The survey intends to assess this relationship and how it impacts on business performances. There have been numerous studies on relationships between financial and social performances, but none of the studies provides findings on the importance of disclosures. According to the study, annual reports and accounts disclosures are sufficient elements that should be considered in social performance measurements. The significance of the survey is further explained by the fact that social reports and disclosures are only made by large firms with no audit records. This implies biasness in such reports; hence they are not sufficient tools to assess business performances. The report focuses on the element of environmental performance as an external measure in indicating and assessing corporate performance and its significance in the business assessment criteria.
Importance of the study.
Surveys conducted on business assessments reveal that most of the financial and annual disclosure reports, in many companies, are formulated by the management. The reports are never audited, and this may imply that they are not sufficient in measuring performance. The point of concern is the impact measurement on social responsibility in a sustainable environment. This leads to the question on the importance of implementing social responsibilities in financial reports. The survey is crucial since, in most cases, the social responsibilities of corporate are ignored and not considered as measures of performances. Such costs should be disclosed in financial reports so that some businesses do not look like high performers yet they do not implement the SCR principals.
10 aspects on the usefulness of the research.
One thing that makes the research appealing is the fact that it touches on all business aspects. The survey does not discriminate large, or a small enterprise rather emphasizes on the need for corporate responsibility and the need for sufficient account disclosures. Secondly, the research focuses on the need of society recognition in business performance. The survey promotes the need to get back to this society and provide some positive feedback on sustaining the environment. Thirdly, the research provides examples of empirical studies and gives the importance of the positive relationship between environment and financial performance and the impacts of social responsibility in measuring performance. Fourthly, the study supports the relevance of environmental performance in making investment decisions.
In addition, the research suggests the importance of Council on Economic Priorities (CEP). It reveals that CEP data is crucial in making investment decisions. The seventh point is on the revelation there lacks significant relationship on annual reports contents and actual performance on environment, as per the reports submitted in CEP. There are extremely associations found between annual disclosures, and performance ratings and the survey provides the reasons on the weaknesses. Further, the research finds out why annual reports may not be reliable in making decisions on investments. Lastly, the research interests further research on the importance of environmental disclosures in comparing performances between firms operating in a common industry.
Results of the survey.
The findings of the research were that voluntary disclosures on environmental contributions provide diversity in business backgrounds and make sufficient elements in comparing and evaluating environmental performance within an industry. The results indicated that environmental and CEP rankings show a positive correlation in firms within the same industry. This suggests that although there were consistent evaluations on environmental performance derived from annual reports, such evaluations lacked accuracy.
The results revealed that data reported in annual reports of the subjects lacked environmental performance detail. The results provided negative coefficients which indicated that, the worst environmental performers are rated as best financial performers and vice-versa. This proved the importance of environmental disclosures in financial reporting.
Ways to improve the study.
The sample size of the study was too small considering the many firms and industries in US. The study could have provided better results if the sample was collected in more industries. Secondly, the involvement of societies whose environmental conditions are affected could have provided better environmental assessments. Thirdly, more scientific tests could have provided more validity. For instance conducting a correlation test or a Pearson correlation could have tested the strength of association between the variables.
Using more statistical tests on the data could have improved on the quality of the results. The use of inferential analysis to provide the effects of the distribution of data and establish if there was a correlation between the variables could have improved the results. Lastly, the study the use of CEP rankings could have been scrapped off. There was no proof as to whether the data from CEP was accurate. Conducting a baseline survey on the rankings could have provided more reliable results.
Current requirements of SEC and FASB, regarding environmental disclosure
The SEC requires that companies should disclose their environmental conditions or breach of environmental laws, which are not subject of formal proceedings. In addition, general descriptions on possible environmental liability are considered insufficient to inform investors on the business position. SEC requires that if internal environmental policies are to be disclosed, then they must be accurate.
FASB requires disclosure of conditional assets and retirement obligations on environmental reports. FIN 47 requires focusing as to whether there is a legal obligation in incurring environmental costs and such should be accounted for in financial statements. Uncertainties like conditional asset maintenance and their fair values should also be accounted for as contingencies, in reports. Accrued costs on contaminated property should also be accounted for as environmental costs.
Accounting for environmental costs, by Richard Macve.
The paper analyses the importance of external reporting and the extent to which culture and management systems influence decision making. It emphasizes on the need for theoretical research and experiment on the ‘greening of accountancy’. A key factor in this paper is the impacts of the changes that businesses make and their effect on the environment. In general, the paper explores the roles suggested in reporting of environmental goals, policies and achievements.
Environmental Accounting: An Essential Component of Business, by Mehenna Yakhou and Vernon P. Dorweiler.
This paper emphasizes on generation of reports, procedures and standards for business regulatory purposes. It insists on environmental awareness in business reporting. Examining the integration of business and environmental policy is the objective of this research. The writers propose that environmental science law and regulation are crucial aspects that should be complemented in financial and risk management and control systems.
A comparison of the three papers.
The point clarified by the papers is that, financial reports are not sufficient if they do not disclose environmental costs. The papers absorb the input by SEC and FASB on improving accounts standards and on the need for validity of accounting and financial data. Joanne Rockness’ paper is more preferred since it provides practical assessment on environmental disclosure. The advantage of this survey, over the rest, is that it has provided tangible results, which disclose the difference in financial reports.
Marcve’s work is advantageous since it breaks down the basic concept of environmental accounting. This is complemented by Mehenna and Vernon’s report, which assists a researcher in understanding business accounting systems and accountability requirements in making corporate decisions. The three papers complement each other in that Marcve’s work provides a baseline for environmental accounting consideration, Vernon and Mehenna indicates its importance and Joanne provides a practical survey on the same.
