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Social and Environmental Accounting

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112 views32 pages

Social and Environmental Accounting

Uploaded by

shubham arora
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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SOCIAL AND ENVIRONMENTAL ACCOUNTING

INTRODUCTION OF SOCIAL ENVIRONMENT


Social accounting is the process of communicating
the social and environmental effects of
organizations' economic actions to particular
interest groups within society and to society at large
HISTORY OF SOCIAL ACCOUNTING

Socialaccounting as an approach began


developing in the UK in the early 1970s

 The Public Interest Research Group established


Social Audit Ltd
DEFINITION OF SOCIAL ACCOUNTING

 "An approach to reporting a firm's activities which stresses


the need for the identification of socially relevant behavior,
the determination of those to whom the company is
accountable for its social performance and the development
of appropriate measures and reporting techniques."
SCOPE OF SOCIAL ACCOUNTING

 FORMAL ACCOUNTABILITY

 SELF REPORTING AND THIRD PARTY


AUDITS

REPORTING AREAS
APPROACHES

1. Classical Approach
2. Descriptive Approach
3.Integral Welfare Theoretical Approach
4. Programme Management Approach
5. Pictorial Approach
1. Classical Approach
 The classical approach asserts that by maximizing the profits
within the constraints of the existing legal and ethical
framework, business corporations are acting in the best
interests of the society at large. Milton Friedman (1961)
advocated, “there is one and only one social responsibility of
business-to use its resources and engage in activities designed
to increase its profits, as long as it stays within the rules of the
game, which is to say, engage in open and free competition,
without deception or fraud.” However, in the changing
environment and social parameters this approach is no more
acceptable.
2. Descriptive Approach:

This is the simplest and traditional method of


reporting social information. According to this
method the social activities of business
corporations are presented along-with financial
statements in narrative form. Usually, only positive
social aspects of a firm are presented in a non-
quantitative form. Thus, the impact of social
activities is not measured under this method
3.Integral Welfare Theoretical Approach

This approach advocates the preparation of a


social report comprising social benefits and
social costs.
4. Programme Management Approach:]

According to this approach whenever any enterprise has some


social objective to achieve, it has some definite social programme,
and plan to achieve the objectives and how the feedback and
control has been exercised, should be disclosed.

SOCIAL OBJECTIVE >SOCIAL PLANS AND PROGRAMMS


>EXCEUTION >FEEDBACK
5. Pictorial Approach

Under this approach, photographs of health care


center, schools and hospitals run by the company are
presented) in annual reports.
6.Foot Note Disclosures

It consists of quantitative measurement on the


social involvement of the firms. This is to be
included as an additional footnote in the financial
statement section of the annual report
MODELS APROACHES

1. Reporting Seidler’s Model:

Lee. J. Seidler has given two reporting formats for disclosure of social
information in his article. “Dollar value in the social income statement” in
1973 Seidler suggested separate model of social income statement for profit
seeking organization and separate statement for nonprofit organization.
Seidler was of the view that the nature of social income of Profit seeking
Organization differs from nonprofit organization.
.
2.Abt’s Model

This model was developed by Abt associates in United


States of America. Under this model social information is
presented in a quantitative form through social
statements. It consists of two parts.
(1) Social Income Statement
(2) Social Balance Sheet
.
3. Ralph’s Comprehensive Social Benefit Cost Model

Ralph. W. Estes has proposed a comprehensive model and


reporting format for social corporate reporting in his book
“corporate social accounting” in 1976 at New York USA,
Ralph’s Model is based on two items.
1.Social benefits
2.social costs.
.
OBJECTIVES OF SOCIAL ACCOUNTING

EFFECTIVE UTILIZATION OF NATURAL


RESOURCES

 HELP TO EMPLOYEES

 HELP TO SOCIETY

HELP TO CUSTOMERS
EXAMPLE
 Corporate Social Responsibility like the
construction of a hospital in their local area

 The paper manufacturing sector uses waste paper


to recycle the same to produce paper.

 Manufacturing units are set up outside the local


area because of the release of toxic air, harmful
to both living and nonliving things.
 Use of waste disposal techniques to avoid water
pollution
LIMITATIONS
 1. Environmental accountings have no economic value.
2. The method of estimating the social value of environmental goods
and services are imperfect, often misleading and construers.
3. Estimated values for environmental goods quantified or qualified
in terms which have no fixed conversion into money.
4. On account of unrecorded environmental costs and difficulty in
extracting and separating environmental cost the industry data is virally
unreliable.
5. Social value placed on environmental goods and services are
changing so fast that the estimates are likely to be obsolete before they
are available for use.
6. Lack of accounting standards for environmental accounting
ENVIRONMENTAL ACCOUNTING
ENVIRONMENTAL ACCOUNTING

 INTRODUCTION
The term "environmental accounting" is open to
interpretation. In this guideline, environmental accounting
is the identification, measurement and allocation of
environmental costs, the integration of these
environmental costs into business decisions and the
subsequent communication of theinformation to a
company's stakeholders. Identification includes a broad
examination of the impact of corporate products, services.
DEFINITION

Environmental accounting, also called


green accounting, refers to modification of
the System of National Accounts to
incorporate the use or depletion of natural
resources.
FORMS OF ENVIRONMENTAL
ACCOUNTING
• Environmental Management Accounting
• Environmental Financial Accounting
• Environmental National Accounting
• Environmental Cost Accounting
Environmental Management Accounting

 Itfocuses on resource management and internal


decision-making through the identification,
analysis, and measurement of environmental
costs and the benefits of an organization’s
operations. Moreover, it concentrates on
incorporating the data into the management
systems to enhance environmental performance.
Environmental Financial Accounting

It specifically focuses on reporting the


environmental liability costs besides other important
environmental costs.
Environmental National Accounting

This national-level accounting process


specifically focuses on externality costs,
environmental costs, and more.
Environmental Cost Accounting

 Thistechnique involves computing a service or product’s


overall social, environmental, and economic costs, including
hidden charges, which are generally not considered when
conducting financial accounting. This process enables a
more detailed assessment of the actual consumption and
production cost. Moreover, it can help organizations make
more informed business and policy decisions to minimize
negative environmental effects.
NEED OF ENVIRONMENTAL ACCOUNTING
 Meeting regulatory requirements or exceeding that expectation
 Cleaning up pollution that already exists and properly disposing of the hazardous
material.

 Disclosing to the investors both potential & current, the amount and nature of the
preventative measures taken by the management (disclosure required if the
estimated liability is greater than a certain percent say 10 per cent of the
company’s net worth).

 Operating in a way that those environmental damages does not occur.•


Promoting a company having wide environmental attitude. • Control over
operational & material efficiency gains driven by the competitive global market.
• Control over increases in costs for raw materials, waste management and
potential liability
OBJECTIVES
Fostering stakeholder participation and engagement with regard to
environmental decision-making.

Encouraging accountability and transparency concerning the


management of environmental effects and utilization of natural
resources.

Offering a detailed view of the economic activities’ true benefits and


costs by incorporating social and environmental considerations

Supporting the switch to a green economy and promoting sustainable


development
THANKYOU

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