Question

A socially responsible company would interact with the physical and social environment in which it operates in a way that left the environment no worse off – and preferably better off – than before it began operations.

Required:

a. List two ways in which businesses can enhance their corporate social responsibility. Provide an example for each choice.

b. Discuss roles of accountants in helping to promote the practice of CSR in businesses.

Answer 1

A socially responsible company would interact with the physical and social environment in which it operates in a way that left the environment no worse off – and preferably better off – than before it began operations.

The Companies Act 2013 expects large companies in India to spend 2 percent of their net profits on corporate social responsibility projects. From the time of its effect in 2014, there has been much debate over if the CSR initiatives taken by companies have been good enough.The area needs active participation from companies as well as experts on the subject to help entrepreneurs dissect how companies can ensure they indulge in innovative and productive CSR activities.

A) Two ways in which businesses can enhance their corporate social responsibility are :-

1. View Different Problems With Different Lens :- There lies a huge challenge in handling hardware and software behind a livelihood or agricultural practice put in place for CSR. For example, building toilets is easy but getting people to use it is difficult.

People solve two problems with same lens. Getting the right mechanism to define outcome and what milestone one is putting now to 5 years hence is important. CSR initiatives whether product or service is not worth it if it is not big enough or focused and not making a small dent.

Companies must build and an entity that solves the broken problems. Corporate put money in go solo. They should rather be a part of the ecosystem and solve one problem at times.

2. Board Committees Must Take CSR Seriously :- CSR is a lot of money. The keen challenge is to move beyond issuing cheques or creating physical assets. The need of the hour is some innovative, new, replicate and scalable initiatives.

Can corporate take an ecosystem view which is start with results, X-ray to what is broken and fix it and look into solving the problem is a question that needs answering. Another important point that needs answering is can corporate think of scalable ideas.

Examples:-

- Reduce carbon footprints to mitigate climate change

- Make socially and environmentally conscious investments

- Change corporate policies to benefit the environment

- Engage in charitable giving and volunteer efforts within your community

- Improve labor policies and embrace fair trade

B) Roles of accountants in helping to promote the practice of CSR in businesses are :-

Corporate Social Responsibility (CSR) and sustainability are key issues in the current business environment as stakeholder groups are incorporating CSR as one of the important factor in decision making. These decisions about organizations include investment/ procurement decisions or extending support to maintain/ obtain social licenses to operate.

The accountants have a pivotal role in organizational areas closely related to CSR such as reporting, transparency,ethics, legal compliance, resource consumption and communication with stakeholders. The accountants measure,control and communicate within and outside the organization. The present business environment provides opportunities and threats to the accountants and the accounting profession. The increasing importance of environmental and social issues, organizational risk management and reporting are the key drivers of this change

Several concepts related to CSR apply to the accountants or accounting domain e.g. Environmental Management Accounting (EMA), Social Environmental Accounting (SEA), Corporate Social and Environmental Reporting or Social Responsibility Accounting. These concepts link CSR to accounting system arguing the importance of such aspect in the work of accountants

CSR-related concepts influence significantly the accountancy profession, via the use of critical competencies ofaccountants. For example, in Environmental Management Accounting (EMA) the management of environmentaland economic performance is done via management accounting systems and practices that focus on both physicalinformation on the flow of energy, water, materials, and wastes, as well as monetary information on related costs,earnings and savings.