There are many social accounting approaches, but all aim to address the material sustainability issues and information needs of an entity and its stakeholders through dialogue and engagement. In the corporate sector, social accounting is used to collect and report information for corporate social responsibility (CSR) or sustainability reports.
This aims to measure CO2 equivalent emissions, and has become increasingly important since the Kyoto Protocol was ratified. Carbon accounting is a complex area lacking a single internationally recognized model, yet companies (especially global organizations) have to respond to a wide array of national and regional regulations. As a result, a number of major frameworks and accounting standards are being established.
The Role Of The Accountant
In the context of sustainability accounting and reporting, the role of the accountant is focused in four main areas:
Accountants are best placed to use their economic experience to apply a market value to potential social and environmental impacts and opportunities. If they can assure integrity, then the effect of these impacts will be increasingly valued as long-term performance indicators.
When engaging stakeholders in decision making, accountants can provide rigor, impartiality and a link to transparency. Stakeholder response to non-financial elements helps accountants determine their materiality and the associated risks or opportunities created if these are disclosed.
Regulations And Tax
Accountants need to decode taxes and subsidies, especially those taxes and penalties linked to sustainability. Accountants will be asked to provide critical operating information on how to account for these, as well as advice on compliance and penalties.
Standards And Guidelines
Accountants must know of the guidelines recommended by their own profession, and interpret these. Sustainability reporting systems must be integrated into existing information structures, so that data can be collected and audit trails maintained thereby providing assurance and assisting boards. By using professional accounting standards to meet society’s changing needs, accountants can help rebuild trust in capital markets and respond to the increasing awareness of the link between social, environmental and economic exposure.