If public confidence in the integrity of audit reports is damaged, their value is lost. More than half saw prosecution as the ultimate weapon to put accountability at the top of the board meeting agenda. For any organization, the issue of organizational management hinges on the ability to measure performance and then evaluate and report on that performance.
Although Solomons proposes this model, which appears to provide a reasonable method for reporting on the effects of an organization's activities on its external environment, he does not provide any suggestions about the actual measurement of external costs and benefits. Such measurement is much more problematic and this is one of the main problems of any form of social accounting: the fact that measuring effects outside the organization is extremely difficult. They identify four components of the Balanced Scorecard, each of which is equally important and each has associated objectives and measures.
The scorecard outcomes and performance drivers should measure those factors that create competitive advantage and breakthroughs for an organization." The overarching goal of the balanced scorecard is to achieve both short-term and long-term financial success and in fact competes with other more explicit shareholder value-based approaches as a method of enabling businesses to achieve this.
The environmental audit
Shareholders and customers are thus two specific stakeholders mentioned in the balanced scorecard. But the focus on innovation and learning and on continuous improvement will also indicate that the need for employee development and supplier relations should be incorporated into the internal-business-process perspective (as discussed in 1996). The existence or potential for implementation of environmental management procedures Such an audit will require a detailed understanding of an organization's processes and will therefore be detailed and cannot be performed only by the organization's auditors.
It will also involve other specialists and managers within the organization who will need to pool their knowledge and expertise to reach a full understanding. Indeed, one of the characteristics of environmental accounting is that its operation depends to a significant extent on the cooperation of the various technical and management specialists within the organization, such an accounting cannot be undertaken by the accountants alone. The purpose of such an audit is firstly to gain an understanding of the effects of organizational activity and then to be able to allocate costs to such activity.
It should also enable the organization's managers to consider alternative ways of performing the various activities comprising the organization's operational processes, and to consider and assess the cost implications as well as the benefits of performing such processes differently. Such an audit will probably necessitate the collection of information that has not previously been collected by the organization, although it may well exist somewhere within. A complete environmental audit is a detailed and time-consuming operation, but there is no need for such an exercise to be carried out as one operation.
The way to approach this is therefore to extend the normal routines of the organization to include a consideration, and quantification, of environmental effects on an ongoing basis. However, it is important to recognize that such an environmental audit, although the essential starting point for the development of such accounting and reporting, should not be viewed as a discrete isolated event in the development process. Environmental auditing should be carried out on a recurring basis, just like financial or systems auditing, to both review progress through a comparative analysis and to identify where further improvement can be made in light of progress to date and changing operational procedures .
The Measurement of Performance
Performance in itself is not absolute but rather comparative and when evaluating performance it is essential to be able to evaluate comparatively in the nature of "better than expected", "worse than the competition". Performance cannot be assessed other than in these terms, so a quantitative approach to performance evaluation is essential, even if some aspects of performance are qualitative in nature. Therefore, it is imperative that measurement is an integral part of performance evaluation, and it is necessary to determine what needs to be measured in order to evaluate performance.
However, it is argued that appropriate measures cannot be chosen until the purpose of the evaluation is determined. It is therefore again demonstrated that the basis of performance measurement is the identification of the reasons for the evaluation of performance, and this must now be considered. It is clear from the evaluation of the literature, and a consideration of actual practice, that the evaluation of performance is done for several reasons.
The Evaluation of Performance
However, part of the semiotics of corporate reporting is that managers have the opportunity to direct the provision of information in such a way that all stakeholders can be satisfied, both with the information received and with the performance of the organization. An important factor in performance evaluation is the concept of sustainability of performance. It is therefore important that all stakeholders can identify, or at least predict, not only current performance, but also its consequences for the future.
The appropriate measures developed through this proposed framework are likely to facilitate a better projection of the sustainability of performance levels and the future impact of current performance. This is because addressing the needs of all stakeholders is likely to reveal factors that will have an impact on future performance and that cannot be considered if a more traditional approach to performance evaluation has been taken. An example could be the extent to which raw materials from renewable resources have recently become significant to many industries, but have not been considered at all by any stakeholders of an organization other than community and environmental pressure groups until recently.
Multi-dimensional performance management
Conclusions
These effects are based on the adoption of social and environmental accounting principles, but these principles must be translated into action, in terms of the organization's accounting and reporting systems.
Further reading
Self-test questions
Globalisation and CSR
- Introduction
- Globalisation
- How Globalisation Affects CSR
- Globalisation, Corporate Failures and CSR
- Is Globalisation an opportunity or threat for CSR?
- Conclusion
- References
- Further Reading
- Self-test Questions
One of the most striking manifestations of globalization is the use of new technologies. Technology is also one of the most important tools for competition and the quality of goods and services. One of the reasons is that international/multinational companies have subsidiaries, partners and agencies in different countries.
Previous global crises have also shown that one of the reasons for the crisis is unregulated markets. But the answer to this question applies not only to the last quarter of the 20th century, but also to previous centuries. More recently, Friedman has paid attention to the moral impact of economic growth and development of society.
One of the main reasons is that we do not take into account the moral, ethical and social aspects of this process. This not only has to do with the company's profit, but also with the social and environmental performance of the company. One of the reasons for this result is the increasing competition between the company and the market.
The concern is that the social responsibility implication of the company cannot be controlled by legal means. It is the only social contract between managers and society and stakeholders of the company and for responsible and accountable behavior. It is clear that globalization has different effects on the social responsibility of the company and the behavior of managers.
Furthermore, implementation of CSR is one of the most important issues for globalized economies and markets. The customer's purchase decision is not only related to price and quality, but also based on a consideration of the company's social behavior.
CSR in not for profit organisations
- Introduction
- Distinguishing features of sector
- Types of NFP organisation
- Motivation for NFP’s
- Implications for managers
- Available resources
- Structure of a charity
- Accounting issues
- CSR issues in NFPs
- Conclusions
- References
- Further reading
- Self-test questions
There is a growing movement within the non-profit and non-government sectors to define themselves in a more constructive, accurate way. The first thing to remember about this sector is that there is no profit motive and decisions must be made based on different criteria. Furthermore, there is normally a disconnect between the acquisition of resources and their use – in other words, the money to provide the services does not normally come from the recipient of those services.
Thus, there is a concern for optimizing the utilization and distribution of inevitably scarce and finite resources. Because there is no profit motive, then this way of motivating managers and rewarding them for their performance does not exist and alternatives must be sought. In an NPO there is no client and the beneficiaries of the service do not pay (or at least not the full cost) for the service received.
There is considerable uncertainty about the availability of resources and this makes planning particularly difficult. Then, as we have already hinted at, there is the fact that service delivery is not valued by its beneficiaries, who do not pay to receive it. NFPs - at least in theory - are not in competition with each other: this is true in terms of aid to beneficiaries, but there is an element of competition in purchasing resources.
So there is a long-term period for expenditure but a short-term period for income, which is problematic and a source of planning difficulties for many of these organisations. This can be problematic when the need for such money is complete and there is a surplus - it is difficult to use it for another purpose. For national contact points we can see that the focus is different and we need to consider this in terms of CSR implications.
Accountability is an even more important issue for this type of organization, and who it is accountable to can be very different. With this diverse set of stakeholder groupings, all of whom have a significant interest in the organization and its activity, there is naturally a great need for transparency, and all such organizations will strive for this.