Sustainability Accounting Doc

Running head: SUSTAINABILITY ACCOUNTING
Sustainability Accounting
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1SUSTAINABILITY ACCOUNTING
Table of Contents
Introduction......................................................................................................................................2
Report Analysis of Academic Theory and Framework...................................................................2
Literature Review............................................................................................................................3
Extent of Compliance with GRI’s requirements.............................................................................5
Critical Analysis of Assurance Levels.............................................................................................7
Conclusion.......................................................................................................................................7
References........................................................................................................................................9

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Introduction
Sustainability accounting refers to that concept of accounting, which primarily focuses on
the non-financial information that has been presented in the financial report, prepared by the
management or administration of an organization. A sustainable report is essentially a corporate
social report that concentrates on the non-financial information that has been disclosed by the
management in regards to the performance of the firm. A sustainable financial report is of great
help to the external stakeholders as they get a clear image of the company. This helps the
external stakeholders to make particular financial decisions (Ioannou & Serafeim, 2017).
This particular study aims to critically analyze the statement that has been provided in the
question. The statement that has been provided effectively summarizes the fact that the
sustainability reports that have been prepared by the listed organizations do not present crucial
information in regards to the non-financial performance of the company. The sustainable reports
that are prepared by the management of the listed organizations instead represent the particular
way in which the management has addressed the concept of sustainability. This particular
perspective conveyed by Gray, in his social accounting journal has been aimed to be analyzed in
this particular study (Fonseca, McAllister & Fitzpatrick, 2014).
The company that has been chosen for the purpose of determining the usefulness of the
sustainability accounting principles is BHP Billiton. The sustainability report of BHP Billiton for
the financial year of 2017 and 2012, has been attempted to be analyzed in regards to the global
framework reporting standards. This particular study also focuses on the different sustainability
theories and tries to determine whether the sustainable report has been published complying to
the proposed theories. The study also aims to find out whether the sustainability of the proposed
organization has been achieved by the practice of measuring, disclosing and being accountable to
the internal and external stakeholders of the firm.
Report Analysis of Academic Theory and Framework
The theories that are, in general adopted by the organizations in executing their corporate
social responsibilities can be counted as legitimacy theory, stakeholder theory, signaling theory
and social contract theory (Hughen, Lulseged & Upton 2014).
The legitimacy theory refers to the theory that depends upon the notion that there a social
contract exists between the organization and the surroundings in which it operates. This means
that the corporate body operating in the society is obligated towards positively contributing to its
surroundings, which further justifies its existence. According to this theory, some executives
utilize the corporate social responsibility as an effective tool for managing the complexities of
the multinational companies (Fernandez-Feijoo, Romero & Ruiz, 2014).
Next, the stakeholder theory states that the management of a particular organization are
not only accountable to the stakeholders but also is obligated to reveal the respective interests of
the stakeholders that are in collision with the organizational objectives (Deegan, 2014).

3SUSTAINABILITY ACCOUNTING
The social contract theory is same as the legitimacy theory that indicates the existence of
a social contract between the organization and the society. This obligates business to be
positively contributes to the society in which it operates (ArAs, 2016).
Lastly, the signaling theory refers to the theory that states that firms should have an
incentive structure for disclosing information voluntarily to the capital market. The effectiveness
of the voluntary disclosures lies in the fact that such disclosures give a healthy boost to the
competing strength of the company using the signaling theory (Frias‐Aceituno, Rodríguez‐Ariza
& Garcia‐Sánchez, 2014).
The essence of the stakeholder theory lies in the fact that it focuses on the primary entity
of any organization that are the stakeholders. This means that entire objective of services
contributed towards the society revolves around the stakeholders of business. The stakeholder
theory essentially postulates that there are various groups in the society that an organization can
impact upon. The stakeholder theory states that it is the primary responsibility of business to
incorporate the expectation of its stakeholders into their policies and planning.
The particular challenge that the businesses face while implementing the stakeholder
theory as a primary tool for sustainable reporting is that the identification of the potential
stakeholders of business becomes difficult. However, the stakeholder theory is the major element
of the corporate social responsibility in case of every organization that engages itself in
interaction with the open society. The company being discussed in this particular report has
successfully aligned the corporate social responsibility program with the expectations of its
stakeholders.
Nonetheless, the preparation of a sustainability report is a complex procedure and cannot
be supported by just one theory. The simultaneous integration of the environmental, economic
and social theme is a complicated process. Thus, experts in this field are of the opinion that no
single theory can ever be conclusive. (Cho, 2015) is of the opinion that legitimacy theory is
another potential theory. The legitimacy theory as mentioned earlier assumes the existence of a
contract between the society and the organization. The reporting on the social, economical and
environmental aspects of business is a part of fulfilling that contract. (Reimsbach & Hahn, 2015)
is on the other hand of the opinion that compliance to the agency theory while reporting can
invariably decrease the information asymmetry that exists between the management and the
stakeholders of the business thus resulting in the reduction of the agency costs. The agency
theory also focuses on the importance of specific disclosures that are effective in winning the
trust and loyalty of the investors. Thus, the common factor of the all the above mentioned
theories is that all of them can be integrated and incorporated within the stakeholder theory.
Thus, the management of BHP Billiton adopting the stakeholder theory appears to be beneficial
for the purpose of reporting.
In case of BHP Billiton the particular theory that has been utilized by the management of
the organization is the stakeholder theory. This is because the management of the organization
has focused on the welfare of its stakeholders. The management of the company has also
established compliance codes and policies for protecting the interests of the stakeholders.
Therefore, it is evident from the above discussion that the particular theory adopted by the
organization in executing the corporate social responsibilities is the stakeholder theory.