The literature Review aims at explicating more about the subject by reexamining the past theories, expressions, attacks and methodological analysiss of SEA in all its facets.
Definition of Social and Environmental Accounting:
Social and Environmental Accounting ( SEA ) has been defined by Gray and Al. ( 1987, p.9 ) :
“ … the procedure of pass oning the societal and environmental effects of organisations ‘ economic actions to peculiar involvement groups within society and to society at big. As such it involves widening the answerability of organisations ( peculiarly companies ) , beyond the traditional function of supplying a fiscal history to the proprietors of capital. In peculiar, stockholders. Such an extension is predicated upon the premise that companies do hold wider duties than merely to take money for their stockholders. ”
Social and Environmental Accounting is frequently used as an “ umbrella term ” to depict the impact of concern activities on the society ( both local and international ) , employees and consumers… It offers a mechanism for describing information that enables direction to supervise cardinal societal and environ.mental chances and menaces confronting organisation.
Social Accounting can besides be termed as Corporate Social Reporting, Non- Financial coverage or sustainability accounting. It is a manner by which a concern seeks to put a value on the impact on society of its operations.
As quoted from Adrian Henrique:
“ The societal impacts of organisation underlie some existent societal issues – such as fleshiness, ill- wellness and community regeneration. The profound effects organisations have on society are going progressively obvious. From the point of position of stakeholders, societal accounting is hence a critical portion of presenting answerability and transparence. From organisation ‘s point of position, societal accounting can assist to place and pull off societal hazard ”
In the corporate sector, Social Accounting is used to roll up and describe information in CSR or sustainability studies.
Environmental Accounting as green accounting or resource accounting is a important tool for understanding the function played by natural environment in economic system.
Edu et Al ( 2009 ) stated that ;
“ aˆ¦the usage of environmental information to unwrap the impact of corporate activities on the natural environment to stakeholders of the corporate entity or organisation ”
Environment histories provide information which highlights both the part of natural resources to economic wellbeing and the costs imposed by pollution or resource debasement. Traditionally accounting suffers from restriction in covering with environmental issues ( Fortes, 2001 ) , therefore the chief ground for the non- being of accounting criterion dedicated to environmental accounting and coverage. Therefore, environmental coverage has been included in the field of CSR.
Areas of Social and Environmental Accounting ( SEA )
SEA has been loosely defined as the “ readying and publication of an history about an organisation ‘s societal, environmental, employee, community, client and other stakeholder interactions and activities and, where, possible, the effects of those interactions and activities ” ( Gray, 2000 ) .
There is a planetary move from the individual to the ternary underside line, which embraces the economic, environmental and societal facets of a company ‘s activities ( Code of Corporate Governance for Mauritius, 2004, p13 ) . Therefore, Social and Environmental Accounting has become popular in modern-day economic sciences. Due to the large involvement in this country, there has been rising prices on similar footings over the time- particularly on corporate degree. Therefore, SEA is besides known as Corporate Social Responsibility ( CSR ) , Sustainability Reporting and Triple Bottom Line ( TBL or 3BL ) .
Corporate Social Responsibility
CSR in the beginning known as Social Responsibility ( SR ) , was started in the 1950 ‘s and was ab initio defined by Bowen as “ aˆ¦ the duties of business communities to prosecute those policies, to do those determinations, or to follow those lines of action which are desirable in footings of the aims and values of our society ” . Clarence C. Walton highlighted in 1967, that the new construct of Social Responsibility recognizes the familiarity of the relationships between the corporation and society and realizes that such relationships must be kept in head by top directors as the corporation and the related groups pursue their several ends. With clip, the significance of CSR has sharpened. Harmonizing to the World Business Council for Sustainability Development, CSR is the go oning committedness by concern to act ethically and lend to economic development while bettering the quality of life of the work force and their households every bit good as a local community and society at big.
Governments across the universe take the enterprise to promote concerns to follow the construct of CSR by implementing new Torahs which concerns should adhere to. For illustration ; in Mauritanian Government has established a policy with the chief aim of mandating registered companies to pay 2 % of their book net incomes towards programmes that contribute to the societal and environmental development of the state.
In 2008, Kemp Chatteris Deloitte ( KCD ) was appointed by the Government of Mauritius, in partnership with the Mauritius Council of Social Service ( MACOSS ) and the United Nations Development Programmes, to set about a reappraisal of Corporate Social Responsibility in Mauritius Republic. This undertaking chiefly involves analysing the chief constructs of CSR in major industries and Small and Medium Enterprises ( SMEs ) . The sample totaled 100 concerns in different sectors, viz. ; 59 big organisations and 4 Bankss in Mauritius and 37 SMEs in Mauritius and Rodrigues. And the methodological analysis used was face-to face interview.
The findings revealed that most organisations ab initio engaged in CSR activities chiefly to heighten their image vis-a-vis ;
Internal community – 60.3 %
External community – 54 %
Therefore this was chiefly for image edifice. Whereas for multinationals, they are abide by their planetary policies to follow the CSR construct.
There were besides other grounds found, including corporate repute and image, employee keeping and trueness, saving of occupations, transparence, higher productivityaˆ¦
And eventually it was found that 37 % of the respondents carry out CSR activities in a formal manner and 63 % in an informal manner. The chief CSR engagements in Mauritius are charity work ( contribution ) and outsource its CSR duties.
Sustainability Reporting and Triple Bottom Line
Gradually, new footings have surfaced and the phrase Social and Environmental Accounting appears to hold been replaced by Sustainability Reporting, due to spread outing phrase of research chances. Sustainability is based more on the long term compared to CSR. As defined by The Australian Government, Corporate Sustainability as embracing schemes and patterns that aim to run into the demands of the stakeholders today, while seeking to protect, support, and heighten the homo and natural resources that will be needed in the hereafter.
In 1994, Elkington found that along with economical facet of the concerns, societal and environmental coverage is besides of import. He, hence coined a broader sustainability coverage model centered on three dimensions of public presentation – economic, societal and environment, known as the Triple Bottom Line. TBL is said to be comparatively advanced in states such as South Africa and the United Kingdom and is besides going a factor in Mauritius ( Code of Corporate Governance for Mauritius, 2004, p13 ) .
A study demoing the international tendency in Social and Environmental Reporting conducted by the KPMG Global Sustainability Services every 3 old ages, demonstrates the growing of the publications of studies incorporating environmental public presentation. The most recent one day of the month 2008, the sample comprises of the planetary luck 250, and the 100 largest companies in 22 states.
The study found that the rate of coverage among the largest 100 companies is 45 % norm with the highest Numberss in Japan ( 88 % ) and the UK ( 84 % ) . Furthermore, it was highlighted that the integrating of corporate duty information in one-year studies is on rise in France, Norway, Switzerland, Brazil and South Africa.
Harmonizing to KPMG, despite the rise in corporate duty mentions in one-year studies is promoting, most of them are still issued without any environmental and societal information. But KPMG insight predicts a greater demand for environmental and societal informations by traditional fiscal study readers, such as investors.
To reason, all the footings ( i.e. CSR, Sustainability coverage or TBL ) mentioned above spell in the same way and are mutualist, i.e. The chief purpose is to take into history the house ‘s environment and its stakeholders which means being responsible to them for the corporate end products and impacts and run intoing non merely stockholder ‘s involvements. But why are those companies engaged in the pattern of Social and Environmental Accounting?
There are many theories have surfaced over clip, explicating why companies should prosecute in SEA. This survey concentrates on some of the most of import theories, viz. ; Legitimacy theory, Stakeholder Theory and Agenda Setting theory.
Legitimacy theory is the most cited and popular theory within SEA country. Legitimacy is defined as:
a generalised perceptual experience or premise that the actions of an entity are desirable, proper or allow within some socially constructed system of norms, values, beliefs and definitions ( Suchman,1995, p574 )
This theory is describe as a positive theory as it seeks to depict or explicate corporate behaviour ( in term of attempts made to look legitimate ) instead than ordering how organisation should act. Deegan ( 2000 ) declares that organisations endlessly seek to guarantee that they work within the bounds and norms of their several societies, that is they try to guarantee that their activities understood by outside parties as ‘legitimate ‘ . It implies that an organisation ‘s image and success may be lurked if society perceives that the organisation has breached its societal contract. Where the society is non excessively pleased with the manner that the organisation operates, or legitimate mode, so society will efficaciously revoke the organisation ‘s “ contract ” to go on its operations.
As suggested by Caroll ( 1999 ) corporate societal revelations relates to a wider audience, which is represented by stakeholders. The chief focal point of the stakeholder theory is the stakeholders. Stakeholders are persons or groups which have an consequence on and are affected by an organisation ‘s activities. Stakeholder theory ( Gray, Kouhy & A ; Lavers 1995b, p. 53 ) asserts that “ the corporation ‘s continued being requires the support of the stakeholders and their blessing must be sought and the activities of the corporation adjusted to derive that blessing. The more powerful the stakeholders, the more the company must accommodate. Social revelation is therefore seen as portion of the duologue between the company and its stakeholders ” .
Therefore, the entity should be used as a vehicle for organizing stakeholders ‘ involvements, alternatively of maximising stockholders net income. Directors have an inducement to unwrap information about their assorted plans and enterprises to peculiar stakeholder groups to bespeak that they are conforming to the stakeholders ‘ outlooks.
Directors have besides understood that one of the best ways to vehicle societal and environmental information is through the media, which can be explained by the Agenda Setting theory. Agenda Setting theory is the theory that explains the impact of the media on its audience. It is said that Agenda scene is all about making a public consciousness and is concerned with dramatic issues by the new media.
Bernard Cohen ( 1963 ) stated:
“ The imperativeness may non be successful much of clip in stating people what to believe, but is spectacularly successful in stating its readers what to believe about. ”
Presents, companies use a batch of the media to acquire free promotion, for illustration: an phantom of their charitable contribution on telecasting. They attempted to measure the relationship between what stakeholders in one community said were of import issues and the existent content of the media messages used during the coverage of their activities.
Other Drivers for Social and Environmental Accounting
Making or Reinforcement of Organization ‘s image
The repute of a house though being intangible is the most seeable portion of an organisation. Sending an image where environmental, societal and economic issues are taken into history, may convey stakeholders to good perceptual experiences. Indeed, it can be considered as a promotional run to heighten repute and public dealingss ( KPMG, 2005 ) . And it might besides place the company as ’employee of pick ‘ , therefore motivation and retaining staff and pull the gifted 1s.
Attracting long term capital and favourable funding conditions
Investors include sustainability considerations within their determination processes. Capital market has known an addition in the “ ethical investing ” ; for illustration Dow Jones Sustainability Group Index. And besides through the publication of those studies, a mechanism is provided to guarantee that the proper communicating is established with this stakeholder group. Investors tend to take into history that their investings are profitable but besides aspects as environment and societal issues weigh in the balance.
Desire to follow with Legislation
Harmonizing to Deegan ( 2000 ) this would non be a major motive in a great trade of states given the deficiency of demands in relation to societal and environmental revelations and associated confirmations. But nevertheless, 10 old ages after ten old ages, things have alterations and many Governments around the universe issue Torahs refering SEA which the companies are adhere to as they understand that their economic systems wo n’t work without a healthy environment and society.
Keep a good relationship with the stakeholders
Bing socially and environmentally responsible, acquiring involved in CSR or sustainability coverage demonstrate that there is a certain contract between a company and its stakeholders and ensures the continuity of the company ‘s activities. Mattews ( 1993, p26 cited in Deegan, 2002.p. 202 ) asserts that the societal contract would be between corporations ( normally limited companies ) and single members of society. Society ( as a aggregation of persons ) defines the boundaries of corporations in footings of legal standing and properties and the right to possess and utilize resources and to engage workers. Organizations draw on community resources and end product both goods and services and waste merchandises to the general environment. The organisation has no built-in rights to these benefits, and in order to let their being, society would anticipate the benefits to transcend the costs to society.
Making fiscal Value
This frequently involves roll uping, collating and analysing informations on resources and stuffs used by the company, and the scrutiny of concern procedures. This procedure can assist an organisation to better to better highlight their chances for cost nest eggs and gross coevals through more efficient usage of resources and stuffs. Therefore, taking to slack resources ( extra resources ) , Cyert & A ; March ( 1963 ) stipulated that slack Resources play a important function in leting organisations to introduce by allowing them to experiment with new schemes and advanced undertaking that might non be approved in a more resource-constrained environment. Research of Bowman ( 1996 ) and Ullman ( 1985 ) affirm that corporate public presentation have a positive relationship under the slack theory.
A belief in the transparence and answerability
Transparency is one of the major issues held in Mauritanian companies, particularly in listed 1s due to corporate dirts held in the recent decennary. A Code of Corporate Governance was settled in Mauritius, which is bounded on listed companies and act as guidelines to non-listed 1s. The codification sets out points such as incorporate sustainability coverage.
Accountability merely means the action of describing the activities for which one is held responsible. There is a growing in the demand for answerability with turning force per unit area being put on concerns to be more crystalline in their actions to society and the environment ( Ernest & A ; Young, 2002 ) .
Therefore, SEA demonstrates a company ‘s willingness to decently pull off its environmental, societal and economic effects, hence, set uping a good interaction with the stakeholders and showing transparence.
Criticism for Social and Environmental Accounting
Integrating the SEA construct within an organisation requires a batch of processs and takes a batch of clip and money as argued by Ness and Mirza ( 1991 ) . Furthermore, KPMG ( 2005 ) argue that the measuring of societal and environmental public presentation is instead a complex undertaking. And it was noticed that it is hard to mensurate societal or environmental cost or benefits. Working towards being environmentally and socially responsible, should get down from the underside of the organisation, but is it truly practical? Can this civilization be inculcated to everyone or some of them might defy to this. The execution of SEA does n’t stand for a guarantee for obtaining fiscal public presentation or environment/social-related public presentations.
Compulsory v/s Voluntary Coverage
Due to the insufficiency of coverage patterns, revelation of nonsubjective and negative information on environmental public presentation is limited ( Deegan & A ; Rankin 1996, Frost 2001 ) , and an ‘expectations spread ‘ between the sort of information companies provide and what users of company studies desire has emerged ( Deegan & A ; Rankin 1999 ) , hence for the impulse of enforcing certain ordinances. Compulsory Coverage are those information looking in the studies in conformity with certain ordinances imposed upon them by authorities or another authorized and recognized organic structure. This enables companies to unwrap a certain grade of information and a basic criterion for unwraping that information, hence comparing among different companies ‘ studies would be possible.
As stated by Deegan, Rankin and Voght ( 2000, p.127 ) :
“ Arguably, stakeholders have a ‘right to cognize ‘ about the societal and environmental deductions of an organisation ‘s operations at all times-not merely when direction has been ‘shocked ‘ into action by ‘legitimacy endangering ‘ events. Regulation might be necessary to guarantee that this ‘right to cognize ‘ is satisfied ”
While, the Voluntary Reporting attack makes certain that corporations will run into the petitions of their stakeholders without any legislative instructions ( Maltby, 1997 ) . Deegan and Rankin ( 1997 ) found that voluntary environmental revelations are considered in the decision-making procedure of several user groups of one-year studies. Research workers in the voluntary revelation field have argued that companies do non supply such revelations to fulfill the user ‘s right to cognize but as a agency to which the organisation will be deemed legitimate by society and later harvest the wagess of such legitimacy ( Guthrie and Parker, 1989 ; Deegan and Rankin, 1996 ; Wilmshurst and Frost, 2000 ; O’Donovan, 2002 ) .
To reason, it was found that companies are more willing to unwrap larger proportions of positive information within a voluntary coverage model than within a compulsory coverage model. companies continue to utilize greater degrees of self-puffery within a voluntary coverage environment than within a compulsory coverage environment, and suggests that stakeholders may be more likely to have information that is less favourable to the corporation ( and potentially more decision-useful to stakeholders ) within a legislated revelation environment.
Components of Social and Environmental Accounting.
The importance of stakeholders ‘ battle.
The value of a company is influenced by the quality of its relationship with a scope of external and internal stakeholders. Social and Environmental accounting and coverage is a agency of communicating between a company and its stakeholders.
Stakeholders include the internal and external 1s, viz. ; stockholders and investors, employees, providers, society, Bankss, regulators and authorities. A stakeholder is defined as those who straight or indirectly act upon the activities of a house.
Stakeholders are progressively interested in understanding the attack taken to the sustainability impacts of house ‘s activities. The growing in ethical investing has persuaded corporations to give attending to corporate duty ( Lydenberg and Grace, 2008 ) . Furthermore, competitory advantage can be achieved through environmental answerability ( Bansal and Roth, 2000 ) . In subdivision 7 of the Code of corporate administration ( 2004 ) which deals with Integrated Sustainability Reporting, it is stated that:
“ Every company should regularly study to its stakeholders on its policies and patterns as respects to moralss, environment, wellness and safety and societal issues. ”
Therefore, the ability of a company to pass on its activities and public presentation efficaciously with its cardinal stakeholders can be critical to its long term success, viability and growing.
Where are the Social and Environmental Information Disclosed?
Corporate Governance Section
Notes to the Account
Director ‘s study
Stand Alone Reports
Health and Safety study
Internet web pages