Social Accountability in Accounting Public Goods

Question: Discuss about theSocial Accountability in Accounting for Public Goods. Answer: Introduction Social accounting is a modern concept that is gaining interests from the researchers all across the world. Social accountability is a term that is used for the process when the society plays an important role in improving the accountability of the government or the organisations. As per World Bank (2006), social accountability is a strategy that is used by civilians for building accountability or holding the social organisation or government accountable. Retaining the comparative benefit of the state over the market in terms of basic necessities, public goods, products and natural monopolies is the main features of social accounting that needs development and long-term planning (Darus et al., 2016). The present report aims to understand the concept of social accountability in accounting. For this purpose, the report will analyse the operations of one organisations based in Australia and the prevailing social issues in accounting. Moreover, the report will also examine the environmental related issues of the company in detail and evaluate its impact on various stakeholders. In addition to this, specific recommendations will also be provided in the report for the organisations which can be used by the organisation to deal with the issues. The company that will be studied in this report include Energy Australia because the company is among the highest polluters in Australia and is socially accountable (Om, 2015). Brief Introduction about Energy Australia The first company that will be analysed in terms of social and environmental accountability is Energy Australia. Energy Australia formerly known as TRUenergy is an Australia based company that deals in energy sector (Energy Australia, 2016). Energy Australia was founded in the year 1995 and at present it is one of the largest energy companies in Australia. Energy Australia operated as TRUenergy initially from the amalgamation of generation assets and retail which were bought from CLP Group and Singapore Power. The headquarters of Energy Australia is in Melbourne and the company invest in wide range of projects related to solar energy, wind and gas across Australia (Energy Australia, 2016). In the year 2011, the retail business of Energy Australia along with its name was sold to TRUenergy since then TRUenergy is operating as Energy Australia. Corporate Governance The company claims that it is committed to the governance at highest level and also attempt to cultivate and promote a culture those rewards and values ideal standards of ethics, personal and professional integrity and respect for others (Energy Australia, 2016). The company also provides in depth information regarding the environment, community and operations for the key stakeholders and the local communities. Energy Australia believes that long term value can be created by high quality governance. The Role of Management and Board in Energy Australia The Board of Directors in the company helps in managing the company and also examines the corporate governance system of the company. Board of Directors helps in examining and approving the industrial, financial and strategic plans of the company. They are also liable for assessing the adequacy of administrative, organisational and general accounting of the company. Assessment of the overall management trends is also one of the major roles of Board of Directors. In Energy Australia, Board of Directors is committed to fulfil all the above mentioned roles and they also periodically compare the achieved results with planned results. Along with this, Board of Directors in Energy Australia also provides information on corporate governance in the annual report of the company. Board of Directors in the organisation approve budgets and also review the performance against the performance indicators. In addition to this, they also ensure that the policies of the company are in compliance with the standards. Composition of Board of Directors Catherine Tanna is the new Managing Director of Energy Australia since 2014 (Energy Australia, 2014). It is evident that right group of people are required in Board with adequate mix of skills and experiences to be effective. A bard with diverse range of skill set and experience will be less likely to make wrong decisions rather they would effective respond to the challenges faced by the organisation. If the Board has right skill set of legal, accounting, finance, strategic expertise along with risk management and experience with dynamics of fundraising it means right and balance of people are present. Code of Business Conduct and Right of Stakeholders The Board is responsible to periodically review the business conduct and operations. It is the prime responsibility of Board of Directors to ensure that the standards set for business conduct are met and also reflect the values and objectives of Energy Australia. Along with this, Boards also ensures that every employee in the organisation along with the management teams know that they are expected to perform high and deliver effective results in compliance with ethical standards (Energy Australia1, 2016). The code of business conduct of Energy Australia provides a guideline for all of its employees to behave honestly and function in a right manner. Code of conduct also guides employees to treat other people in a fair manner and respect their diversity. It provides employees to communicate openly and accept accountability along with obeying all the laws (Energy Australia1, 2016). Energy Australia understands that by prioritising the customers, leading change and doing right thing the company can build a strong reputation and set it as a world class energy retailer. Issues with Corporate Social Responsibility of Energy Australia Social accounting is also known as corporate social reporting of social and environment accounting that helps in understanding the impact of government and organisations on the society and the environment (Dimitriades, 2007). Social accounting generally seeks to engage all the stakeholders in the process of measuring environmental and social performance to accomplish improvement. It is a tool that can be used by the organisations in accomplishing continuous improvement (King, Owusu and Braimah, 2013). Energy Australia serves about 1.7 million customers across the nation and fulfils the energy requirement of over 2.5 million accounts. The ultimate goal of the company is to maintain safety of the people. The company also claims that it is making investment in the environment safety to produce electricity by renewable energy (Appendix 1). The company also developed a sustainability framework that creates value for all the stakeholders (Appendix 2). According to a report Energy Australia is one of the greatest producers of pollution in Australia that results from greenhouse gases. As per the data collected by Om (2015), Yallourn coal-fired power station owned by Energy Australia is responsible for large quantity of pollution and is the worst offender in Australia with pollution of about 20.8 million tonnes of toxic gases which is equivalent to CO2. According to Carbon Monitoring for Action (2016), it is estimated that Yallourn Power Station burns large amount of coal which resulted in emission of approximately 10.6 million tonnes of greenhouse gases in 2004. In addition to this, it is also investigated that in the year 2009 more than 10.7 tonnes of CO2 was emitted by the power station which is estimated to rise or remain stable in the future (Carbon Monitoring for Action, 2016). According to IBISWorld (2015), the total revenue generated by Energy Australia is approximately $7,756,000,000 which includes sales and other revenues. In addition to this, Energy Australia is also involved in number of scandals that affects society and the environment. As per the Market Forces report (2015), Energy Australia along with AGL and Origin are the top three energy companies in Australia which are reported to produce and sell electricity from dirty power. Getup (2016) reported that the three companies are using dirty tactics to manipulate the energy market and con the customers. The three companies uses filthy strategies therefore, the companies together are termed as the Dirty Three. The Dirty Three are responsible for emitting a significant amount of carbon dioxide along with other toxic air pollutants in the air. It is evident that coal-fired power stations emit fine particle pollution that has a devastating health effects on humans (Business Spectator, 2015). Moreover, it is also revealed by Hewson (2015), that the Dirty Three is found to oppose Renewable Energy Target (RET) policy for cutting the prices of power for the consumers. On the other hand 9 out of 10 Australians in a survey revealed that they are in support of RET and wants to change to clean and sustainable energy from dirty power (Taylor, 2014). The Dirty three claims that they support renewable energy however, these three companies emits a significant amount of carbon dioxide that results in climate change and also poses a threat to the environment (Market Forces, 2015). It is explored that between 2013 and 2014 the total carbon emitted by Energy Australia was 40,000,000 tonnes which is approximately 7.5% of the total carbon emission in Australia. It is also reported that the toxic emissions from the power stations of Energy Australia and Origin Australia has increased by more than 500% in 2015 as compared to toxic emission in 2014 (Market Forces, 2015). According to Zelman (2011), air pollution that is emitted by coal plants or coal-fired power plants is extremely toxic which affects the health of human beings. The air pollution generated from these coal-fired power plants causes strokes, premature death, heart attack, lung cancer and birth defects (Zelman, 2011). Furthermore, the Dirty Three are also responsible for emitting more than 37% of hydrochloric acid (Market Forces, 2015). It is found that out of the total electricity produced by the company 86% of the electricity is produced from coal, 13% is generated from gas and only 1.96% is produced from renewable. Moreover, the Mount Piper plant of Energy Australia is ranked second in terms of emission of hydrochloric acid (Delta Electricity, 2009). The data collected from Market Forces report (2015) shows that between 2012 and 2013, Energy Australias total toxic pollution emission was 20.95 million kg which increased by 530% in next year. The recent report of NPI depicts that two of the coal-fired power stations of Energy Australia including Wallerawang and Mount Piper have increased toxic emission at a significant level emit more than 5,600 tonnes of toxic in the air between 2013 and 2014 (Market Forces, 2015). Along with this, Yallourn power station plant of Energy Australia is the second highest toxic particulate matter emitter in Australia. All the six plants of the company reported a total of 130,871,357 million toxic in the environment (NPI, 2014). Discrimination and Harassment It is also evident that there are cases of harassment and ill-treatment with the employees in Energy Australia. According to Farnsworth (2013) Kate Shea who was one of the top executives in the company files a sexual harassment case against her fellow executive. Shea stated that she was a great performer in the organization for almost five years before she was dismissed cruelly on a negative note. She exclaimed that there is a culture of overlooking the cases of sexual harassment in the company and Mr. McIndoe the managing director of the company also harass its staff (Farnsworth, 2013). This shows that the employees in the company are not treated in a fair manner and are sexually harassed. Increased Price of Electricity Energy Australia has announced that the company will increase the electricity bill by $22 on a monthly basis or $260 per year (ABC News1, 2016). This is concerning issue for the consumers and the society because increased prices of electricity will affect their lifestyle. The people below the poverty line and lower middle class people are not able to afford high prices of electricity. Impact on Stakeholders It is identified that the environmental threat that an organisation poses on the ecology also affects its stakeholders in many ways. The air pollution emitted by coal-fired power stations has the physiological affect on the behaviour of the workforce which ultimately affects the performance of the employees. It has been surveyed that level of glucose and oxygen is affected by air pollution that influences the self-control and it can also lead to psychological conditions such as feeling anxiety, insomnia and depression (Zelman, 2011). Moreover, it is also identified that air pollution causes by coal-fired power plants are associated with several health problems including lung disease, infant deaths and asthma (Penney, Bell and Balbus, 2009). Other than this, the air pollution causes global warming which impact the environment and also affects the reputation of the company. As observed from a survey above, 9 out of 10 respondents want to switch to renewable energy. It is also explored that consumers concern regarding the environmental issues is rising on a continuous basis, therefore; they look for the products which are eco-friendly. Thus, a company that has a negative impact on the environment and causes immense air pollution will have a negative impact on the consumers (Cunningham et al., 2014). This in turn will influence consumers to switch to other brands that provide environment friendly products and services. This means that in long term the company may see downfall and may lose its reputation. Recommendations The organisation must take necessary steps to decrease toxic emission in the environment. For this purpose, using natural resources and advance technology can be helpful in less toxic emission. Other than this, the negative effects of air pollution on the behaviour of the employees can be mitigated when the organisation supports and shows concern for their employees. Strict government policies such as Clean Air Act are required to control toxic air pollutants (Matt, 2016). Using renewable energy for producing electricity can help the company in gaining recognition and people will be attracted towards the company forming positive attitude. The purchase of product is increased from a company that operates in an environment friendly manner. Conclusion From the overall discussion it has been identified that at present organisation needs to be socially accountable for their operations that influence the environment and the society. Being socially accountable can help the organisations in many ways such as providing profitability in the business, increasing sales and also established the brand name of the organisation. Moreover, the selected company namely Energy Australia must adopt different strategies in order to sustain in the market such as using renewable resources, lowering the emission of toxic pollutants in air by using advance technology. This will help the organisations in accomplishing a significant position in the market and making huge profits. References ABC News. 2016. AGL Macquarie fined over pollution incident. [Online]. Available at: https://www.abc.net.au/news/2016-01-09/agl-macquarie-fined-over-pollution-incident/7077864 [Accessed on: 14 September 2016]. ABC News1. 2016. Energy Australia announces electricity price hike for South Australian customers. . [Online]. 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