Chapter 15

Social & environmental issues

S& E issues

Sustainability

Mgmt Systems S&E audits

*Sustainability

*Meet present need without compromising future needs

*Long term mtce of systems according to env, eco, social concerns.

*Sustainability is an attempt to provide the best outcome for human beings and env. Both now and for the indefinite future.

*Importance of Sustainability

*Gain awareness of org’s actions on the env

*Nowadays co’s feel more responsible and accountable to limit damage caused to the env

*A.k.a: Environmental footprints

*Sustainable development implies intergenerational equity

*CSR reports give details of env & sustainability actions

*Sustainability – includes economic & social concern

*Sustainability also include the concept of Triple bottom line developed by John Elkington

*TBL shows full cost of development, i.e , Economic, Social & environmental.

*Sustainability relates to the org i.r.o plannnig for LT growth, thus ensuring that the org will still operate in the foreseeable future.

Economic Social Environmental Perspective Perspective Perspective

Limits to Eco Growth exist Org impact on Community Org impact on EnvOrg can change social impact

Sustainability implies : Org is a shaper of societyPlanning for L. T growthEnsure Co will be a going concern in the future

Sustainability here refers to social justice

Lack of concern from Org may cause depletion of resources

Sustainability implies:Effective mgmt of env resources .These should be available to future generations

Sustainability impliesreplacing resources used by human beings

*Effects of economic activity

Economic activity

Social footprint

Env footprint

* Environmental footprint

*Org operates at a cost to the Env- negative externalities.

*E.F – Attempt to evaluate the size of a co’s impact on the env in 3 aspects

*1)resource consumption

*2)harm to the env- eg pollution, emissions

*3)resource consumption &pollution emissions – qualitative and quatitative evaluations.

* Environmental footprint

Quotient approach Subjective

Approach

*Quotient Approach

*Objective Approach.

*Sustainability measured : Amt of resource available v/s actual use of resource.

*- Has quantifiable measures of social & env footprints.- same as Tri Bottom line.

*Progress towards sustainability can be measured by analysing , e.g , water usage over time…

*Sustainability = usage < production

*Subjective approach

*Measures intentions of org to achieve goals & objectives.

*Progress achieved is not easy to quantify

*Progress can be made , eg waste reduction

*But org cant determine the exact amount and effect of this waste reduction.

*Social footprint*Evaluation in 3 areas:

*1) social capital

*2) human capital

*3) constructed capital

*Eco activities must be sustainable in all 3 areas.

*Sustainability achieved when social needs of org are met.

*Social capital- Social networks & mutually held knowledge to take effective actions.

*Human capital – Personal health , knowledge , skills , human rights , ethics

*Constructed capital – Physical infrastructures in society ; e.g roads

Anthro capital

*Accounting for Sustainability

FCA/TBL

Eco objective

s

Env objective

s

Social objective

s

- 2 methods to account for sustainability : Full cost accounting and Triple bottom line .

*Full cost accounting

*Calculate total cost of Co’s activities , incl : env, eco & social costs.

*Aim of FCA- include all costs , even those incurred outside the org.

*Include all the costs of an action/ decision , into the costing system.

*So now the product costing will contain both financial and non financial data.

*Look for other examples

*TripleBottomLine accounting

*Expands traditional reporting framework

*Includes env & social perf over and above traditional eco & financial perf.

*Consider Triple P’s : People, Planet , Profit.*Org need proper tools to measure success and monitor

progress.

*People- these are stakeholders of the Co. Actions of the co from the viewpoint of different user groups

*Planet- Attempt to reduce ecological footprint. Limit env damage. Co wont be involved in resource depletion.

*Profit- Normal , traditional bottom line. Aim is to maximise profit to maximise shareholders’ return. A TBL org will balance/synergise profit objective with 2 other objectives.

*Internal management systems*EMAS- economic management & audit software.

*Focus on disclosure of env systems

*Help to improve co’s env perf

*Co need to produce a regular public env stmt

*Accuracy & reliability of info is checked by independent verifier – to ensure credibility & recognition

*ISO 14000 is a pre-requisite before implementation of EMAS.

*EMAS require org to implement an Env mgmt system( ems)

*4 important elements in EMAS scheme:

*1) Legal requirement

*2) Dialogue/ reporting

*3) Improved environmental performance

*4) employee involvement

* Internal management systems

*ISO 14000

*Focus on compliance with internal environmental systems

*Series of stds dealing with env mgmt, supported by audit programme

*ISO14000 provides a basis for EMAS

*ISO14000 focus in internal control systems, but provide stakeholders with assurance of good environmental mgmt

*There are a Number of required to be fullfilled before obtaining iso accreditation

*Benefits of compliance with ISO or EMAS

*Reduced cost in waste mgmt

*Savings in consumption of energy & materials

*Lower distribution costs

*Improved supply chain

*Improved corporate image/ integrity/ image/accountability in front of stakeholders

*A framework for continuous improvement of co’s environmental performance

*Social & environmental audits*Social audit

*- process where org assess & demonstrate social , eco, env – benefits & limitations.

*- measure how much org achieve shared values set in mission stmt.

*A process for env audit

*S.A provides info , over and above traditional fin reporting

*S.A links TBL with FCA

*An important factor in S.A is the involvement of external stakeholders.

*S.A evaluates org’s footprint within a given accounting period from the external perspective.

*Elements of Social audit

*Stmt of purpose

*External view - external stakeholders’ view to form opinion on the org’s position- outside/in approach.

*Internal view – views of directors, staff.. To assess ways of working and rewards . Also to ensure mgmt & i.c.s can achieve stated purpose & objectives.

*Review & planning- audit team manages social audit. Also the performance will be measured to be included in next year’s audit planning.

*Social audit report

*Overview of the co

*Salient features of the fs

*Overview of products with negative env impacts

*Co’s stance wrt : salaries, job security , policies on discrimination .

*Social impact of the Co in terms of the community, social work

* env impact from co’s activities/ operations

*Environmental auditing *AIM

*assess org’s impact on the env

*Help to implement env stds – emas & iso14000

*It provides basic data for env accounting

*Integrate env perf measures into core financial processes to generate cost savings

*Reduce env impact through improved mgmt of resources

*Environmental auditing

*3 elements to consider:

*1) agreed metrics- what should be measured?

*2) performance measured against the metrics

*3) reporting on the levels of compliance / variance.*Env audit leads to env action plan

*Main areas in env audit: waste mgmt, emissions, ground/water protection, surface water protection, energy consumption, protection of env sensitive areas(ozone layer), mgmt of contracts.

*Environmental accounting

*Supports integration of env perf measures

*Social & env auditing provide meta data / empirical evidence of the achievement of social & env objectives

*Social & env auditing makes env accounting possible.

*Benefits of Env accounting

*Cost savings

*Environmental preservation

*Good corporate governance

*Examples of measuring impact on env

*Env accounting – monitor water usage

*Social footprints – choose suppliers using sustainable sources of raw mats, following adequate social & env practices

*Env footprints – reduce waste , eg co2 emissions