Accounting in Organizations for Citizenship -myassignmenthelp.com

Question: Discuss about theAccounting in Organizations for Citizenship. Answer: Introduction Modern day accounting is an intricate web of interlinked operational activities inclusive of internal and external factors. The revolution in todays supply chains has not diminished the requirement for corporate citizenship. Indeed, it requires citizenship which is even stronger, and efficient at including both parent firm and its several contractors, even if located offshores. The present report revolves around a computer manufacturing firm and the problems it is facing with some of its unethical suppliers. Accounting information assists users in making better and efficient decisions by considering financial aspects of the business. Financial information users can be internal or external. Description of major stakeholders and their requirements is enumerated as below: Suppliers Accounting Information allows suppliers to determine credibility of business. For this purpose they are required to assess liquidity position of business to know their working capital efficiency. The terms and conditions of credit are based on the financial status of the company, as it helps in analyzing their business position (Rodrigue, 2014). On the basis of this information they determine credit policy for trading transactions. Local communities Local communities are interested in accounting information so as to ensure that operational activities of business is ethical in order to protect the stakeholders interest. Considered information also helps in evaluating the tax returns reliability been filed on the behalf of business. For this purpose, they check financial statements and associated accounts. Customers Customers make use of accounting information in order to consider the business position and performance, especially, when they are involved for a long term, as it allows maintaining a balanced business source. For this purpose; they need information regarding growth in revenues and market based and same can be collected from the income statement. Employees Accounting information is required by employees to determine whether their job is secured or not (Collier, 2015). For this purpose; entire financial accounts are required by them with appropriate details and past records. This will assist them in determining future opportunities available to them as their growth is directly associated with the success of company. Shareholders Shareholders utilize accounting information for determining the profitability and feasibility of their investments. Also, accounting information allows them to consider the capability of the organization to pay out the dividends. It also helps in evaluating any approaches regarding the future. Proposed investors also need accounting information because they can consider the risks involved in investing and their returns (Cooper, 2017). Further, this information is significant to analyze the viability of investing in the organization, as they want to ensure either they can get an effective return on the investment before they offer financial resources to the organization. For this purpose, they need income statement, dividend provided by the company, payout ratios and overall value of the company as it will affect their revenue returns and capital value of investments. The supply chain of the company is illustrated below: The main stage where the social and environmental impacts are being triggered is the first stage in the companys supply chain, i.e. suppliers. The organization has been sourcing parts from China and Bangladesh as they are cheaper. The four impacts identified are listed below: Unsafe working conditions for the local staff of suppliers Low wages to the local staff of suppliers Physically demanding work Improper working hours and rest days All the above-mentioned impacts are socially detrimental. It is important for the organization to source its parts responsibly. In order to minimize such socially detrimental impacts, the company must strictly ask its suppliers to follow policies and have due diligence in place to ensure that the suppliers are producing the parts responsibly and ethically. Secondly, a diverse and ethical supply chain forms a critical component of the business. The company must collaborate with suppliers who share their goal of promoting a diverse manpower and seek vendors from different backgrounds (Jacobsen, 2011). Thirdly, supply chain transparency must be made imperative. The company should ask its suppliers to publish their sustainability report complying with all the standards on their website and annually update it. In addition to this, to ensure that the suppliers are implementing global standards and the companys policy commitments, the company must design capability building programs and man date all its suppliers to get involved in them. These programs are specially designed to enable the suppliers to surpass applicable global standards and rectify areas of concern, i.e. poor working conditions, low wage, and occupational safety (Dujon, Dillard and Brennan, 2013). Human trafficking, slavery and forced labor are the three major risks to supply chain ethics. It is very important to work with ethical suppliers, else a companys reputation can go for a toss. Primark is an example of how working with bad suppliers can have negative impacts on the business. Primark got embroiled in a controversy over the unfair treatment of sweatshop laborers in 2009 as the companys shareholders were preparing to celebrate strong profits. As per the study was done by War on Want charity, laborers making Primark clothes in Bangladesh were being paid so little that they were not even able to eat properly and were becoming malnourished (Hickman, 2009). They were working nearly 84 hours per week and were exposed to verbal threats. These workers were also banished from becoming part of a trade union. Moreover, an investigation done by BBC revealed that children as small as 11 were working for Indian suppliers of Primark. Though the company promised to reinforce its effort s to eliminate sweatshop labor, the evidences by War on Want suggested that improvements did not make any difference to the workers lives (McDougall, 2008). The parent company of Primark, Associated British Foods faced huge embarrassment because of the timing of this report. The company faced huge criticism in the wake of its record operating profits. Primarks customers reacted strongly to this news, and the fashion label came under heavy public scrutiny and negative light. The company ended up cutting ties with some of its very crucial suppliers due to heightening curiosity over its association with sweatshops (Hickman, 2009). Sustainability is required to be considered for making investment decisions to be ethical along with the consideration of profitability. The following concerns are covered under an accountants remit (Cheng, Green and Ko, 2014). Public and private sector accountants have an important role in promoting and decision making that assists companies to be more flexible. Thus for assisting in investment decision; the following process is required to be implemented by the accountant: Identify and implement opportunities, trends to the managements model, strategies and performance. Amalgamation of crucial normal and public issues of capital in the process of decision making. Considering the benefits of addressing issues regarding social and environmental like minimizing cost and increasing profits. Managing internal resources and procedures in order to certify what matters is measured and managed (Vesty, Oliver and Brooks, 2013). Connect both resources and strategies for value creation of stakeholders. Give reliability to data and information generated by efficient oversight and authority. Better communication and relationship must be maintained so as to guarantee transparency. The main elements of a sustainability project for the computer manufacturing company would be to introduce responsible sourcing, quarterly business reviews, sustainability reporting and transparency, Capability Building, Supplier Engagement and Evaluation program. The company must go beyond legislation to benefit from ethical supplier networks. It is likely that the shareholders may resist this sustainability project because such programs might demand an investment without the promise of a related return. Hence, there is a need to integrate the ESG (Environment and social governance) performance into shareholder value. Beginning with the fundamental cash flow valuation computation, there is a need to decide an organization specific discount rate (Nassos, 2014). A company which does not follow ESG frameworks is likely to have a lower stock and resultantly a higher discount rate. On the other hand, a company following attractive ESG frameworks will be trading at a premium with the incr ease in institutional demand. This will then be reflected in a low discount rate. Now the company requires a methodology for relating its cost of capital to its ESG performance. When the companys management comprehends how ESG programs can impact its stock prices, it enables them to make efficient investment decisions. The senior management could be faced with a decision to invest in sustainability for improving some process. This might not lead to an acceptable ROI or IRR. However, the consequent rise in stock price displays a different and precise image of the shareholder value if the initiatives lead to a better perception of the companys efforts to work toward sustainability (Muldavin, 2010). Conclusion With the world cracking down on immoral and unethical supply chains, companies that can exhibit transparency and provide guarantee that there are no cases of environmentally and/or socially detrimental impacts in their supply chains are likely to pull ahead. References Cheng, M.M., Green, W.J. and Ko, J.C.W., 2014. The impact of strategic relevance and assurance of sustainability indicators on investors' decisions.Auditing: A Journal of Practice Theory,34(1), pp.131-162. Collier, P.M., 2015.Accounting for managers: Interpreting accounting information for decision making. John Wiley Sons. Cooper, S., 2017.Corporate social performance: A stakeholder approach. Taylor Francis. Dujon, V., Dillard, J. and Brennan, E., 2013. Social Sustainability: A Multilevel Approach to Social Inclusion. Routledge. Hickman, M., 2009. Primark faces new claims that it uses sweatshop labor. [Online]. Available through: https://www.independent.co.uk/news/business/news/primark-faces-new-claims-that-it-uses-sweatshop-labor-1833843.html. [Accessed on 21st August 2017]. Jacobsen, J., 2011. Sustainable Business and Industry: Designing and Operating for Social and Environmental Responsibility. ASQ Quality Press. McDougall, D., 2008. The hidden face of Primark fashion. The Guardian. [Online]. June 21st. Available through: https://www.theguardian.com/world/2008/jun/22/india.humanrights. [Accessed on 21st August 2017]. Muldavin, S., 2010. Value Beyond Cost Savings: How to Underwrite Sustainable Properties. Green Building FC. Nassos, G., 2014. How sustainability improves shareholder value. [Online]. Available through: https://www.greenbiz.com/blog/2014/09/11/how-sustainability-improves-shareholder-value. [Accessed on 21st August 2017]. Rodrigue, M., 2014. Contrasting realities: corporate environmental disclosure and stakeholder-released information.Accounting, Auditing Accountability Journal,27(1), pp.119-149. Vesty, G., Oliver, J. and Brooks, A., 2013. Incorporating sustainability impacts in capital investment decisions: Survey evidence.Melbourne: CPA Australia.