Social and Environmental Accounting Pertemuan 07
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Transcript of Social and Environmental Accounting Pertemuan 07
Social and Environmental AccountingPertemuan 07
Matakuliah : F0122 – Seminar AkuntansiTahun : 2009
Social and Environmental Accounting
Accounting SeminarWeek 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 Accounting1. Multi-perspective2. Comprehensive3. Comparative4. Regular5. Verified 6. 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
a
GETTING READY…Understanding processWhat organisation already doesCommitmentManaging the processResourcesMaking the decision
STEP 1: SEE PLANNINGMissionValuesObjectivesActivitiesStakeholders Key stakeholders
STEP 2: SEE ACCOUNTINGDeciding the scopeAgreeing indicatorsCollecting dataEnv./economic impact Social account planImplementing plan
STEP 3: SEE REPORTING & AUDITDrafting Social AccountsSocial Audit PanelProcess for the PanelSocial Audit StatementUsing the Social AccountsDisclosure
Assessment Assessment Assessment
Buy-in Mission etcStakeholders
Consultation - data results
Social Audit Report
Website: Updateable information
Open College Network
CD:Case Study - GFCIntroductory OHP/PPCase studiesChecklist for Intro'nDiagram of processInformation SheetWhat you already doSA on One Page!Cycle diagram3 Step Process
CD:Case Study - GFCOHP/PPExamples - techniquesExamples of MVOAExamples – S/H mapsLists of MVOAExamples of outputsTemplates
CD:Case study - GFCOHP/PPExamples - SBKSExamples:QuestionnairesInterviewsFocus groupsPA techniquesAlternative methods Planning toolsTemplates
CD:Case study - GFCOHP/PPExamples of using SAExamples - Chair notesPanel criteria/ChecklistsExample of timetableTemplates
Video
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 Allocationan 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
OtherOverhead
Toxic WasteProduct B
Product A
Allocated Overhead
Product B
Modified Allocation System
OtherOverhead
Toxic WasteProduct B
Product A
Allocated Overhead
Product B
MethodologiesRelated 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)