My interest in sustainability accounting began very early in my academic career. As a Ph.D. student at Florida State University, I was involved with several projects related to an early subset of sustainability — environmental accounting. These projects led to a dissertation which explored environmental liabilities and an academic career of almost 30 years exploring issues related to sustainability and social issues in accounting.
There are three different approaches related to corporate sustainability and social and environmental accounting (CS/SEA): business case, stakeholder accountability and critical theory. Considered as a business case, CS/SEA is viewed as an extension of management’s existing toolkit to enhance shareholder value for shareholders. As such, companies can expect improved reputation, social marketing and employee relations.
From a stakeholder accountability approach, CS/SEA is viewed as increasing the accountability and transparency of firms. Unlike the business case, the stakeholder accountability approach values various stakeholder groups, not just the shareholders. All of these different stakeholders have a variety of information rights. In the decision-making process, managers will acknowledge these rights in their reporting.
From a critical theory approach, CS/SEA will identify fundamental challenges of a free-market system including environmental degradation and social inequities. This approach is skeptical about the potential for “real accountability” in a capitalist society.
As shareholders demand more information about corporate sustainability and social and environmental accounting topics, firms continue to explore the presentation of information to identify and promote corporate sustainability through both actions and goals. Typically, this reporting has been within the firm’s annual reports or in a stand-alone report.
The continuous development of guidelines, standards and regulations has allowed firms to develop reports that address the needs of global stakeholders. Even though many of these guidelines are non-binding, this information presented to stakeholders allows the companies to consider input from a variety of sources to broaden the firm’s perspective on how they report their sustainability commitment and measure their actions.
Most recently, the CS/SEA agenda has been addressed by the Sustainability Accounting Standards Board, an independent standards board that is accountable for the due process, outcomes and ratification of SASB standards. The current SASB standards are being used in annual reports, governmental financial filings, company websites and sustainability reports to help connect businesses and investors concerning financial impacts of sustainability. The SASB published standards for 77 specific industries in November 2018.
Companies face a myriad of sustainability issues and accounting for those issues will bring new challenges to the accounting profession. By introducing students to these ideas in the classroom and by continuing to share research with them, our Harbert College of Business graduates will be ready to face the complexities of those challenges.
Sarah Stanwick
Associate Professor
School of Accountancy
