A Broad Solution

As pre-determined, Toyota and NiSource are both socially responsible corporations participating in strategic CSR. Unfortunately, the transition toward both CSR and Strategic CSR are rather recent changes for most companies. Therefore, it is difficult to determine any trend regarding how financials for any one corporation may have been impacted by these transitions. It is evident however that most of the efforts are measurable in some way to a certain extent. Although these companies participate in strategic CSR, they do not solely participate in it; they also participate in CSR. Although this may be a benefit to different interest groups, it is not in the best interest of the shareholders or the company. Therefore, the ideal balance between intrinsic and extrinsic value is not being met.

Benefits of Strategic CSR & Social Accounting

Incorporating strategic social accounting into operations is beneficial in several different ways. It satisfies the informational demands of stakeholders, which can prove to be even more beneficial to companies through subsequent events such as word of mouth or investing. Due to the planning and implementation needs, a greater work force will be needed, which will increase the number of jobs available. Who knows, maybe someday an institution will even create a Bachelor of Arts in Social Accounting. The demand for businesses to have a social aspect is growing. Having the opportunity to incorporate social aspects strategically will allow for the maximization of benefits compared to waiting until there are regulations that require it and be unprepared. During the presentation of this project at the Honors Research Exhibition, someone questioned how something like this would impact their retirement. This would concern any investor. However, adding strategy to operations to include a social aspect is what distinguishes historical CSR from this. It turns an expense into a long-term investment. It’s pulling away from philanthropy that responds to social issues that don’t concern the businesses and moving towards preventing social issues that will arise as a result of operating amongst other things.

Action Plan

How can a business approach incorporating a social aspect into the accounting department strategically? Well, there are different factors that need to be considered. The result will be different across industries and businesses. However, this is the responsibility of the entire firm as a collaborative effort, not just one department. There must be initiatives that require inter-department team work to successfully accomplish this. Prior to adopting strategic social accounting, a plan needs to be developed. The beginning of the plan design should answer the following questions:

What is the line of business
What does the business as a whole value
What societal impacts do current operations have and for whom (indirect and direct)
What actions are currently being taken to be socially responsible
Do current actions align with values
Do current actions address operating societal impacts
What actions do not align with values and/or operating societal impacts
How do current actions impact all stakeholders
Can societal impacts be measured
What is appropriate budget for a long-term investment in human capital, capital assets, etc. to incorporate a new plan

Once these questions are answered thoroughly, a plan can be developed. The plan should include the initial questions posed as well as how reporting will be done such as measurement standards, estimations, research, audit, etc. Some ways that could possibly accomplish this reporting is through:

Independent qualitative statements
- Example: Toyota creates sustainability, environmental, and neighbor statements
Separate financial statements for social impacts based on industry standards for certain values that are reasonably estimated with related disclosure notes that include the details behind the financial data, basis of estimates, etc.
- Example: A firm may sell med-packs for ambulances while transporting patients. Customers (ambulances) can report the number of med-packs used, the number of lives saved, the number of lives prolonged, and the number of deaths. The number of lives saved or prolonged add value while the number of deaths decreases value. They could measure it based off the price of the med-packs. It could be recognized in a social impacts statement of value (similar to income statement). The details could be disclosed in the notes.

The goal is to create shared value for all stakeholders. The concept of shared value recognizes that societal and economic needs define markets. Furthermore, it emphasizes the opportunities that arise for growth and innovation while improving social problems. Although social weaknesses create internal cost for businesses, addressing them doesn’t necessarily require costs to be raised. When participating in strategic CSR, shared value is created through operations and CSR being parallel, making it difficult to tell the difference between the two. Shared value, first introduce by Porter and Kramer, should identify a range of balances of benefits for the short- and long-term that ultimately can maximize efficiency. There’s no wrong or right way to do this; however, there are some ways that will be better than others. Like a production possibilities frontier, the goal is to achieve the highest attainable point that maximizes efficiency, which requires an ideal balance between different things as well as trade-offs. Strategic CSR will yield the highest benefit for all stakeholders. Social accounting is an evolved financial accounting that considers all stakeholders rather than shareholders (monetary interest holders).

CONCLUSION

The idea of CSR most distinctively started with Howard Bowen (1953) who focused on manager decision making and obligations to the larger society and not just those internal to the business. However, Bowen didn’t negate the fact the internal concerns are important. After Friedman, the focus seemed to change to focus more on internal concerns. The goal was to maximize shareholder wealth, which couldn’t be possible if companies were using their assets on social problems. Then, Freeman helped guide the focus back to general stakeholders. Then, Porter and Kramer stepped in and introduced the concept of strategic CSR and shared value. They held that value should be added throughout the value chain, and CSR should not focus on generic social issues since they were not relevant to the business. It brings reform to the operations level.

My conclusion is that they’re all right—to an extent. Business and social issues are all things to be concerned about; however, the extent to which a business should be concerned with what may not be so clear. A business should strive to maximize value (intrinsic and extrinsic), not merely profits, which shareholder theory promotes. Value can be shared by more than just shareholders. It can involve all stakeholders. But who are stakeholders? Everyone and everything are, which takes stakeholder theory to a different level. It’s not about the direct effects and interest holders. The collapse of Enron effected a lot more than those directly involved with the corporation, which proves that interest holders can go on to include everyone and everything to a certain extent. Value should be added at more than just the value chain. Value should be added throughout the value chain as well as through long-term investments; it is critical to consider the now and the later. The value that is added should benefit all stakeholders and the business and minimize costs to all, both intrinsic and extrinsic. Ultimately, this will lead to a maximization of efficiency and yield the highest attainable benefit for all stakeholders.

Social accounting is the way to consider all stakeholders in the most efficient way, hence incorporating strategic CSR into accounting. Social accounting is strategic CSR at the departmental level. CSR isn’t about compliance; it’s about being more than compliant; it’s about finding the appropriate balance that allows corporations to maximize profits while acting ethically and compliantly and promoting the lifespan of our natural finite resources through preservation and sustainability. Social accounting makes other stakeholders visible; they appear in statements (Quarter, n.d.). This is a multi-dimensional construct that needs to be understood by businesses. Creating shared value will ultimately be the most rewarding for all stakeholders, but it needs to start at the departmental level by incorporating social aspects into operations to parallel business functions. Eventually, the goal is to develop a simulation that will model the environment so that businesses can test different models of incorporating a social aspect into their business strategically.