Social and Environmental Accounting - Thames and BP Companies - Research Paper Example

Table of Contents Table of Contents 1.0 Similarities of Thames and BP companies 2 Differences between Thames vs. BP companies reports 5 Comparison of Thames vs. BP companies 7 2.0 Business report 7 3.0 References 17 Task 1:- Compare and Contrast how well Thames Water and Bp publications sustainability report 1.0 Similarities of Thames and BP companies Bp vs. Thames Water Company The BP Company is a company that undertakes its operations in over 100 countries in the world. The Thames Water company is a sewerage company that is located in the United States of America. It has a total of 13 million customers that live in London and the Thames Valley. Water management is the similarity between Thames Water and Bp states in sustainability report 2007. BP has briefly explained it in where Thames water has provided a full range of information on their water management. Although water management do not states clearly in Bp sustainability report but it was clearly states in BP Refinery (Quintana) Public Environmental Report 2003-2006. This report states, Western Australia has implemented a water minimization program in 1997 and its implementation led to the reduction of usage of water, saved the company thousands of dollars and reduced their level of reliance on the water that is supplied by the municipal council. The objective of implementing this program was to optimize the water supply and also reduce the rate of consumption of poor quality drinking water that could be a health hazard to the residents of the area and minimize the flow of untreated waste water that was being discharged to the environment (BP, 2006). BP refinery processes over 138 barrels of oil per day .The refinery equipments and machinery ensures that the raw materials are processed into complete finished products. The management of the company found it worthwhile to be conservative after becoming more water conscious and water efficient. BP implemented various strategies that were aimed at improving the rate of performance within the organization. The strategy includes; delivery of water that is of high quality for consumption, minimizing on the cost of running the operations of the organization and maximizes the profits of the organization. It also minimizes the potential environmental risks from water that is being discharged from the environment (Bp, 2006). The management of the BP Company published the sustainable report 2007, addressed issues that are related to the observance and recognisition of the audience as important persons within the community. It also states that the major stakeholders' role within the community involves meeting the needs and wants of the customers within the stipulated period of time. The major stakeholders include academicians, investors and other non-governmental organizations (Appendix 1, Bp, 2007, cover page). BP sustainability refers to the capacity to endure and meet the needs of the people through renewing their assets, creating and delivering different kinds of products and services that can meet the needs of the people within a given period of time. It also refers to the process of ensuring that the rights of people are respected and observed in order to enable them carry out the tasks that have been assigned to them and also ensure that the operations and activities carried are undertaken in the appropriate manner. Moreover, Bp also ensures that the mutual trust and support that is bestowed on the customers, shareholders and the communities is maintained so that the activities of the company can continue into the foreseeable future (Burke, 1999). In similarity to BP water minimization program, Thames report was prepared and aimed at identifying the cause and solutions of flooding observed in Bowmonts Road. This report states the impact of the proposed development in River Tadley that would have been undertaken on the network. Besides that, is also intended to identify the options that can alleviate foul flooding in the region and also to provide the cost estimates for options available for usage within the organization. Moreover, it also gives recommendations on the best engineering solutions that can be implemented within the organization to reduce the flooding problem. The other scope of investigation that is highlighted within the Thames report involves the assessment of the developmental impacts such as identifying the local impact of the developmental design flows on the foul sewerage network. It also involves the identification of options that are aimed at alleviating foul flooding that results from the developmental design implemented within the organization. The other crucial factor that is being addressed within the report is that of providing the preliminary cost estimates of different transactions that are carried out within the organization (Burke, 1999). BPs group chief executive officer stated that they would build a business that would ensure a long term sustainability of the society and its environment in which the community would live in. The major priorities that can lead to the preparation of a sustainable environment involve the safety of the people and a good and a strong performance of an organization (Appendix 1, Bp, 2007, pg 1). For every action undertaken people must be involved in the growth and development while a good performance provides the people with the opportunity to exploit the resources that are within their reach so as to increase the productivity within a region. (Burke, 1999) Safety is a factor that is used to ensure that sustainability is achieved within any workplace at any given time and it involves prevention of accidents, preparing and training employees on the safety precautionary measures that should be taken and also ensuring that the environment in which people live in is safe and conducive for undertaking the tasks that are assigned to them (Appendix 1, Bp, 2007, pg 1). Differences between Thames vs. BP companies reports The BP report consists of the forward looking statements that relate to the implementation and completion of certain safety and environmentally related measurements, the completion of the global compliance framework, implementation of the risk assessments tools of the voluntary principles, security and human rights that are across the group. The timing of the various initiatives relate to the management training and the time spent by the management of the BP company to research and invest in the alternative forms of energy that include the planned growth in the wind capacity and the solar sales. The other issues that are addressed within the BP report involves providing the assurance on the information that is reported to the shareholders, testing the information that is important for the growth and development of the organization. It also involves making interviews on how to conduct their activities through managing the employees. In contrast to the management of BP, Thames Company intends to make realistic plans that can improve on the performance of the company. Over the last financial years of the company it has recorded improvements in its performance due to having a new management team that carries out their activities as stipulated in their work regulations. It has also made tremendous progress in ensuring that the goals and objectives are fulfilled. Therefore, BP company has implemented more and better strategies than the Thames companies since its reports indicates different kinds of approaches that are aimed at ensuring that the performance of the company increases. Comparison of Thames vs. BP companies These two companies take into consideration the issues that relate to the needs and wants of the customers, stakeholders as well as the communities in which they live in. It has encompassed different procedures and techniques aimed at increasing the output of the organization. Thames Company has been basically involved in meeting the needs of the customers and stakeholders which is not beneficial for carrying its activities and meeting the needs of the customers within a stipulated period of time. Task2:- Produce a business report which advises either Thames Water or BP companies on how they might usefully any one of the environmental management accounting techniques. 2.0 Business report The Environmental Cost Accounting method is an accounting method that is used in communicating the social and the environmental effects of an organization and the activities that undertaken by different persons in the society. The usefulness of this accounting method is that it assists in supporting and facilitating the implementation of the goals and objectives of the organization within a stipulated period of time. It also assists the shareholders in getting the right information that can enable them make the right decisions concerning the best decisions that can improve on the organizations activities. The costs incurred while running the operations of the organization are also calculated and analyzed using this accounting method. The other advantage of implementing the social accounting practices involves increasing the information that can enhance proper delivery of services to the customers within the stipulated period of time. It also ensures that the decision-making process is practiced within the stipulated period of time and avails the right information about the product, services and costs that are incurred when running the operations of the organization (Bennett et.al, 2003). Furthermore, publication can also provide an effective means for companies to differentiate themselves in increasingly competitive global markets (ACCA, 2001). This process is normally practiced in businesses whereby it is applied in the corporate social and economic responsibilities and other organizations such as the non-governmental organizations, charitable organizations, and government agencies. Besides that, it also involves the notions such as corporate responsibility. The reports prepared using this process involves identifying the socially relevant behavior that are desirable, determines the practices that a company should be held accountable for its social performance, it ensures that there is development of the appropriate measurements and spells out the reporting techniques that should be applied within the organization. The environmental accounting that is practiced within the organization involves taking into account issues that relate to the financial statements items such as the liabilities, commitments accounts and the contingencies involved. These accounts take into consideration the redemption of the laws or issues that may result from the activities undertaken within the population. The kind of reporting techniques that should be used within the organization involves the description of the qualitative and the detailed environmental data that is based on the non-financial sections of the annual report or the environmental reports (ACCA, 2001). The report takes into consideration the pertinent issues such as the pollution emissions, resources used or the wildlife habitat that is damaged or any habitat that needs to be reestablished. In case of the large companies the reports address issues that relate to the reduction of the usage of resources and energy. It also takes into account issues that relate to the rate at which waste is produced within a specified period of time (Bennett et.al, 2003). The Environmental Management Accounting techniques are the techniques that involve the establishment of a culture of preventing pollution and that of minimizing the waste that is produced by the industries. Governments and the corporate companies establish programs that are aimed at promoting the environmental management techniques through the development of the environmental management accounting systems that are cost effective. These accounting techniques are used for making internal organizational calculations and ensuring decision making takes place in the right way. The Environmental accounting procedures that ensure that the decision making process takes place effectively involves the physical procedures for the material and energy consumptions, flows and final disposal, using the materiliased procedures for controlling costs and having savings and revenues that are related to the activities that may be having an impact on the environment. Procedures that are followed in order to make effective decisions depends on the type of organization that either may be a manufacturing or a service sector or the type of decisions made depends on the purchasing of raw materials for their organization. Investment decisions for energy efficiency and the product designs may also be altered depending on the requirements (Humphrey & Lee, 2004). The Environmental Management Accounting data helps in supporting the environmental management systems and also enhancing the decision-making as per the improvement targets and investment options. The linked financial and environmental performance indicators are used in controlling and for the bench marketing purposes. The ranking agencies are basically interested in ensuring that the combined monetary and physical approaches enhance the sustainability and that all plans are implemented in the right way. The costs incurred when ensuring that the environment is kept in a safe and conducive place involves; costs of reducing the rate of pollution, managing waste, monitoring, making the regulatory reports, incurring legal fees as well as insurance. Where the environmental costs are identified, assessed and allocated then the management can assist in identifying the opportunities that can save on cost of running the operations of the organizations. For instance there are savings that emanate from the replacement of the toxic materials and organic components through using the non-toxic substitutes that eliminate the high and growing costs of making the regulating and reporting services. It also enhances the technique of handling waste and other costs that are associated with the toxic materials. The cost and benefits analysis should be evaluated so as to determine whether an organization is carrying out its activities in the right way or not. Damages incurred and benefits earned as a result of undertaking different tasks within the organization may either be short term or long term and therefore precautionary measures should be put in place in order to curb their effects as they may harm the operations of an organization (Burke, 1999). The Life Cycle Costing refers to the accounting method that is used to evaluate the economic performances of the major building and the building systems economic performances. This technique is used to establish the total cost of the ownership of an asset. It is also used to address the issues that relate to the elements of costs and later on produces the profiles of a product or service over its anticipated period of time (Boussabaine & Kirkham, 2004). The results that are generated as a result of calculating the lifecycle costs assists the management in making the right decisions for the various choice options that are beneficial to them. The benefits of applying the techniques involves the evaluation of the competing options in purchasing of goods and services, improving the awareness of the total cost of an organization, maintaining more accurate forecasting procedures for the cost profiles and determining the performance of the tradeoffs against the costs incurred in running the operations of the organization (Boussabaine & Kirkham, 2004). The major objectives of most organization are to ensure that they make huge investments returns and to increase their sales revenue within a stipulated period of time. The investment includes; purchasing of plants and machineries, buildings and equipments that would enable an organization carry out its activities in the right way. The decision to make the right investments involves using the right investment appraisal methods that involves the traditional as well as the discounted cash flow methods. The Traditional Methods are the methods that are subdivided into the average return and pay back methods. Pay back method involves taking into account the amount of time that is required to ensure that the cash inflows is equivalent to the cash outflow of a business. The project that consists of the shortest payback period is the one that is accepted while a manager usually rejects the one with the longest payback period. The average rate of return is a traditional method that takes into account the profits that arise from the project that is stated over a given percentage rate .The usefulness of this method is that is it's easy to understand and use it for managerial purposes. The Discounted Cash Flow Method consists of the methods such as the net present value and the internal rate of return. The net present value refers to the discounting method that takes into account the cash inflows that should be discounted back to their present values. A discounting rate that is similar to the interest rate is used to calculate the sum that could have been received had the sums been saved and interests paid to the firm .The other discounting cash flow method is the internal rate of return method that involves an annual percentage that is determined for a project at which the sum of the discounted cash flows over the life of a project is equal to the sum of the capital that has been invested into the project. The BP Company can make the decisions of the projects that can generate the greatest returns through implementing either the discounting or the traditional methods that are beneficial for their organizations. The criteria that should be used when evaluating the best project should be based on the one that derives the greatest returns within the organization. The Trucost Method refers to the method that is used to calculate the funds of carbon footprints. The carbon footprints for both the active and the index funds are measured where the trucost holds the greenhouse emissions of data that is more than 90% of value of the holdings which is calculated on the basis of data that is generated from the free-float adjusted holdings. The emissions are later on converted into equivalent carbon dioxides (CO2) .The total carbon dioxide emissions are mostly attributed to the funds that are in proportion to each of the companies. The funds are mostly found in different sizes which are used to calculate the carbon footprints that have got large quantities of carbon dioxide emissions .The use of this method has enabled many companies to generate revenue that have enhanced its growth and development within the financial year of the company. BP Company can calculate the amount of carbon dioxide that is emitted through using the trucost method .The method is used by the management to calculate the emitted gas from the production process. The externalities are the economic transactions that have an impact on a party that is not engaged in the transactions of a business. External cost result from having factors that have got a negative impact on the society. The producers as well as the customers may not always bear the cost of handling the emissions generated that reduces the sales revenue of the organization. For instance where a manufacturing company pollutes the air, the cost of living in a polluted environment is borne by all the persons that are living within the community. The existence of the external costs leads to ethical and political problems since the persons living within the environment may always be wishing to live in the environment thus conflicts and anger may be prevalent in those areas (Busquin, 2003). The existence of the external costs leads to the violation of the property rights of the individuals since they cannot find any pleasure in undertaking the tasks that they wish to do due to lack of living in a clean and healthy environment. The majority of the external costs are mostly related to the environment having possible negative consequences when producing goods and services within an organization. For example the anthropogenic climate change is mostly attributed to the gas emissions that occur in greenhouses resulting from burning oil, gas and coal. Global warming on the other hand is an external factor that causes harm to persons living in the environment whose effect is high and unmitigated. The pollution that results from the industries adds to poisonous substances to the water tables that cause harm to the animals and plants that make use of water (Busquin, 2003). The Management of BP Company can determine the magnitude of the external costs that are incurred in running the operations of the company so as to run in a cost effective manner. The effect of having the external costs on the environment is that the society appreciates them and increase sales revenue for their organization. In case there more external costs than the benefits earned from an organization then a check should be established in order to implement structures that can lead to increased returns for the organization. 3.0 References ACCA Environmental Agency, (2001) Advances in Environmental accounting (Seminar), Certified Accountants Educational Trust for the Association of Chartered Certified Accountants: London. Basingstoke and Deane Borough Council, (2009) Thames Water Report. Available From: [online] Accessed Date on [April 23, 2009] Bennett, M. Richardson, P. M. and Schaltegger, S. (2003) Environmental Management Accounting: Purpose and Progress Edition. United States of America: Springer. Boussabaine, H. A. and Kirkham, R. L. (2004) Whole Life-Cycle Costing: Risk and Risk Responses Edition. Wiley-Blackwell: United States of America. Beyond Petroleum, (2007) Sustainability Report, Beyond Petroleum: United Kingdom. Beyond Petroleum Refinery (Kwinana), (2006) Public Environmental Report, Beyond Petroleum: Australia. Burke, E. M. (1999) Corporate Community Relations: The Principle of the Neighbor of Choice Edition: illustrated Greenwood Publishing Group: United States of America. Busquin, P. (2003) External Costs, Research Results on Socio-Environmental Damages Due To Electricity and Transport: Belgium European Communities. Available on: [online] Accessed Data [4 April 2009] Finger, M. , Slouched, J. and Lus-Manso, P. (2007) Water and Liberalization: European Water Scenarios Edition: illustrated. United States of America: IWA Publishing. Humphrey, C. and Lee, B. (2004) The Real Life Guide To Accounting Research: A Behind-The-Scenes View of Using Qualitative Research Methods. United States of America, Elsevier. Press Release (2009) Carbon Footprints" Of Top U.S. Mutual Funds Revealed In Groundbreaking Trucost Report: Boston & London. Available on: [online] Accessed Date [2 April 2009] Thames Water Utilities Limited (2007) Corporate Responsibility Report, Thames Water Utilities Limited: United Kingdom. Read More