Social Accounting

“Financial data should AID not MAKE decisions for firms”

Accountants have a “social responsibility” to a range of stakeholders; not just those who have a narrow financial interest in the firm’s decision making. This is is also part of business ethics.

Typically such social responsibility extends to considering the side effects and implications of the decisions that may be significantly influenced by financial data.

Considerations could include: -

• The impact of redundancies,
• Is the firm a large local employer with a “community responsibility” too?
• environmental factors (pollution, congestion, destruction of the “natural” environment – brown field development as opposed to green field developments).
• The percentage of waste generated
• Levels of toxic waste
• The number of industrial accidents
• Labour turnover rates
• The percentage of materials that come from sustainable sources
• The amount of waste that is recycled
• The amount of the finished product that can be recycled when it reaches the end of its useful life; this is a big factor in car production – where a tax on the disposal/ scrap value of the vehicle may be charged if much of it isn’t recyclable.
• Will there be “hidden costs”? – Compensation, fines or taxes to pay for the negative externalities generated from firms’ selfish actions?

Summary

Accountants shouldn’t be making decisions that affect the whole business without reference to others Senior Managers in the organisation.  The firm’s Corporate “Mission Statement” should include something about the values and beliefs that they trade under – ETHICS – where profit maximisation doesn’t necessarily always come first.

Indeed cynically many firms now recognise that being “ethical” is good business and this taps into a growing awareness and consciousness in consumers who see ethical practice as one of the factors affecting their purchase choice.  In other words using it to increase profits!