Loading

Module 4: Accountability

Notes
Study Reminders
Support
Text Version

Overview of Accountability

Set your study reminders

We will email you at these times to remind you to study.
  • Monday

    -

    7am

    +

    Tuesday

    -

    7am

    +

    Wednesday

    -

    7am

    +

    Thursday

    -

    7am

    +

    Friday

    -

    7am

    +

    Saturday

    -

    7am

    +

    Sunday

    -

    7am

    +

Accountability

Overview of Accountability

What is Accountability?

Accountability is a concept in corporate governance that is the acknowledgement of responsibility by an organization for actions, decisions, products, and policies that it undertakes.

Federal Government
The federal government expects that a business pays its taxes properly and promptly.

Investor
An investor in a business expects that the managers of the company are working to maximize shareholder return and to not be wasteful of corporate resources.

Customer
A customer of a business expects that a product manufactured and sold by a business has been designed, tested, and produced so that it is safe to use.

Stakeholder Expectations

Rising stakeholder expectations are motivating organizations to consider the impacts of their actions in a broad, transparent, and systematic manner. Businesses are a major actor in modern society, and stakeholders expect that businesses be a positive contributor to societal well-being. Stakeholders want companies to be more than purveyors of a product or a service; they expect them to fulfill a more positive societal role.

Consumers are showing increasing concern for the environmental and societal impacts of the products and services they purchase.[1] Many investors are starting to use a company’s performance in sustainability as an indicator of business value and of management strength.

GoDaddy
In March 2011, Bob Parsons, the CEO of GoDaddy, the world’s largest provider of web hosting and domain name registrations, posted a video of him shooting an elephant in Zimbabwe, Africa, on the Internet. The video showed the elephant being killed and local villagers stripping flesh from the carcass of the dead elephant to a score of rock band AC/DC’s “Hells Bells.”
While Parsons claimed the elephant was destroying the villagers’ crops and that he was actually providing a service to the local African community, his actions-and specifically the callous way that he documented his actions-spurred outrage from customers with many cancelling their accounts as a result. This is an example of how the social conduct of the CEO of a company carried over to the brand image of the company and resulted in a loss in revenue.

Survey
In June 2011, Jewelers’ Circular Keystone (JCK), the jewelry industry’s leading trade publication, reported on the results of a survey that found 78 percent of consumers said they cared about sustainability and 60 percent of consumers said they were willing to pay a premium for “ethical jewelry.” Rebecca Foerster, the US vice president at Rio Tinto Diamonds, stated, “This generation that is up and coming is more concerned about where the products they are buying come from, and they are becoming activists about it.” [2] Consumer demand for ethical jewelry is increasing sales for products, such as recycled gold and conflict-free-certified diamonds.

Ethical Jewelry
Ethical jewelry is an example of how consumer concern for sustainable products is transforming the offerings from the jewelry industry. By customers “voting” with their purchases they are supporting conflict-free diamonds, which helps reduce a source of funding available to rebel forces with the expectation that this will either shorten wars or prevent their occurrence.

Conflict Diamonds
“Conflict” diamonds, also known as “blood” diamonds, are defined by the United Nations as those that originate from areas controlled by forces opposed to legitimate and internationally recognized governments. Angola and Sierra Leone in Africa are examples of two countries that are sources of conflict diamonds. Diamonds have often been used by rebel forces in these countries to finance arms purchases and other illegal activities. Conflict-free diamonds do not look any different from conflict diamonds but have proof of origination showing that were produced in more peaceful regions of the world.

Government Measures

Organizations also need to prepare for anticipated regulation and new government measures related to environmental and social impact. Governments continue to pass legislation to change or end business practices that are harmful to the environment, consumers, or employees.

Governments also provide programs and incentives to support voluntary efforts by business to improve their impacts on the community and the environment.

Transparency

The response by many businesses has been an increase in transparency on the reporting of the economic, ecological, and social impacts of their activities. This allows for credibility and operational integrity in a company’s business activities.

Businesses need to clearly communicate the positive and measurable impact that they have on all the stakeholders impacted by their operations.

Sustainability Reporting

Definition
Triple bottom line (TBL) reporting, also known as sustainability reporting, has emerged as the primary vehicle to communicate information from businesses to stakeholders. This type of reporting goes beyond profit (financial) information and discloses the planet (environmental) and people (social) impact of a business.

Sustainability reporting is a tool to communicate to society the actions a company is undertaking to fulfill its broad responsibilities to society.

Core Values
Quite often sustainability reporting is driven not only by external stakeholder forces but by the internal core values of the companies. Some companies are founded by social entrepreneurs who want to incorporate aspects of social change or environmental stewardship into their business operations.
Sustainability reporting provides a way of documenting efforts by these organizations and communicating that to customers and other stakeholders. Some companies hope that by publicly disclosing successes and failures related to their sustainability initiatives that they can provide lessons learned to help other companies become more sustainable.

Goal
A goal of sustainability reporting at the society level is to identify uneconomic growth. Uneconomic growth is a concept from human welfare economics and is economic growth that results in a decline in the quality of life. Only measuring financial activity would not identify uneconomic growth, but with the inclusion of social and environmental performance, stakeholders have a better indication of the quality of economic activity.

Sustainability Reporting at Ford

Ford’s “12th Annual Sustainability Report” [3] provides a performance summary with measures that are important to Ford in its pursuit of sustainability.

Ford chose to publish their report as an interactive website that allowed stakeholders to quickly jump to the areas of sustainability that were of interest to them.

Report Highlights
Highlights from the Twelfth Annual Sustainability Report
• Reduced CO2 emissions from Ford’s global operations by 5.6 percent on a per-vehicle basis, compared to 2009.
• Set a goal to reduce global facility CO2 emissions by 30 percent by 2025 on a per-vehicle basis.
• Listed water as one of the top sustainability concerns; Ford aims to reduce 2011 global water use by 5 percent per vehicle compared to 2010. This is in addition to the 49 percent per vehicle reduction since 2000.

Bibliography

[1] “Conscious Consumers Are Changing the Rules of Marketing. Are You Ready?,” BBMG,https://www.fmi.org/docs/sustainability/BBMG_Conscious_Consumer_White_Paper.pdf

[2] “JCK Las Vegas: Consumers Want Sustainable Products,”Rob Bates, JCK Magazine, June 4, 2011, http://www.jckonline.com/2011/06/04/jck-las-vegas-consumers-want-sustainable-products.

[3] “Sustainability Report 2010/11”, Ford Company, 2012. http://www.socialfunds.com/shared/reports/1308487118_Ford_2010-11_Sustainability_Report.pdf