Sustainability Accounting

Sustainability Accounting

Introduction

In the view of Langfield-Smith (2009), sustainability accounting enables modern organizations to create quality information and promotes environmental friendly business procedures. The paper sets an argument in favour of the notion that sustainability accounting changed the traditional organizational practices. The paper aims to construct critical evaluation on the emergence of sustainability accounting and its increasing use by organizations. In the light of relevant literature, the paper sets an argumentative position on modern organizations' use of environmental management accounting. The author clears his position with the support of relevant examples from the practical organizational context. Finally, the paper provides conclusive remarks on the overall understanding of the subject matter.

Discussion

With the advent of the information age, corporations stepped into a new world of information management and accounting practices. In the view of Welford (1998), organizations realize that sole focus on maximizing shareholders' wealth at any cost will no longer be an effective approach to achieve sustainable profits and earn competitive advantage. Growing awareness of societies and communities regarding environmental issues such as global warming has induced organizations to engage in sustainable and environmentally (SE) responsible practices. Hence, Gray (2006) states that major organizations across the world are increasingly involved in social and environmental reporting.

However, Adams and Larrinaga-González (2007) highlight a strange transfusion of corporation focus from business reporting on social and environmental issues to sustainability reporting, which remains a vague term. Contrary to above comments, Ball and Grubnic (2007) claim that accountability and sustainability accounting practices by organizations are yet to come in the lime light. GRI (2005) reports on sustainability accounting held corporations responsible and liable to their regulatory bodies and related government agencies in combination with an organization's civic responsibility towards the society and other stakeholders (Farneti & Guthrie, n.d.). In addition to this, Schaltegger et. al. (2003) identifies modern environmental litigations as another underlying factor to the growing corporate use of environmental management accounting and practices.

Over the past two decades, corporations and organizations have been living in new millennia, which are well known for environmental and social accounting (Langfield-Smith, 2009). In the recent world, drastic changes in the business environment urge business operations to rely on accounting as one of the most reliable business functions (Gray, 2006). In the pursuit of assuring business survival in a highly competitive business environment, companies are increasingly adopting sustainability accounting standards and practices to satisfy both internal and external stakeholders of the business (Gray, 2006). Researchers claim that modern organizations' movement towards sustainability accounting and reporting gave rise to criticism on the capability of tradition financial reporting framework to provide a complete picture of business activities (Elkington, 1997 & Gray et al., 1996).

Furthermore, Deegan (2005) accused traditional financial accounting of ignoring associated social costs that are likely to be imposed on the communities by an organization. Hence, sustainability accounting introduces reforms in the traditional financial accounting. According to Bent and Richardson (2003), sustainability accounting is a subcategory of financial accounting, which is also known as CSR reporting, social accounting and CS ...