Emerald | International Journal of Accounting and Information Management

Lease and service for product life-cycle management: an accounting perspective

Wei Qian, Roger Burritt — 2011-09-20 00:00:00.0

Abstract

Purpose – Previous research in lease finance and evaluation has given little consideration to environmental factors. The purpose of this paper is to add to the literature by analysing how leasing provides a more attractive option than selling and extended producer responsibility (EPR) in helping to close product life-cycle loops, extend the useful life of products, and increase environmental benefits. Design/methodology/approach – This paper revisits the accounting concepts of asset depreciation, residual value and cost of leasing and proposes methods to incorporate these concepts into the “closed loop” lease and service mode for product life-cycle management. Findings – For business, the “closed loop” lease and service mode changes asset values through the extension of the asset's useful life and in particular, the increase of the residual value of the product (i.e. recoverable value to the producer/lessor). Such changes reduce the cost of leasing to the advantage of both lessor and lessee. However, the argument about a “win-win” monetary and environmental outcome being associated with leasing presents several challenges for current accounting standards in terms of recognition of lease and lease revenue, recognition of intangible assets and internalisation of environmental costs and impacts associated with the leasing process. Originality/value – To date, accounting and finance literature seems to focus exclusively on the economic aspects of leasing strategies. This paper uses a different lens to make a call for a rethink about leasing with environmental considerations. It is expected that the findings and suggestions in this study will facilitate the adoption and diffusion of the “closed loop” lease and service mode in the business world for the benefit of the environment in the future.

Corporate social responsibility implementation: Comparison of large not-for-profit and for-profit companies

Alan D. Smith — 2011-09-20 00:00:00.0

Abstract

Purpose – Corporate social responsibility (CSR)-based strategies have become important concepts in dealing with firms' stakeholders. The purpose of this paper is to focus on the processes of stakeholder legitimacy and interest detection, namely ethical considerations and community obligations, to promote CSR as an intangible strategic asset. Design/methodology/approach – The two relatively large service-based firms (contrasting not-for-profit with for-profit) that were selected for study were Pittsburgh-based, namely the largest single employer of the metropolitan area of Pittsburgh (The University of Pittsburgh Medical Center (UPMC)) and WESCO, a distributor of electrical construction products and electrical and industrial maintenance products and the largest domestic provider of integrated supply services. Findings – It was found that the management teams at UPMC and WESCO approach CSR-based strategies and its initiative from completely different perspectives. UPMC functions a not-for-profit organization while WESCO is a for-profit entity. They also approach CSR differently as a result from its geographically based service and product offerings, UPMC being more local/regional and WESCO going for global markets. These differences promote differences in the groups and types of CSR that each company is currently engaged in promoting. Originality/value – The paper demonstrates that both not-for-profit and for-profit entities have a reason to be socially responsible, whether they are local or global firms. The overarching fact is that consumers expect firms to be conscience of the social concerns of the community in which they operate and socially responsible to the various stakeholder groups they serve.

Development of social, environmental, and economic indicators for a small/medium enterprise

2011-09-20 00:00:00.0

Abstract

Purpose – A growing number of companies are measuring the sustainability performance of their businesses. Some companies are using pre-existing sustainability indicator systems to assess their performance. Other companies are looking beyond measurement of impacts to create their own system of indicators to measure sustainability. Formulating relevant indicators of sustainability performance is a difficult task for any organization, but especially for small/medium enterprises (SMEs) that often lack financial, knowledge, and labor resources. The purpose of this paper is to consider two different sustainability assessment approaches undertaken by a single case study company, a start-up SME. Design/methodology/approach – The authors developed a method for an SME, Ecologic Designs, Inc., a self-identified green business that reclaims materials to make bags and accessories, to create its own sustainability indicators without outside expert help. This research chronicles the struggles and triumphs of the SME in measuring its sustainability performance using a pre-existing system and then using the developed method. Findings – The SME's managers applied the developed method to create, select, and weight sustainability indicators to help answer a strategic planning decision – where to locate operations and facilities in an expanding supply chain. Originality/value – The paper describes the struggles and triumphs of a start-up SME in measuring its sustainability performance using a pre-existing system and then using the developed method.

Sustainability reporting and reputation risk management: an Australian case study

Janine Hogan, Sumit Lodhia — 2011-09-20 00:00:00.0

Abstract

Purpose – The purpose of this paper is to explore the ways in which a leading Australian public company uses sustainability reporting to respond to reputation risk arising from proposed regulation. Design/methodology/approach – The paper uses a case study approach and both qualitative and quantitative methods of content analysis. The qualitative component is based on a framework of reputation conceptualisations and image restoration strategies adopted from existing literature. Findings – The key findings of this paper are that the concept of reputation risk management (RRM) could assist in understanding what motivates sustainability reporting, and how proposed regulation could lead to a decrease in the quantity but increase in the quality of sustainability reporting. In addition, “honesty” is revealed as a potential RRM strategy. Originality/value – The paper extends existing research on the RRM thesis by studying an Australian case of a reputation-damaging event over a number of reporting years, examining a range of sustainability reporting media, and adding a quantitative aspect to an otherwise qualitative research framework.

Does voluntary corporate citizenship pay? An examination of the UN Global Compact

Marinilka Barros Kimbro, Zhiyan Cao — 2011-09-20 00:00:00.0

Abstract

Purpose – The UN Global Compact (GC) is the world's largest voluntary corporate social responsibility (CSR) initiative. Signatory companies voluntarily agree to abide by the GC ten principles and explicitly declare compliance with social and human rights, environmental protection, and anti-corruption practices. Participants commit to CSR and are required to publish a yearly report called Communication on Progress (COP). If firms fail to provide a COP for one year they are labeled “non-communicating”, and for two years they are “delisted” from the GC. In 2006, the first list of non-communicating and delisted firms was announced. The purpose of this paper is to investigate the extent by which being a signatory company – that reports COP – reduces information risk, and thus leads to better market returns, lower cost of debt, and lower cost of equity. Design/methodology/approach – The authors studied the period from the launch of the GC until the first list of non-communicating firms was made public, investigating the extent by which being a signatory company – that reports COP – reduces information risk, and thus leads to better market returns, lower cost of debt, and lower cost of equity. Findings – The results suggest that communicating (reporting) firms have statistically significant higher market valuation – lower book to market – than companies that initially agree to participate in the GC but that do not comply with the reporting requirement. Communicating firms also have statistically significant higher ROA, lower cost of debt, lower cost of equity, and lower beta indicating better performance and less risk. The authors also find some evidence that non-communicating firms might be “free riding” and could have joined the GC to improve their corporate image. Originality/value – The paper provides evidence of the value of CSR reporting. It is not enough to disclose compliance with CSR, but it is also necessary to account for this through some sort of formal mechanism such as a CSR report. Voluntary disclosures and narrative statements in annual reports will continue to have questionable information content, but standards of environmental reporting, such as the Global Reporting Initiative, not only improve the way in which social and environmental performance is measured, but they also provide evidence of compliance. This paper also presents evidence of the value of voluntary initiatives such as the GC when these initiatives are supported by formal reporting and when accountability/enforcement measures are in place.

Sustainability in businesses, corporate social responsibility, and accounting standards: An empirical study

Orhan Akisik, Graham Gal — 2011-09-20 00:00:00.0

Abstract

Purpose – The purpose of this paper is to examine the relationship of sustainable development in businesses with corporate social responsibility (CSR) and accounting, in 53 developed and emerging economies over the period 1997-2008. Design/methodology/approach – The authors test the relationship of sustainable development in businesses with CSR and accounting using ordinary least squares estimation technique for country-level panel data. Findings – The results of the analyses provide evidence that sustainable development is strongly related to CSR and accounting standards, even after controlling for a variety of macroeconomic variables such as inflation, foreign direct investment, and unemployment. Moreover, the authors find that sustainable development is strongly and positively associated with customer satisfaction and the availability of senior managers. Practical implications – Conclusions that have been drawn are important for a large group of stakeholders such as investors, companies' managers, employees, customers, suppliers, governmental and private regulatory agencies, and the general public, indicating that socially responsible firms and good accounting standards are likely to contribute to sustainable development in businesses in developed and emerging countries. Originality/value – To the best of the authors' knowledge, this is the first country-level study of its kind that attempts to explore the association of sustainable development in businesses with CSR and accounting standards.

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