Question

1. In the contemporary business world, a firm has to adopt any one approach or progressively move from one approach to another approach to have sustainable strategy to exist in this competitive world. In this context :

You are required to Explain any two approaches of Social Responsibility Accounting? With appropriate examples?

                                                                                                (20 marks – Maximum 400 words +/- 10%)v

Answer 1

The concept of sustainable development has received growing recognition, but it is a new idea for many business executives. For most, the concept remains abstract and theoretical.

Protecting an organization’s capital base is a well-accepted business principle. Yet organizations do not generally recognize the possibility of extending this notion to the world’s natural and human resources.

Definition

For the business enterprise, sustainable development means adopting business strategies and activities that meet the needs of the enterprise and its stakeholders today while protecting, sustaining and enhancing the human and natural resources that will be needed in the future.

This definition captures the spirit of the concept as originally proposed by the World Commission on Environment and Development, and recognizes that economic development must meet the needs of a business enterprise and its stakeholders. The latter include shareholders, lenders, customers, employees, suppliers and communities who are affected by the organization’s activities.

mplications for business

It has become a cliché that environmental problems are substantial, and that economic growth contributes to them. A common response is stricter environmental regulation, which often inhibits growth. The result can be a trade-off between a healthy environment on the one hand and healthy growth on the other. As a consequence, opportunities for business may be constrained.

Practical considerations

While business traditionally seeks precision and practicality as the basis for its planning efforts, sustainable development is a concept that is not amenable to simple and universal definition. It is fluid, and changes over time in response to increased information and society’s evolving priorities.

The role of business in contributing to sustainable development remains indefinite. While all business enterprises can make a contribution towards its attainment, the ability to make a difference varies by sector and organization size.

Some executives consider the principal objective of business to be making money. Others recognize a broader social role. There is no consensus among business leaders as to the best balance between narrow self-interest and actions taken for the good of society.

Companies continually face the need to trade off what they would ‘like’ to do and what they ‘must’ do in pursuit of financial survival.

Businesses also face trade-offs when dealing with the transition to sustainable practices. For example, a chemical company whose plant has excessive effluent discharges might decide to replace it with a more effective treatment facility. But should the company close the existing plant during the two or three-year construction period and risk losing market share? Or should it continue to operate the polluting plant despite the cost of fines and adverse public relations? Which is the better course of action in terms of economy, social wellbeing and the environment?

Moreover, many areas of sustainable development remain technically ambiguous, making it difficult to plan an effective course of action. For example, the forestry industry has had difficulty defining what constitutes sustainable forest management. Some critics believe that simply replacing trees is not enough, because harvesting destroys the biodiversity of the forest. Clearly, more research will be needed to resolve such technical issues.

From a broader perspective, however, it is clearly in the interest of business to operate within a healthy environment and economy. It is equally plain that, on a global basis, growing and sustainable economies in the developing countries will provide the best opportunities for expanding markets.

To some, sustainable development and environmental stewardship are synonymous. In the short term, sound environmental performance is probably a reasonable objective for most businesses, with sustainable development as a longer term goal. However, this can lead to confusion. In the developed world, the focus is on environmental management, while in developing countries, rapid and sustainable development is paramount.

The global economy is coming under growing pressure to pay for the restoration of damaged environments. But this economic engine is being asked to help solve other pressing problems at the same time. The challenge is to solve all of these problems in a sustainable manner, so as to generate continuing development.

Perform a stakeholder analysis

A stakeholder analysis is required in order to identify all the parties that are directly or indirectly affected by the enterprise’s operations. It sets out the issues, concerns and information needs of the stakeholders with respect to the organization’s sustainable development activities.

A company’s existence is directly linked to the global environment as well as to the community in which it is based. In carrying out its activities, a company must maintain respect for human dignity, and strive towards a society where the global environment is protected.

The road to implementing a sustainable development philosophy will be different for smaller businesses, but with ingenuity, perseverance and cooperation, they can achieve the desired result.