Contemporary Issues in Accounting Considering Stakeholder Theory
Business organisations rising within the contemporary world is experiencing multiple contemporary issues considering internal control, restatements, accounting transparency, earning management, and aggressive accounting. These elements in accounting has implications for policy setting, formulation of rules and regulations and implies to academic propositions. It is important to assess the issues that delineates the relationship between different organisational setting. The problem of carbon emissions has posed major issues within the organizational setting. It is important for the organization to account of the climatic changes and carbon emissions and register thye issues and risk associated with it. The challenges of the organization is to monitor and account the potential carbon identification, carbon intensity and climate change.
Literature review - Stakeholder theory
The stakeholder theory addresses the opportunities that is created by any organization in creating value for stakeholders so that they can be sustainable, aligned and motivated towards new direction and meet challenges with ease. There are rising issue in relation to climate change and carbon emissions (Andriof et al. 2017). The theory was originally introduced by Ian Mitroff in his book ‘Stakeholders of the Organizational Mind’ that was published in 1983. Due to the rise in emissions of carbon, affect the environment around, the people and the habitat. When there is an increase in carbon emissions of carbon, the accounts, intensity chart, report and analysis is to be delivered to the stakeholders responsible of management of climate change.
It is then the responsibility of the respective stakeholder to assess the report, carbon footprint and analyze the ways it can be reduced. Climate change leaves adverse effects on the environment, customers and world population. Since, organizations are the principle source of carbon emissions, it is the responsibility of the stakeholders and entrepreneurs to derive potential strategies in making necessary changes in reduction of emissions (Hörisch et al. 2014).Besides, when an organization fails to value its stakeholders it bridges a gap between organization and stakeholders. Therefore, it is the moral responsibility of the organization that they make positive impact on their stakeholders.
According to the theory, the organization need to increase value for its shareholders and stakeholder (Moriarty, 02016). The theory states the different kinds of stakeholder such as customers, competitors, suppliers, employees, staff, political groups, government bodies, trade unions, marketer, financer, accountant and more. All the key personnel together form the motivational aspect of working condition who unitedly help in management of risk. In managing the risk of the carbon emission, the different stakeholder need to engage in decision-making process towards problem solving (Liesen et al. 2017). The awareness regarding the effects and consequences of emission need to be delivered among every stakeholder and make strong communication relationships among different bodies.
Managerial branch of stakeholder theory works on the premise of designated organization address ist stakeholders and how one another are correlated in the productivity process. It also helps examining how they have maintained relationship among each other for the organizational survival (Liesen et al. 2017). It helps in seeking the ways the corporate management will be able to examine the expectations of stakeholders and how is the organization being able to fulfil the requirements and provide value to them (Depoers et al. 2016). It also ensures that the organization is able to maintain its position for the stakeholder need to be identified by the name of the organization and how far has the organization been responsible in carrying out relationship with its stakeholder in interest of its operation, productivity and more. It si important for the amangerial branch to seek stakeholder’s degree of control within the premises and assess stakeholders ability toinfluence consumption, marketing of goods and services, influence media, and monitor ability, utility and finance.
The previous theory has focused only on the voluntary disclosure that assess the information of the issues, climate change, accounting and decision-making. But it did not address the responsibilities and strategic implementation. The disclosure regarding different tangible assets, requirements, decision making is important but it is important to address the intellectual capital that is required in reducing the issue. It is important to train the stakeholder under management groups against the crucial cause and foster communication skills in identifying the needs, decisions, concepts, ideas of stakeholders. Emission of carbon creates a negative impact on the organization production, brand name, positioning that affects the profitability ratio. Therefore, working unitedly with the stakeholders and monitoring their performance towards the reduction process will help in challenging the consequences of climate change.
The conceptual model in the management of climate change will help in understanding the composition concepts and ideas that will help stakeholders to understand stimulate the emissions of carbon that the model represents.
The model gives a visual understanding of the procedure and strategies that can be implemented in limiting the emissions of carbon account towards growth and development using stakeholder participation and building up strategies like waste recycling, knowledge, implementation of strategy, energy recovery and others.
Development of literature review and hypothesis
Stakeholders are the group of people of are affected by the organizational impact, regulations, policies and production process. While the shareholders are the people who help in sponsoring, investments and supply resources. Shareholder holds a part of an organization through shares of stock while stakeholder help in facilitating the performance and productivity of the organisation. Shareholder can be considered as stakeholder but stakeholder do not have any part in the share and stocks for their responsibility is to address performance and operations (Chiu and Wang, 2015). Both are significant in the success of an organization. Under the Corporate Social Responsibility, it is the duty of organizations involve every stakeholder including shareholder in the decision-making process and problem-solving requirements.
The Carbon Disclosure Project (CDP) is a voluntary organization that is operated in United States. It helps the organizations to disclose environmental impact laid by different companies (Liesen et al. 2017). The dependent variable triggers the Voluntary Reduction target among those companies that has been affecting the environment, there are companies who do not consider environment during their investment. Therefore, CDP acts as a voluntary trigger to the companies to drive disclosure, drive operations towards sustainable economy. As per the report, since 2002, there are more than 6000 organizations whose environmental disclosure has been made through CDP (Liesen et al. 2017). It initiates the organizations to take action against the insight into climate change, supply chain, water supply, carbon emission and how investors can accelerate investment towards environmental safety and reduction of carbon emission depleting the air and environment and be able to generate positive return out of the investment made (Depoers et al. 2016).
Each stakeholder within the organizational setting has respective power that can be accessed with the premise of the organization. The four important powers are legal power where the stakeholders are entitled to rights, duties, protections, contracts and others. Stakeholder need to be given every requirement stated by the law and maintain legal implications of the relationship. Shareholder being a part of stakeholder si powerful for it has shares as stocks and provides economic power to the organization when there is a need of large scale requirement or when the organization is undertaking a project (Cordeiro and Tewari, 2015).
Stakeholder belong from different community with different social power. If any disrespectful acts is experienced by the organization toward any community that will result in protest, campaign, complaints affecting the operational process of the organization.Lastly, it is important to involve the stakeholders in the decision making process so that there can unified access to information and foster teamwork and develop ideas concerning the reduction of carbon emission, and advocate the needs of environmental safety and awareness.
Carbon emission is national concern that is most likely to expand in a decade if the firms are unable to control their reduction of carbon. It is expected that the low powered organization will be effectively respond to the pressure that has been created by the stakeholder against the reduction of emission and management of climate change while the developing and developed companies like Puma, Apple, Samsung will initiate emission targets, research projects, in relation to the fulfilment of organizational objectives and maintain customer sustainability (Bridoux and Stoelhorst, 2014). The stakeholder needs to be given power,value and opportunity in putting pressure against management of carbon emission reduction and bring in new targets in monitoring manufacturing and productivity (Andriof et al. 2017).
It is learned that the stakeholder have an important role to play in building success of the organization. By putting pressure they will be able to limit the huge consequences on organizational, customers and general population. There can be an understanding between stakeholder power and organizational role play. It also examined the positive relationship of stakeholders towards carbon emission reduction and that financial environmental disclosure and Carbon disclosure possess positive relation. ious and aware of the implementation of strategies towards the reduction of carbon emission. Stakeholders are constantly pressurizing their respective organization in the management of emissions of carbon and its effects of depletion.
The research includes primary sources through an extensive research study on the stakeholder theory, Carbon Disclosure Plan, managerial branch of stakeholder, aspects of stakeholder, stakeholder responsibility and strategies, relationship of stakeholder and its organizations has been studied. The literature review focus on the previous review and identifies the gap inthe review while attempts to interpret the theoretical constructs combining independent and dependent variable and carating an ideal platform in analysing the stakeholder relationships. The information has been collected from primary sources like journal,, articles and critical studies that provided with extensive learning and understanding.
The corporate and organizational objective need to ally with the theoretical aspect of stakeholder that helps in increasing the interest of different stakeholders in operating goals, and reduce adverse impacts of the organization on the environment. The study has evolved robust idea towards value creationand that it is the responsibility of organization to create as much value for powerful stakeholders without resorting to any trade offs.