Matakuliah
Tahun
: F0122 – Seminar Akuntansi
: 2009
Social and Environmental Accounting
Pertemuan 07
Social and Environmental Accounting
Accounting Seminar
Week 6
Gatot Soepriyanto
Understanding Social Accounting
• Social Purpose – Social Accounting – Social Audit –
Social Report
• Social = social + environmental + economic
• Financial performance = organisational sustainability
• Social Accounting (social accountant) –
Understanding Social Accounting
• Proving and Improving – and Accountability
• Performance (what we did) + Impact (what happened)
Principles of Social Accounting
1.
2.
3.
4.
5.
6.
Multi-perspective
Comprehensive
Comparative
Regular
Verified
Disclosed
•
•
•
•
•
•
Getting Ready for Social
Accounting
Understanding the process
Looking at what you already do
Get commitment
Think about available resources
Make it manageable!
Actively decide to go ahead
The Building Blocks of Social
Accounting and Audit
• Step One – Planning
– Mission
– Objectives (how we seek to achieve it) + Activities (what we
do) + Values (what we believe - how we behave)
– Stakeholders – whom we affect and who affect us (intentionally
and unintentionally)
The Building Blocks of Social
Accounting
• Step Two - Accounting
– Scope
– Indicators (narrative, quantitative and qualitative information)
– Stakeholder consultation
The Building Blocks of Social
Accounting
• Step Three – Reporting and Audit
– Draft social accounts
– Social Audit Panel and social audit statement
– Social Report
Three Step Process
CD:
Case Study - GFC
Introductory OHP/PP
Case studies
Checklist for Intro'n
Diagram of process
Information Sheet
What you already do
SA on One Page!
Cycle diagram
3 Step Process
CD:
Case Study - GFC
OHP/PP
Examples - techniques
Examples of MVOA
Examples – S/H maps
Lists of MVOA
Examples of outputs
Templates
a
Assessment
GETTING READY…
Understanding process
What organisation
already does
Commitment
Managing the process
Resources
Making the decision
Assessment
STEP 1: SEE PLANNING
Mission
Values
Objectives
Activities
Stakeholders
Key stakeholders
Buy-in
Video
CD:
Case study - GFC
OHP/PP
Examples - SBKS
Examples:
Questionnaires
Interviews
Focus groups
PA techniques
Alternative methods
Planning tools
Templates
CD:
Case study - GFC
OHP/PP
Examples of using SA
Examples - Chair notes
Panel criteria/Checklists
Example of timetable
Templates
Assessment
STEP 2: SEE
ACCOUNTING
Deciding the scope
Agreeing indicators
Collecting data
Env./economic impact
Social account plan
Implementing plan
Mission etc
Stakeholders
Website:
Updateable information
STEP 3: SEE REPORTING
& AUDIT
Drafting Social Accounts
Social Audit Panel
Process for the Panel
Social Audit Statement
Using the Social Accounts
Disclosure
Consultation data results
Social Audit
Report
Open College Network
Using Social Accounting and Audit
• Proving – demonstrating what we have done and
achieved (performance and impact) to all stakeholders
(accountability)
• Our Objectives and Their Objectives – the 360 degree
picture
• Common or Shared Objectives – making comparisons
• Improving – social enterprise plans
Some Contemporary Issues
• Mandatory or Voluntary?
• A kite-mark for social economy organisations? – the
ethical dimension
• The cost of social accounting and audit
Environmental
Accounting
Discussion
• Environmental Accounting Overview
– What is environmental accounting
– Why do environmental accounting
– What is an environmental cost
• System Strategies
– Reactive, Proactive, Leadership
• Business Purpose and Application
– Example - Cost Allocation
• Methodologies
Environmental Accounting Overview
What is environmental accounting?
– A flexible tool to provide information not necessarily provided in
traditional managerial systems.
Goal
• Goal of environmental accounting is to
increase the amount of relevant data for
those who need or can use it.
• “Relevant data ” depends on the scale
and scope of coverage
Scale and Scope
• Applicable at different scales of use and scopes (types)
of coverage.
– Application at an individual process level (production line), a
system, a product, a facility, or an entire company level.
– Coverage (focus) may include specific costs, avoidable costs,
future costs and/or social external costs
Scale and Scope
• Decisions on scale and scope of application significantly
impact ability to assess and measure environmental
costs
– Process vs Facility
– Discreet costs vs Hidden vs Contingent vs Image Costs
Why do Environmental Accounting ?
• Environmental cost can be significantly
reduced or eliminated as a result of business
decisions.
• Environmental costs may provide no added
value to a process, system or product (i.e.
waste raw material )
• Environmental costs may be obscured in
general overhead accounts and overlooked
during the decision making process.
Why do Environmental Accounting ?
• Understanding environmental costs can lead
to more accurate costing and pricing of
products.
• Competitive advantage with customers is
possible where processes and products can
be shown as environmentally preferable.
Environmental Costs
• Major challenge in application of environmental
accounting as a management tool is identifying relevant
costs.
• Cost definition determined by intended use of data (i.e.
cost allocation, budgeting, product/process design or
other management decision support).
Environmental Costs
• Types of Environmental Costs
– Conventional: material, supplies, structure and capital
costs need to be examined for environmental impact
on decisions.
– Potentially Hidden:
• Regulatory (fees, licenses, reporting, training, remediation)
• Upfront and back end (site prep, engineering, installation,
closure and disposal)
• Voluntary (training, audits, monitoring and reporting)
– Contingent: penalties/fines, property liability, legal)
– Image: Relationship with employees, customers,
suppliers, regulators and shareholders
Overview Summary
• Flexible tool to provide relevant data not
ordinarily captured in traditional systems.
• Successful application requires up-front
understanding of scale and scope of
application.
• Once identified, information needs to be
communicated/distributed to decision
makers and considered as a component of
management’s decision making criteria
System Strategies
• Environmental Accounting systems typically fall into one
of three categories:
– Reactive
– Proactive
– Leadership
Reactive Systems
• Typically spread costs (capital and expense)
across various overhead categories.
• Environmental costs typically not assigned to
specific line/process or activity.
• Reactive system fails to provide indication or
quantification of environmental costs.
• As a result it fails to identify cost drivers and
minimizes opportunity to develop tactics to
reduce these costs.
Proactive systems
• Costs are categorized and assigned to
specific process and activities.
• Costs incurred can be identified, classified
and quantified but are limited to discreet
costs.
• Decisions typically focus on incremental
activities ( i.e. minimize waste, etc.).
Leadership Systems
• Includes both financial and non-financial issues
in the relevant data used in the business
decision process.
• Systems are designed to include value chain
perspectives.
• Both the process as well as the product are
evaluated for relationship between inputs and
overall value provided to minimize “total costs”.
Application
• Utilization of data generated from application of
environmental accounting tool can be used for a variety
of decision classes including:
–
–
–
Cost allocation
Capital budgeting
Product design
Cost Allocation
an example
• Goal - Bring environmental costs to attention of
corporate stakeholders.
• Four steps in environmental cost allocation:
–
–
–
–
Determine scale and scope of the application
Identify environmental costs
Quantify those costs
Allocate those costs to responsible product, process or system
Traditional Cost System
Other
Overhead
Toxic Waste
Product B
Allocated
Overhead
Product A
Product B
Modified Allocation System
Other
Overhead
Toxic Waste
Product B
Allocated
Overhead
Product A
Product B
Methodologies
Related Accounting Topics
• Application of Environmental Accounting typically used in
conjunction with:
–
–
–
–
Activity Based Costing (ABC)
Total Quality Management (TQM)
Business Process Re-engineering
Balanced Score Card
References
• www.socialauditnetwork.org.uk
• www.proveandimprove.org
Assignments
• Summarize, Discuss and Present the
following paper (see additional material):
– Determinants of Corporate Social
Responsibility Disclosure: An Application Of
Stakeholder Theory (Roberts, 1992)