2. Social and Environmental Accounting Pertemuan 07
Matakuliah : F0122 – Seminar Akuntansi
Tahun : 2009
Social and Environmental Accounting Pertemuan 07

3. Social and Environmental Accounting
Accounting Seminar
Week 6
Gatot Soepriyanto

4. Understanding Social Accounting
Social Purpose – Social Accounting – Social Audit – Social Report
Social = social + environmental + economic
Financial performance = organisational sustainability
Social Accounting (social accountant) –

5. Understanding Social Accounting
Proving and Improving – and Accountability
Performance (what we did) + Impact (what happened)

6. Principles of Social Accounting
Multi-perspective
Comprehensive
Comparative
Regular
Verified
Disclosed

7. 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

8. 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)

9. The Building Blocks of Social Accounting
Step Two - Accounting
Scope
Indicators (narrative, quantitative and qualitative information)
Stakeholder consultation

10. The Building Blocks of Social Accounting
Step Three – Reporting and Audit
Draft social accounts
Social Audit Panel and social audit statement
Social Report

11. Consultation - data results Updateable information
Three Step Process
CD:
Case Study - GFC
Introductory OHP/PP
Case studies
Checklist for Intro'n
Diagram of process
Information Sheet
What you already do
SA on One Page!
Cycle diagram
3 Step Process
CD:
Case Study - GFC
OHP/PP
Examples - techniques
Examples of MVOA
Examples – S/H maps
Lists of MVOA
Examples of outputs
Templates
CD:
Case study - GFC
OHP/PP
Examples - SBKS
Examples:
Questionnaires
Interviews
Focus groups
PA techniques
Alternative methods
Planning tools
Templates
CD:
Case study - GFC
OHP/PP
Examples of using SA
Examples - Chair notes
Panel criteria/Checklists
Example of timetable
Templates a
Assessment
Assessment
Assessment
GETTING READY…
Understanding process
What organisation already does
Commitment
Managing the process
Resources
Making the decision
STEP 1: SEE PLANNING
Mission
Values
Objectives
Activities
Stakeholders
Key stakeholders
STEP 2: SEE ACCOUNTING
Deciding the scope
Agreeing indicators
Collecting data
Env./economic impact Social account plan
Implementing plan
STEP 3: SEE REPORTING & AUDIT
Drafting Social Accounts
Social Audit Panel
Process for the Panel
Social Audit Statement
Using the Social Accounts
Disclosure
Buy-in
Mission etc
Stakeholders
Consultation - data results
Social Audit Report
Video
Website:
Updateable information
Open College Network

12. 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

13. Some Contemporary Issues
Mandatory or Voluntary?
A kite-mark for social economy organisations? – the ethical dimension
The cost of social accounting and audit

14. Environmental Accounting

15. Discussion Environmental Accounting Overview System Strategies
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

16. Environmental Accounting Overview
What is environmental accounting?
A flexible tool to provide information not necessarily provided in traditional managerial systems.

17. “Relevant data ” depends on the scale and scope of coverage
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

18. 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

19. 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

20. 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.

21. 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.

22. 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).

23. 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

24. 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

25. System Strategies
Environmental Accounting systems typically fall into one of three categories:
Reactive
Proactive
Leadership

26. 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.

27. 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.).

28. 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”.

29. 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

30. Cost Allocation an 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

31. Traditional Cost System
Other
Overhead
Toxic Waste
Product B
Allocated
Overhead
Product A
Product B

32. Modified Allocation System
Other
Overhead
Toxic Waste
Product B
Allocated
Overhead
Product A
Product B

33. Methodologies Related 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

34. Assignments References
Assignments
Summarize, Discuss and Present the following paper (see additional material):
Determinants of Corporate Social Responsibility Disclosure: An Application Of Stakeholder Theory (Roberts, 1992)