Responsible Management Accounting and Controlling

Daniel A. Ette

• Publisher: Business Expert Press
• Year: 2014
• Print ISBN: 9781606498224
• eBook ISBN: 9781606498231
• Topic: Business
• Subtopic: Business Ethics
• Index: Business

Sustainability is becoming a business megatrend. This book looks into why controlling departments are rarely involved in sustainability topics and do not contribute to corporate responsibility. The author postulates the following assertion: responsible controlling is indispensable in making an organization more responsible. Inside, you'll learn a specific course of action for the development of a responsible controlling framework toward decision making, which is based on an ethically driven, reflective fundament in order to make a company a responsible business. Through the development of a responsible controlling framework, the author gives recommendations for how controlling should be altered in terms of both tools and mindsets. A twelve-step responsible controlling roadmap is detailed, showing how controlling can contribute to foster a corporation's responsible behavior and how sustainability topics can be integrated in management decisions. The conclusion of Responsible Management Accounting and Controlling reiterates the main goal of this book: responsible controlling must first and foremost be understood as a mindset. Responsible controlling, therefore, is an uncommon but indispensable approach of making an organization more responsible.

CHAPTER 1

Setting the Stage

“Nowadays people know the price of everything and the value of nothing.” 1

—Oscar Wilde

1.1 Why Read This Book

Sustainability is becoming a business megatrend that can no longer be ignored by managers.2 More and more stakeholders consider the so-called externalities like water usage and pollution, as well as carbon dioxide emissions, as crucial elements of a company’s performance. Moreover, globally interacting supply chains lead to environmental strains and also to corresponding liabilities of business actors. In the future, all parts of a business will be affected by sustainability-related issues.3 A “clear vision and the (necessary) execution capabilities”4 are crucial in order to be a pioneer within this megatrend.

Corporate Social Responsibility, Corporate Sustainability, or Corporate Responsibility: Same or Different?

Our understanding will be clarified in Chapter 2—for the moment we will use the expressions as synonyms.

In addition to the expression “sustainability,” other terms like corporate social responsibility (CSR) or corporate responsibility (CR) are being discussed among academicians as well as in business environments.5 Regarding CSR, Milton Friedman states in his article, The Social Responsibility of Business Is to Increase its Profits, that businesses cannot have responsibilities other than making profits.6 But does that mean that profit maximization should be the overall goal of a corporation? Already Adam Smith, the founder of the market economy, considers the well-being of mankind as the central idea of economic activities,7 and not profit maximization. Profit only is the yardstick to measure the efficiency. In today’s economy, though, profit has become an end in itself, while the production of goods and services only serves as a means to this end.8

Sustainability and CR matter not only in terms of environmental issues, but also in terms of social factors. They are not less important. In our current economic behavior, human rights are often infringed and people are only seen as a means to an end. Moreover, against the backdrop of the aging population in Europe and the resulting shortage of skilled labor, high-potentials increasingly look for employers who provide meaning and values within the job—a job in which the employees can contribute to the development of the society and have an adequate work–life balance.9 As shown in the United Nations’ World Population Prospects, in contrast to Europe the global population is rapidly growing.10 As incomes internationally are expected to rise, resource consumption will also increase. Hence, corporations are acting in a field of expanding markets, while resources are running out and their prices becoming more volatile.11

There are many other aspects in which companies strive toward sustainability. It may be due to intensified customer interest in ecological products12 or due to an increasing regulation in the field of CSR in many parts of the world. Furthermore, there is an increasing corporate obligation to legitimize its behavior in society and to adapt to a new understanding of a corporation’s role.13 Undoubtedly, corporations must contribute toward a sustainable development and not leave this task exclusively to the state and to society.14 As a side effect, companies thereby have the chance to participate in scoping sustainable actions and not just having to react to legislative pressures. The United Nations Global Compact is one prominent example that defines 10 voluntary principles in the fields of human rights, labor practices, environment, and anticorruption with which companies should be compliant and give a guideline for responsible behavior (Table 1.1).15

Table 1.1 The 10 principles of the United Nations Global Compact

Field	Principle
Human rights	1	Businesses should support and respect the protection of internationally proclaimed human rights; and
	2	make sure that they are not complicit in human rights abuses.
Labor	3	Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;
	4	the elimination of all forms of forced and compulsory labor;
	5	the effective abolition of child labor; and
	6	the elimination of discrimination in respect of employment and occupation.
Environment	7	Businesses should support a precautionary approach to environmental challenges;
	8	undertake initiatives to promote greater environmental responsibility; and
	9	encourage the development and diffusion of environmentally friendly technologies.
Anticorruption	10	Businesses should work against corruption in all of its forms, including extortion and bribery.

Source: United Nations (2000).

Facts

Sixty-six percent of the respondents of the Ernst & Young survey realize a growing number of sustainability-related inquiries from investors and shareholders. Therefore, the need for reporting is growing.

Thirty-nine percent of the respondents stress the importance of the CFO because of his or her role in approving the budget for sustainability topics.

Ernst and Young (2012).

Being sustainable means that all parts of a business must necessarily be integrated into the strive for sustainable development. The finance departments too need to realize the relevance of these global issues. An Ernst & Young survey, conducted in 2011, shows six trends on sustainability in a business environment. Among them, three directly influence an organization’s finance section: (1) sustainability reporting is growing but currently is not well equipped; (2) the chief financial officer (CFO) is gaining an important role; and (3) sustainability rankings and ratings are becoming relevant to business leaders.16

In this b...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Chapter 1: Setting the Stage
• Chapter 2: Responsibility, Sustainability, and Ethics
• Chapter 3: Management Accounting and Controlling: A Basic Introduction
• Chapter 4: Current Controlling Trends Toward Sustainability and Responsibility
• Chapter 5: Responsible Controlling: Synthesizing Controlling and Responsible Management
• Chapter 6: Stage 1: Soft Factors and People
• Chapter 7: Stage 2: Hard Factors and Structures
• Chapter 8: Summing It All Up
• About the Author
• Notes
• References
• Index
• Ad page
• Backcover