ACCT1046 Accounting in Organisations and Society-Accounting System
Case Study
Required
1. As a newly appointed accountant, you would like to have a better understanding of the new company. You believe the most efficient way is to identify important stakeholders. Identify five relevant stakeholder groups and discuss how different accounts could be used to satisfy each group’s information requirements.
2. Regarding the social and environment issue, you found the major difficulty faced by
the CEO is to identify the direct and indirect social and environmental impacts of the company’s operations. You have been asked to assist the CEO with this task and are required to draw the supply chain, and select one or two stages, identifying a total of four possible social and environment impacts. If the impact is detrimental either socially or environmentally, give suggestions to minimize the impact. If the impact is positive, give suggestions as to maximize the benefit.
3. After the CEO has discussed his view on social and environmental awareness of customers, the manufacturing department manager approaches you to seek your advice on whether an investigation into the working conditions of the factories of their overseas suppliers should occur. You believe that the manager should take action immediately as it is important to work with ethical suppliers. Give either one or two real life examples to discuss how a business could be negatively impacted if they are working with unethical suppliers.
4. The CEO is considering an investment of $1m to establish a sustainability department. The CEO uses the five step process (see Module 2 Topic 1) to make decisions, and is wondering how you as an accountant could assist in the decision making process. Advise the CEO on how you can assist with his decision making. Be specific and in your response make reference to the five step process.
5. Subsequently a plan to establish a sustainability department is agreed upon. Some important shareholders attempted to block this proposal. Their belief as the owners of this company is that the company should aim to maximize the value of their shares, however, the new sustainability department could significantly increase the costs and therefore reduce the profit. Think of a potential sustainability project and explain whether and how that project could potentially increase the value of their shares in the long term. Further, discuss how value could be created for other stakeholders (if any) when the project is implemented.
Answers:
This case study has been prepared with a view to determine the possible impacts of computers on internal and external stakeholders of organizations. Accountant is the person who prepares accounts of company and accountable for the organizations for recording, classifying and summarizing all the monetary aspects.
Accounting numbers are based on conventions that are shaped by accounting standard setters. Accountant by developing effective accounting system could provide useful information to large set of stakeholders ranging from shareholders, creditors, suppliers, debt holders, government and general public. There are several stakeholders who could be satisfy with different accounts (Stake, 2013).
|
Stakeholders |
Accounts type |
|
Shareholders |
These stakeholders could be satisfied with the financial statements prepared by accountants. These are the persons who have invested their money in the business of organization. They could evaluate the financial statement such as Profit and loss account, Balance sheet, cash flow statement and other accounts to gauge the organizational performance. |
|
Employees |
These are the pillars of organizations who are indulged in the value chain activities of organizations. They could evaluate the impact of organizations activities by analyzing the Ledgers and government penalties determined by accountants. |
|
Governments |
Government imposes penalties and duties on organizations. Government could use compliance report prepared by accountant with the coordination of compliance officer. Government could justify with the help of governance of company whether company has made any default in its ethical business practice. |
|
Creditors |
These are the person who provides raw material or goods to organization. They could gauge company’s performance by evaluating the Bad debts accounts and provision accounts prepared by accountant. |
|
Supplier |
These are the vendors who evaluate the invoices and bill book prepared by accountant. It helps suppliers to measure the business functioning of organization and determine how company has been performing throughout the time. |
|
Local community |
These persons get highly influenced with the business practice of organization. Accountant could satisfy their doubts by providing corporate social responsibilities report prepared to them. It helps them to evaluate that company has been discharging its social responsibilities in effective manner (Vanclay and Esteves, A, 2011). |
In this question, there are several direct and indirect impact on the social and environment has been discussed which have aroused due to the business functioning of organization (Glasson, Therivel and Chadwick, 2013).
|
Impact |
Brief description |
Action to minimize and maximize the impact accordingly |
|
Increment in pollution and dirt |
If organization is going to manufacture some of computer parts own its own then it would damage the environment on mineral resources extraction. |
Company could install eco friendly system which would be helpful to make recycling of mineral. |
|
Child labor or exploitation of workers |
Labors who would be engaged in manufacturing activities of organization are children and low class labor. There are chances that they would be exploited by team managers. |
Company need to establish a proper hiring chain which would be accompanied with set code of conduct and norms. It would curb hiring of children in factory and other working areas. |
|
Carbon emission |
Transport of computers and its peripherals has environmental impact in the form of large amount of carbon emission. |
Company need to install anti Pollution system which could be used to encounter the effect of Carbon emission. |
|
High resources consumption |
Company would use petrol, Diesel and coal to produce electricity for manufacturing of computers. It may result into use of scarcity of resources (Macombe et al, 2013). |
Organization should go for other resources such as water generation electricity and other methods to generate light. |
These are the following environmental impacts which have been observed by Organizations. Therefore, CEO of company should endeavor towards developing an effective mechanism to overcome such problems. Nonetheless, CEO should take consistent feedbacks from employees and other stakeholders to make its existing working system more environments healthy (Musaazi, et al, 2015).
It is evaluated that if organization would be working with unethical suppliers then it would diminish the value of organizations and will also result into creation of negative brand image in the mind of stakeholders. However, CEO has discussed his views on take consistent feedbacks from employees and other stakeholders to make its existing working system more environments healthy. There are following examples which could classify the impact of having business unethical suppliers on the value chain activities of organizations.
Creation of negative brand image- If organization continues with unethical suppliers then it would result into negative value creations. It could be defined with the real example that if suppliers are providing goods and services such as computer peripherals and motherboard of which they are not having any invoice and bills then it would make final products of company illegal as well. In addition to this, company would be encountered as doubtful company which would decrease overall turnover of company as well (Delmas and Pekovic 2013).
Imposition of high amount of penalties- This is observed that if company is working with unethical suppliers then it would result into high amount of penalties on the business functioning of organization. For instance, if suppliers have not paid duty or other taxes on their raw material at the right time in order to reduce the overall cost of raw material then it would increase chances of legal penalties on company’s final products. Therefore, it would be inferred that if organization would have healthy business practice then it could earn profit simultaneously increase its brand image in the eyes of stakeholders (Wathern, 2013).
Organization is accustomed to act on the instruction of CEO. He makes all the valuable decision for the organization for its better sustainability. In this case study CEO has been considering making investment of $1 million to establish a sustainable department. It is strategic decision as it has high impact on the performance and brand image of organizations. Therefore, CEO of company should take effective decision by using appropriate methods in determined approach. CEO has indulged in making strategic decision for its organization.
CEO of company should indulge in five step decision making process which would start with scoring organization in stakeholders mind, focus on key decisions, determining the impact of decisions, build a supervisory system to make changes as per the demand of situations and in the end embedding of decisions would be made. This process will help him to gauge overall impact of its decisions throughout the formulation and implementation stages. In addition to this, this type of five step process would provide clear road map to CEO which he could use to understand and evaluate the current situation of its decision and its impact on other stakeholders.
CEO should go for installing sustainability department as it would result into increment of brand image of company and also increase the perpetually of organizations for long run. Therefore, it would be inferred that a complete level of planning process would not only increase the effectiveness of decisions taken by CEO but also help him to gauge all the pros and cons of his decisions. This will help CEO to avoid possibilities of mistakes and will result into less overall cost of productions of organizations (Epstein and Buhovac, 2014).
Sustainability department is department which is indulged in management of ability of company in such a ways that restore and enhance all forms of capital such as human resources, capital to make effective use. This department would help organization to use resources in determined approach which would reduce the overall cost of capital. In addition to this, after establishment of Sustainability department in organization it would curb the wastage and by products. Eventually this type of mechanism will not only increase the overall quality of products and services but as well reduce the cost of products. With the help of this Sustainability department company could create core competency by using product differentiation and cost leadership in its value chain activities.
Therefore, shareholders should understand that only in the starting, it would increase overall cost of production of goods but in the future run it would cut down all the unnecessary cost in effective manner. Nonetheless, it would cut down the return available to shareholders but in the future it would increase the value of its capital invested in the business functioning of organization. For instance, if sustainability department will result into increment in the brand image and reduction in cost of capital then in future overall profit of company would increase as well. In addition to this, company would distribute more profit to its investors.
Conclusion
In this case study, newly appointed accountant has made its efforts to determine the most suitable stakeholder who could get affected by the business functioning of organization. Now in the end it would be inferred that company should take into consideration all the environmental and social impacts in determined approach.
References
Delmas, M.A. and Pekovic, S., 2013. Environmental standards and labor productivity: Understanding the mechanisms that sustain sustainability. Journal of Organizational Behavior, 34(2), pp.230-252.
Epstein, M.J. and Buhovac, A.R., 2014. Making sustainability work: Best practices in managing and measuring corporate social, environmental, and economic impacts. Berrett-Koehler Publishers.
Glasson, J., Therivel, R. and Chadwick, A., 2013. Introduction to environmental impact assessment. Routledge.
Macombe, C., Leskinen, P., Feschet, P. and Antikainen, R., 2013. Social life cycle assessment of biodiesel production at three levels: a literature review and development needs. Journal of Cleaner Production, 52, pp.205-216.
Millar, R. and Hall, K., 2013. Social return on investment (SROI) and performance measurement: The opportunities and barriers for social enterprises in health and social care. Public Management Review, 15(6), pp.923-941.
Musaazi, M.K., Mechtenberg, A.R., Nakibuule, J., Sensenig, R., Miyingo, E., Makanda, J.V., Hakimian, A. and Eckelman, M.J., 2015. Quantification of social equity in life cycle assessment for increased sustainable production of sanitary products in Uganda. Journal of Cleaner Production, 96, pp.569-579.
Musaazi, M.K., Mechtenberg, A.R., Nakibuule, J., Sensenig, R., Miyingo, E., Makanda, J.V., Hakimian, A. and Eckelman, M.J., 2015. Quantification of social equity in life cycle assessment for increased sustainable production of sanitary products in Uganda. Journal of Cleaner Production, 96, pp.569-579.
Stake, R.E., 2013. Multiple case study analysis. Guilford Press.
Vanclay, F. and Esteves, A.M. eds., 2011. New directions in social impact assessment: conceptual and methodological advances. Edward Elgar Publishing.
Wathern, P. ed., 2013. Environmental impact assessment: theory and practice. Routledge.
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