Module 4:

Business Sustainability
Chapter 5
Prepared by Wahseem
Soobratty
Prepared by Wahseem Soobratty

Learning objectives
After studying this chapter you should be able to:
1.Describe

business sustainability, outline its key drivers

and principles and compare key theories in the area
2.Appraise

corporate social responsibility (CSR) reporting

frameworks and the accountants role in CSR
3.Explain

the concept of corporate governance

4.Outline

the role of ethics in business and compare ethical

philosophies relevant to business decision making
5.Explain

the use of codes of ethical conduct and apply

ethical decision-making methods to business situations.

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Business sustainability
Sustainable development is development that meets the
needs of the present without compromising the ability of
future generations to meet their own needs.
Brundtland (1987)
Key

Concepts in the above quote

Needs of the worlds poor

Limitations of the environment

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Business sustainability
Key drivers

Competition for Resources

Climate Change

We have a fossil-fuel based economy

Economic Globalisation

The worlds population is continuously growing

The integration of national economies into the global

economy

Connectivity and Communication

Increases in connectivity has led to less time to both build

reputations and/or destroy reputations

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Business sustainability
Principles
1.

Ethics

2.

Governance

3.

Transparency

4.

Business relationships

5.

Financial return

6.

Community involvement/economic development

7.

Value of products and services

8.

Employment practices

9.

Protection of the environment

Source: Epstein and Roy (2003) Improving Sustainability

Performance as cited in Epstein (2008), p. 37.
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Theories of business
sustainability
Corporate
social
Corporate social responsibility (CSR) refers to the
responsibility an entity has to all stakeholders, including
responsibility
society in general and the physical environment in

which it operates.

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Theories of business
sustainability
Corporate social responsibility
continued
Reasons?

entities act in a socially responsible manner because there

is ultimately some benefit to their profits.

entities want to limit interference from governments or

other groups

managers are motivated simply by the desire to do the

right thing, and that there is no economic motive behind
acting in a socially responsible manner

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Theories of business
sustainability
Shareholder value

A corporation has many stakeholders

Individuals or groups who have an interest in the

corporations affairs.

Shareholder Value

Shareholder (owner) returns are the primary focus of an

organisation

Agency Theory

Managers act on behalf of shareholders

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Theories of business
sustainability
Legitimacy theory

Theory that entities must conduct operations in

accordance with societal expectations social contract

Society allows the entity to operate (pursue its

objectives and rewards) so long as the entity agrees to
act in a socially acceptable manner

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Reporting and disclosure

In addition to the required financial reporting, organisations

are voluntarily reporting on their sustainability practices.

One approach to sustainability reporting is the GRI reporting

framework which is comprised of

Reporting Principles and Standard Disclosures

Implementation Manual

The GRI reporting principles relate to:

content (stakeholder inclusiveness, sustainability context,

materiality and completeness) and

quality (balance, comparability, accuracy, timeliness, clarity and

reliability).

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Triple bottom line reporting

Triple Bottom Line refers to:

1. Economic

performance

2. Environmental
3. Social

performance

performance

Pillars of Sustainability

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Triple bottom line reporting

continued

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The role of accountants in

sustainability

Reporting

Cost Analysis

Report the entities sustainability performance, includes

environmental and social information

Include economic, environmental and social information in

decision making processes

Audit and Assurance

Internal controls to ensure the integrity of the information

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Ethics

The key to governance for sustainability may be determined by

the extent of ethical consciousness.

Morality vs Prudence

Prudence

Acting in ones self-interest.

Morality

Acting as one ought to by taking into account the interests of other people

There are no hard and fast rules when it comes to ethics in business.

Four key responsibilities of business

1.

Economic

2.

Legal

3.

Ethical

4.

Discretionary

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Professional codes of ethics

APES110 Code of ethics for professional accountants, issued by

the Accounting Professional & Ethical Standards Board (APESB)
and established by CPA Australia and the Institute of Chartered
Accountants Australia

Members of the two professional bodies above MUST comply

with the code of ethics

Five fundamental principles espoused in the code to guide a

member's decision making:

1.

Integrity

2.

Objectivity

3.

Professional competence and due care

4.

Confidentiality

5.

Professional behaviour

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End of Module 4

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