Contemporary Accounting Issue Research Business Project Environment

Question: Describe about the Contemporary Accounting Issue Research for Business Project Environment. Answer: Introduction If the operations of a business organization cause uncontrolled damage to the environment, then it would adversely affect the survival of other human beings. For example business activities leading to rash falling of trees or wastage of energy or pollution would harm the interests of society as a whole. Moreover business organizations need to treat their employees and customers fairly. It is due to these reasons the topic that has been chosen for research is environmental and social reporting by companies. More specifically research is being done to find out why many companies do not produce sustainability reports (Research Gate, 2016). This research is linked with many theories and the theory that stands out most is the stakeholder theory that gives that companies produce sustainability reports because they feel or are held accountable to the different stakeholders. Practical motivation The reporting by a company of its social and environmental performance is important for different stakeholders like shareholders, employees, potential investors and also general public. So the issue that many companies do not produce sustainability reports becomes significant and the reasons why these organizations do not disclose such reports need to be investigated into. Many resources are limited and need to be used responsibly. As the business organization is part of the system it would also suffer from its rash behavior in the long run. The management of the business enterprise would also like to know the environmental risks facing the organization. The investors would like to know how responsible the company is regarding sustainability issues. All these entities can get such needed information in the sustainability report (Probonoaustralia.com.au, 2016). Theoretical motivation Although there is lot of concern among people regarding the environmental and social costs that society has to pay as a result of operations of business organizations, this has still not resulted in companies producing sustainability reports which give also give an indication about the seriousness with which these organizations treat these issues and their commitment towards environment protection. This research would find real reasons why companies are not producing such reports. Some reasons for such behavior have been found in earlier researches. These reasons would be more thoroughly analyzed in the current research project. Moreover the areas which have been inadequately researched like what should be specific disclosures in sustainability reports by companies would be looked into in the current research (Probonoaustralia.com.au, 2016). In addition ways in which the present laws and regulation of sustainability reporting by companies can be strengthened would be found out. Literature review According to Stubbs, Higgins and Milne, (2013) there are many Australian companies which do not do sustainability reporting and there are various underlying reasons for this. The pressures from various stakeholders have increased on management of companies over the years to provide sustainability reports. But still whether a company reports on sustainability of its operations is determined by many internal factors like its size, organizational culture, the industry the firm belongs to, its organizational structure etc. The firms which are relatively bigger in size with progressive outlook and employees specifically looking after sustainability issues report more. There is more sustainability reporting in industries like mining and energy where people are more concerned about the impact of such firms on environment. Many firms do not report because they consider it to be something noble but not a necessity. So there is need for more pressures from different stakeholders and more clear laws relating to environment protection and disclosures regarding the sustainability. According to Ameer and Othman, (2012) who carried out a study, the companies which have adopted more ethical practices and take steps for minimizing adverse effects on environment through their operations are more profitable. In other words being socially responsible has improved their financial performance. These results show that there is need to make companies and people more aware that being socially responsible is for the benefit for business organizations also in monetary terms. Thus business organizations should not only be socially responsible, but should also report about their social performance. According to Hahn and Kiihnen, (2013), there are several factors that determine whether the firms publish sustainability reports or not. The above mentioned individuals argue that sustainability reporting is linked to an extent to legitimacy and stakeholder theories. The companies feel the need to justify their actions affecting environment through sustainability reports. But government should pay more attention to make and implement laws clearly defining the extent of sustainability disclosures to be made by companies. There is need for more stakeholder awareness and pressures in this regard. According to Aceitimo, Ariza and Sanchez, (2012) the extent of integrated sustainability and financial reporting depends on many factors like the size of a company and degree of competition in the industry. A large company is more visible and has more political and public pressures to disclose sustainability reports. Moreover it needs large funds and has investor pressures and it wants to give a positive signal by such disclosures. If there is more competition in industry, the firms would be reluctant to make sustainability disclosures in fear of harming their competitive positions. According to Rao, Tilt and Lester, (2012) the degree and quality of corporate governance in a company is directly related to its environmental reporting. If there are larger number of independent directors in a company there are more chances the firm would disclose adequate information relating to its operations affecting the environment. Thus the government and other regulatory authorities should strengthen corporate governance requirements. Many companies with relatively lesser corporate governance mechanisms do not do sufficient environmental reporting. Hypothesis The available literature which has been analyzed above points to different reasons which have prompted companies to produce sustainability reports over the years like its size and nature of industry the firm belongs to. But still it is the pressures from stakeholders like shareholders and public which has resulted in more disclosures by companies. But the laws relating to sustainability reporting by companies still do not impose many obligations on companies in this regard. Left to themselves, most companies would not produce sustainability reports. These are the reasons why the following hypothesis has been suggested which would be tested during the research process (Zikmund et al., 2013). The hypothesis that has been taken in the research is that inadequate laws and insufficient stakeholder pressures are the primary reasons for many companies not producing sustainability reports. The theory that relates to the above hypothesis is the stakeholder theory. This theory proposes that the reason for companies making disclosures regarding their sustainability performance is that they are accountable to different stakeholder for their actions. Different stakeholders care for environmental and social issues and use their powerful position to put pressure on the management of company to make such disclosures. Research method In this research both primary and secondary data would be collected. Questionnaires would be distributed among different stakeholders of ten companies (Zikmund et al., 2013). These stakeholders would consist of shareholders, managers, customers, suppliers and government officials. The questionnaires would be sent to ten stakeholders of each company. The questionnaire would consist of close ended and open ended questions to find information about how well informed these persons are about environmental and social issues, whether they are aware of sustainability reporting by companies and if they are satisfied with the level of information disclosed by companies in this regard and if their business decisions are influenced by the degree and quality of reporting by companies on their performance relating to environmental and social issues. Further there would be questions like if they have taken any measures to put pressure on the companies to produce adequate sustainability reports. The responses of different stakeholders in the sample would be analyzed (Zikmund et al., 2013). The data would be assessed both quantitatively and qualitatively. This would reveal the extent of awareness and response of different stakeholders in the sample regarding sustainability reporting by companies. In addition to the primary data, secondary data would be collected in the form of government reports, journal articles, and newspaper articles to find out about the current laws that are in place regarding disclosure of reports by companies relating to their environmental and social performance and the views of people regarding them (The Conversation, 2016). The analysis of data collected from primary and secondary resources would help to arrive at the conclusion whether the above mentioned hypothesis is correct or not. Conclusion There has been an increasing awareness about environmental and social issues among people in the last few decades. Business organizations have helped to bring economic prosperity to people by creating employment and quality products. But as incomes of people have risen, they have beginning to care more about other issues which affect their survival and quality of life. There has been spread of information and people have become more aware about how the business organizations carry out their operations and how their actions are affecting environment and working conditions of people. This is the reason why there has been more pressure on companies to produce sustainability reports. But this pressure does not seem to be adequate as many organizations still do not report on sustainability performance. Therefore the role of government becomes very important as it has the power to make laws. As in most countries there is democracy the people can influence what kind of laws are made (The Co nversation, 2016). Moreover investors in companies also yield considerable power. There is need for these stakeholders to realize the importance of sustainability reporting. References Aceitimo, J. , Ariza, L. and Sanchez, I. (2012) Explanatory Factors of Integrated Sustainability and Financial Reporting, Business Strategy And Environment, 23(1), pp. 56-72, [Online]. Available at: https://onlinelibrary.wiley.com/doi/10.1002/bse.1765/full (Accessed: 8 October, 2016). Ameer, R. and Othman, R. (2012). Sustainability Practices And Corporate Financial Performance: A Study Based On The Top Global Corporations,Journal of Business Ethics,108(1), pp.61-79, [Online]. Available at: https://link.springer.com/article/10.1007/s10551-011-1063-y (Accessed: 8 October, 2016). Hahn, R. and Khnen, M. (2013). Determinants Of Sustainability Reporting: A Review Of Results, Trends, Theory, And Opportunities In An Expanding Field Of research,Journal of Cleaner Production,59, pp.5-21, [Online]. Available at: https://www.sciencedirect.com/science/article/pii/S0959652613004654! (Accessed: 8 October, 2016). Probonoaustralia.com.au (2016) Reporting For Reportings Sake? Sustainability Reporting In Australia. Available at: https://probonoaustralia.com.au/news/2015/05/reporting-for-reportings-sake-sustainability-reporting-in-australia/ (Accessed: 8 October, 2016). Rao, K., Tilt, C. and Lester, L. (2012) Corporate Governance And Environmental Reporting: An Australian Study,Corporate Governance: The International Journal Of Business In Society,12(2), pp.143-163. Available at: https://www.emeraldinsight.com/doi/abs/10.1108/14720701211214052 (Accessed: 8 October, 2016). Research Gate (2016) Why Do Companies Not Produce Sustainability Reports. Available at: https://www.researchgate.net/publication/263145763_Why_Do_Companies_Not_Produce_Sustainability_Reports (Accessed: 10 October, 2016). Stubbs, W., Higgins, C. and Milne, M. (2013). Why Do Companies Not Produce Sustainability Reports?,Business Strategy And The Environment, 22(7), pp.456-470, [Online].Available at: https://onlinelibrary.wiley.com/doi/10.1002/bse.1756/full (Accessed: 8 October, 2016). The Conversation (2016) New ASX Guidelines To Force Sustainability Reporting. Available at: https://theconversation.com/new-asx-guidelines-to-force-sustainability-reporting-24885 (Accessed: 8 October, 2016). Wiley Online Library (2016) Explanatory Factors of Integrated Sustainability and Financial Reporting. Available at: https://onlinelibrary.wiley.com/doi/10.1002/bse.1765/pdf (Accessed: 10 October, 2016). Zikmund, W. , Babin, B. , Carr, J. and Griffin, M. (2013) Business Research Methods. 9th (edn.) Australia : South Western Cengage Learning.