Essay title - Advances in Accounting: Corporate And Social Responsibility
Aim: To critically explore and examine both the practical and analytical interaction of corporate social responsibility in relative to the role of an accountant.
Objectives: Identifying what the term CSR means and what it means to an accountant. Examining the relationship between accountant and Corporate Social Reporting. Identifying the seven users of accounting information. Classifying the legal and mandatory requirements for reporting Corporate Social responsibility issues in the UK. Investigating why Corporate Social responsibility has various meaning based on the sector of industry you operates in. analysing both the petroleum industry and bank social responsibilities.
In this essay I shall be considering applicability of the interrelation between the terms Corporate Social responsibility and accountant.
Corporate Social Responsibility (CSR) is a concept outlining an organisations duty of care owe to all its stakeholders. The term “duty of care” simply means without any reasonably doubt the company must make a sustainable decision bearing in mind the interest of its stakeholders at heart.
CSR is the continuing commitment of an entity to act ethically in order to contribute to the economic development whilst adding extra value in terms of improving the quality of life of the workforce and the local community it operates in. this notion outlined that the primary goal of an organisation shouldn’t be solely to make profit but to serve the needs of their shareholders.
It is argued by an economist (Milton Friedman) that an entity principal goal is to maximise its return for its shareholders, while complying with mandatory laws and obligation of the countries of which it operates. Other analyst also argued that Corporation choosing to lay out a social project are doing so for utilitarian purposes, that is, they see it as a commercial benefit in building their reputation with the general public and the government.
Other entity might also choose to practice being good corporate Citizen in order to divert the public attention from the ethical questions posed by their core operation.
Businesses should seek to minimise any negative social and environmental impact resulting from their economic activity as this can affect their stakeholder’s confidence in them. Having an environmentally friendly business activity would be beneficial in helping the entity in terms of promoting its reputation to publicise its CSR credential’s as well as an increase in profit.
The development of CSR…
CSR was once a striking ambition of some corporate, today it has become practically omnipresent. In our today's socially aware times, it is almost impossible to find a global corporation that does not convey a commitment to corporate social responsibility (CSR). Businesses are now made aware of the benefit at hand of practicing good ethical stances. It now means companies have moved from their supposed primary objective of profit maximisation and the best interests of the company, its staff and its shareholders, to include a broader obligation to help build an improved society.
The UK is seen as one of the world leading provider of CSR practices internationally. The Government has raised and highlighted the importance of social and environmental responsibility; they have also help promote transparency in CSR reporting and its awareness in the marketplace.
CSR encourages businesses to have the interest of a broader stakeholders at heart, of which can widen up their understanding of any potential risk and return available to them.
It will also help bring about closer link between the entity and its consumers as the entity will be more aware of the consumers needs which would lead to comparative advantage to the entity.
The president of the free market economics Madsen Pirie stated that, CSR should not be a company's concern. She commented that CSR should be determined by society as a whole through the mandatory requirement from the Government. Its also argued that although, the concept of CSR might bring about better awareness and close link between the entity and its stakeholder, the company’s responsibility should be to increase its shareholders’ wealth at all times. Despite the large philosophical criticism to CSR, the concept is indubitably here to stay.
What is accounting…
Accounting is a financial language which helps communicate the financial position of an organisation to its user group. The concept accounting is said to be a convincing explanation that reveals basic information about finances, it is socially constructed in a sense that it is practice by the people and for the people.
Accounting supposedly reports financial reality, but based on the fact that people have different perspectives and interests differ and the way we see things are different, each individual user group’s reality differs.
According to the text from (Financial Reporting text book) by Alexander and Britton, the chapter two states that there are seven users groups of accounting information, and each groups need differs. Each user groups reality differs based on their class, power etc. Due to this social inequalities and antagonisms that exist, accounting practice has to exist. So therefore, each identified user groups rely heavily on accountant to bring about a constructive economic reality, based on the individual need.
In so doing, accountant construct economic reality, they can be considered to be a communicator of economic reality. Accounting theory elaborates imagery, these images influence the way accounting theories and researchers shape and make sense of things.
The concept of accounting reality has been presented differently by different psychologists and researcher, so that, the significance of the term has become a matter of question. According to Garret Morgan article (accounting as reality construction 1988), his research lies on the elaboration of different images of reality. He identify four principal images, which he felt have shaped the development of financial accounting. For example, he sees accounting information as a historical record, which I felt is true in a sense that the accounting information generated help keep records of economic transaction of an entity. David Solomon (Accounting and social change 1991) theories, sees accountant as a journalists, he believe they should reports the news, not make it, of which analyst like Tony Tinker criticises this view as he sees accounting as an agent of changing reality.
- Chapter 2 of “Financial Reporting” by Alexander and Britton (Users of accounting Information).
- Morgan, G (1988) `Accounting as reality construction` AOS Vol 13, No 5, pp477-485
- Solomon’s, D. (1991) `Accounting and social change` Vol 16, No 3, pages 287-295