Social and Enviromental Accounting

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Social and Environmental Accounting

  1. Introduction

Accounting forms the most important quantitative system within an enterprise.  Information is offered to users in the form of financial reports, which are the final product of the accounting process.

The purpose of financial reporting is to communicate financial information to interested parties.  It is therefore important that financial reports must be presented in such a way that the relevant information is timeously communicated in a meaningful, comprehensible and useful manner, allowing users to act upon it and to use it to aid effective decision-making.

However, environmental reporting embraces a number of quite different concepts and practices, for which different professional disciplines are appropriate. A company may be reporting principally the impact that the business has on the environment; or the impact the environment has on the business. Environmental accounting here is chiefly concerned with the latter (Anon, no date).

This paper will focus on the discussion of whether the social and environmental reporting fulfils the objective of accounting. Moreover, it will give an account of how qualitative characteristics are relevant to such reporting.

  1. Social and Environmental Accounting

When the whole world experiences a rapid growth of industry and economic, unfortunately, the natural environment is terribly damaged at the same time. Nowadays, with the increasing awareness of the importance of environment, accounting is no longer just for the economic aspect or financial aspect. For example, the Global Reporting Initiative Guidelines (GRIG) defined their framework for reporting on 3 parts: the economic, environmental and social performance of an organization. Similarly, it can be seen in Accountancy and Business journal (Stikich, 1997), in which high lights that there are three aspects of core values of a modern sustainable business, one of them is environmental responsibility. In fact, a number of companies begin to reflect on and revise their corporate environmental responsibilities, not only because of the pressure and activity coming from non-governmental organizations and the growing sense of environmental issues by the general population, but using it as a part of their management strategies to specify measures for dealing with environmental issues and to internally carry out environmental conservation activities.

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Moreover, advocated by many organizations like the United Nations, the World Bank, the Organization for Economic Co-operation and Development (OECD) and the European Union, environmental accounting is widely recognized as an essential tool of a sustainable development, which does not harm the planet’s resources needed for the future generations and the development on the earth.

The question must be asked as to whether the accounting profession can provide reports to management on the use and abuse of natural resources. Some would see accounting as having a wide area of responsibility while not standing separate from the wider society in ...

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