Accounting Fundamentals In Society ACCY111

Lecture 10
Dr Sanja Pupovac
Accounting and Social Responsibility
Readings

• Christ et al (2019)

• Please see all media and other resources available on

Moodle site

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So far in ACCY111……

• A discursive practice – people and organisations use

accounting to record events in a language of money.

• Technical aspects of an accounting system.

• Identifying, measuring, recording, reporting and decision

making.

• Much broader than what you might think

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Today...

• Move beyond the common assets, liabilities, revenues and expenses

• Accounting and accountability

• Corporate Social Responsibility (CSR) and its disclosure

• Modern Slavery

• You are now asked to consider broader implications of HOW we do

accounting?

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 ‘Accounting’ in Accounting in Society

• Exploring accounting and accountability relationships and phenomena in a

social context.

• Social context – people, institutions,

the environment, cultures, regulations etc.

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Accountability
• “... the duty to provide an account (by no means necessarily a financial account) or reckoning of
those actions for which one is held responsible” (Gray et al. 1996, p. 38).

• Accountability...... “entails a relationship in which people are required to explain and take
responsibility for their actions” (Roberts and Scapens 1985, p.447).

• Accountability…….. “the fact of being responsible for what you do and able to give a satisfactory
reason for it, or the degree to which this happens” (Cambridge English Dictionary, 2019, np).

• Accountability requires transparency.

• Government, organisations and other institutions operate in a society where stakeholders want
greater transparency and accountability (Milne and Gray 2007)
– Why? Because accountability:
– Makes people answerable
– Mechanism to ensure standards and regulations are met (Australian Council of
– Auditor General 2010)
– Creates a culture of openness and integrity (Sendt 2002)

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Accounting financial reports

• Prepared for:

– Shareholders – owners
• individuals
• other entities
• Who make decisions in response to the organisation
• Directors /managers make decisions on behalf of owners
of organisation

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 Accounting financial reports

• Reflect:

– Accountability
– Stewardship
– Governance
– Ethics

• To stakeholders (e.g. government, shareholders, local community,

environment, employees, suppliers and consumers).

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 A-L = OE A Capitalist Ideology?

• Corporate values spoken of come from capitalist ideology.

• Should concerns for environmental and social issues be the domain of

accounting, or can it only be a technology that serves capitalism?

• Can we measure these things, or do we choose not to measure them? (

Chwastiak and Young, 2003).

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 A-L = OE A Capitalist Ideology?

• “Corporations silence the negative impact of their activities upon the earth, hell
of war and the beauty of peace, the spiritual, human and social impoverishment
arising from excessive consumption, and the dehumanization of workers”
( Chwastiak and Young, 2003, p.533).

• “Annual reports rely upon the silencing of injustices in order to make profit
appear to be an unproblematic measure of success” .

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To whom is business responsible?

• Responsibilities extend beyond shareholders to encompass

communities in which they operate and society as a whole

• Pressure from governments, NGOs and other groups about the

negative social impact of corporate activities

• Socially responsibility and accountability has become a major

issue in contemporary capitalist society

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 Corporate Social Responsibility
(CSR) Accounting
• … acts as a mechanism to offer greater corporate accountability and transparency (Buhr 2007)

• “...the preparation and publication of an account about an organisation’s social, environmental,

employee, community, customer and other stakeholder interactions and activities, and,
where possible, the consequences of those interactions and activities” (Gray 2000, p.250).

• Globally many corporations produce voluntary social reports.

• These may also be called corporate social reports (CSR) or sustainability reports; e.g. 93% of
G250 companies report on CSR (KPMG, 2017)

• More recently modern slavery accounts, see Rio Tinto example

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Corporate Social Responsibility (CSR)

• A departure from sole economic focus that was traditional in financial reporting.

• CSR began to be widely used in 1990s, when sweatshops supplying garments to

Nike came to the world’s attention through widespread media coverage.

• It gains further traction each time the world experiences corporate social and
environmental problems (e.g. BP’s 2010 Deepwater Horizon oil spill ).

• Assumes information about social and environmental performance will increase

the trust a community has in the organisation

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 What is CSR?

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Corporate Social Responsibility
(CSR) Accounting
• Challenges traditional financial accounting (Gray 2002)

• Challenges the absences of traditional accounting

• Gives accountability beyond the shareholders

• Ensures the corporation acknowledges the responsibility it has

towards the ethical, social and environmental performance (Adams
2004)

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 Some Examples

• Apple Environmental Responsibility Report

• Woolworths Group - Sustainability Reports

• McDonald 2018 Report CSR

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"Accounting for modern slavery: an
analysis of Australian listed company
disclosures"
 Modern Slavery

• “modern slavery is everywhere “[f]rom the construction of

FIFA World Cup stadiums in Qatar to the cotton farms of
Uzbekistan, from cattle ranches in Paraguay to fisheries in
Thailand and the Philippines to agriculture in Italy, from
sweatshops in Brazil and Argentina to berry pickers in
Sweden” (p. 837)

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 CPA UK Modern Slavery Project

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Modern Slavery
• More slaves in the world today than at any other time in human
history

• Currently more than 45m slaves worldwide

• An umbrella term used to describe a collection of practices and

a vast array of abuses that range from domestic servitude and
sex slavery to organ trafficking and child exploitation.

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 Global Slavery Index

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Modern Slavery in Business

• Areas of greatest concern from a business perspective, includes:

– traditional slavery
– forced labour
– bonded labour/debt bondage
– child labour and human trafficking, which is often necessary to
transport people to where the labour is needed

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Modern Slavery in Business

• At least 80 percent of forced labour occurs in the private

economy and involves business [organisations] in some way.

• Generates $150bn in illegal profits each year from forced labour in

private enterprise alone.

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Modern Slavery in Business

• Employment of slaves, e.g. The Intercontinental Hotel Group

• In West Africa and the Ivory Coast, the cocoa industry is where modern slavery thrives.

• In Uzbekistan, the conditions faced by workers in the cotton industry

• Debt-bonded labour in Bangladesh is common

• Human trafficking in Thailand's fishing industry

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 Modern Slavery Registry

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Australian Examples

• Ten nurses trafficked from the

• Foreign agricultural workers
Philippines on the pretext of being
trafficked into Australia to offered nursing work in Australia.
undertake seasonal work.
• Once in the country, the women
• These workers were housed were confined to a house in
in animal shelters, underpaid Victoria where they were forced to
and managed by gang- work as unpaid cleaners.
masters who threatened them
with both physical and
sexual violence

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Modern Slavery Regulation

• For the first time, certain disclosures are required to be made, regardless of whether
these are relevant to shareholders or not.

• The aim of this is to achieve transparency for wider groups (NGOs, media, local
community, consumers and so on) on issues of human rights and social responsibility.

• UK’s 2015 Modern Slavery Act require companies to disclose the actions they take to
tackle modern slavery, child labour, human trafficking throughout their production
chains (including supply chains overseas).

• In Australia - Modern Slavery Act, 2018.

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Modern Slavery Reporting in Australia

• Entities based, or operating, in Australia, which have an

annual consolidated revenue of more than $100 million

• Report annually on the risks of modern slavery in their

operations and supply chains, and actions to address those
risks

• The first reporting period will be the 2019/2020 financial year

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Christ et al., (2019)

Investigate:

How do Australian listed companies account for modern

slavery?

• Terms associated with modern slavery identified from

the literature

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Results

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Results
• Ten companies disclosed no modern slavery-related information either in standalone,
annual reports, or on their websites,

• Of the ten non-disclosing companies three (ResMed Inc., Domino’s Pizza Enterprises Ltd
and Reece Ltd) did produce an online modern slavery statement.

• For Domino’s it was the UK Act, but Reece did not reference any overseas legislation.

• 90 companies did make some disclosures.

• Just over one-third of companies sampled voluntarily provided a modern slavery

statement, with these mostly following the example of UK legislation

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 • Some companies appear to have no interest in making disclosures in standalone reports,
they have decided to publish modern slavery statements.

• Modern slavery statements were disclosed by 37 companies (see Table III) in the paper

• While 63 companies did not provide a modern slavery statement, some information
about modern slavery was disclosed in annual and standalone reports and online.

• The dominant source of disclosure was provided on corporate websites.

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• 2 per cent of companies provide disclosures on child labour
in their annual reports

• In standalone reports 11 per cent of companies report,

whereas on their websites 38 per cent made such
disclosures.

• “Child labour” is quantified and reported on the web by 13

companies with only 3 companies reporting in standalone
reports and none in the annual reports.

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• Evidence gathered about modern slavery disclosures by ASX 100 companies shows
information in annual and standalone reports reveal far less than other disclosures on
company websites.

• The volume and quality of disclosures are low and, where made, narrative.

• Under a third of companies make disclosures.

• The disclosures focus is on bribery and corruption, human rights and generic
slavery-related issues, rather than specific themes.

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• Can a business be accountable for such things as the environment and society?

• What do you think businesses have a responsibility towards?

...think outside the boundaries and the common assets, liabilities, balance sheet and P&L
statement items.

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Review CSR report as homework!

• You have to source & download Sustainability/CSR report, modern slavery

report/statement from any (1) company of your choice.

• Review their disclosure in relation to any modern slavery themes we discussed

today.

• Make a summary of your findings.

• HINT: this will help you in your Assessment 2

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Rio Tinto example on Moodle

Respecting
human rights Our statement on modern slavery 2018

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Next week…

• Accounting Systems – Chapter 7

• See Moodle site for week 11 tutorial questions

“Be the change you wish to see in the world” –

Mahatma Ghandi

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