Discuss about SUSTAINABILITY REPORTING………………….
TABLE OF CONTENTS
INTRODUCTION…………………………………………………………………………3
SUSTAINABILITY REPORTING………………………………………………………..3
ASSURANCE……………………………………………………………………………..3
ASSURANCE VERIFICATION………………………………………………………..…3
REPORTING PRACTICE………………………………………………………………….4
RELATION BETWEEN SUSTAINABILITY REPORTING AND ACCOUNTING…….4
THE VARIATIONS IN SUSTAINABILITY REPORTING……………………………….5
CONCLUSION………………………………………………………………………………6
REFERENCES………………………………………………………………………………7
INTRODUCTION
Organizations have become aware of the fact that their day to day activities have direct or indirect effects on social, environmental and economic issues. This has necessitated them to come up with ways of reporting that enables them to incorporate and evaluate their performance with regards to information about the economic, environmental, and social issues. This kind of reporting is referred to as sustainability reporting. Organizations will therefore base their sustainability reporting on three basic grounds, social, economic and environmental aspects (Perez-Batres, 20120). To ensure that an organization maintains a sustainable operation while trying to achieve their goals, they will often employ the concept of sustainable reporting as a means of communication. Sustainability reporting is usually done on a regular basis by the organizations. Sustainability reporting is of a significant importance to companies as it ensures that companies are more responsible to matters concerning their environmental conditions, economic situations that prevail at a particular time and social needs of the population.
ASSURANCE
Assurance refers to the process by which organizations or companies evaluate the performance or effectiveness of certain activities which they might initiate during their daily operations. It uses some principals to verify and asses any system that an organization undertakes in its operations. Assurance will always give the quality, and validity of data that any organizations might have come up with (Manetti & Toccafondi, 2012). Assurance is an important tool to organization as it helps them to prove the reliability of their data and findings, meet the legal requirements, gain trust, and enhance reliable and credible flow of information to the concerned parties. Assurance is very useful to different stakeholders including management of different companies, entrepreneurs, governments, various institutions and the population as a whole. Organization will therefore adopt assurance in their sustainability reporting so as to ensure that their reporting on environmental, social, and economic issues is credible and useful in achieving the organizations goals. Furthermore assurance will also ensure that sustainability reporting is of significance importance to the society at large. Sustainability assurance will also ensure that companies are accountable for their sustainability reporting on the environmental, social, and economic issues. An effective sustainability assurance will therefore be that type of assurance that is conducive as well as the one that ensures accountability for improvement of the performance. The assurance should be able to comply with the required standards so as to pass accountable information to the whole society group.
ASSURANCE VERIFICATION
Assurance verification involves the process of confirming that a particular data has achieved its objectives or aims in its operations. It ensures that the organizations meet their expectations through a particular criterion. In sustainability reporting assurance certification will ensure that the environmental concerns, economic issues and social concerns of an organization are achieved by the sustainability reporting (Manetti &Toccafondi, 2012). The purpose of assurance verification is to check whether a system has met its basic objective. Assurance verification will always involve testing of a model which is used by a particular company; the model testing is done over a period of time to ensure its reliability and effectiveness. In essence, the verification process is designed by organizations to evaluate a system and to check whether that system complies with certain established regulations and specifications throughout its stages.
REPORTING PRACTICE
Reporting practice refers to how organizations communicate certain aspects of their undertakings to the society as a whole. It comprises of the ways by which the organization presents and discloses the aspects or the issues. The issues that an organization may wish to present vary widely. It can be a financial issue, economic issue, environmental issue or social issue. In sustainability reporting organizations mainly communicates issues which are related to economic, social and environmental aspects.
Sustainability reporting is essentially meant to address the concerns of the society. It largely contributes to the wellbeing of the society. Sustainability will address the environment needs in different ways. It will help address environmental concerns such as pollution, soil erosion, and other types of environmental hazards (Verschcoor & Curtis, 2011). On the economic perspective it will help make use of our limited natural resources in the most effective way possible. On the social aspects sustainability will promote the level of cooperation between organizations and the society. This will be done by adopting some social corporate responsibility practices by the concerned organizations. Sustainability is very different from the traditional financial reporting in a number of ways. The traditional accounting mainly involves reporting which can be measured in monetary terms while the sustainability reporting may or may not be measured in financial terms. Sustainability reporting is measured using different parameters. Again in traditional financial reporting the data are mainly retrieved from the companies records while in sustainability reporting data is usually received both from the organization data and from external sources. Hence sustainability reporting cannot be reported entirely on dollar terms.
RELATION BETWEEN SUSTAINABILITY REPORTING AND ACCOUNTING
The traditional accounting actually compares the financial performance of organizations over a given period of time. It evaluates the financial performance of a company in relations to profit or loss margins of organizations, its revenues, sales, purchases, expenses and all other aspects which companies can measure financially using monetary values. The comparison between the past performance and the subsequent one will allow the companies to evaluate their level of performance and to establish whether a specific system used by any company is working as per required (D’Aquila, 2012). On the other hand sustainability reporting will also compare the performance of the organizations set of policies towards environmental, social, and economic issues. The comparison of performance for sustainability reporting is also aimed at evaluating the performance of the organization within a given period of time. The sustainability reporting is wide and will always measure the social, environmental, and economic performance. The economic performance as measured by the sustainability reporting will involves quantification of data just as the case with the traditional accounting. Sustainability reporting is both performance and positioned based means of reporting. It is always geared towards achieving the goals and objectives of organizations. The sustainability report can be prepared by any qualified accountant just as the case of traditional accounting. In sustainability accounting issues of profit or loss do not feature in the report, basic accounting is part of the issue which it addresses in its report. This is also the case of traditional accounting where accounting is not only part of the issue but the main issue addressed in the reporting. Traditional financial accounting mainly focuses on the needs of information of the specific parties who are directly involved decisions regarding the resource allocations. Traditional accounting in its reporting does not include information pertaining to the environment and social issues. Traditional accounting has some assumptions which tend to ignore some transactions which can either impact indirectly to the firms activities. These can be external issues such as social or environmental concerns which might have some significant implications on the company’s performance. These external factors cannot be measured under traditional accounting as they are not usually recognized by the organizations. There is also no evaluation of social and environment values in financial terms in the traditional financial reporting whereas in sustainability accounting the social and environmental issues is measured in the sustainability reporting.
Traditional account reporting can be linked to sustainability reporting in a number of ways; both of the traditional accounting and financial reporting compares the performance of organization in different periods of operations. Hence they are measurements of performance for the organizations. Both of the traditional accounting and sustainability reporting are used to measure the economic performance of the companies, in this case the traditional accounting will measure the financial performance while the sustainability reporting will measure the economic performance of a company(Perez-Batres, 20120). In essence economic performance can be linked to financial performance in a number of ways. The two reporting methods; the traditional accounting and the sustainable reporting at some points measure the performance of a particular organization using a specified monetary value. In sustainable reporting the economic issues are evaluated using a given monetary value likewise to traditional reporting where financial statements are in terms of monetary values.
THE VARIATIONS IN SUSTAINABILITY REPORTING
Sustainability reporting just as the case for traditional account does vary from country to country across the globe. The variation in sustainability reporting is attributed to the different accounting principles applied by the different countries. Countries around the globe do have different accounting bodies which regulates their accounting principles. The accounting principles adopted by the accounting bodies will depend on the specific needs of a particular country. This will depend on the economic, political, and social impact of the individual countries (Financial executive, 2012). The adoption of a particular sustainability accounting will therefore be guided by a number of parameters within a particular country. Some of the determinants of the suitability of a sustainability accounting method are the cultural groups within a given country, the development stage of the country in terms of its economy, the various concerns of the stakeholders, and to some extent the internal influence. Culture within a country will determine the kind of sustainability reporting. Some countries have unique beliefs and traditions about the financial reporting hence they will follow their respective belief when adopting the type of sustainability reporting. The development stage of a given country will determine how advance a country is and this will be instrumental in developing a sustainability reporting that will be understood by various stakeholders within that particular country. Stakeholders concerns will also be considered when developing a sustainability reporting system. The stakeholders such as investors, government agencies and various civil organizations concerns will be taken seriously when deciding the reporting system for any country. The interest of these organizations differs from country to county, and this will imply that countries will come up with different reporting systems. Lastly there can be international pressure for countries to develop a uniform and systematic reporting system.
CONCLUSION
Sustainable financial reporting is an internal concept just like the traditional accounting, and it is basically used to pass some information regarding economic, social, and environmental issues to the society. It is similar to traditional accounting in a number of ways although it evaluation approach is more broad than traditional accounting.
REFERENCES
D’Aquila, J (2012). Integrating sustainability into the reporting process and elsewhere. CPA Journal. 82(4), 16-64.
Financial executive (2012). Sustainability rises: On the CFO’s ‘To-Do’ List. Financial executive. 28 (2), 54-57.
Manetti, G, Toccafondi, S (2012). The role of stakeholders in sustainability reporting assurance. Journal of business Ethics. 107 (3), 363-337.
Perez-Batres, L, et al (2012). Why do firms engage in national sustainability programs and transparent sustainability reporting? Management international review. 52(1), 107-136.
Verschcoor, C, Curtis, C (2011). Should sustainability reporting be integrated? Strategic finance. 93(6), 12-14.
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