Social and environmental accounting

Traditionally, the main goals and objectives of most organizations were to maximize shareholders or stakeholders wealth by employing cost reduction strategies. However, with the rise in globalization, competition and social and environmental awareness as well as regulation, organizations have turned to social and environmental accounting as a means of ensuring accountability and sustainable future. Different principles have been formulated which forms the basis for demonstrating accountability of firms using accounting mechanisms to measure and reports such mechanisms.

These mechanisms are known as the social and environmental accounting systems. Environmental accounting refers to the collection, assessment and analysis of environmental and the financial performance information which is obtained from the information systems of business management, financial accounting systems and environmental management functions (Crowther, 2000). Environment accounting involves taking remedial management actions to lessen environmental impacts as well as costs plus. It also ensures external reporting in regard to environmental and also financial benefits is done on confirmed organizational reports.

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This aims at improving the environmental performance as well as minimizing risks associated with the environment. Social accounting on the other hand emphasizes on the idea of corporate accountability. Social accounting is an approach used to report an entities activities which stresses on the importance of identification of behaviors which are socially relevant, development of reporting techniques that are appropriate and determination of stakeholders whom an organization is accountable to for in terms of social performance. Social responsibility entails practice and research.

Environmental accounting is viewed as a subset of the larger social accounting (Convery et al, 1994). Social and Environmental Accounting v. accountability and sustainable future The issue of social and environmental accounting has been in existence since the 1970s although it came to the light recently. Traditionally, though social and environmental accounting was being performed by organizations, only reports on economic performance of an organization were being produced thus little was being revealed to stakeholders in regard to social and environmental issues.

However, in the wake of the 21st century, most organizations embraced social and environmental accounting and today it has become a requirement for almost all entities. In some countries, social and environmental requirements have been made mandatory and legal implications have been put in place to guide corporations on the same. In other countries, reporting is voluntary with no legal implications. Environmental and social accounting has been vocal in balancing the corporate responsibility and corporation power.

Shareholders through social and environmental accounting are able to scrutinize the activities and decisions of the corporation’s top management thus reducing the traditional power of the corporation (Gray & Bebbington, 2001). From the past, it is believed or assumed that the discipline of accounting is technical and relies of objectives and rules in order to organize information necessary for the decision making process. Different literature reviews on mainstream accounting suggests there are different levels of focus though the underlying principles guiding accounting are somehow static and almost homogenous.

Accounting information has thus been seen as financial date aimed at fulfilling some voluntary and regulatory standards which enables an organization to ensure or meet accountability requirements. As such, the underlying concept behind practicing accounting is the idea of accountability and this notion can be transformed to a discipline which is environmentally conscious. This leads to the debate of whether implementation of social and environmental accounting can make an organization more accountable thus ensuring a sustainable future (Andrew, n. d).

The major aim of emphasizing on the need for social and environmental accounting is that it leads to enhanced accountability by corporations as well as ensuring a sustainable future. Environmental and social accounting contributes towards solving of environmental issues which faces most communities thus leading to implications or issues of accountability. Accountability here is considered in terms of development of moral and ethical accountability and also functional and technical accountability. Accounting is built on the notion of accountability which is meant to facilitate or arouse public scrutiny.

Accountability means that people and organizations have to account for all their actions and roles. Accountability provides an avenue through which an individual is able to explain his or her action to stakeholders. Environmental and social accounting as such is bound to increase organizational accountability. When an organization is held responsible over an issue, it has a duty to ensue that accountability is exercised. Accounting principles are the ones which impose accountability and as such, exercise of environmental and social accounting would be a sure way of improving accountability in an organization (Hecht, n. ).

Environment accounting entails placing cost on all environmental aspects and determining the costs of all the related actions such as pollution prevention, environmental management and environmental design. Unlike in the past where no such cost allocation were being made, social and environment accounting calls for quantification of any measures taken towards environmental conservation as well as labor and social welfare (Schaltegger & Burritt, 2000). Traditionally, organizations were not required to explain how any money allocated to environmental conservation and social programs were being used.

This created loopholes for funds embezzlement and tax avoidance and evasion tactics within organization. With implementation of social and environment accounting standards, organizations are supposed to explain how the costs were incurred by providing reports to this regard which must be verified by the stakeholders. Unlike in the past, the stakeholders have a wider base of scrutinizing any action taken by an organization and to demand explanation. Any unsatisfactory explanation can be challenged using legal means thus making an organization responsible.

Social and environment accounting thus ensures that all the commitments undertaken by an organization towards future sustainability of the environment and other social responsibilities are met. Public or stakeholders involvement in the process helps in enhancing and maintaining accountability in an organization (May, Cheney & Roper, 2007). One way of enhancing accountability is by providing information which as mentioned above leads to public scrutiny. Accountability entails explaining why certain actions are taken in regard to a particular issue.

Organizations have a responsibility to the society as well as the environment. Businesses are supposed to act in a manner that is socially acceptable or responsible and all the activities of an organization should not pose major threat to the environment. Despite this common and agreed upon notions regarding the behavior of an organization, without information on the same it would be difficult to demand an explanation or even scrutinize the actions taken by an organization despite such acts being detrimental to either the society or the environment.

Accounting deals with reporting of information and other data regarding the actions and decisions of an entity and this information is open to stake holders for evaluation and analysis and the data is then subjected to questioning with an aim of soliciting accountability. Accountability goes hand in hand with responsibility and this has been evidence in regard to financial reporting (Benston, 1982). Instituting social and environment accounting in organization would mean that the organizations would be required to provide information to the stakeholders regarding their actions and decisions in regard to the society and the environment.

This creates responsibility on the part of organization which in turn demands for accountability. Information empowers people to demand for explanation of an organizations acts and demand for remedies incases of detrimental practices by an organization. Failure to account for any decision is followed by consequences which can be costly to an organization. As such, implementation of social and environmental accounting standards would lead to imposition of responsibilities on the organization and thus enhancing accountability (Lehman, 2004).

Currently, the world is being faced with environmental issues such as globalization and acid rains which are direct effects of industrialization. While industries were previously blamed for this scenario, even non industrial organizations have been found to consume or use materials which enhance environmental degradation around the world. This is threatening the future sustainability of the environment and making organizations and businesses accountable is the only way to secure future sustainability. Social and environmental accounting would not only lead to accountability but also future sustainability of the environment.

Accountability also enhances transparency in organizations leading to greater cooperation between the society and organization in enhancing environmental conservation or protection (Nath, 1998). For sustainable future strategies to be formulated there is need for financial or economic reports in regard to environment. Environment accounting has enabled systems to ensure such information is available thus ensuring proper planning in relation to environment conservation is achieved. Economic reporting on environmental conservation strategies can be vital in ensuring that sustainable future goal is achieved.

Also, such information can be used by environmentalist for giving advice on the main issues which an organization should concentrate on while formulating strategies for future sustainability. Environmental accounting groups have also been used in some areas to provide practitioners with a forum where they can share and disseminate information on their experiences while formulation, developing and even implementing environmental accounts. Apart from ensuing that sustainable future is achieved, they also ensure that this is carried out in the most cost effective manner (Dernbach, J.

C. & Environmental Law Institute, 2002). Hindrances to accountability and future sustainability while exercising social and environment accounting techniques Despite the fact that social and environmental accounting may enhance accountability through dissemination of information which empowers people, this may also lead to detrimental effects as far as accountability and future sustainability are concerned. According to analysts and researchers, information given or issued by corporations may at times disempower people instead of empowering them.

Organizations have their own distinct objectives which revolve around profit maximization, status quo maintenance and cost reduction. Also owing to the fact that environmental responsibilities and decisions are unquantifiable in monetary terms unlike in financial reporting, an organization with an aim of fulfilling any of the mentioned objectives may issue untrue information in regard to social and financial accounting. Such information can be misleading thus lowering the level of accountability and threatening the future sustainability of the environment (Gray & Bebbington, 2001).

Competition is also another issue which can hinder an organization from issuing neutral information while reporting for social and environment accounting. This in turn would hinder accountability as information given makes people have untrue views in regard to an organization thus the environment. Also, power disparity between the corporations and the stakeholders and especially the society makes it hard to ensure accountability by organizations is maintained regardless of social and environment accounting standards requirements (Timmer, 2006).

The majority of individuals who are supposed to ensure accountability is maintained by organizations are the poor and uneducated making it difficult to impose any legal implications in cases where accountability is not exercised by organizations. Most organizations also lobby government and other policy making bodies to make laws which favor them thus making sustainability difficult as well as accountability.

Accountability goes hand in hand with power and as such, social and environment accounting may not be very effective in ensuring accountability and future sustainability (Gowthorpe, Blake & Pilkington, 1998). Conclusion Social and environmental accounting have recently being given much attention especially as societies as well as individuals are demanding for organizational accountability, future sustainability of the environment strategies and enhancement of social responsibilities by entities.

Organizations have also realized the need for accountability which is fostered by increased globalization, competition and societal and stakeholders awareness on their rights and the obligations of corporations. Today, an organizations success is greatly influenced by the strategies it implements to ensure social responsibility and environmental conservation. Social and environmental accounting helps an organization to quantify all the cost associated with environment conservation as well as social responsibilities.

Organizations are required to produce economic reports in this regard which are then issued to stakeholders who in turn scrutinize them for verification. This practice calls for greater accountability thus enhancing transparency in organizations. However, organizational goals may conflict with accountability and future sustainability goals thus leading to issuing of erroneous or untrue information. For accountability and future sustainability to be achievable through implementation of social and environmental accounting, transparency is imperative and should thus be highly advocated.