Social Responsibility Reporting and Accounting Theory

Accounting theories are the basic assumptions and the ideas on which financial accounting is done. The theories are made up of rules that are followed by accounting professionals and have been developed over a period of time. They define the basic concepts and they bring uniformity to the financial performance of different companies.

Social responsibility reporting is a form of communicating the environmental and the social effects of business activities that have social impact to the people who are concerned. According to Dierkes and Preston, (1977, p3-22), the report contains the physical environment issues that benefit the society. The companies or the businesses that choose to use the social reporting should state their objectives and the reasons why they choose to adopt the system. The main objective of social responsibility is supposed to be accountability to the society. The information on the social responsibility reporting should be related directly to the needs of the people who are to use the information. As a requirement to all the financial accounting reports, the information in the social reporting is supposed to be understandable and free from manipulation in the manner it is represented.

Arguments for Social Responsibility Reporting

Social responsibility reporting can be done for the purpose of accountability as Ataur Rahma, (2002, p8-15), suggests, and it helps to monitor the performances of the companies and help to improve their long term performance over time. The companies who comply with the reporting get the advantages of improving the issues that might affect the companies in long term. They plan for the economic success and identify the costs that are likely to occur in social and in environmental activities.

The social reporting makes the companies to improve their accountability to the society at large since their activities affects the environment. According to Yongvanich and Guthrie, (2006, p309-321), the management of the company provide complete account of performance and facilitate change in the way activities of the companies are done and this empowers the stakeholders who are a large group of people. This makes it to be broad and to go beyond the boarders and not only to report about their financial success but also to report about the social activities

Social responsibility reporting help in measuring, knowing and identifying the things that firms and companies do internally and externally to contribute to the society. It makes the companies to be responsible to the community and the society by being transparent, and honouring them by giving them the information required. It also helps the public to know whether the strategies adopted by companies and firms are in line with the social principles that are shared by all.  The information is always readily available in a good way and it gives the details that are needed about the goals of different firms and the plans they have of contributing to the resources.

Social reporting is also important for the benefit of the company’s objectives because it helps the management in controlling and in planning. The management get information that helps them in decision making of important issues that affect the company. Social responsibility reporting help the companies who do it to have good images from the public and the society and in turn they get good public relations when they fulfil their promises as stated by Gray, (2001, p. 9-15). The public holds them responsible for their actions. The information is also helpful to them because it helps the companies to identify social responsibilities that are supposed to be taken care of for the sake of the society. The reporting leads the companies to get market opportunities as Jan and Ian, (2007, p.38-55), states, where they can develop and expand their businesses. They also identify the risks that might be in future and they plan on how to avoid the risks if possible.

Arguments against Social Responsibility Reporting

Most Companies who do social responsibility accounting on environmental issues do not clearly elaborate the strategies and the measures they adopt that can sustain and affect the operations of the company. The failure to clearly put the crucial dimensions makes the method less usable by the public as Owen et at, (2001, p264), puts it. The method used does not bring out the economic and the financial consequences of the environmental performances. Some have not succeeded in linking the financial annual report with the environmental reports that are prepared.

There is a need to have some regulations as stated by Hess, (2001, p307-330), that will help in meeting the goals of social accounting and reporting. This will contribute to creating a consistent system that will regulate the system of social reporting. Different companies put some minimal information about the social responsibilities which at time is not enough. There are no specified patterns on the sections or the pages the disclosure should contain in the annual report.

Many managers are not knowledgeable about the environmental issues and so they do not see the need of giving the information about the environment. The accountants as suggested by O’Dwyer, (2001, p. 27-39), are supposed to offer technical skills in providing the social reports. For non-profit making organizations as Raynard, (1998, p1471-1479), states, they lack budgets for the social work because they rely on the funds from outside and they become limited and less committed. Managers in these companies do not get the time to deal with social responsibilities and reporting and it becomes a challenge to them.

The owners of companies are the shareholders and they have the right to decide on what they should do with the money earned from the company. Some shareholders have not accepted the idea of including social work in their companies and they have seen it as theft since they are the rightful owners of the companies.

It has also been seen by most companies to be a waste of time and some leaders of the companies have refused to do it because they claim that you do not need to act good for your business to succeed. Some companies have a lot of activities and they prefer to deal with the financial issues of the company in expense of social activities. They decide to focus on the core issues of the business.

Other business people have seen the issue of social reporting as issues that are supposed to be dealt with by the government and politicians and not the businesses men and companies. This has been contributed by the personal histories of people as suggested by Gray, (2008, p3-18), and the attitudes that people have about social contribution. They focus on profits and the benefits they get from the business and ignore social responsibilities.

 

 

 

 

 

 

 

References

Ataur Rahman. B., 2002.  Stakeholder accountability or stakeholder management: a review of UK firms’ social and ethical accounting, auditing and reporting (SEAAR) practices. Academic Journal. Vol. 9 Issue 1, p8-25, 18p

Dierkes. M; Preston. L. E. 1977. Corporate social accounting reporting for the physical environment: a critical review and implementation proposal. Academic Journal. Vol. 2 Issue 1, p3-22, 20p

Gray. R., 2001. Thirty years of social accounting, reporting and auditing: what (if anything) have we learnt?. Academic Journal.  Vol. 10 Issue 1, p9-15, 7p

Gray.R., 2008. Social and Environmental Accounting and Reporting: From Ridicule to Revolution? From Hope to Hubris? €“ A Personal Review of the Field. Academic Journal. Vol. 2 Issue 1, p3-18, 16p

Hess. D., 2001.  Regulating corporate social performance: a new look at social accounting, auditing, and reporting. Academic Journal. Vol. 11 Issue 2, p307-330, 24p,

Jan. B; Ian.T., 2007, Social and environmental accounting, auditing, and reporting: a potential source of organisational risk governance?. Academic Journal. Vol. 25 Issue 1, p38-55, 18p

Owen. D. L.; Swift. T; Hunt. K., 2001.  Questioning the Role of Stakeholder Engagement in Social and Ethical Accounting, Auditing and Reporting. Academic Journal. Vol. 25 Issue 3, p264,

O’ Dwyer. E., 2001. The legitimacy of accountants’ participation in social and ethical accounting, auditing and reporting.  Academic Journal. Vol. 10 Issue 1, p27-39, 13p

Raynard. P., 1998. Coming Together. A Review of Contemporary Approaches to Social Accounting, Auditing and Reporting in Non-profit Organisations. Academic Journal.  Vol. 17 Issue 13, p1471-1479,

Yongvanich. K; Guthrie. J.,(2006.  An extended performance reporting framework for social and environmental accounting. Academic Journal Vol. 15 Issue 5, p309-321, 13p