ACFI 2208 Performance Measurement in Organisations Assignment

Answers:

Introduction

This report examines the comparison of sustainability reporting in government institutions, private organizations and non-government institutions. Examples will be illustrated from Bank of England, John Lewis Partnership and Care for children– a Non-Government Organization. A deep analysis has been administered to illustrate how the book-keeping is done with regards to NGOs.

To appreciate the relationship of terminologies adopted in the context of discussion, ‘it is important to have a vivid definition of the mentioned lingos’ (De, D.V.C., 2014, p.4). Sustainability is defined as ‘the process of ensuring that depletion of resources is mitigated at the onset, growing a society that is environmentally self-centered by providing a long-term ecological assurance’ (Zvezdov, D., 2017). Similarly, accounting is defined as ‘a process that involves a précised way of describing business transactions through analysis and reports’ (Callahan, K.R., Stetz, G.S. & Brooks, L.M., 2007, p.68). Adjoin of the two terms can be used to comprehensively describe the matter at hand as; the process of describing the transactions of a firm, through analysis and reports in a manner that shows the firm’s position too long term ecological assurance. Other intellectuals have defined it as, ‘the way financial experts express the dealings of a company in a social environmental oriented manner’ (D. Bent & J. Richardson, 2003, p.6).

The reporting framework strives to ensure that firms are not only money minded but with a public interest of solving their problems. Derived from its origin about 20 years ago, it was introduced under the performance disclosure of non-monetary information. The environmental interest bore, the Global Reporting Initiative (GRI), an organization reputable in instigating standards for businesses and government institutions in their corporate reporting, on ways that they ensure there is environmental value add and having their stance to social-environmental issues; climate, anti- corruption, anti-bribery, human rights, corporate social responsibility known to the public. The United States o

The drivers of actualizing the accountability and reporting with the spectrum of sustainability differ from the public and private sector. In 2005, the GRI introduced sustainability reporting for the public institutions. As for public sector, it’s more of an influence on the government, pivoted by pressures from multinational agreements, political agendas, trading negotiations etc. For instance, a government institution that receives funds in terms of an aid may be required by the donating organization to rate for their sustainability performance.

Evaluation of eco-friendly, communal and governance performance of firms, by utilizing their capital resources to create long-term value is considered as the main objective of the reporting standards. The framework entails five key strategic milestones that companies should disclose in order to be considered as a social environ sustainable firm. The five strategic pillars or performance indicators include; Environment, Social Investment, Human Capital, Business Model and Innovations, Corporate Governance.

Environment

‘The reporting on the environs has been mostly emphasized by national governments’ (Wikipedia, 2017). Natural resources and climate changes have been the main concern when it comes to evaluating and reporting performance. The reporting entails how the organization has strived to preserve the environment for a better climate change geared towards having a brighter future. As for most institutions, the environmental performance is catered at the Corporate Social Responsibility Section.

For instance, Bank of England 2016 financials, describe how they contribute towards sustaining United Kingdom’s Environment. In fact, they use the term ‘protect the environment’ (Bank of England, 2016, p.63). The Bank describes its strategic commitment to minimizing negative impact to the environment, by optimizing the available natural resources at a minimal consumption rate and managing their waste. In 2016, the bank key strategies were the usage of Building Management Systems that are used to control the building services as; lighting, air conditioning etc., energy saver bulbs, environmental cleaning services, recycling and waste management and disposal of banknotes in agriculture. Another example, John Lewis private partnership whose expertise in on online selling, illustrates its stance towards environmental sustainability in their financial reports. In their audited financial report of 2016, they reported the use of Greenhouse Gas protocol as a key milestone in reducing carbon emissions. In addition, the reported to have diverted 98% of their waste from landfill through innovations of recyclable packing materials for the Waitrose shops. Non-Governmental Organizations (NGOs), are known as advocates of environmental sustainability. There are fully fledged organizations that deal with environmental sustainability, likes of, FSD which has trained over 500 institutions and funded projects through the planting of seeds. The United Nations has also grown its objective in diverse areas of the world. United Nations. Organizations such as clean seas, Wild for Life, Green Economy, and Geo are seen as amongst the frontiers of environmental sustainability.

Social Capital

Organizations also should evaluate their performance related to their role of business contribution in improving the economy of the environs they operate in. This involves voluntary workshops, charity participations, supply chain management, tax contributions amongst others. As for public institutions, the delivery of products and services is sensitive to quality and quantity. Using Bank of England as an example, the Bank is known for its support towards the community. The Bank reports its milestones on encouraging its staff in participating in community initiatives as such as volunteering and charitable giving. In 2016 audit report, the Bank discloses that it offers allowances to its employees to perform voluntary duties. ‘The Bank travel costs for volunteers and charitable events stood at 405 thousand Euros in the financial year 2015, 2016’ (Bank of England, 2016, p.61). In addition, the bank engages college students through internships. ‘In the financial year 2015/2016, the bank recruited up to 150 students’ (Bank of England, 2016, p.62). Training offerings are part of sustainability development and the costs accrued by organizations are accounted as social capital. For instance, the Bank of England conducts free training to developing countries with an aim of uplifting the knowledge sphere within those countries. Supply chain management is also a vital subject related to social capital. Companies are seen to ask for sustainability compliance before commissioning tenders. Another illustration is shown vivid in John Lewis Partnership’s reporting on charitable activities. The partnership introduced a golden jubilee trust, - a volunteer that offers the society education, care and extends it to environmental protection. ‘The company has used 12.2 million euros in its communities related to cash, time, and management costs’ (John L., 2016, p.45). In NGOs, their projects are primarily driven by social endeavors. As an example of child hope organization, whose vision is to see children transformed from organizational care to their own families reported how they used the donated funds to better the community.

Employment

Employment is another key pillar when reporting on sustainability. The reporting should entail the number of employees, types of contracts catered by the employer, their stance on gender equality and how it’s deployed in the recruitment policy. Benefits rendered to staff, leave management etc. Most organizations report on how the account for their staff under a pillar named ‘our people’. For instance, Bank of England defines its people as the greatest asset it can account for’ (Bank of England, 2016, p.60). It denotes its success over its people, and how it offers conducive working environment. Training done to its employees is also mentioned. How it engages its employees on surveys to make the employer better and learning points is also reported as an area of concern. Diversity and inclusion form a key component of their reporting. Gender equality is reported analytically. For instance, in 2016, ‘the female representation in the Bank was 28% compared to a target of 35%’ (Bank of England, 2016, p.62). John Lewis partnership illustrates their sustainability reporting on employment partners under ‘partner’s rights and responsibilities’ (John L, 2016, p.72). They report on the code of conduct governing the partnership, equal employment opportunities, its stance and contribution to human rights. In NGO’s the reporting is not inclined to how the organization handles employment, but rather how its employees contribute to the society. For instance, children for care reported on their employees’ attitude of their job. A family placement worker of the organization noted that he ‘is proud of working in the organization’ (Care for Children, 2016, p.16).

Occupational Health & Safety.

Health and safety are a matter of concern when it comes to business operations. In fact, it’s more of a risk management concern than a sustainability issue. In sustainability reporting, Occupational health & safety is reported as how employees operated in a specified reporting period. Injuries management, diseases, accidents and emergencies, risk training programs are reported. The Bank of England reported that ‘it attaches the utmost importance to its staff well-being and it further noted that the number of accidents that happened in the year was 20’ (Bank of England, 2016, p.60). Private entities also report on their employees’ safety, the risk measures they undertake to ensure that their employees operate in the conducive environment. John Lewis Partnership as a reference reported that ‘it has an audit and risk committee that provides oversight of health and safety’ (John L., 2016, p.89). NGO’s, on the other hand, do not report on health and safety as an area of concern in their reporting. It is only done to NGOs that are related to health and safety services.

Risk Management

The reporting of how organizations optimize returns by minimizing business risks is a key pillar of sustainability reporting. Organizations report on their risk management governance structures and the process of risk management or approach to risk. The type of risk reporting is biased to the industry of the organization. The key main risks are however known strategic, operational, financial and compliance and regulatory. Risk Governance illustrates the overall responsibility of risk and how it trickles down to the organ structure and related stakeholders. Using Bank of England as an example, ‘risk is governed by the court, which is responsible for ensuring that the Bank at all times uses available resources in the most efficient way possible’ (Bank of England, 2016, p.47). This is similar to the Private organization as illustrated by John Lewis reporting, the partnership board is primarily the one responsible for risk mitigation’ (John L., 2016, p.59). As for NGOs risk management is reported from the client’s perspective rather that the organization reporting. For instance in Care for children reporting, ‘they reported that at all times they ensure that their orphans are protected from any inherent financial risks’ (Child Care, 2016, p.5.).

Product Responsibility

Stakeholders need to be informed about the products and services offered to them. Information on packaging, marketing or even privacy, compliance etc. The process of how products are developed or the manner in which services are delivered is reported. The products and services delivery performance is evaluated in regards to right products that are harmful free, efficiency in distribution, provision of customer satisfaction. In Non-Governmental Organizations, the deliverance of services is usually noted in the institution’s strategy. For instance, Care for children reported ‘its product responsibility in four forms i.e. partnering with the government, offering training in an expert manner, issuing of practical solutions and ensuring financial stability’ (Child Care, 2016, p.5.).

Sustainability reporting yield positive results in any organization. It ensures better governance, transparency within institutions and improvement in relation to the social economic environment.

Sustainability R For Care For Children- An NGO 

The organization is a charity that resides in Asia. It is a foundation that seeks to transform institutional children to having their own families. Founded by Robert and Elizabeth, the organization ensures partnerships with the Asian government to provide home care to disadvantaged children. Their milestone is driven by the upcoming and increasing orphanages within the Asian continent, merely due to unskilled countries. The organization reports on every financial year. Although its reporting is indifferent to other private/governmental institutions, it is partly in line with sustainability reporting. The analysis conducted on sustainability shows that it would score of 67.5% (above average). 

Sustainability Analysis

The first part of the reporting is an introductory reporting which caters for; a message from the founders, the core business – which is an explanation of why it was formed and how it strives to achieve its objectives. The organization strategy, what it does and its performance over time, and the upcoming projects. The next part of reporting involves the review of the past financial year, the organization also reports on the oncoming events for the coming year and finally, the accounting of finances obtained, with a detailed expenditure analysis, the board of trustees, and lastly the organization structure.

The key pillars of sustainability reporting are identified as direct or indirect i.e. environment, social responsibility, employment, occupational health & safety, risk management and product responsibilities.

The organization does not participate in projects that are directly related to conservation of the environment, as it is in partnership, companies, and government-owned entities. This is due to its core business is to ensure that children who are kept in orphanages are transformed into families. In its self-being a social responsibility and a service make it difficult to account for its steps towards conserving the environment e.g. recycling of material, saving of energy, emission effluents being a subject matter.

The foundation being a social – economic type of an organization, it plays a big role in reporting on social responsibility. On employment, it is more of a volunteer than a job. ‘Join us’ (Care for Children, 2016, p.1) is an indication that it does not choose the type of person they would want to join them. It also indicates the team members in its reporting. For instance, in the financial report, they indicated that the founders work together with the board of trustees in UK, Hong Kong, and the USA.

The other key pillar under social responsibility is training. The foundation has got teams within which training are disseminated across the Asian jurisdiction. They have even developed training hubs for mentorship, just to provide a clear picture of the mission and vision. ‘The training hubs are a vital sustainability agenda’ (Care for Children, 2016, p.3). They also empower generations to ensure that the future generation is not orphaned. In 2016, the foundation also reported that it ‘trained 291 people across 33 orphanages. The training resulted in over 5000 children being placed into families’ (Care for Children, 2016, p.13). In addition, it also reported its key milestone in conducting training in an online platform to cater for the world.

Again, this is not reported directly, from the financial report, it is vivid that health and safety are essential in their business as they envision to reduce the number of orphans without families. The presence of a health specialist on their board of trustees is an indication that the underlying topic is of the essence. This is alongside with risk management pillar as they do not specifically report on how they conduct risk management, but instead, they report that they strive to ensure that financial risks are mitigated. Disclosures on expenditure are thus reported in clear and precise manner. They report on the sources of funds, where to find their audited accounts, their expenditure, and a sum it up form of donations.

References

Bank of England, (2016) ‘Audited Financial Report 2016; sustainability reporting; environment’, p.60 -63

Bank of England, (2016) ‘Audited Financial Report 2016; sustainability reporting; social capital’, p.45 -47

Callahan, K.R., Stetz, G.S. & Brooks, L.M., (2007), ‘Project management accounting: Budgeting, tracking, and reporting costs and profitability’, Hoboken, NJ: J. Wiley. 

Care for child (2016), Annual Report 2016, sustainability reporting, p.1-19,

David Bent and Julie Richardson, (2003), ‘The Sigma Guidelines- Toolkit’ SIGMA Project, 389 Chiswick High Road, London, W4 4AL

De, D.V.C., (2014), ‘Special issue on sustainability accounting’, Bingley: Emerald.

John Lewis Partnership plc (2016), ‘Annual Report and Accounts 2016; sustainability reporting; social capital -’, p.45

John Lewis Partnership plc (2016), ‘Annual Report and Accounts 2016; sustainability reporting; social capital - volunteer’, p.72

John Lewis Partnership plc (2016), ‘Annual Report and Accounts 2016; sustainability reporting; social capital – risk management’, p.59

Sustainability. (n.d.). Dictionary.com Unabridged. Retrieved April 12, 2017 from Dictionary.com website https://www.dictionary.com/browse/sustainability

Tilt, C. A. (2007). ‘Corporate Responsibility Accounting and Accountants’. Idowu, Samuel O.; Leal Filho, Walter (Eds.), Professionals' Perspectives of Corporate Social

Wikipedia, (2017), ‘Corporate social responsibility’. Wikipedia. Available at: https://en.wikipedia.org/wiki/Corporate_social_responsibility [Accessed April 14, 2017].