INTERPRETING FINANCIAL STATEMENTS 95
performance and suggested a wider social responsibility for business andsocial
accounting.Conceptsofcorporate social accountingandsocially responsible account-
ing– most recently corporate social and environmental reporting (CSR) – attempt
to highlight the impact of organizations on society.
Jones (1995) suggested three reasons for this:
1 A moral imperative that business organizations were insufficiently aware of the
social consequences of their activities.
2 External pressure from government and pressure groups and the demand by
some institutional investors for ethical investments. This was linked to the role
of accounting in demonstrating how well organizations were fulfilling their
social contract, the implied contract between an organization and society.
3 Internal change taking place within organizations as a result of education etc.
However, there has been little support for broader social accounting because
accountants and managers have generally seen themselves as the agents of owners.
Social reporting could be seen as undermining the power of shareholders and the
foundation of the capitalist economic system. There are also technical difficulties
associated with social reporting, and a dominant belief among business leaders
that government and not business had the responsibility to determine what
was reported.
During the 1980s and 1990s environmental accounting (see for example Gray
et al., 1996) focused on responsibility for the natural environment and in particular
on sustainability as a result of concerns about ozone depletion, the greenhouse
effect and global warming. These concerns were associated with the growth of
pressure groups such as Greenpeace and Friends of the Earth. Part of the appeal
of environmental accounting was that issues of energy efficiency, recycling and
reductions in packaging had cost-saving potential and therefore profits and social
responsibility came to be seen as not necessarily mutually exclusive.
Zadek (1998) argued that social and ethical accounting, auditing and reporting
together provide one of the few practical mechanisms for companies to integrate
new patterns of civil accountability and governance with a business success model
focused on stakeholders and core non-financial as well as financial values. Socially
responsible businesses:
find the spaces in the pipeline between investors and consumers where some
choice in behaviour is possible...[and] a far more ambitious agenda of
shifting the basic boundaries by raising public awareness towards social
and environmental agendas, and supporting the emergence of new forms of
investors that take non-financial criteria into account. (p. 1439)A further example of how the boundaries of accounting are set in arguably
inappropriate ways by the rational-economic paradigm is in the exclusion of
intellectual capital from financial statements.