What is Sustainability Accounting and How Can It Help Us?

Sustainability is centered on the premise that, as the human species continues to populate the world and the demand for food and natural resources rise, we identify and adjust our behaviors to lessen the impact on the natural environment.

Sustainability typically has 3 key aspects, namely economic, social and environmental impact. The economic dimension entails the financial aspects of a company’s performance. The social dimension, at its broadest, includes anything that impacts on a company’s relationship with all its stakeholders. The environmental facet involves the impact of the company’s activities and operations on the natural environment.

In the business context, sustainability accounting is the inclusion of non-financial data of a company, data linked to the social and environmental impact an organisation has on the local community and the world at large. This practice is also referred to as corporate social responsibility (CSR) reporting or Triple Bottom Line (TBL). While sustainability accounting is a voluntary activity, it is important that companies give reports about their environmental and social impact and performance.

Benefits

Competitive advantage

In recent years, companies have been increasingly thought of as the real causes of economic, social and environmental problems. The common perception is that companies are flourishing at the expense of the community and natural environment. The solution lies in the idea of shared values, captured through sustainability accounting reports. Companies can still make economic profits by introducing sustainable practices like using recyclable products that don’t harm the environment. Through creativity and proper linking of sustainability practices to business goals, a competitive edge may be achieved. A reputation for responsible disclosure may be the key difference in the competitive employment market in terms of boosting recruiting efforts.

In contrast, organisations opting to carry on with unsustainable practices like poor remuneration to its employees will soon grapple with high turnovers and other undesirable consequences.

Company image and reputation

Since the economic meltdown in 2008, consumers have become wary of putting their faith in corporations. In any business context, trust is an important commodity. For enterprises keen on sustainability accounting, they are aware that doing well economically and doing well socially are not mutually exclusive. By publishing their reports, they integrate well with nearby communities and create a good impression outside there.

For example, a company that uses renewable sources of energy is likely to have a good image than one that relentlessly burns fossil fuels. Investors who are conscious about the environment are thus more likely to work with the company that uses renewable energy. Sustainability accounting can help a company that is seeking to:

• Create or repair a brand
• Show trustworthiness
• Target social-choice clients
• Maintain operational licenses

Access to capital

Studies reveal that producing sustainability reports, with the help of accounting services in Singapore, can open the doors to new and less expensive sources of funds. By revealing its sustainability initiatives, a firm may well be able to persuade prospective sources of capital that they are competitive and low-risk investments. In fact, investors prefer putting their funds in transparent companies because of high level of trust between stakeholders and directors, reduced information asymmetry, and precise forecasting.

In recent years, there’s been a significant development in socially responsible investments. That’s why more and more companies are adopting sustainability accounting services in Singapore. Indeed, there’s a healthy craving for sustainability information from investors, members of the public, institutional shareholders as well as mainstream analysts.

Initially, sustainability accounting was the province of a few green or socially responsible companies. Today it’s thought of as the ideal practice by enterprises across the world. Focusing on sustainability allows companies to manage their environmental and social impacts and enhance operating efficiency. It has become an integral element of shareholder, stakeholder, and employee relations.