The purpose of this paper is to propose a public policy solution to updating mainstream financial accounting from its nineteenth century roots and make it more relevant and consistent with public policy, individual investor motivations and global needs as exemplified in the sustainability development goals. Many approaches to integrating social and environmental accounts with financial accounts are additive; the two types of accounting information sit alongside each other. The opportunity to revise the basic building block of financial accounting, information to help investors make economic decisions relating to investments to increase integration and recognition that this is a public policy decision and not an accounting profession decision, is rarely considered.
The approach is a viewpoint on the opportunities for and benefits of integration of financial, social and environmental accounting.
The current basis of financial accounting does not reflect private investors’ motivations, and changing the basis of accounting is a public policy issue.
This is a viewpoint paper. The pros and cons of current approaches to valuation of social and environmental outcomes are not explored.
Changing policy would require support from asset managers and owners, accounting bodies, civil society and politicians and would need a plan for transitioning from the existing approach.
This is a possible starting point for formal research that could support policy changes that could result in resource allocation decisions taking account of social and environmental impacts.
There are several approaches for integrating social environmental and financial accounting; however, the proposal that integration would result from a change in public policy specifically clarifying and updating investor motivation provides a possible solution to many of the challenges of integration.
Nicholls, J. (2020), "Integrating financial, social and environmental accounting", Sustainability Accounting, Management and Policy Journal, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/SAMPJ-01-2019-0030Download as .RIS
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