Importance of Sustainability Accounting on the Financial Performance of Food Companies in Bedfordview Assessment Answer

Stakeholder Theory

Stakeholder theory is reliant on the supposition that a company's success relies on effective management of all the relations that a business has with its stakeholders. It is found that a vital element that the business can utilize to handle stakeholder relations is the information handled to attain the assistance and approval of the business approach from the stakeholders without objecting. It is found that voluntary disclosure is significantly validated by the stakeholder theory. The stakeholder offers a theoretical framework to elucidate the relationship between numerous stakeholders and management and is mainly helpful in examining or influencing corporate social disclosure (Tiamiyu et al. 2021). ure or sustainability accounting by the company in the yearly business reports (Ordu and Amah 2021).

Concept of Sustainable Accounting

As opined by Srivastava et al. (2022), sustainability accounting and TBL (Tripple Bottom Line) is the term first devised by John in 1994. The purpose of the development of this concept was that organizations focusing on an aspect of business while neglecting the others mainly those which possess a direct bearing on externals is not in the ideal interest of the business. It has further been argued that the businesses must instead be drawing up three diverse and autonomous bottom lines. Another scholar Ekwueme and Onuora (2019) supported this finding by mentioning that there must be a business ‘Account measure’ - a P&L (profit and loss) statement; ‘People account’ which is a measure in a certain form of how socially accountable a company has been through its functions; and ‘Planet measure’ which gauge how ecologically accountable it has been. It is further asserted that sustainability accounting encompasses three Ps namely people, planet, and profit which intends to gauge the social, ecological, and financial performance of the company over some time. Furthermore, a study by Dalimunthe et al. (2022) explained this concept as social, ecological, and economic factors of the business actions. It is found that when businesses are sufficiently involved in corporate social responsibility (CSR) practices, they must be capable of really presenting entire facets of the business entailing stakeholders that have been affected economically, environmentally, and socially. As per the scholar, there are different terms synonymous with sustainability accounting namely CSR (corporate social responsibility); SR (sustainability reporting); and SDR (sustainability development reporting).

Advantages of Sustainability Accounting

According to the study by Hörisch et al. (2020), it has been stated that the advantages entail among other companies dedicated to sustainability looking ahead instant profitability to value and returns that can be attained over numerous years and in manners which have consideration of ecological and societal issues. Another researcher found that sustainability accounting might be utilized to collate information on ecological and socially related expenditures and associate them with fiscal benefits. Moreover, it is asserted that sustainability accounting can demonstrate how ecological and societal external costs might lessen over time with dedication to sustainability. Besides, this concept is found to highlight the ecological and social threats linked with present financial performance and assist risk management. It can recognize which stakeholder relations depict sustainability threats and benefits. As opined by Bellucci et al. (2019), another benefit of sustainability accounting is that it can be used to stimulate partnerships between stakeholder companies. It is also used as a means of increasing awareness, inspiring, and aligning workforces, and appealing to talented workers.

Economic Performance  Disclosure and Financial Performance

A study by Dian (2018) found that economic performance disclosure reflects the influences of the business's functions on the macro and microeconomic environment. It is found that the businesses that possess a significant impact on refining the micro and macro economy might appeal to shareholders and clients to join as finance advocates and users of the products of the company. Another scholar Nguyen and Tran (2019) asserted that disclosing the business's economic performance on sustainability accounting might impact the business's financial performance. It has been shown that the economic aspect variables have a favorable impact on financial performance.

Social Performance Disclosure and Financial Performance

Social performance disclosure demonstrates the societal influences caused by business actions and the actions considered by the business to overcome this (Magnanelli and Izzo 2017). A study by Cho et al. (2013) stated that social disclosure is deemed a fundamental part of sustainability accounting which encompasses various areas like workforce lights; workplace conditions; and human rights to which an effective work setting is anticipated. It has been found that businesses have been signing unseen contacts with their settings to follow a transparent set of actions in respect of their commitment to society. Another study by Tiamiyu et al. (2021) asserted that the financial performance of firms in Indonesia and Malaysia has surged enormously as an outcome of growing social disclosure levels. Besides, it is stipulated that disclosures in banks at the GCC (Gulf Cooperation Council) were effective enough to improve the financial performance of the banking sector. It is further inferred that to improve the financial performance of the companies, proactive actions in implementing sustainability must be clarified to fulfill the expectations of the stakeholders. Nevertheless, a study by Al-Hadi et al. (2019) asserted that as businesses mature, their financial performance is not impacted by social disclosure. Similarly, the recommended constructive impact of sustainability disclosure was not as measurable as predicted, as an unfavorable link has been documented between the social areas of sustainability and financial performance. Social concepts of sustainability accounting are extremely crucial in enabling the acceptance of businesses as proactive social participants in the Nugrahani, T.S. and Artanto, D.A., 2022. ociety. Henceforth, improving the excellence of the social areas might attain stakeholder goals by improving businesses’ financial performance.

Ecological Performance Disclosure and Financial Performance

As per Nor et al. (2016), Environmental performance disclosure indicates the disclosure of the influence of the business’s operations on the environment and the actions taken by the business to refine the quality of the external environment. It is found that a great level of ecological disclosures such as emission of gases, water consumption, and pollution levels might be appreciable in advocating the trust of the stakeholders in the business activities that might improve businesses’ financial performance. It is suggested further that businesses are required to make sustainability reports that fulfill the expectations of the stakeholders and hence improve the business’s financial performance. It has further been found that disclosure of ecological information can obtain marketplace benefits and the capability to gain profits from investment in environmental refinement (Nugrahani. and Artanto 2022).

References

Al‐Hadi, A., Chatterjee, B., Yaftian, A., Taylor, G. and Monzur Hasan, M., 2019. Corporate social responsibility performance, financial distress, and firm life cycle: evidence from Australia. Accounting & Finance, 59(2), pp.961-989.

Cho, C.H. and Patten, D.M., 2013. Green accounting: Reflections from a CSR and environmental disclosure perspective. Critical Perspectives on Accounting, 24(6), pp.443-447.

Dalimunthe, R.H., Arif, M. and Syafina, L., 2022. Analysis of the Implementation of Corporate Social Responsibility (CSR) in Islamic Financial Institutions in the Triple Bottom Line Perspective (Study at PT BPRS Puduarta Insane). The ES Accounting And Finance, 1(01), pp.01-15.

Dian, A.S., 2018. The effect of sustainability report disclosure on financial and market performance in Indonesian companies. Russian Journal of Agricultural and Socio-Economic Sciences, 81(9), pp.185-192.

Ekwueme, J.A. and Onuora, J.K., 2019. Sustainability accounting and stock performance of quoted consumer goods manufacturing firms. Journal of Global Accounting, 6(2), pp.102-115.

Hall, R., 2014. Sustainability Reporting within the food industry.

Hörisch, J., Schaltegger, S. and Freeman, R.E., 2020. Integrating stakeholder theory and sustainability accounting: A conceptual synthesis. Journal of Cleaner Production, 275, p.124097.

Magnanelli, B.S. and Izzo, M.F., 2017. Corporate social performance and cost of debt: The relationship. Social Responsibility Journal, 13(2), pp.250-265.

Nguyen, L. and Tran, M., 2019. Disclosure levels of environmental accounting information and financial performance: The case of Vietnam. Management Science Letters, 9(4), pp.557-570.

Nor, N.M., Bahari, N.A.S., Adnan, N.A., Kamal, S.M.Q.A.S. and Ali, I.M., 2016. The effects of environmental disclosure on financial performance in Malaysia. Procedia Economics and Finance, 35, pp.117-126.

Bellucci, M., Simoni, L., Acuti, D. and Manetti, G., 2019. Stakeholder engagement and dialogic accounting: Empirical evidence in sustainability reporting. Accounting, Auditing & Accountability Journal, 32(5), pp.1467-1499.

Nugrahani, T.S. and Artanto, D.A., 2022. Sustainability Reporting by Disclosing Economic, Social and Environmental Performance. Studies in Business & Economics, 17(2).

Ordu, P. and Amah, C., 2021. Sustainability accounting and financial performance of oil and gas companies in Nigeria. Int. J. Innov. Finan. Econ. Res, 9(1), pp.182-192.

Reed, J., Van Vianen, J., Deakin, E.L., Barlow, J. and Sunderland, T., 2016. Integrated landscape approaches to managing social and environmental issues in the tropics: learning from the past to guide the future. Global change biology, 22(7), pp.2540-2554.

Srivastava, A.K., Dixit, S. and Srivastava, A.A., 2022. Criticism of triple bottom line: TBL (with special reference to sustainability). Corporate reputation review, pp.1-12.

Tiamiyu, M.A., Oyedokun, G.E. and Adeyemo, A., 2021. Firm Characteristics and Sustainability Reporting of Listed Manufacturing Companies in Nigeria. AFAR Multidisciplinary Journal of Management Sciences, 3(1), pp.1-18.

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