Contemporary Issues

Part 1

1. Sustainability Accounting

The concept of sustainability has become an important matter of discussion almost all fields and disciplines including accounting. Accordingly, sustainability accounting is known by different names such as environmental accounting, corporate social responsibility reporting, and non-financial reporting. The concept of sustainability accounting is ascertained to have first emerged in the 1970s in order to complement the financial reporting with respect to social and environmental aspects. In the current context, sustainability accounting has become an important management tool being applied by the organizations to become more sustainable. Sustainability accounting serves as an important source of information for all stakeholders of the organization and a useful tool to evaluate the risks arising from the interaction of social and environmental aspects (Peršić et al., 2016; Lamberton, 2005). Notably, social, environmental and economic are the key aspects of sustainability accounting. The sustainability accounting aspects in the UK are governed by the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013. The SR regulation in the UK creates a mandatory requirement for the organization for non-financial reporting (Mayer Brown, 2013).

In addition, sustainability reporting is recognized as an important output of sustainability accounting. Accordingly, Rupley et al. (2017), argued that while the financial statement reporting is concerned with the disclosure of information related to financial implications on the internal and external stakeholders, the sustainability reporting deals with providing non-financial information related to governance as well as social impact of organization’s decisions and activities that might include both financial and non-financial implications on internal and external stakeholders. In addition, it is argued that even though both financial statements reporting and sustainability reporting is associated with disclosure of relevant information, the sustainability reports are argued to address the stakeholder’s needs for transparency and accountability along with the information pertaining to risks and opportunities that are present in the traditional reporting.

Even though sustainability reporting promotes accountability and transparency, few scholars have criticized the sustainability reporting. Accordingly, Solomon & Lewis (2002), argued that despite the increasing CSR activities by the organizations across the world, there has been limited disclosure of relevant information. Similar view has also been postulated by Moneva et al. (2006) and argued that several organizations label themselves as sustainability reporters but in reality, these organizations do not behave in a socially responsible way that can be considered sustainable. Moreover, it is argued that even though several organizations demonstrate their intention for CSR and sustainability but they hardly execute their intentions into actions or practices.

2. Need for Sustainability Accounting Education and Training in the UK

Sustainability accounting in the context of education can be defined as the branch of accounting that deals with the analysis and reporting of the financial effect caused due to the three key dimensions of sustainability that include social, environmental and economic factors. The primary function of sustainability accounting can be identified to be related to a collection of data concerning the social, environmental and economic performance of organizations and evaluate these data for making an informed decision about the business and to enhance its general acceptance in the society (Peršić et al., 2016; Lamberton, 2005).

In recent years, there have been considerable discussions on a matter related to the need for sustainability accounting in education and training across many parts of the world including the UK. Notably, various reasons are being identified to have created the need for sustainability accounting in education and training in the UK. In this regard, one of the major factors that have led to the growing need for sustainability accounting in education and training is related to the limitations associated with the traditional accounting system. The traditional accounting system is argued to be based on reporting different events that arise from business activities like sales, purchases, cash flows. Correspondingly, traditional accounting can be argued to provide a narrow perspective regarding corporate activities and is mainly concerned with earnings and profitability. Thus the information provided using traditional accounting is inadequate to evaluate the corporate activities in relation to social and ecological impact (Maunders & Burritt, 1991). It is, therefore, the inability of traditional accounting information pertaining to sustainability can be argued to have created the need for sustainability accounting in education and training in the UK (Schaltegger & Burrit, 2010). At the same time, it can be argued that there is a growing awareness about the sustainable behavior within the business entities and the aspect of sustainability are being increasingly integrated into the corporate strategies, practices, and behavior. Thus, to support corporate sustainability management, there is a greater need for training employees in the organization to develop sustainability-related competencies (Baumgartner & Winter, 2013).

Nonetheless, despite the growing importance of sustainability accounting in the UK, it can be argued that responses from accounting schools towards integrating sustainability accounting in education and training are slow and there lag sustainability educated accounting graduates (Gray, 2013; Khan, 2011).

Part 2:

2.1 SMEs Sector in the EU

Small and Medium Enterprises (SMEs) is defined by The European Commission as “those enterprises employing fewer than 250 persons that have a turnover of fewer than 50 million euros and/or a balance sheet total of fewer than 43 million euros” (Eurostat, 2019). Accordingly, it has been observed that SMEs in the European Union (EU) serve as an important aspect in shaping the policies related to organizations and enterprises within the EU. In addition, it has been noted due to the growing importance of SMEs in the EU, the European Commission recognizes SMEs as a key source of job creation, economic development, social integration and integration in the EU (Eurostat, 2019).

In the EU region, the SMEs are categorized into three different enterprises that comprise micro-enterprises, small enterprises, and medium-sized enterprises. Moreover, the SMEs in the EU are ascertained to 99 percent of all business operating in the EU. Over the last five years, the SMEs in the EU are ascertained to have provided roughly 85 percent of new jobs (European Commission, 2019). Undoubtedly, the role of SMEs, in the socio-economic development in the EU is significant.

2.2 Existing EU Sustainability Accounting and Reporting Practices

Sustainability accounting and reporting practices have emerged as an important aspect for organizations operating in the EU. Many organizations including large and small enterprises in the EU are viewing sustainability accounting and reporting as an opportunity to integrate sustainability in their strategies and practices and avail benefits. Notably, the last two years has been defining time for sustainability accounting and reporting practices. Accordingly, the EU Directive (Directive 2014/95/EU) was introduced that deals with the disclosure of non-financial and diversity information (Matuszak & Rózansk, 2017). This Directive has to be implemented by all EU member state including UK ad it set clear course towards promoting greater transparency and accountability in social and environmental matters and issues. Moreover, organizations under this Directive are required to provide information minimum for the four key matters that include environment, social and employee matters, anti-corruption and bribery and respect for human rights (Matuszak & Rózansk, 2017).

Part 3

3.1 Introduction of the selected Company

The organization that has been considered for this section is Deeley Construction. Accordingly, Deeley Construction is a small and medium-size business enterprise with an annual turnover of £40 million. The SME has significant expertise in the field of design & build, construction, refurbishment and fit out. The SME operates its business and caters the needs of its customers from its office located in Coventry in the West Midland region in the UK. Moreover, the SME renders its services to a wide spectrum of sectors including retail, industrial, education, and social housing. At the same time, the size of the contract undertaken by the SME varies from £250,000 to £25 million (Deeley, 2019).

3.2 Sustainability Strategy of Deeley Construction

The sustainability strategy of Deeley Construction can be argued to focus on all three components of sustainability including society, economy, and environment. Accordingly, the SME has developed numbers of sustainability strategy and has demonstrated its firm commitment towards promoting and integrating sustainability throughout its business practices and operations. In this regard, the SME is ascertained to be actively engaged in promoting the welfare of the local community as well as the developed long lasting relationship with the numbers of local charities to help eradicate many negative causes. At the same time, the SME regularly engages in generating awareness both at the site and the communities in which it operates about the importance of safety of people (Deeley, 2019a).

3.3 Stakeholder Engagement

Stakeholders are an individual person, group or organizations that are directly or indirectly affected by the policies, decisions, and activities of an organization (McGrath & Whitty, 2017). The key stakeholders of Deeley Construction include suppliers, investors, customers, government and employees. Accordingly, Deeley Construction is ascertained to engage with its different stakeholders through dialogue. The element of dialogue in sustainability reporting has helped the SME in building an effective relationship with the stakeholders. Different stakeholders have different information needs and requirements, for example, investors need for information is different from customers, it is, therefore, sustainability reporting is argued to have provided a suitable instrument for dialogue and interaction between the SME and its different stakeholders (Hess 2008).

3.4 Sustainability Practices

Deeley Construction is observed to have adopted a variety of sustainability practices. Some of the key sustainability practices adopted by the SME include installation of renewable energy technology, incorporation of energy efficiency in its design and structure and minimization of waste at the construction site (Deeley, 2019a). Deeley Construction is accredited with certificates including Contractors Health and Safety Assessment Scheme (CHAS), ISO 9001:2015 Quality Management Standard and ISO 14001:2015 Environmental Standard (Deeley, 2019). These sustainability certificates are important as they help the SME to meet statutory and regulatory requirements while achieving excellence in their operations (Deeley, 2019a).

3.5 Good sustainability practices

For an organization, related construction industry like Deeley Construction, numbers of good sustainability practices can be identified. First, it is important to define the sustainability policy. Next, it is important to build a sustainable supply chain and work towards reducing the wastage of resources and materials. It is equally important to focus on using energy efficiency tools and equipment (Ahn et al., 2012; Pitt et al., 2009).

3.6 Value Creation in Integrated Reporting (IR) and Benefits of IR

Value creation in Integrated Reporting (IR) is explained as “Value is created through an organisation’s business model, which takes inputs from the capitals and transforms them through business activities and interactions to produce outputs and outcomes that, over the short, medium and long term, create or destroy value for the organisation, its stakeholders, society and the environment” (Ernst & Young LLP, 2013, p. 9).

There are numbers of internal and external benefits of IR. Considering the internal benefit of IR, it can be argued that IR facilitates organizations to have better insight and understanding of business value drivers, improve the strategic plan and engage in through risk analysis. In a similar context, organizations that have adopted IR are also offered with external benefits such as it allows companies to condense relevant information in the context of external environment through the use of tables which makes then easy for the audience to read and compare performance against strategic objectives (Dumay et al., 2016; James et al., 2014).

Part 4

4.1. A brief outline of the IASBs current project to update the conceptual framework with a focus on Chapter 6 Measurement

The International Accounting Standards Boards(IASB) have made a publication of its revised conceptual framework for financial reporting. The new framework will describe the two measurement bases which include the current values and historical costs. This framework has proclaimed that both the bases can give the confirmatory as well as predictive values to its users but it is also stated that one basis could be of very essential information rather than another as per the difference in circumstances (Lin, 2018). In such cases, the framework will not favor one of the measurements over the other measurements. The historical costs give the reflection of the transactional price or different other events which gives rise to assets, income, expense or liabilities. On the other hand, the current value measurement gives the reflection over the conditions at the variant measurement dates (Shang, 2019). The current values possess the current costs, fair values and also value in use along with the fulfillment values. Moreover, the current project of IASB will set out the factors so as to consider while selecting the basis of measurement which includes faithful representation, relevance, enhancing qualitative characteristics and well as cost constraints (Shang, 2019). This current project will however not provide the detail direction on how the particular measurement basis will be suitable as the suitability of particular bases of measurement will differ and rely on the circumstances and facts. The current frameworks will provide limited discussion on equity although there is no direct measurement of the total equity. Still, it is useful and logical to measure the individual classes of equity so as to provide useful information (Lin, 2018).

4.2. Review IFRS for SMEs and critically evaluate the benefits and international application problems of IFRS for SMEs

The International Financial Reporting Standard for the Small and Medium-sized Entities (IFRS for SME) is designed so as to make the usage of all the entities which doesn’t have any accountability publically. the International Accounting Standards Board(IASB) has improved the IFRS for SMEs taking in consideration the difficulties and costs which is relevant to smaller private entities in order to prepare the IFRS information which is complaint fully (Timothy, 2010). The IFRS for SMEs possesses very lesser requirement of disclosure which is present in a shorter document. The IFRS for SMEs standards is present only for instantaneous usage. However, it actually important and appropriate for the standards authorities and setters in each of the country so as to decide and acknowledge the permit of the entities and is also required in order to make the application of IFRS for SMEs.

There have been various functional complications which are reported in the convergence process of IFRS by different countries who have adopted the IFRS. The issues are adopted with the development process of IASB which is related to IFRS for SMEs (Stokdyk, 2010). It is reviewed that IASB makes an individual confused so as to select an appropriate title with the different changes being made different times. In addition to that, the national legislation and enforcement issues, complexity in implementing IFRS for SMEs, technical difficulties inherited in IFRS for SMEs are some of the additional issues which so linked and associated with IFRS for SMEs (Stokdyk, 2010).

The accounting rules prevailing in IFRS for SMEs are written in a very simple format and thus, the entities could be understood and read properly. The IFRS for SMEs helps the users to achieve the improved and well-managed comparability. In addition to that, the entity’s financial statements which is compared effectively to prepare in various jurisdictions. The IFRS for SMEs had also encouraged the number of cross-border trade and also the activities of the mergers and acquisitions (Timothy, 2010). Lastly, IFRS for SMEs also assists in the reduction of the costs of the regulatory compliance on the SMEs.

References

• Ahn, Y. H. et al. (2012). Paradigm Shift of Green Buildings in the Construction Industry. International Journal of Sustainable Building Technology and Urban Development, 2(1), 52-62.
• Baumgartner, R. J. & Winter, T. (2013). The Sustainability Manager: A Tool for Education and Training on Sustainability Management. Corporate Social Responsibility and Environmental Management, 21(3), 167-174.
• Deeley. (2019). About us. [Online] Available at: http://www.deeley.co.uk/construction/about-us/ [Accessed 02 March 2019].
• Deeley. (2019a). Our approach to sustainability is consistent. [Online] Available at: http://www.deeley.co.uk/group/csr/the-environment/ [Accessed 02 March 2019].
• Dumay, J. et al. (2016). Integrated reporting: A structured literature review. Accounting Forum, 40(3), 166-185.
• Ernst & Young LLP. (2013). Value Creation Background Paper. [Online] Available at: http://integratedreporting.org/wp-content/uploads/2013/08/Background-Paper-Value-Creation.pdf [Accessed 02 March 2019].
• European Commission. (2019). Entrepreneurship and Small and medium-sized enterprises (SMEs). [Online] Available at: https://ec.europa.eu/growth/smes_en [Accessed 02 March 2019].
• Eurostat. (2019). Statistics on small and medium-sized enterprises. [Online] Available at: https://ec.europa.eu/eurostat/statistics-explained/index.php/Statistics_on_small_and_medium-sized_enterprises#SME_definition [Accessed 02 March 2019].
• Gray, R. (2013). Sustainability + Accounting Education: The Elephant in the Classroom. Accounting Education, 22(4), 308-332.
• Hess, D. (2008). The Three Pillars of Corporate Social Reporting as New Governance Regulation: Disclosure, Dialogue, and Development. Business Ethics Quarterly, 18(4), 447-482.
• James, M. L. (2014). The Benefits of Sustainability and Integrated Reporting: An Investigation of Accounting Majors’ Perceptions. Journal of Legal Ethical and Regulatory Issues, 17(2), 94-144.
• Khan, T. (2011). Sustainability Accounting Education: Scale, Scope and a Global Need. Journal of Modern Accounting and Auditing, 7(4), 323-328.
• Lamberton G. (2005). Sustainability accounting—a brief history and conceptual framework. Accounting Forum, 29(1), 7-26.
• Lin, H., 2018. Discussion about conceptual framework. International Business Research, Vol. No.8, No. 6, pp. 191-195.
• Matuszak, L. & Rózanska, E. (2017). CSR Disclosure in Polish-Listed Companies in the Light of Directive 2014/95/EU Requirements: Empirical Evidence. Sustainability, 9, 1-18.
• Maunders, K.. & Burritt, R. L. (1991). Accounting and Ecological Crisis, Accounting, Auditing & Accountability Journal, 4(3), 9–26.
• Mayer Brown. (2013). Environment, Social and Governance (“ESG”) New UK Mandatory Reporting Rules. [Online] Available at: https://www.mayerbrown.com/files/Publication/123b4ac7-a050-46f2-9449-0b6740327749/Presentation/PublicationAttachment/57d4f570-4b22-4a0b-8376-1e639889272e/UK_Mandatory_Reporting_Sep13.pdf [Accessed 02 March 2019].
• McGrath, S. K. & Whitty, S. J. (2017). Stakeholder defined. International Journal of Managing Projects in Business, 10(4), 721-748.
• Moneva, J. et al. (2006). GRI and the camouflaging of corporate unsustainability'. Accounting Forum, 30, 121-37.
• Peršić M. et al. (2016). Sustainability Accounting: Upgrading Corporate Social Responsibility. In: Aluchna M., Idowu S. (eds) The Dynamics of Corporate Social Responsibility. CSR, Sustainability, Ethics & Governance. Springer, Cham.
• Pitt, M. et al. (2009). Towards sustainable construction: promotion and best practices. Construction Innovation, 9(2), 201-224.
• Rupley, K. H. et al. (2017). Evolution of corporate reporting: From stand-alone corporate social responsibility reporting to integrated reporting. Research in Accounting Regulation, 29(2), 172-176.
• Schaltegger, S. & Burrit R. L. (2010). Sustainability Accounting for Companies: Catchphrase or Decision Support for Business Leaders?. Journal of World Business, (45), 375-384.
• Shang, T., 2019. The latest progress of the conceptual framework. Modern Economy, Vol. No.6, No. 6, pp. 694-699
• Solomon, A. & Lewis, L. (2002). Incentives and disincentives for corporate environmental disclosure. Business Strategy and the Environment, 11(3), 154-169.
• Stokdyk, J., 2010. Focus: EU uncovers resistance to IFRS for SMEs. [Online] Available at: [Accessed 03 March 2019].
• Timothy, A. C., 2010. IFRS and SMEs: Some points to consider on the private company standards. [Online] Available at: [Accessed 03 March 2019].