accounting for sustainability oradea may 2011
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8/6/2019 Accounting for Sustainability Oradea May 2011
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Accounting for Sustainability: What
Next?
A Research Agenda
Gary M. Cunningham
Arne FagerströmLars G. Hassel
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This is a working paper. Please do not
cite or quote without explicit
permission of the authors.Feedback is especially welcome
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Urgent Needs Expressed Everywhere
� Accounting research conferences
� Award-winning authors, e.g. Friedman (2009)
� Television and daily newspapers
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Many uncoordinated responses
� New Journals
� Centre for Social and Environmental
Accounting Research, Accountability,Transparency, Sustainability (CSEAR)
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No commonly accepted notions:
� What is sustainability
� What is or should be role of accounting
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Traditional view of Sustainability
� Much of previous research is based on
Buntland, U.N. 1987
�
Ensuring sustainable development meetscurrent needs without sacrificing needs of
future generations
� Creative and innovative at that time
� External focus
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Working definition for this paper
� Sustainable entity is one that is as well off atthe end of a period as at the beginning withrespect to use of all resources:
± Environmental and ecological
± Human and social
± Financial
± Technological
� Focus on sustainable company
� Subject to change as this research agendaproceeds
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Traditionally
Sustainable reporting is:
� Ecological, social, and sometimes governance
activities� Narrative of how good we are i.e.
greenwashing
� Triple bottom, e.g. Swedish State enterprises
� Oriented almost exclusively to sustainability of
ecology and natural resources
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Current focus
Accounting and reporting for sustainable entity
� Use of resources
�Financially
� Legally
� Etc.
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Now recognize� Scope is much broader than mere use of
ecological and social resources, e.g.
� Sustainability of entity as a business, e.g.
± Supply chain, markets, products
± Financially
± Legally
� Interests of users of information
�
Audit and assurance issues� Consequences of failures
± Privatize profits but socialize losses
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Initiatives to date
Major focus on so-called integrated reporting
� Principles of Responsible Investment (PRI)
Academic network -U
N� Accounting for sustainability project
� International Integrated Reporting Committee
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Many remaining issues
� No common notion of what is integratedreporting
± Parallel
± Incorporate in financial measurements
� No consideration of users of integratedreports
�No consideration of auditing and assuranceissues
� No systematic framework for analysis
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Accounting theory issues
� If sustainability issues are integrated into
traditional reports, then many accounting
theory issues must be addressed
� Especially if sustainability items incorporated
into accounting measurements
� Must either modify theory or adapt integrated
reporting
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Accounting theory issues (Continued)
� IASB (and other) conceptual framework is
based on needs of investors as primary users
�
Advocacy and study of sustainability reportingso far has not extensively considered needs of
users information, whether investors or
others.
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Accounting theory issues (Continued)
� IASB conceptual framework says reporting
objective oriented towards future cash flows.
�
Many uses of free ecological dont have cashflow consequences, or not near term, that can
be readily measured
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Accounting Theory (continued)
Postulates� Going concern
± Essentially same as sustainability but more thanfinancial
� Entity ± More than traditional consolidated group; include
supply chain and consumers of products
� Monetary unit ±
Many ecological factors not measured monetarily� Time period
± Sustainability consequences extend over long period
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Accounting Theory (continued)
Postulates (continued)
� Exchange transaction
± Not all uses of resources represent exchange
transactions
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Research Issues
� Accounting research framework foraccounting for sustainability
� Reporting sustainability information including
integrated reporting
� Users of sustainability information
� Auditing and assurance of sustainability
information� Financial distress, accounting and auditing
failure, lack of enforcement.
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Research Issues and methods
Accounting research framework for accounting forsustainability to include:
� Roles and levels of accountability
� Relevant interest groups and persons
� Sustainability entity, which can vary depending onanalysis
�
Common taxonomy and language� Uses general systems theory methodology that
has been used for such frameworks before
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Research Issues and methods
Reporting sustainability information including
integrated reporting
�
Standards for reporting; different standardsexist at moment
� Objectives of companies in such reporting,
e.g. reputational
� Objectives of organizations promoting
� Methods: content analysis; field studies
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Research Issues and methods
Entity failure, accounting and auditing failure, lackof enforcement
� Extent to which users of sustainability
information view the link between ecological andfinancial failures
� Impact of non-compliance with accounting andauditing standards and lack of enforcement on
users.
� Methods: market studies, bankruptcy preditionmodels
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Thanks for your attention
Comments and feedback especially welcome!