reporting form making available for the public.
Sustainability Assurance: Consists of expressing the opinion by an expert and independent
person regarding the reasonableness of the sustainability report.
Sustainability Management: Consists of the organizational activities relating to the
identification of the key impacts and challenges of the sustainability and the effective management of
them in order to minimize risk exposure.
With regard to the subjects which have been expressed, it can be mentioned that the issue of the
sustainable development has been referred to implicitly in the Fiftieth article of the constitutional law
of the Islamic Republic of Iran and expressed as follows: “In the Islamic Republic of Iran, the
protection of the environment, which today and the next generations must have a growing social living
in it, is to be construed as a general duty. As a result, the economic activities and so forth which are
accompanied by the pollution of the environment or its irreparable destruction are prohibited.”
The continuation of the paper includes the sustainability framework of the International
Federation of accountants and the role of the accountants in the sustainability issues then the subjects
will be expressed regarding the sustainability reporting. The conclusion is the terminator of this paper.

The Sustainability Framework of the International Federation of Accountants
The sustainability framework of the International Federation of Accountants combines the whole
aspects of the sustainability aiming at the objectives of the organization, which is the giving of the
sustainable value to stakeholders. The framework expresses four aspects in the gathering of all the
critical regions which are taken into consideration for the successful management of a sustainable
organization.

Figure 1

Business
Internal Strategy
Financial
Management
Investors
Other
Stakeholders

These dimensions are: Business strategy, internal management, financial investors and other
stakeholders.
The organizations which have understood and admitted the sustainable development in order to
generate the added value for organization and other stakeholders usually pay attention to above-
mentioned dimensions and taken some actions. The various groups of the professional accountants may
have more interest in, and attention to, the special dimension of the framework. For example, the
accountants who are being active in the managerial high levels may concentrate more on the dimension
of the commerce strategy. Therefore all the accountants must know that the success in the whole
activities depends on the actions and performances which are to be done in the strategic level. The
professional accountants who are employing in the execution of the roles related to the management


(Including planning, budgeting, assessment of the operation and the roles such as the financial analyst)
may pay attention to the internal management and the individuals who are responsible for the
preparation of the financial and trading reports or conduct the accounting and assuring services may
consider that the dimensions of the investors and other stakeholders are to be used more. The
dimensions of the sustainability framework are described briefly:

A. Business Strategy Perspective- Taking a Strategic Approach
The framework puts emphasis on the importance of the adoption of a strategic approach So that, the
sustainable development is a part of the strategic discussions, demands and goals of the organization
and has been integrated into the responsibility of the risk. Making sure of that the sustainable
developments has appeared prominently in a strategic level is the only way that it can be assured that
the sustainable development has been integrated and simulated/ adapted with all sections of the
management cycle, planning, execution and the operational controlling of the organization. The
sustainable development can be construed as a part of the trading operations of the organization only
by having a strategic business approach.

B. Internal Management
One of the other dimensions of the sustainability framework of the International Federation of the
Accountants is the dimension of the Internal Management which is to be concentrated in order to assist
the organization to achieve the strategy, objectives and the demands of the sustainable development for
the sections which pay attention to the performance and management of the decision-making. As a
result, this view point expresses that how the organizations can reach the success within the reasonable
time span in the improvement of the energy efficiency and reduction of its wasting and, subsequently,
improves their own environmental performance while reducing the environmental costs.

C. Financial Investors
Usually, the organizations which have been developed well from the dimension of the internal
management are of a good situation in the presentation of the qualified information to the investors
regarding the performance of the sustainability and answerability. The sustainability framework
suggests that the environmental issues and other sustainability issues combine with the financial
statements in order to support the supervising role of the organization and increase the reporting and
disclosing of the information for the investors.

D. Other Stakeholders- More Transparency
The last dimension of the framework takes into consideration the expansion and extension of a part of
the sustainable development, which has been formed from the development of the stakeholders, against
the extensive collection of the expectations in order to improve the transparency and the non-financial
reporting.
As a result; in the framework mentioned above; taking a strategic approach, internal
management, improvement of the energy efficiency and environmental performance and reporting has
been regarded; but how to measure and reflect this cases in the report has been forgotten; consequently
how to measure sustainability dimension can be a complement to the above framework.
The important point is that some issues of the sustainability are not concordant with the four-
fold dimensions of the framework, and, on the other hand, these dimensions depend on each other very
much. For example, the accountants must consider the following cases regarding the dissemination of
the carbon gas :A) Its strategic importance for the organization, B) The aspect of the measurement and
internal management, C) Out-of-organization reporting of the carbon dissemination, D) Commitment
and interaction with the stakeholders regarding the long-term effects of the carbon.


The Professional Accountants and Sustainability of the Organizations
With regard to the expressed dimensions of the framework, the accountants must have a useful
collection of the key components of the individual and relational skills to be able to help the
organization in the usage of the sustainability issues for the organizational objectives. These
components are as follows:
Working in the consultative environment in order to solve the complexities and contradictions,
team work, interaction with the different classes of the people intellectually and culturally, negotiation
in order to find the acceptable solutions, presentation, discussion, report and defense of the viewpoints
effectively and through the formal, informal, written and oral connections.
The role of the professional accountants in the sustainability of the companies goes, by far,
beyond the processes of the collection, record, analysis and the reporting of the information related to
the sustainability and has been developed. Many professional accountants occupy various
organizational positions, including the high-level/status managers who have thus direct and much
effect on the organizational strategy and decision-making and can assist the organizations directly or as
the supporter in the employment of the sustainability issues in the strategic planning and the execution
of these plans. In overcoming the cultural, organizational and economical obstacles, the accountants
can assist the sustainability of the organization. For example, often, the decisions are made for the
short-term period and on the basis of the incomplete information and the disregard of the extra
organizational and intangible benefits and costs, while the accountants stimulate the decision-makers to
the foresightedness and prudence and provide with them the complete and useful information.
Dynamics of the sustainability of the companies depends on the production, analysis, reporting and the
assurance regarding the accurateness and reliability of the financial and non-financial information.
Therefore, for the professional accountants, attainment of the understanding of the concept of the
sustainability and the challenges in which there exist is important in order to achieve the long-term
growth in the value of the stakeholders and the other stakeholders. Today, organizations pay a special
attention to the accountants in their decision makings and determining the strategy of the organization,
and the high-level/ supreme executive and consultative positions are often suggested to them. The
attention of the organizations, managers to the accountants in the vital problems is because of the high
understanding and the strength of the accountants, analysis regarding the financial issues and
sustainability. At present, with regard to all activities, performed by the accountants in the previous
years, are conducted by the accounting information systems, not only the need to the accountants has
not been reduced, but also the managers of the organizations feel more reliance upon accountants.
Considering the subjects expressed in this section, we realized the significance of the accountants' role
in the sustainability of the organizations. But, the special role played by the accountants in the
sustainability issues is, by far, different in the various organizations and the internal conditions of each
organization. These roles are briefly as follow:
• Development of the policies of organization against the sustainability issues, their application
and monitoring throughout the organization and also in managing the operating risk.
• Interference in the designation, launching and the monitoring of the purchasing policies,
standards and the managerial systems related to the supply chain.
• Supporting of the process of the interaction with the stakeholders using reliable and available
data and also assistance to analyze the stakeholders' feedback.
• Identification of the voluntary environmental or social regulations and rules which are
appropriate and related to the business of the organization and integration of these regulations
or rules using the available managerial informational system in the organization.
• Supporting benchmarking through relevant and reliable information in accessible, meaningful
and comparable ways.
• Protection and expansion of the awareness regarding the regulations, taxing laws and
exercisable subsides for the activity which the organization is engaging to do it in order to
present the on time information regarding the social and environmental issues.


• Support of the process of data preparation and the reporting mechanism for the interpretation
and decision-making.
As expressed earlier, the role of the accountants in the issues of the sustainability is beyond the
ordinary operations, including the collection, registration and analysis of the information relating to
sustainability, but since the result of the performance of the company regarding the sustainability
becomes certain for the users through reporting the related information and also, the Global Reporting
Institute (GRI)2 has put emphasis on the sustainability reporting and even, raised the guides and
advices regarding the principles of the reporting, it is of the special importance for the organization.
Sustainability reporting is in fact a kind of reporting the triple model (Triple Bottom Line-TBL) and
must be prepared and presented in a form which is to be efficient and usable for the users. For this
purpose, the Global Reporting Institute/ organization (GRI-2002) has determined the related principles
of the sustainability reporting which have as follows: Transparency, Relevance, Reliability,
Comparability, understandability, timely, integrity, sustainability content.
Confirming and emphasizing the suggestions presented by the Global Reporting Institute,
International Federation of the Accountants (IFAC) believes that the sustainability reporting must have
transparency and reliability in order to be useful, fruitful and efficient. The reliability of the
sustainability reporting depends on both the content and the manner of presenting the report (IFAC;
2007).
In fact, the sustainability reporting is the propagation and expansion of the investment of
organization in the development of a systematic approach for the integrated management of the
sustainability performance. As a result, the number of the organizations which have presented the
sustainability reporting in the recent years has had the rising trend.
However; to improve sustainability and sustainable development attention should be paid to all
four concepts of Sustainability Accounting, Sustainability Reporting, Sustainability Assurance and
Sustainability Management. But it seems that the concept of Sustainability Reporting has been
considered more than sustainability accounting and other concepts. the sustainability accounting
discusses measurement, analysis and records basic dimension of sustainability. In other word, reporting
is done after measurement; therefore until we cannot find an appropriate standard to measure
sustainability dimensions, we will not be able to have a desirable reporting.

Conclusion
Today, sustainability of organizations is one of the concepts which has attracted much attention.
Therefore, organizations in order to conduct the social duty and also remain in the scene of the trading
competition must include the sustainability a part of the policies of the organization and take it
seriously. Because remaining in the trading competitive space requires the attraction of the customers'
satisfaction and the customers are, in fact, those which the aspects of the sustainability of the
organization relate to them and are important for them. In this direction, whereas the accountants play
an undeniable role in this context, they require to develop their knowledge and skill not only in the
accounting and financial fields, but also in the aspects of the sustainability and decision making.
Otherwise, if they rely on the accounting knowledge, they will go out from the working life cycle like
the organizations which are indifferent towards the sustainability.
With regard to the discussions which were raised, the lack of time does not allow to include
such important cases, which are today's discussion of the world of the business in the university
academic chart as the institution of the academic instruction of the accounting occupation, so that the

2
The Global Reporting Institute (GRI) has started working since 1997, and it presented the guidance and advices in the
domains of the business, accounting, investment, environment, human right and organizational job in 2002, as an
independent and non-governmental institution. (MoradzadehFard- 2006).


students who are the future accountants of the organizations will not neglect such important and vital
concepts for the organization.

References
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