54 Accounting: Business Reporting for Decision Making
Chapter 2 preview
‘You and I, and our government must avoid the impulse to live only for today, plundering, for our own
ease and convenience, the precious resources of tomorrow.’ (Dwight D Eisenhower 1961)
In the previous chapter you were introduced to the accounting process, the different types of accounting
and the important role accounting plays in helping businesses plan and thrive in a global economy. The global
economy has as its foundation many rules and regulations. The previous chapter introduced you to some of
these rules and regulations in the Australian and New Zealand context. These regulations are changed and
updated often as cultural and societal expectations shift. It is important that accountants, as leaders in business,
are aware of how political and geostrategic themes impact on the business world. For example, financial mar-
kets are being profoundly influenced by environmental and social systems, so accountants today need to have
an increased awareness of this impact to ensure their decisions take full account of the world around them.
Climate change, greater competition for resources, the shortage of soil and water, demographic imbalances,
increased migration, increased techno-terrorism and transnational crime, swelling numbers of national and reli-
gious extremists and economic imbalances require new ways to think about efficiency and resource allocation.
This chapter provides a framework for reflecting on these issues.
2.1 Business sustainability, drivers, principles
and theories
LEARNING OBJECTIVE 2.1 Describe business sustainability, outline its key drivers and principles and
compare key theories in the area.
Generally, a growing environmental and societal awareness has put pressure on entities to consider their
non-financial impact. More specifically, entities need to account for all resources used (labour, material,
energy, forests, water, air, etc.) and all outputs produced (whether products/services, carbon emissions,
waste, etc.). To cope with this expectation, new frameworks and techniques are being developed and
adopted under an overarching theme of business sustainability. But what is business sustainability?
An often cited definition of sustainability was that put forward by Brundtland (1987):
Sustainable development is development that meets the needs of the present without compromising the
ability of future generations to meet their own needs. It contains within it two key concepts: the con-
cept of needs, in particular the essential needs of the world’s poor, to which overriding priority should
be given; and the idea of limitations imposed by the state of technology and social organisation on the
environment’s ability to meet present and future needs.Many reasons have been put forward on the need for a focus on sustainability. Ceres (2010) suggests
there are four key drivers of sustainability. These are outlined in figure 2.1.
Competition for resources
The world’s population is projected to increase to more than 9 billion people by 2050. Rising living
standards will result in both expanded markets for goods and services and unprecedented demands
on the planet’s natural resources. Many of the resources once considered renewable — like forests
and fresh water — have become finite when we consider that human demands are growing more
quickly than the ability of natural processes to replenish them. While exhaustion of commodities can
be monitored and measured, the impact of depletion on ecosystems is harder to gauge and often
impossible to remedy. With resource depletion comes risk of conflict as people struggle to meet their
basic needs. Take water — population growth, economic development and climate change are straining
access to fresh water globally. By 2025, two-thirds of the world’s population will live in water-stressed
countries, posing significant risks to the economic and social stability of entire regions and to the
corporate operations in those regions.