Abstract
This chapter begins by providing a brief history of the evolution of financial accounting and then addresses the need for non-financial metrics that track the value of natural and human capital in any complete assessment of company value, reviewing the decision-theoretic rationales for the integration of non-financial metrics in the capital allocation process. It examines the disclosure frameworks and standards that are intended to expand transparency on the social and environmental impact of corporate and government activities by taking into account the interests of stakeholders other than investors. The chapter ends by examining the Sustainable Development Goals as a common global vision for a plurality of constituencies with actionable goals and quantitatively measurable indicators.
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Notes
- 1.
Double-entry bookkeeping has been credited by some to be the essential progenitor of capitalism, most notably by Werner Sombart, though this is a somewhat debunked view (Yamey, 1994).
- 2.
The term ‘high-powered incentive’ in this context was coined by Williamson (1984).
- 3.
Note that by the same logic, it is impossible to verify that assets in the balance sheet have not been understated. To check that assets are not omitted in the accounts, the auditor must imagine an infinite range of possibilities and check if all the corresponding assets have been incorporated.
- 4.
In general, economic analysis assumes that wages are an accurate estimate of the opportunity cost of leisure, which is the resource expended when labor is utilized in the production of goods and services.
- 5.
The Corporate Register maintains maps that list the number of organizations using the IIRC framework and the GRI framework for their corporate responsibility reports. Maps are available at http://www.corporateregister.com/frameworks/gri/ and http://www.corporateregister.com/frameworks/iirc/. For 24 countries accessed in January 2019, the number of organizations using IIRC was 15% of the number of organizations using GRI.
- 6.
In January 2014, the IIRC and SASB signed a memorandum of understanding “to more closely collaborate to advance the evolution of corporate disclosure and communicate value to investors”.
- 7.
Extreme poverty is defined by the UN as living on $1.25 or less a day.
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Bose, S., Dong, G., Simpson, A. (2019). Accounting for Sustainability: Frameworks for the Aggregation of Financial and Non-financial Metrics. In: The Financial Ecosystem. Palgrave Studies in Impact Finance. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-05624-7_4
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