The Importance and Relevance of Sustainability Reporting among Australian Companies - Case Study Example

CASE ANALYSIS: RELEVANCE & IMPORTANCE OF SUSTAINABILITY REPORTS Prepared by (Student’s Name) Course Name Professor’s Name University Name Date Table of Contents Executive Summary………………………………………………………………………………3 Introduction..………………………………………………………………………………………4 A. The Concept of Sustainability........................................................................................4 B. Relevance of Sustainability to Business and Accounting..............................................7 C. Possible Sustainability Adoption by WML.................................................................10 D. Embracing Sustainability Reporting by WML............................................................11 Conclusion ...................................................................................................................................12 References List..............................................................................................................................13 Executive Summary The report is focused on examining the importance and relevance of sustainability reporting amongst Australian-listed companies. The paper has established that sustainability reports are relevant since it help generate information that is transparent and easily compared amongst other companies within and outside of the industry. The paper has recommended that WML should adopt sustainability reports since it offers transparent information relating to protection of the natural resource used in the production of the surfboards; fast-growing bamboo. The surrounding communities will need assurance that the firm is committed to protecting the natural environment upon where it operates to create a positive rapport. It is also recommended that it should formulate sustainability reports that focus on providing information on employee composition within its extensive production centres. This is set to improve on its overall company reputation in relation to how it perceives gender balance within its staff and executive composition Introduction Sustainability reporting has continued to gain enough confidence amongst different organisations over a couple of years now. The failure to employ with this reporting process is likely to result to a negative impact on such aspects as performance; image reputation as well as the capacity to access significant level of capital amongst investors. Currently there are two fundamental aspects of sustainability in organisations; reporting and strategy. Reporting greatly involves the immediate measurement of different elements that are deemed to be important to effective and efficient sustainable business operations. In contrast, strategy focuses on sustainability reporting as a fundamental tool that is used for comprehension of both internal and external impacts on the business. This report is a complete examination of the current status of sustainability reporting amongst businesses across the world. It seeks to figure out the relevance of sustainability reporting for a case study business; Wave Master Ltd (WML). It is important to note that while conducting the research; it is assumed that WML, just like any other business is bound to benefit a lot from engaging in sustainability reporting. Thus, the paper further tries to examine the different ways for which the notion of sustainability can best suit this organisation in order to improve on its existing production capacity. E. The Concept of Sustainability Sustainability is an accounting concept that has continued to gain momentum over the couple of recent years. Research indicates that businesses have continued to expand their accountability and responsibility from merely focusing on profit-making to ensuring that they cover the social issues that could affect operations altogether (De Beer & Friend, 2006). The concept of sustainability focuses on both short and long-term deliberations in order to ensure purposeful reconciliation of economic growth; social equity and perfectness; as well as immediate environmental-related protection. In essence, the concept of sustainability is indeed a goal and process that is aimed at achieving certain social settings. It is critical to note that sustainability extensively focuses on reconciling both short and long term issues; possible issues arising from local communities to a global platform; and, also posits on how aspects related to objectives, political powers and suitable mechanisms for purposes of achieving imminent goals (Elkington, 1994). Milne (1996, p.137) notes that sustainability is related to the integration of social; economic; and ecological values. In the course of exploring underlying value issues of environmentalism; Milne (1996, p.138) argues that ethicists have entirely put much attention on the overall nature of human morality as well as the scope of business responsibilities towards others including the non-human part of the living organisms. From an environmental economic viewpoint, it is ascertained that in order to accomplish sustainable development; there should be increased levels of attention directed towards integration of such components as attributes of equity within and beyond different generations; purposeful concerns for the environment; and the aspect related to futurity, which is basically an extension of intensive time horizons as well as possible economic considerations. The aspect of added dimension of time in sustainable development as well as the relative distinction the dimension brings about in social values between people at the present time and in the near future. In fact, it is argued that in the course of traditional decision-making; the entire process is solely focused on short term periods; and is narrow in regards to the affected people and environment as a whole. Research presents two forms of sustainability reporting in accounting; exploitationism and conservationism. Different authors ascertain that the aspect of value commitments of exploitationists’ model is extensively based on two assumptions; material value and abundance. Under the material value; the model perceive the large wilderness sections and raw natural resources as being uncontrolled by human-related activities are unproductive and thus, they are deemed to be of no value till the aspect of human labour is integrated. The abundance perspective, leads to exploitationists to indicate a less shortage of raw materials since the component attributed to value is significantly imparted to resources that are truly scarce. Traditional management accounting is thus majorly perceived to be the most popular literature that seems to be consistent with the traditional neoclassical economic and exploitationists model for immediate environmental resources. This form of accounting however; in most cases fail to tackle activities related to both social and political aspects that is greatly involved. In regards to the conservationism approach- formulated and popularised by US-based conservationists, is based on promoting the greatest good for the greatest number within the shortest-time possible. It is argued that the conservationist viewpoint is thus set to expand on the rather narrow pursuit of economic goals and objectives for purpose of environmental resources. Research mentions two different decision-making models that are used for the purpose of identifying and analysing the conservationist perspective; both the environmental impact analyses (EIA) and expansive cost-benefit analyses. Bebbington (200, p.138) argues that the concept of accounting sustainability is in itself a more than a new phrase for environment. It greatly involves the examination of both environment and development aspects as well as the interplay of the aforementioned concepts. It provides a relationship between environment and development that later results to a distinctive call for sustainable development altogether. In this regards, aspect related to the environment ascertains the limits presented to human beings by nature while on the contrary; development is an aspect that greatly relates to potential for human material development that are presented within the underlying nature. Gray (1994, p.19) notes that accounting environmental reporting is fairly expounded by conventional economic theory that focuses on assuming that wealth is distinctively derived from both humans and the utilisation of unlimited resources. The theory is integrated in distinctive ways of thinking in regards to businesses and economies and thus, results to the presumption that continued economic growth and development is indeed an inalienable right and duty that should not be challenged on any given perspective. Following this line of argument, the current framework of environmental attributes is perceived to be either systemic or even critical in nature. For this reason, the operationalisation of a given concept like sustainability is certainly expected to be over-simplified by the element and thus, results to a reduction of possible essential level of necessary attributes. Given that the assumption that the society will certainly decline to revert back to a given level of existence whereby the aspect of sustainability should be easier to attain, it will be a necessity to come up with a model that can be perceived to gauge the concept in a much practical manner within both current institutional and, also structural arrangements. F. Relevance of Sustainability to Business and Accounting It is important to note that reporting for sustainability should be comprised of financial statements related to the extent for which companies are committed to the reduction or even the increasing of options deemed to be available to future generations. The inventory approach is relatively concerned with the immediate identification; recording, monitoring and thereby, reporting of non-financial quantities, distinctive sets of natural capital and their immediate level of depletion or even enhancement. Sustainable cost approach is a sustainability approach that focuses on expounding exceptional difficulties in mere practice. It is much more attractive to the current model of reporting practice hence perceived as being a simple business and accounting concept. Relevance of sustainability reporting rests with its underlying goals and objectives that relates to the measuring of organisational performance towards sustainable development. It is noted that information measuring performances towards sustainability could indeed result to the accountability or even decision useful objectives that is clearly perceived within the already availed traditional accounting set of data (Bebbington, Unerman, & O'Dwyer, 2014). In essence, the fundamental objective of sustainability accounting model seeks to establish the principles necessary for guiding the confinement as well as the immediate treatment of accounting set of available data. These set of guidelines are deemed as being analogous to those that relate to traditions underpinning financial accounting like historical cost as well as other relevant accounting concepts. Of particular interest to note, data management tools and techniques that are employed in the course of treating as well as recording of sustainability accounting are perceived to be comparable to the overall financial personnel journal’s, that are utilised to post overall set of financially-retrieved information. Most notably, as it pertains to traditional accounting information, use of external parties is set to be used by external stakeholders for purposes of discharging the aspect of accountability of businesses in regards to their immediate environmental effects to a wider range external user (Foran, Lenzen, Dey, & Bilek, 2005). Similarly, sustainability accounting information should focus on presenting a given set of both qualitative attributes of transparency as well as comparability in a much relevant sustainability setting in order to allow stakeholders to immediately assess the environmental and social impacts of an organisation. The relevance of sustainability expands to the needs of the society as a whole. The society requires that accounting information that sets to render the impact of an organisation’s immediate operations to be transparent so that its overall contribution to the objectives of sustainability is easily accessed and determined. The presentation of sustainability accounting information to internal users set to focus on the immediate provision of relevant and decision usefulness of information to existing management personnel (Schaltegger, Bennett, & Burritt, 2006). A perfect example of this will be the presentation of a given set of performance indicators as well as life cycle information in comparison to the relevant sustainability targets that seeks to help with internal management of a company towards multi-dimensional sustainable goals and objectives. The inclusion of both social and environmental-related facets within the sustainability concept facilitates the utilisation of a given set of measurement units. For this case, monetary units are deemed to be relevant for purposes of assessing a business economic performance but it is never proper for determining the social or even environmental performances (Schaltegger, Bennett, & Burritt, 2006). Given this case, any efforts made to monetarise aspects related to both social and ecological impacts risk could further result to misrepresentation and comprehension of the significance of issues relative to economic challenges. Markedly, it is ascertained that the financial accounting concept of materiality is deemed to be relevant to the concept of sustainability accounting framework. Considering the fact that the level of interconnectedness that is clearly visible within the natural environment as a whole, it is not considered to be feasible for purposes of capturing and reporting all necessary human-related environmental impacts (Ball & Bebbington, 2008). Impacts need to be prioritised depending on their immediate level of significance as a potential threat to humankind or even the underlying natural environment; and thus, their immediate relevance to stakeholders. In consequence, the underlying accounting framework related to business capital sustenance practices remains related to the concept of sustainability as indicated by both aspects related to cost and normal initial amounts inventory model techniques. Most notably, the aspect of accounting sustainability is relevant to both business and accounting in general since it is specifically formulated for the purpose of ensuring that it posit response to issues that are brought forward and demands that are a result of both current and future social environment. Organisations ensure to adopt sustainability reporting given that it assists with reduction of possible negative impacts and thereby increase a positive impact on both the environment and societies for which it operates. G. Possible Sustainability Adoption by WML Just like any other business organisation that is focused on building a positive perspective on its existing social and environmental-related issues, WML should also do the same. WML is certainly, the organisation should not only focus on maximising on its underlying profitability ventures but also ensure to report on the economic growth for the environment in which it operates. Wave Master Ltd set of stakeholders have different set of expectations especially since the company’s raw materials are sourced from the natural resources. The company’s focus on manufacturing surfboards in Australia indicates that it should abide by the different Environmental-based acts in the country. Thus, the Australian government is a major stakeholder and readily expects that WML engages in its operations while at the same ensuring not to deplete the environment of its natural resources. For instance, the government expects the company to operate within the minimum protection guidelines set on exploitation of natural resources in order to prevent possible future collapse of the environmental-related activities. The surrounding communities upon where the company operates also expects that the activities of the company; do not interfere with their daily way of life. It means that as the company engages in the manufacturing of its surfboards from the fast-growing bamboo, it should take care that it does not engage in depletion of the environment in a way that would distort weather patterns (KPMG, 2007). Currently, the release of the revised ASX Corporate Governance Principles expects that all listed companies in Australia to ensure to generate internal sustainability risk reports. In a survey conducted by KPMG, the key findings were that about 30% of the top 500 Australian companies have either published or in the process of publishing sustainability reports for the operational period ending 2006 while amongst the ASX 100 listed companies; the level of sustainability report disclosure for 2006 rose to about 35% (KPMG, 2007). The survey expects that the trend will continue into 2007, which is clearly driven by an increase in the level of greenhouse emissions as well as immediate stakeholder expectations that relate to corporate responsibility that is triggered by staff expectations in the ever-increase competitive employment market. H. Embracing Sustainability Reporting by WML WML should embrace sustainability report especially that which offers transparent information relating to protection of the natural resource used in the production of the surfboards; fast-growing bamboo. The surrounding communities will need assurance that the firm is committed to protecting the natural environment upon where it operates to create a positive rapport. It should also formulate sustainability reports that focus on providing information on employee composition within its extensive production centres. This is set to improve on its overall company reputation in relation to how it perceives gender balance within its staff and executive composition. In fact, it should ensure to adhere to the proper guidelines set forth by the GRI in order to be positioned fairly in stakeholder assessment reports. Conclusion To sum up the discussion above, the report indicate that the importance and relevance of sustainability reports in the operations of a business like Wave Master Ltd. Sustainability reports builds on brand image; and ensures that different stakeholders’ expectations are met at all cost. The report has recommended that Wave Master Ltd adopt a sustainability report that focuses on ensuring that the raw materials for which its raw materials are sourced are not depleted even further thus affect the daily lives of the surrounding communities. It should also adopt the current GRI index for purposes of ensuring that most of the information relating to gender composition amongst staff and executive is presented to different potential stakeholders hence gain substantial level of social capital in the process. It thus goes without saying that the company should not only focus on profit maximisation but rather also integrate it with non-financial aspects of company operations. References List Bartolomeo, M., Bennett, M., Bouma, J.J., Heydkamp, P., James, P. & Wolters, T., 2000. Environmental management accounting in Europe: current practice and future potential. European Accounting Review, 9(1), pp.31-52 Ball, A. & Bebbington, J., 2008. Editorial: Accounting and reporting for sustainable development in public service organizations. Public Money and Management, 28(6), pp.323-326 Bebbington, J., 2001. Sustainable development: a review of the international development, business and accounting literature. Accounting Forum, 25(2), pp. 128-157 Bebbington, J., Unerman, J. & O'Dwyer, B., 2014. Sustainability accounting and accountability. Routledge. De Beer, P. & Friend, F., 2006. Environmental accounting: A management tool for enhancing corporate environmental and economic performance. Ecological Economics, 58(3), pp.548-560 Elkington, J., 1994. Towards the sustainable corporation: Win-win-win business strategies for sustainable development. California management review, 36(2), pp.90-100. Foran, B., Lenzen, M., Dey, C. & Bilek, M., 2005. Integrating sustainable chain management with triple bottom line accounting. Ecological Economics, 52(2), pp.143-157 Gray, R.H., 1994. Corporate reporting for sustainable development: accounting for sustainability in 2000AD. Environmental values, pp.17-45. KPMG. 2007. Sustainability Reporting In Australia. Retrieved on August 7, 2016 from http://kpmg.com.au/portals/0/ras_sustainability_reporting_aust200710.pdf Milne, M.J., 1996. On sustainability; the environment and management accounting. Management Accounting Research, 7(1), pp.135-161 Schaltegger, S., Bennett, M. & Burritt, R, 2006. Sustainability accounting and reporting (Vol. 21). Springer Science & Business Media Read More