Accountability, Ethics and Sustainability of Organizations

Table of Contents

1. Frontmatter

2. Organizations Towards 2030: The Primary Interest of the Economic Entity

   1. Frontmatter

   2. Chapter 1. The Real Entity Theory and the Primary Interest of the Firm: Equilibrium Theory, Stakeholder Theory and Common Good Theory

      Emiliano Di Carlo

      Abstract

      According to the entity theory, the firm is a real person interested in survival and growth quantitatively and qualitatively. However, the literature is often vague and ambiguous for what concern the conditions to achieve for the survival and growth, as well as the modalities through which find the right compromise between continuity (or long-term profitability) and social function (or sociality) of the firm. This chapter wants to contribute to the theories that consider the firm as a real entity, proposing the concept of ‘primary interest of the firm’, which includes the conditions that allow firms to survive and grow, as well as to serve the common good of their stakeholders and society. The primary interest concept is multidimensional and derives from the intersection of three theories: equilibrium theory, stakeholder theory and common good theory.

   3. Chapter 2. The Incentives of a Common Good-Based CSR for SDG’s Achievement: The Importance of Mission Statement

      Cristina Quaranta, Emiliano Di Carlo

      Abstract

      The normative stakeholder theory is the most appealing approach for business in order to achieve the SDGs and an ethical corporate social responsibility (CSR). However, the incentives for managers to follow a normative rather than an instrumental approach to stakeholders’ management are unclear. Indeed, in both cases they have the duty to satisfy stakeholders’ interests (in the latter case with the aim to maximize profit, in the former with the awareness that stakeholders, as persons or groups, have needs and wants to be cared). The chapter would find out incentives for managers to implement an ethically driven CSR by linking the stakeholders’ normative concept to the common good from catholic social teaching (Argandoña 1998). Those incentives are intrinsic and transcendent needs to be satisfied together with the virtuous cycle generated by a business oriented to the common good. However, how could managers start orienting their business to the common good? Literature on mission statement gives the answer considering it as the main tool to spread ethics in business and orients firms to act in compliance with ethical principles.

   4. Chapter 3. SDGs Achievement: Commitment, Channels of Action and the Role of Integrated Reporting in the Disclosure Mechanisms

      Sandro Brunelli, Francesco Ranalli

      Abstract

      This chapter deals with the great challenge represented by the desirable achievement of Sustainable Development Goals (SDGs) by profit and non-profit organization. To do so, organizations should strive in individuating which channels, rather than others, could lead them to the success and how to report results achieved over time. The more recent literature has individuated two channels for success: the development of sustainable business models through strategic alliances and several important topics in the large field of Accounting for Sustainability (A4S). In the light of these pillars, the chapter proceeds first in illustrating successfully strategic alliances occurred around the world as positive patterns for further alliances. Then, using the lenses of sustainability, important issues such as Big Data and its governance, tax compliance, economic democracy and fair wages accounting will be dealt in order to prioritize actions organizations should take for the achievement of many SDGs. All actions required ask for effective disclosure mechanisms. Hence, we argue the need of suitable Integrated Reports not necessarily in the form of Integrated Reporting (IR) proposed by the International Integrated Reporting Committee (IIRC) able to outline input, processes, output and outcome as a result of commitment and channels used by organization for the SDGs achievement.

3. Financial Reporting, Non-financial Reporting and Sustainability: Challenges and Changes

   1. Frontmatter

   2. Chapter 4. Harmonization of Non-financial Reporting Regulation in Europe: A Study of the Transposition of the Directive 2014/95/EU

      Silvia Testarmata, Mirella Ciaburri, Fabio Fortuna, Silvia Sergiacomi

      Abstract

      This chapter deals with the new European Union Directive 2014/95 on non-financial and diversity information (NFI Directive). The aim of the study is to explore the transposition of the NFI Directive in the leading European countries to understand what and how non-financial information is reported and verify whether the flexibility given to Member States in the implementation of the NFI Directive has implied that individual national interests prevail on achieving the success of NFI disclosure harmonisation. The research method is a multiple case study on the transposition of the NFI Directive in France, Germany, Italy, Spain and the UK. The comparison of the transposition laws indicates significant differences shape company obligations at the country level; however it appears that the harmonisation of non-financial reporting regulation in Europe has generally enhanced the consistency, transparency and comparability of NFI disclosed by companies and has improved corporate accountability to a large extent.

   3. Chapter 5. Corporations’ Eco-Consciousness in the New Deal of Non-financial Information Disclosure System: Preliminary Evidence from Italian and French Practices

      Sandro Brunelli, Pascale Delvaille

      Abstract

      This chapter deals with the sensibility of selected Italian and French listed corporations toward climate change issues and related disclosure in the light of the recent transposition of Directive 95/2014 into the respective legislations. After briefly reviewing the path which has brought to the aforementioned directive and how Italy and France have transposed its contents, eight firms (four for each country) belonging to the most representative and comparable sectors of the two countries have been selected. Then, selected features related to their non-financial information dealing with climate change aspects have been analyzed using the method of content analysis. The results of this effort are an unweighted climate-related disclosure index, which allows us to resume the state of the art of firms’ eco-consciousness individually, at country level and in comparative terms. Evidence achieved suggests that the directive and its transposition have fostered higher attention to climate change aspects, especially in country with a poor tradition in disclosing non-financial information like Italy. On the other hand, the flexibility agreed by Directive and respective laws rise up questions regarding whether, to what extent and where information have to be disclosed in order to make possible effective comparisons. At last, the lack, until now, of any attempt to translate in monetary terms effects of climate-related behaviors and actions draws out doubts regarding the consistency of the overall efforts actors involved are spending to enhance the sensibility toward climate change and environmental issues.

   4. Chapter 6. The Role of Auditors to Improve Sustainability in Financial Reporting

      Chiara Carlino

      Abstract

      This chapter is aimed to discuss the role of auditors in the contemporary Era to assist the development of sustainable financial reporting. In a period affected by the consequences of the Global Financial Crisis, the survival of companies and their sustainable growth are primary goals. To this end, this chapter starts from the definition of Going Concern (GC) Assumption under academic and regulatory perspectives, to move on auditors’ assessment standards on this principle. Further, the focus is on the consequences for several categories of stakeholders when auditors issue a Going Concern Opinion (GCO). Following evidence from previous research on consequences of GCOs and the auditors’ role and function in financial reporting environment, there is the necessity to increase the assurance of sustainable reporting. The social audit pursues this effort but fails in practice due to the lack of detailed regulation on it. Therefore, there is the need to develop a specific framework on social audit and even more, on sustainability reporting.

4. The Relevance of Public Sector: New Pathways for Sustainable Accounting, Accountability and Performance

   1. Frontmatter

   2. Chapter 7. Value-Based Healthcare Paradigm for Healthcare Sustainability

      Camilla Falivena, Gabriele Palozzi

      Abstract

      Healthcare represents a paramount issue in the current debate around sustainability. Developing sustainable practices within health systems is fundamental not only to guarantee the right of care, but also to enhance the growth of a country. The widespread dissemination of innovation, on the one hand, could represent a way for providing a better service, in terms of quality and access. On the other hand, it is severely undermining the sustainability of health organisations due to high costs and magnitude on existing organisational arrangements. Among the various research strands aimed to identify theoretical framework to face the various challenges, Value-Based Healthcare is largely considered as the blueprint for promoting sustainable management approaches in healthcare. This paradigm stresses the importance to deliver care towards enhanced value for the patient, which could be measured through the ratio between outcomes and costs.

      This chapter has a twofold aim. First of all, it is aimed at exploring the concept of Value-Based Healthcare to realise the state-of-art and to identify main issues and open questions around the drivers of value in health. Besides, it attempts to understand whether this approach could effectively contribute to the attainment of sustainable development goals. To do that, an in-depth explanation of the concepts of outcome and cost in healthcare has been carried out.

      At the end of the analysis, principles of Value-Based Healthcare seem to be usefulness to cope with the need of improved practices. The focus on the value of patient, instead, allows to foster behaviours that could support the achievement of sustainable goals aimed to provide better and more accessible infrastructures. Within this complex mosaic, accounting could represent the common language to orient health management towards a higher sustainable value for the patient.

   3. Chapter 8. Public Sector Accounting and the Sustainability of Public Finance Among Accounting Bases, Harmonization, and Flexibility Concerns

      Alessandro Giosi

      Abstract

      Since the introduction of the European Semester, the endorsement of the “Six Pack” and the Directive 85/2011 (European Council Secretariat, Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States), harmonization and mutual influences among Government Accounting (GA), Government Finance Statistics (GFS), and IPSAS have been addressed continuously at the European level. The main issue seems to be “if and how” the IPSAS may integrate the GFS’ various purposes, within the entire financial reporting process. After focusing on the role played by accrual accounting in the public sector and the financial accountability needs in the European context, this chapter presents an argument centered on a systematic relationship among different accounting systems, in the light of the current European legislation. It highlights, from a qualitative standpoint, the impact of that relationship on users and their information needs. A breakdown into the revenue recognition practice, as an explanatory approach on the subject, is provided. The results raised the cue to bring out an unavoidable and structural trade-off, recognizable between the harmonization among different accounting systems and the flexibility within each of them. As such, this is discussed as a purposeful starting point, useful to figure out future improvements of the public sector accounting rules across Europe. At the end, progresses by this side could help European Union countries in effectively contributing to the achievement of some sub-targets and indicators included in the Sustainable Development Goal (SDG) 17—Partnership for the Goals—promoted by the United Nations (UN) in 2015.

   4. Chapter 9. The State of the Art of Green Public Procurement in Europe: Documental Analysis of European Practices

      Irene Litardi, Gloria Fiorani, Daniele Alimonti

      Abstract

      The aim of this chapter is to study what is the state of art of the Green Public Procurement in the light of the newest tendencies promoted by the United Nation in the Agenda 2030. The objective is mapping the principal practices and their environmental impact. After an introduction on the topic, we define a theoretical framework regarding the Green Public Procurement. Using a qualitative research methodology such as documental analysis, we review and evaluate electronic documents collected by the European Commission on its website. This list includes the most prominent Green Public Procurement practices, divided in 129 PDF documents (update in August 2016) and separated for each sector. The authors draw a map of the initiative put in place by European public administrations and provide a critical reading of the cases examined based on pertinent theories and models, in particular, the Triple Bottom Line approach.and 29 PDF documents (update in August 2016) and separated for each sector. The researchers present a map of public administrations initiatives and their critical reading on the basis of the main theories and models considered, in particular, the Triple Bottom Line approach.