Theories in Accounting, and Sustainability and Environmental Accounting

 i
Theories in Accounting, and Sustainability and
Environmental Accounting
[Enter the date of submission]
prepared by
[Enter your name]
i
Executive Summary
In the last 20 years, sustainability reporting has gained a lot of audience as consumers exert
pressure on corporations to engage in sustainable business activities. In addition, governments
and regulators are demanding sustainability reporting to enhance transparency and
accountability. Big global companies such as FTSE 250 have integrated sustainability as part of
their business strategy. Therefore, sustainability is mandatory in contemporary business setting.
According to Fauzi (2009, p.1) empirical finding reveal that corporate sustainability is linked to
improved business performance. Companies that have failed to pursue sustainability are
experiencing diminished business performance, this is forcing corporations to reorient and
incorporate sustainability in their business activities. As a result, accountant‟s role has been
broadened to include sustainability accounting, sustainability reporting, sustainability assurance
and sustainability management. Contemporary accountants go far beyond the presentation of
financial information to include non-financial information. In addition, accountants help
organizations incorporate sustainability issues into strategic planning and implementation. One
facet of corporation sustainability has been on environmental conservation and preservations.
Corporations are adopting Environmental Management System to enable them reduce their
ecological impact.
Maier and Vanstone (2005, p. 2) assert that an implementation of an Environmental Management
System involves the adoption of an environmental policy such as a certified Environmental
Management System, ISO 14001 or Eco-management System (EMAS), or in house systems. The
policy highlights the corporation‟s commitment to environmentally friendly business operations
and environmental management. According to IBM (n.d), the global computer technology giant
IBM uses Environmental Management System to identify and manage operations that pose
environmental impacts. The global computer technology giant monitors and measures the
effective implementation of Environmental Management System to ensure improved
environmental performance. The measurement systems include professional self-assessment
programs, environmental performance database, corporate internal audits and ISO 14001
surveillance audits, which improve environmental performance.
ii
Contents
Executive Summary ........................................................................................................................i
Contents.......................................................................................................................................... ii
Introduction ....................................................................................................................................3
Sustainability Reporting ................................................................................................................5
Sustainability Reporting Issues.....................................................................................................7
Accountants’ Role in Sustainability Reporting ...........................................................................9
Environmental Management System .........................................................................................11
Conclusion.....................................................................................................................................13
Reference List...............................................................................................................................15
3
Introduction
Background
Studies reveal that there is a strong relationship between corporate social performance and
corporate financial performance. In their study on effects of sustainable business practices in
both consumer and capital markets, Filbeck and Gorman (2004) observe that corporate
sustainability practices are an indicator to both consumer and capital market of the company‟s
quality products, increasing company‟s reputation and share price in the long term. Studies reveal
that even if a company pursues business success at the expense of social and environmental
degradation, the effects in the short will be damaging to the company‟s image and reputation and
negative to the share performance in the long term. Therefore, there is a need for companies to
entrench sustainable business practices. This has led to the emergence of another form of
reporting besides financial reporting known as sustainability reporting. Sustainability reporting
concerns presentation of non-financial information regarding the performance of a corporation.
Corporations are measured based on social, economic and governance performance. This has
expanded the scope o