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Sustainability and Strategic Audit - Module 1
Financial Accounting (AE 111)
University of San Agustin
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Sustainability AuditPreview text
BUSINESS ADMINISTRATION AND ENTREPRENEURSHIP
MODULE 1 PACKET
PRE 21 – SUSTAINABILITY AND STRATEGIC AUDIT
####### MODULE 1: INTRODUCTION TO CORPORATE SUSTAINABILITY
####### Module Content:
This Module will present an overview and definition of Corporate Sustainability. It will also tackle the origins of Corporate Sustainability. Furthermore, this Module will show the ways of achieving Corporate Sustainability that will help improve the performance of the business as well as increasing its profits towards sustainable operations. The need to know why it is important to learn the importance of Corporate Sustainability is likewise discussed in this module. This module contains in-lesson exercises, quiz and assignment.
MODULE 1 LEARNING OBJECTIVES:
By the end of this module, the students will be able to:
Understand the meaning of Corporate Sustainability
Identify and describe the origins of Corporate Sustainability
Explain and discuss the ways to achieve Corporate Sustainability
Discuss the importance of Corporate Sustainability
2021-2022 Module Packets for BA 111 (Fundamentals of Finance) | College of Commerce |
BUSINESS ADMINISTRATION AND ENTREPRENEURSHIP
COURSE CONTENT FOR MODULE1: INTRODUCTION TO CORPORATE SUSTAINABILITY ACTIVITY DESCRIPTION TIME TO COMPLETE
Lecture discussion Overview and definition of Corporate Sustainability 45 minutes
Lecture discussion Origin of Corporate Sustainability Achieving Corporate Sustainability 45 minutes Lecture Discussion Why is Corporate Sustainability Important 25 minutes Review Quick Review 20 minutes Activity ACTIVITY 1 30 minutes Quiz Summative quiz for module 1 15 minutes
####### LECTURE DISCUSSIONS: MODULE 1
I. WHAT IS CORPORATE SUSTAINABILITY
Corporate sustainability is an approach aiming to create long-term stakeholder value through the implementation of a business strategy that focuses on the ethical, social, environmental, cultural, and economic dimensions of doing business. [1] The strategies created are intended to foster longevity, transparency, and proper employee development within business organizations. [2] Fundamentally, the concept of sustainability can be defined as “meeting the needs of the present without compromising the ability of future generations to meet theirs. Corporate sustainability is often confused with corporate social responsibility (CSR), though the two are not the same. Bansal and DesJardine (2014) state that the notion of ‘time’ discriminates sustainability from CSR and other similar concepts. Whereas ethics, morality, and norms permeate CSR, sustainability only obliges businesses to make intertemporal trade- offs to safeguard intergenerational equity. Short-termism is the bane of sustainability.
####### II. ORIGINS OF CORPORATE SUSTAINABILITY
The phrase is derived from the concept of "sustainable development" and the "triple bottom line." The Brundtland Commission's Report, Our Common Future, described sustainable development as, "development that meets the needs of the present without compromising the ability of future generations to meet their own needs." This desire to grow without damaging future generations' prospects gradually became central to business philosophies.
2021-2022 Module Packets for BA 111 (Fundamentals of Finance) | College of Commerce |
BUSINESS ADMINISTRATION AND ENTREPRENEURSHIP
MODULE 2 PACKET
PRE 21 – SUSTAINABILITY AND STRATEGIC AUDIT
####### MODULE 2: THE FOUR PILLARS OF CORPORATE SUSTAINABILITY
####### Module Content:
The module will introduce students to the four important pillars of Corporate Sustainability, namely Human Sustainability, Social Sustainability, Social Sustainability and Environmental Sustainability. Likewise, this module contains module application exercises, quiz and assignment.
MODULE 2 LEARNING OBJECTIVES:
By the end of this module, the students will be able to:
2021-2022 Module Packets for BA 111 (Fundamentals of Finance) | College of Commerce |
BUSINESS ADMINISTRATION AND ENTREPRENEURSHIP
Distinguish and describe the pillars of corporate sustainability (human, economic, social, and environmental) and how they work together to help organizations strive for more sustainable practices;
Discuss the unique characteristics of each pillar;
Analyze, understand, and discuss how these pillars can lead to an improved corporate image, reduced costs, happier shareholders, increased productivity and other countless benefits.
COURSE CONTENT FOR MODULE 2: THE FOUR PILLARS OF CORPORATE SUSTAINABILITY
ACTIVITY DESCRIPTION TIME TO COMPLETE
Lecture discussion Introduction to the Four Pillars of Corporate Sustainability 30 minutes
Lecture discussion Human Sustainability Social Sustainability 45 minutes
Lecture discussion Economic Sustainability Environmental Sustainability 45 minutes
Activity ACTIVITY 2 30 minutes Quiz Summative quiz for module 1 30 minutes
####### LECTURE DISCUSSIONS
Module 2 – The Four Pillars of Corporate Sustainability
The term sustainability is broadly used to indicate programs, initiatives and actions aimed at the preservation of a particular resource. However, it actually refers to four distinct areas: human, social, economic and environmental – known as the four pillars of sustainability. Introducing the four pillars of sustainability; Human, Social, Economic and Environmental:
2021-2022 Module Packets for BA 111 (Fundamentals of Finance) | College of Commerce |
BUSINESS ADMINISTRATION AND ENTREPRENEURSHIP
Maintaining high and stable levels of economic growth is one of the key objectives of sustainable development. Abandoning economic growth is not an option. But sustainable development is more than just economic growth. The quality of growth matters as well as the quantity.” Critics of this model acknowledge that a great gap in modern accounting practices is not to include the cost of damage to the earth in market prices (Hawking, 2010). A more recent approach to economics acknowledges the limited incorporation of the ecological and social components in this model. New economics is inclusive of natural capital (ecological systems) and social capital (relationships amongst people) and challenges the mantra of capital that continual growth is good and bigger is better, if it risks causing harm to the ecological and human system (Benn et al., 2014). ENVIRONMENTAL SUSTAINABILITY Environmental sustainability aims to improve human welfare through the protection of natural capital (e. land, air, water, minerals etc.). Initiatives and programs are defined environmentally sustainable when they ensure that the needs of the population are met without the risk of compromising the needs of future generations. Environmental sustainability, as described by Dunphy, Benveniste, Griffiths and Sutton (2000), places emphasis on how business can achieve positive economic outcomes without doing any harm, in the short- or long-term, to the environment. According to Dunphy et al. (2000) an environmentally sustainable business seeks to integrate all four sustainability pillars, and to reach this aim each one needs to be treated equally. The principle of the four pillars of sustainability states that for complete sustainability problems to be solved in relation to all four pillars of sustainability and then need be maintained. Although in some cases these may overlap, it is important to identify the specific type of green business to focus on, as the four types present unique characteristics. Businesses need to make a strategic decision about it so as to effectively incorporate the chosen approach into their policies and procedures.
2021-2022 Module Packets for BA 111 (Fundamentals of Finance) | College of Commerce |
BUSINESS ADMINISTRATION AND ENTREPRENEURSHIP
MODULE 3 PACKET
PRE 21: SUSTAINABILITY AND STRATEGIC AUDIT
####### MODULE 3: SUSTAINABLE DEVELOPMENT
####### MODULE CONTENT:
The 3rd Module talks about Sustainable Development. The focus of interaction and discussion of this Module will revolve around the World Economic and Social Crises, such as the American Banking Crisis, The Crisis of American HyperInflation, The Financial Crisis, The Wroldwide Protests Against Bureaucratic Elites, and the Debt Shock of Developing Countries. These are ecological and social crises that took place in the world and rose awareness that a more sustainable model was needed. This module contains in-lesson exercises, quiz and assignment. MODULE 3 LEARNING OBJECTIVES:
By the end of this module, the students will be able to:
Acquire knowledge of sustainable development
Understand Sustainable Challenges and Opportunities amidst World Economic and social Crises
2021-2022 Module Packets for BA 111 (Fundamentals of Finance) | College of Commerce |
BUSINESS ADMINISTRATION AND ENTREPRENEURSHIP
Module 3 –SUSTAINABLE DEVELOPMENT
I. DEFINITION OF SUSTAINABLE DEVELOPMENT
Sustainable development is the idea that human societies must live and meet their needs without compromising the ability of future generations to meet their own needs. The “official” definition of sustainable development was developed for the first time in the Brundtland Report in 1987. Specifically, sustainable development is a way of organizing society so that it can exist in the long term. This means taking into account both the imperatives present and those of the future, such as the preservation of the environment and natural resources or social HOW DID THE IDEA OF SUSTAINABLE DEVELOPMENT GET RELEVANT? The industrial revolution is connected to the rise of the idea of sustainable development. From the second half of the 19th century, Western societies started to discover that their economic and industrial activities had a significant impact on the environment and the social balance. Several ecological and social crises took place in the world and rose awareness that a more sustainable model was needed (youmatter/en/definition/definitions-sustainable-development-)
WORLD ECONOMIC AND SOCIAL CRISES
####### The American Banking Crisis (1907)
####### BANK PANIC OF 1907
WHAT WAS THE BANK PANIC OF 1907?
The Bank Panic of 1907 occurred at the beginning of the twentieth century. It was the result of shrinking market liquidity and dwindling depositor confidence. In addition to this, there were plans to regulate trust companies. At the time, trust companies faced increased public scrutiny for adhering to less regulation than national or state banks.
2021-2022 Module Packets for BA 111 (Fundamentals of Finance) | College of Commerce |
BUSINESS ADMINISTRATION AND ENTREPRENEURSHIP
This skepticism triggered a run on the trust companies that continued to worsen even as banks stabilized. Without a central bank, leading financiers like J. Morgan stepped in and provided some vital liquidity. Even then, the Knickerbocker Trust Company—New York City's third-largest trust—was unable to withstand the run and failed in late October. This undermined the public's confidence in the financial industry and accelerated the ongoing bank runs.( updated Sept. 24, 2019)
####### The Crisis of American Hyper Inflation (1923)
The Weimar government's main crisis occurred in 1923 after the Germans missed a reparations payment late in 1922. This set off a chain of events that included occupation, hyperinflation and rebellions.
####### The Financial Crisis (1923)
2021-2022 Module Packets for BA 111 (Fundamentals of Finance) | College of Commerce |
BUSINESS ADMINISTRATION AND ENTREPRENEURSHIP
In the developing world, there were severe financial crises in both the 1980s and 90s. But the nature of crises was quite different between the two decades.
In the 1980s, the world experienced a debt crisis in which highly indebted Latin America and other developing regions were unable to repay the debt, asking for help. The problem exploded in August 1982 as Mexico declared inability to service its international debt, and the similar problem quickly spread to the rest of the world. To counter this, macroeconomic tightening and "structural adjustment" (liberalization and privatization) were administered, often through the conditionality of the IMF and the World Bank. This crisis involved long- term commercial bank debt which was accumulated in the public sector (including debt owed by SOEs and guaranteed by the government). The governments of developing countries were unable to repay the debt, so financial rescue operations became necessary.
II. WHY IS SUSTAINABLE DEVELOPMENT GOOD
FOR BUSINESS
Increasingly, businesses are making strategic decisions around the type and extent of their corporate sustainability policies. In addition to environmental and social benefits, companies that incorporate sustainable development into decision-making processes can reap significant financial advantages and attract more interest from investors, which is a key to long-term profitability.
Yet sustainable development can have a variety of meanings, depending on the business context. To better understand this, below are several concepts as applied in terms of the environment, employment practices and business practices.
Environmental sustainability
Environmental sustainability can be applied in many ways, such as creating alternative routes in a production process to reduce waste generation and increase water and energy efficiencies. Investment in renewable energy is also growing momentum among big organizations, with many building their own
2021-2022 Module Packets for BA 111 (Fundamentals of Finance) | College of Commerce |
BUSINESS ADMINISTRATION AND ENTREPRENEURSHIP
solar or wind farms, in order to phase out the consumption of fossil fuels and reduce their carbon emissions.
Climate change, one of the biggest challenges of our time, continues to influence the way companies are doing businesses. Thus, climate leadership is a key to ensure the profitability of organizations over the next decades and is a great incentive for organizations to show climate leadership that contributes to improve the image of companies, as consumers have been asking for urgent climate action.
Sustainability and employment
Businesses with strategies that are sustainable in the long run pay their workers’ salaries and benefits that allow them to live a sustainable life within their community. This builds loyalty within the organization, benefiting the company through increased productivity and creativity, as well as lower levels of fraud and mismanagement. Besides, when organizations look to improve the health and well-being of communities, they are able to motivate employees who are genuinely interested in contributing to the success of the business.
Sustainability in business practices
Pushed by growing demands from consumers for products and services that cause minimal effects to the ecosystems, corporations have shown interest in bringing sustainability aspects to the core of the business. Another driving force behind this is the pressure from investors, who are already considering the level of corporate social responsibility, in other words, the role of businesses to address the needs of society, as a decisive factor on their choice of organizations to allocate capital.
Sustainable investing – the process of incorporating environmental, social, and governance (ESG) factors into investment decisions – is becoming a common practice. Corporations are going beyond the desire of profitability, which is shown by their growing efforts to build internal environmental policies and also take part in global tendencies, like the alignment with the Sustainable Development Goals (SDGs) – topics suggested by the United Nations to guide organisations on the development of policies towards sustainability.
Therefore, the incorporation of sustainability principles into business practices is becoming mainstream. Companies who don’t follow this tendency are likely to lose credibility from investors, as well as opportunities to generate revenues and the chance of being an example to society. (co2australia.com/why-is-sustainability-important-for- business/)
2021-2022 Module Packets for BA 111 (Fundamentals of Finance) | College of Commerce |
BUSINESS ADMINISTRATION AND ENTREPRENEURSHIP
- Use sustainability as a unique selling point Consumers are increasingly looking to buy ethically sourced, sustainable products, especially in the food sector. Brands should use their sustainability as a point of difference to encourage sales.
- Think long term One of the main cultural barriers across society is the focus on short-term key performance indicators (KPIs) and budgets. A sustainable business needs to encourage all those it works with to look at, and reward, long-term results.
- Communicate differently People become involved with sustainable businesses for a variety of reasons. For a graduate, it might be the interesting work or the higher purpose. For an investor, it might be the unique nature of the business and its growth potential. Sustainable businesses should, therefore, tailor the way they communicate with each group, depending on their interests. “Be clear about what’s important to each, and also what sort of language and approach will be most effective,” says David Symons, director of sustainable consulting business WSP Group.
- Embed sustainability throughout your organization Changing organizational structures or creating roles, such as sustainability managers, might only act as a bolt-on, when a complete change in business culture and managerial priorities is needed.
- Improve management skills Symons says that sharing knowledge from the experts to every member of staff is one of the biggest challenges to achieving full sustainability. It is difficult, he says, to find the opportunity “to give all our design teams a practical knowledge of our future world, so that they can design to it”. Good management, however, could make this change happen.
- Take risks Many sustainable businesses have taken risks by investing in systems and technologies that are not yet mainstream. While it is easier for new businesses to set up in a sector with more developed systems working and paying for themselves, it is much tougher for early adopters to raise the finance for relatively unproven technology.
- Disrupt old business models For Ramon Arratia, the sustainability director of flooring business Interface, true sustainability comes in the form of Tesla – the American automotive and energy storage company. Arthur Kay, the chief executive of bio-bean, agrees, saying that “disruption has the greatest impact when it interfaces with and improves existing infrastructure or attitudes”. 8 Network with investors and establish like-minded
- Support other sustainable businesses Many businesses tell a pleasing sustainable story when they sell their own products, but they might not buy into the sustainability stories presented by other companies. While some stories can be greenwash, he says, sustainable businesses can support others like them by buying their products.
2021-2022 Module Packets for BA 111 (Fundamentals of Finance) | College of Commerce |
BUSINESS ADMINISTRATION AND ENTREPRENEURSHIP
“Continuing to meet and share experiences even in tough times can inspire and encourage businesses to keep working towards their goals,” said Alastair Fischbacher, chief executive, Sustainable Shipping Initiative. “It’s important to keep sharing successes.” (theguardian/sustainable-business/2015/jul/08/nine-ways-to-overcome- barriers-to-sustainable-business)
MODULE 4 PACKET
PRE 21: SUSTAINABILITY AND STRATEGIC AUDIT
####### MODULE 4: CORPORATE SUSTAINABILITY TRENDS
####### Module Content: This Module tackles about the different Corporate Sustainable Trends that
introduces to learners major Sustainability Trends that aim towards a Sustainable Environment. The need is more urgent as now, the world is also dealing with a big pandemic of coronavirus and political unrest. The business firms and companies need to help the government fulfill sustainability goals by adopting and incorporating these sustainability trends and make the planet a better place to live in. Further, this module contains in-lesson exercises, quiz and assignment.
MODULE 4 LEARNING OBJECTIVES: By the end of this module, the students will be able to:
- List and explain the various major sustainability trends that affect local and international
marketing.
2021-2022 Module Packets for BA 111 (Fundamentals of Finance) | College of Commerce |
BUSINESS ADMINISTRATION AND ENTREPRENEURSHIP
sustainability. The exploitation and excessive use of natural resources have made the environment suffered and disturbed its ecological balance. Human activities have drastically impacted the environment in many ways, and the result is known to everyone. The climatic changes in the recent few years have raised a question on the global systems working presently. Therefore, the adoption of sustainable goals is the need of the hour.
The importance of sustainability has also been emphasized by the United Nations, where they have set 17 sustainable development goals to eradicate poverty, provide free education, zero hunger, and equality. Various initiatives and actions have been taken by the government to move towards sustainability. The need is more urgent as now the world is also dealing with a big pandemic of coronavirus and political unrest. The business firms and companies need to help the government fulfill these sustainability goals by adopting and incorporating these sustainability trends and make the planet a better place to live in. In the recent past, many sustainability trends have been started and have been successful to quite an extent. Below we will discuss some sustainability trends that will be the talk of the town and aim towards a sustainable environment in the 2020s.
####### Major Sustainability Trends:
- Sustainable Trends in Business and Finance
The world of finance is changing. Since the financial crash in 2008, there has been a slow but steady move away from traditional finance models, as the value of embedding deeper approaches to social and environmental issues has become increasingly clear. Now, the world has taken a shocking blow from the Covid-19 pandemic. The tragic deaths, lost livelihoods, and curtailed freedoms are unprecedented, and no-one can tell how or when the global economy will recover from a downturn of this speed and scale. As we tackle one of the biggest global crises of our time, and look to rebuild in a way that ensures we emerge from this stronger and more resilient, sustainable finance – in other words, finance that takes account of positive and negative social and environmental factors, particularly the factors that tend to play out over the medium to long-term – will be more critical than ever.
Driven by global sustainability challenges, organisations have the opportunity to transform business towards a sustainable economy, creating better value for both society and business. Demand for leaders who can guide their teams through the pressures facing the current financial system is rising, as trends in sustainable finance continue to emerge and develop.
- Carbon removal or zero emissions will be the thing of the future
With increasing human activities in the past, the emission of greenhouse gases has been on a high. One of the significant gases is carbon dioxide. The burning of fossil
2021-2022 Module Packets for BA 111 (Fundamentals of Finance) | College of Commerce |
BUSINESS ADMINISTRATION AND ENTREPRENEURSHIP
fuels, smoke emitted from industries, excessive pollution have all caused an increase in the level of carbon in the atmosphere. As per the statistics, since the industrial revolution the carbon dioxide emissions have increased from 40% to 400 ppm. The US today report states that carbon emissions have seen a most significant jump in seven years. It is disturbing the ecological balance of the environment. Therefore the need of the hour is to keep a check on the carbon emissions and find out ways to reduce it significantly. We need to achieve a zero- emission state, and it requires techniques and ideas to achieve that. One such technique is the carbon removal technique. By carbon removal technique, we mean storing carbon in different forms like soil, trees, oceans, lakes, underwear reservoirs, and concrete forms of carbon and removing the carbon from the atmosphere. The climatic models use bioenergy with carbon capture and storage. This process involves using the energy in the industrial, or other sectors capturing the emissions before they are in the atmosphere and storing them underground or in a concrete form. Some countries have already started working on carbon removal. One such technique is the direct air capture system being used in Canada and the United States. Carbon mineralization has also been deployed wherein carbon dioxide with some other gases turns into solid from gas.
- Change in Eating Habits
Shifting towards plant-based eatables.. this toll on the environment. People are shifting towards being vegan which is affordable and quite accessible these trend has been popular in the recent past. The use of lab-grown meat which is similar in taste, composition, and texture instead of the regular meat. The meat industry has had negative impacts of releasing greenhouse gases into the atmosphere and putting a days. The supermarkets are flooded with such foods like veggie meat, tofu, and tempeh. In this regard, a company named beyond meat has made World’s first meat burger that is made from the plant. It is made from vegetable proteins found in peas.
- Reduction in energy Consumption
The use of LED lights and bulbs is also getting popular these days. It has replaced the traditional incandescent bulbs. They have reduced the energy consumption to a great extent by around 40%, which helps in saving the electricity bill and saves money. By adopting the LED lights, American households can achieve 84% market share by 2030.
- Moving from plastic to eco- friendly paper bags
The plastic has caused water pollution and depletion of the oceans, in turn, affecting the food we consume. So, cutting on the use of plastic and making use of
2021-2022 Module Packets for BA 111 (Fundamentals of Finance) | College of Commerce |
Sustainability and Strategic Audit - Module 1
Course: Financial Accounting (AE 111)
University: University of San Agustin
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