Throughout time, an enterprise’s purpose has been associated with creating value for its shareholders. In today’s day and age, however, shareholders should be replaced by stakeholders in such definition. Actions and decisions of an enterprise have an impact in a wider population, defined as stakeholders. In our present world, a company or firm has responsibilities that extend beyond its profit-generating capabilities and into the effect it has in its environment and society. In the acknowledging and complying with this commitment, a firm is able to engage in corporate social responsibility (CSR), making it socially accountable — to itself, its stakeholders, and the general public.
In the past, there has been a dissociation between CSR and a company’s profitability. Sustainability has been seen as an obstacle, rather than an opportunity, mainly because of the costs associated with operating in a corporate and socially responsible way. In today’s business environment, however, CSR has proven to contribute to a firm’s profitability. As a result, the cost associated with becoming sustainable should not be regarded as a cost, but rather, as an investment. By engaging in corporate citizenship, and therefore sustainability, a company becomes well-equipped to deal with the uncertainty the future holds. The world is following a path where environmental, social, and governance (ESG) principles are at the forefront of business, and, therefore, a company that practices CSR has acquired a slot as a player in its industry’s future. A sustainable company is a more profitable company: sustainability leads to longevity, and longevity leads to more profits.
In addition to this and with a special relevance to publicly traded companies, being classified as a company with a CSR business model facilitates the collection of capital and funds. For example, Larry Fink, CEO of BlackRock, recently revealed in his letter to shareholders, that the firm is placing ESG at the forefront of its investing strategy. BlackRock is a giant in the investment and financial industry, with almost US$7.5 trillion in assets under management.
Another company that has placed sustainability at the core of its business is MSCI. MSCI is a leading global provider of indexes, and its focus on ESG indexes has benchmarked sustainable companies and has facilitated investment vehicles for them to receive funds. These strategies, employed by huge players in the finance industry, means that the modern investor is recognizant of the social impact and environmental footprint of companies, and is increasingly convinced that superior returns accompany sustainability.
Accountancy is in a frontline position to prevent, detect and correct any non-compliances in an enterprise’s social responsibility. The role of an accountant in an organization is to compile, measure, and report data related to its business operations. These functions are correctly associated with the organization’s financial information; however, the role of an accountant goes beyond solely the analysis of a company’s finances. Accountants are equally qualified to perform these functions on the information surrounding an organization’s social responsibility and engage in social accounting. By continuously monitoring features of the firm, like transparency, corporate governance, and carbon emission, an accountant can implement the required changes in the organization’s internal controls and guide it in a sustainable direction. Ultimately, it can be the accountant’s responsibility to identify the risks in a company’s business environment, quantify their impact, and mitigate their effects. This equally applies to the social risks forming part of the same business environment.
Based on the importance of sustainability and corporate social governance in today’s business world, the ever-increasing relevance it will continue to gain in the future, and the qualities of the accounting profession, social accounting is a defining quality of what makes up the accountant of tomorrow. It is the profession’s responsibility to take ownership of this category of accounting and continue to enhance decision-making and guide companies in the right direction, now using a wider spectrum of responsibilities. Despite having their origin and foundation in economic responsibilities to their shareholders, companies are interwoven with society and the environment, and now acknowledge social and environmental responsibilities as part of their purpose. It is necessary for the accountancy profession to recognize this and continue to evolve while continuing to be the backbone of every business.