WWW.THESES.XLIBX.INFO
FREE ELECTRONIC LIBRARY - Theses, dissertations, documentation
 
<< HOME
CONTACTS



Pages:     | 1 |   ...   | 3 | 4 || 6 | 7 |

«Published by the SIGMA Project, September 2003 SIGMA Project, 389 Chiswick High Road, London, W4 4AL SUSTAINABILITY ACCOUNTING GUIDE Contents ...»

-- [ Page 5 ] --

7.5.1 Shadow liability The section on External Flows above discussed external environmental and social costs. These are the costs of avoiding the environmental and social impacts that occurred in the year, or of restoring them. As the shadow costs are debited to the P&L, the Balance Sheet would need to be credited with a shadow liability. This would build up a value that represented what would have had to have been spent to avoid the historic impact of the organisation’s activities. The shadow liability is an indication of how much the organisation has drawn on human, social and natural capitals to be able to perform its value creation.

7.5.2 Shadow provision At present, where a company knows that it will incur a cost and can reliably measure that cost then it must recognise a provision. For instance, the owners of an oil rig know that it has a finite life, that there are regulations in place dealing with its de-commissioning, and what the cost would be to meet those standards. Therefore, it creates a provision, based on the net present value of cash flows associated with the de-commissioning. Each year the calculation is updated for the new life expectancy, disposal technologies, regulations and other assumptions.

By analogy it would be possible for a company to calculate its shadow environmental provision as the net present value of the expected external environmental costs as calculated for the environmental accounts. A similar shadow social provision could be calculated in a similar way.

For the oil rig, as it nears its end of life the provision increases (as the discount unwinds). In order to stay solvent the company must have assets to match the provision. In this way the provision ensures that the company can pay for the de-commissioning costs when they fall due. The provision represents the cost of meeting regulatory standards for the site once the rig has ceased to function.

Similarly the shadow provisions would represent the cost of the restoration and avoidance costs of continuing with present activities. The shadow provision is an indication of how much the company knows that it will draw on external human, social and natural capitals to be able to perform its value creation in the future. An organisation that recognises a shadow provision is acknowledging that it generates value in a way that has negative external impacts.

Clearly, forecasting future performance is uncertain. Choosing an appropriate discount rate would be a challenge. A shadow provision would also raise questions about how the company is obliged into its mode of value-generation.

In other words, is the generation of external impacts a feature of our economic system or are companies able to act independently with free choice over the course of action they pursue. Which may of course include externalising costs onto third parties.

One implication of a shadow provision is that a company will need to raise additional financial capital to remain solvent even before the external costs are incurred by society. The need for extra financing could provide a powerful incentive to minimise the environmental and social footprint of operations.

As such, a shadow provision is likely to be provocative.

8. Conclusion

8.1 Locating the approaches This guide has outlined many examples of using monetised information for sustainable decision making. The guide has located these examples as part of

sustainability accounting in three dimensions by asking:

• is the approach measuring the impact on a stock or a flow?

• is the impact internal or external to the organisation’s accounting boundaries?

• is the impact environmental, social or economic?

Figure 3: Sustainability Accounting in three dimensions

–  –  –

Financial accounting concerns itself with internal economic, social and environmental activity that impacts stocks and flows by presenting monetised data in the Balance Sheet and Profit and Loss account respectively.

Because of the way the Balance Sheet and P&L are framed for the investor, the social and environmental costs and benefits both internal and external are hidden. The different types of internal flows can be brought out by restating the P&L as Environmental or Social Value Added Statements.

The external flows can be captured by extending the boundaries of the organisation and asking: how much would it have cost to avoid or restore the impacts over the period? This information can be presented in external accounts. The impacts which need to be avoided or restored are beginning to be understood for the environment. For the social side, the many different perspectives on a social ‘good’ or ‘bad’ impact can be approached using a stakeholder dialogue model.

The internal stocks of social capital, indicating the competencies and capabilities of the organisation, are being valued by capital markets as the difference between book values and the market value of the company. There have been several approaches to allow managers to understand their intangible assets – including the Intangible Asset Monitor, brand valuation and a Return on Assets approach.

To our knowledge, no organisation has tried to measure its impacts on external stocks.

8.2 Trends in sustainability accounting From our work on sustainability accounting we believe there are several key trends which are of interest to all organisations wishing to move towards





sustainability:

Increasing internalisation of externalities There is an increasing recognition that, in order for a market society to move toward sustainability, the pricing signals that influence behaviour must include the consequences of that behaviour. The mechanisms for internalising externalities – such as taxes and compliance costs – are becoming more popular as legitimate policy instruments for governments to set the context within which organisations innovate. The most prominent example of this are the mechanisms from the Kyoto protocol, including the proposed EU-wide carbon emissions trading schemes.

In these circumstances, organisations which understand and can measure their externalities will have a competitive advantage. Sustainability accounting is one way to achieve this.

The need and difficulty of integrating measures across sustainable development As implied by Figure 3, sustainability requires that attention is paid to all the different economic, social and environmental systems (or all the Five Capitals) now and into the future. Sustainable development is likely to be a dynamic activity where different dimensions are working in synergy. At present most measures or indicators only address one part of the puzzle.

The importance of the need to integrate is matched by the difficulty in doing so.

There have been some attempts, such as the Sustainability Assessment Model given in section 6.2. Integration requires the unbundling of hard issues

such as:

• boundaries and responsibilities – where does an organisation’s responsibilities end and another’s begin? How can we consider an organisation’s individual responsibility when it is participating in a socio-economic system which only rewards certain sorts of behaviour?

• valuation methods – can the same judgements be applied to environmental and social valuation methods?

The avoidance and restoration cost method (used in 6.1 External Environmental Impacts) gives the cost to the organisation of its impact on other parts of society. The cost to that third party may be much smaller, or much larger.

• adding up and across - The conversion of social and environmental impacts into monetary values makes it possible to add up the impacts and trade them off against each other. This opens up the possibility of comparing £1 worth of climate change damage with £1 of reduced impact from waste or £1 of contribution to the local economy.

These trade-offs may not make sense from the sustainability perspective of living off the revenue rather than degrading the capitals. This point about comparing £1 of environmental or social impact also applies to comparing between £1 of impact between different years and between different companies.

• accounting for what you can count – an organisation may not be aware of its impacts, or not able to count them. The strength of using a stakeholder engagement methodology is that the stakeholders can provide an organisation with information on an impact which otherwise might have been omitted.

The challenges around integration form the starting point for considering

areas for future improvements, such as more work on:

• external economic impacts, such as the local multiplier effect on local economies and how this contributes to the organisation’s own financial capital

• including positive external impacts, for instance, the work on the social impacts of alcohol (in Section 6.2) considers social costs like health spending and lost productivity but no estimates of the social benefits of alcohol were made

• linking the values of internal and external flows to movement in internal and external stocks.

• creating more standardised and sector specific methods, to facilitate comparisons.

Impacts on conventional accounting systems We see sustainability accounting as an extension of the conventional accounting system to allow it to face the challenge of sustainable development. As we argued in the section on intangible assets, it is possible to reframe many current-day accounting problems in terms of sustainability.

In particular, the move to service economies and the call for improved governance has drawn out many of the limitations of conventional accounting. There are many developments in non-financial reporting – such as Balanced Scorecards – that are designed partly to finesse intractable measurement issues. We expect these developments to continue, and to increasingly build in sustainability measures such as sustainability accounting.

8.3 Sustainability accounting as an enabler to wider sustainable development Engaging an organisation in the transition to sustainability is difficult. It requires that people engage in a process which builds their understanding of the need to change their behaviour and gives them options on how to change.

Our experience is that sustainability accounting can be a vehicle for that process. People often report that sustainability accounting allowed them to do what they had always wanted to do, but previously they had not been able to argue the case. Focusing on these benefits will help with ‘selling’ sustainability accounting within an organisation.

Sustainability accounting allows for a justification of sustainable decisions. It uses financial language which decision makers are familiar with and provides opportunities for more sustainable behaviour. As such, it can act as a bridge between the ‘old’ and the ‘new’.

We believe it is better to be imprecisely right than precisely wrong when considering sustainability indicators. As such, sustainability accounting is definitely not about getting the ‘precisely wrong’ number but one which is ‘imprecisely right’ enough. Its purpose is to be one carrier in a large change process.

8.4 How to start It is our experience that sustainability accounting works best when it builds from inside an organisation outwards. Reporting performance for internal purposes can then feed into external disclosure.

Also, in order to prepare a ‘complete’ set of sustainability accounts an organisation needs to have the crucial data, such as CO2 emissions and so forth. Starting a sustainability accounting project can drive improving nonmonetary environmental and social reporting as well.

When starting sustainability accounting ask yourself:

• What decisions need to be made for the organisation to be more sustainable? How will the information generated be used?

• Who will make those decisions? Who is this information for?

• What are the organisation’s blind spots? What do people not realise that they need?

• Who will have to be convinced for this to happen?

The answers to these questions will differ from place to place. For some organisations it will be most appropriate to start with an isolated part – say one location, one country, one product line, one project. For others it will make more sense to be global.

There will be problems: how can we value that impact? Where should we draw our boundaries? We believe sustainability accounting is only about getting a number that is good enough to enable the larger change process towards sustainability.

The complexities and difficulties of sustainability accounting should not prevent organisations making a start. They should recognise that their approach will evolve and improve over time.

9. References and Sources ACCA (2001) Advances in Environmental Accounting (London: ACCA).

Alcohol Concern (2001) The State of the Nation (Britain’s True Alcohol Bill).

Bebbington J. and Thomson I. (1996) ‘Business Conceptions of Sustainability and the Implications for Accountancy. ACCA, London.

Bebbington et al (2001) Full Cost Accounting. (London: ACCA) Baxter, Tom; Bebbington, Jan and Cutteridge, David (2002), “The Sustainability Assessment Model (SAM)”, Proceedings of the SPE International Conference on Health, Safety and Environment in Oil and Gas Exploration and Production (March 20-22nd 2002, Malaysia).

Bourmans, R., Costanza R., Farley, J., Wilson, M., Portela, R., Rotmans, J., Villa, F. and Grasso, M (2002). Modelling the Dynamics of the Integrated Earth System and the Value of Global Ecosystem Services Using the Global Unified Metamodel of the Biosphere (GUMBO). Ecological Economics, 41 (3).

BSO Origin (1990, 1991, 1992, 1995) Annual Report CIMA and Forum for the Future (2002) Environmental Cost Accounting: An Introduction and Practical Guide.

CIRIA (2002) Sustainability Accounting in the Construction Industry. Report prepared by Stanger, Forum for the Future and Carillion plc.

CWRT (1999), Total Cost Assessment Methodology: Internal managerial Decision Making Tool. Centre for Waste Reduction Technologies, New York.

Dixon J.A., Scura L.F., Carpenter R.A., and Sherman P.B. (1996), Economic Analysis of Environmental Impacts. Earthscan, London.



Pages:     | 1 |   ...   | 3 | 4 || 6 | 7 |


Similar works:

«Meritocracy, Egalitarianism and the Stability of Majoritarian Organizations Salvador Barber‡ MOVE, Universitat AutÚnoma de Barcelona and Barcelona GSE Carmen Bevi· Universitat AutÚnoma de Barcelona and Barcelona GSE Clara PonsatÌ Institut díAn‡lisi EconÚmica CSIC and Barcelona GSE May 29, 2013 Abstract Egalitarianism and meritocracy are two competing principles to distribute the joint beneÖts of cooperation. We examine the consequences of letting members of society decide by vote...»

«Functional Conjugacy in Parametric Bayesian Models Peter Orbanz University of Cambridge Abstract We address a basic question in Bayesian analysis: Can updates of the posterior under observations be represented as a closed-form mapping from the data to the posterior parameters? The question is closely related to the concept of a conjugate prior, but we do not assume that prior and posterior belong to the same model class. We refer to models for which a closed-form mapping exists as functionally...»

«Sophos SafeGuard Disk Encryption for Mac Help Product version: 6.01 Document date: September 2012 Contents 1 About Sophos SafeGuard Disk Encryption for Mac 2 Security recommendations 3 Sophos SafeGuard Disk Encryption system menu 4 Power-on Authentication 5 Single Sign On to Mac OS X 6 User management 7 Disk management 8 Sophos SafeGuard Disk Encryption and SafeGuard Enterprise 9 Using Sophos SafeGuard Disk Encryption via Terminal 10 Time Machine backups 11 Supported hardware and configurations...»

«Authors’ next to final proof: Clement, J. (2008). The role of explanatory models in teaching for conceptual change. In S. Vosniadou (Ed.), International handbook of research on conceptual change. Amsterdam, Routledge. The Role of Explanatory Models in Teaching for Conceptual Change  John J. Clement University of Massachusetts Abstract This chapter discusses research on instruction aiming to promote conceptual change in explanatory models. Two traditional areas of research have...»

«A conjoint analysis of festival attributes for successful positioning of selected arts festivals in South Africa C. van Zyl ABSTRACT Arts festivals are common happenings in South Africa. Despite the significant growth in the number and size of festivals and events, relatively little research is available on the arts festival package. This article determines which attributes and combination of attributes would drive the best practices of arts festivals. Three main arts festivals were studied,...»

«Minutes are intended to note (a) the date, time and place of the meeting; (b) those members of the public body who were present and those who were absent; and (c) the substance of all matters proposed, discussed and/or action was taken on. Minutes are not intended to be a verbatim report of a meeting. An audiotape recording of the meeting is available for inspection by any member of the public interested in a verbatim report of the meeting. These minutes are not final until approved by the...»

«ISSN 0328-5715 ISSN 2524-955X Marketing de la Experiencia: principales conceptos y características Marcelo Barrios• Resumen El objetivo de esta investigación es analizar el concepto de marketing de la experiencia y sus principales características. Para ello, en primer lugar se plantea el origen y definición del concepto, a través de una revisión de la literatura. Luego se desarrollan los principales componentes de una experiencia, haciendo foco en el marketing sensorial, para luego...»

«False Proposition As a means for making conjectures in mathematics classrooms Fou-Lai Lin Jya-Yi Wu Yu Department of Mathematics National Taiwan Normal University E-mail: linfl@math.ntnu.edu.tw Abstract A teaching model on learning refuting and conjecture making is established based on the performance of Taiwanese junior high school students on argumentation. The main data was taken from a national survey, together with two small-scale studies. Students’ behaviors on giving examples with...»

«National 5 Practical Metalworking Course Assessment Specification (C761 75) Valid from August 2013 First edition: April 2012 Revised: June 2014, version 1.2 This specification may be reproduced in whole or in part for educational purposes provided that no profit is derived from reproduction and that, if reproduced in part, the source is acknowledged. Additional copies of this Course Assessment Specification can be downloaded from SQA’s website: www.sqa.org.uk. Please refer to the note of...»

«Microsoft Research Outstanding Collaborator Awards Microsoft Research Years Preface In the 25 years since its founding in 1991, Microsoft Research has grown to be a worldwide symbol of excellence in computer science. Our over 1,000 scientists, engineers, and designers produce technologies that change the lives of people every day through their innovative software, systems, and designs. We are proud of our accomplishments, but in reality they are all founded on a model of open collaboration with...»

«THE FORTIFIED HOUSE: A REVIEW JOE NUNAN (BLACKWATER~ARCHAEOLOGY) This paper aims to identify the developments that have taken place over the past 60 years in the understanding of a specific late medieval building type unique to Ireland, referred to as the 'fortified house'. A number of these structures have been subject to archaeological and building surveys including those located in the following regions: Munster, the Midlands, Ulster, Dublin county and Connacht. Most of the research...»

«2013 Elaborado por: Especialista sectorial de café y elaborados – Dirección de Promoción de Exportaciones Dirección de Inteligencia Comercial e Inversiones ANÁLISIS SECTORIAL DE CAFÉ Dirección de Inteligencia Comercial / PRO ECUADOR Abril 2013 Contenido 1. INTRODUCCION 2. EL SECTOR Características del sector ecuatoriano a) Descripción de productos y elaborados del sector b) Ubicación geográfica del sector en el Ecuador c) d) Producción nacional (en kilos o toneladas, superficie...»





 
<<  HOME   |    CONTACTS
2016 www.theses.xlibx.info - Theses, dissertations, documentation

Materials of this site are available for review, all rights belong to their respective owners.
If you do not agree with the fact that your material is placed on this site, please, email us, we will within 1-2 business days delete him.