George Joseph teaches students accounting. And he contends that accounting shouldn’t just be about the financial bottom line: sustainability must also be factored into the strategic goals of a company.
Increasingly, corporate social responsibility - more generally described as economic, environmental and social sustainability - has begun to influence every facet of an operation. But accounting has not fully adapted to this trend, says Joseph, an associate professor of accounting in UMass Lowell’s College of Management. He points out that management accounting must support a management strategy that views business not just from the perspective of shareholders but with consideration of stakeholders beyond those with a financial interest.
That approach, in Joseph’s opinion, is particularly important in emerging nations like India, where the model of capitalism is at an evolutionary stage. Political parties and non-governmental organizations (NGOs) are battling for an advantage and companies “caught in the crosshairs are often unprepared for the consequences and incur huge losses in tangible and reputational terms,” Joseph says, adding that a capitalistic model like those advocated for by economist Milton Friedman that focus wholly on profit “is hard to justify in places with extreme inequalities. The broader society and their representatives, the NGOs are becoming increasingly savvy in highlighting this lack of empathy shown by corporations.
“Transparency and an innovative approach that considers these multiple goals are needed for the capitalistic system to be sustainable, serving the developmental needs of [such] nations, while also serving to reduce the environmental, social and economic risks of corporations,” says Joseph. And as the business decision-makers of the future, M.B.A. candidates need to be taught the value of social responsibility and its role in accounting, he adds.
Joseph’s research about social responsibility and accounting is already getting attention. One paper on the subject was chosen as a Highly Commended Award winner for the U.K.-based Emerald Book Publishers’ Literati Network Awards for Excellence 2009 and published in its Journal of Accounting & Organizational Change. Another paper received the Best Manuscript Award at the American Accounting Association’s Northeast Regional Meeting.
The aim of both award-winning papers, according to Joseph, is to illustrate - conceptually, theoretically and through case studies - how the stakeholder basis for management he advocates is the preferable approach to address the issues in developing countries, “even when histories and social structures differ widely, rather than blindly emulating a Western management model that can result in glaring inequalities and lopsided development.”
Additionally, Joseph’s paper uses means like case analysis to illustrate the need to use the broader perspective of multiple stakeholders and how “accounting and strategic techniques are effectively used to engage multiple stakeholders and create wealth on a broader scale that has sustainable development impacts,” he says.
Joseph arrived at his findings after several years of research that included data from case studies and interviews. What he learned changed how he views the role of accounting. “Accounting now has the potential to support the work of managers who are seeking a stakeholder-based approach to management,” he says.
Joseph is developing a course for UMass Lowell M.B.A. candidates that would teach them to integrate sustainability issues into accounting practices, he says.