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13.E: Sustainability Reporting (Exercises)

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  • Multiple Choice

    1. Which agreement did \(196\) nations adopt in December 2015?
      1. Oslo Accord
      2. Paris Climate Agreement
      3. Kyoto Agreement
      4. Copenhagen Accord


    1. The 2015 Paris Agreement on Climate Change aimed to limit the increase of global temperatures to ________.
      1. \(0.5^{\circ}\mathrm{C}\)
      2. \(1.0^{\circ}\mathrm{C}\)
      3. \(1.5^{\circ}\mathrm{C}\)
      4. \(2.0^{\circ}\mathrm{C}\)
    2. Good corporate citizenship ________.
      1. is expensive to implement and does not guarantee returns
      2. must have management’s sincere convictions behind it in order to succeed
      3. is more relevant in countries with less regulation.
      4. makes good business sense


    1. According to the World Commission on Environment and Development, how is sustainable development defined?
      1. It meets the needs of the future without compromising the ability of the present generations to meet their own needs.
      2. It applies the fairness doctrine that no generation, present or future, will be disadvantaged in their ability to meet their own needs.
      3. It meets the needs of the present without compromising the ability of future generations to meet their own needs.
      4. none of the above
    2. Sustainability reporting can incorporate which of the following?
      1. environmental reporting
      2. social reporting
      3. business viability reporting
      4. all of the above


    1. What caused Union Carbide’s deadly gas leak in Bhopal, India, which killed \(3,000\) and injured \(42,000\)?
      1. a combination of low staff levels, corruption, pay-offs to employees to keep quiet, and the manager going on vacation the day before the leak
      2. diversion of funds and resources to a Northern India project that also took staff from the Bhopal plant, plus many safety issues, including fines imposed on community members who camped too close to the plant
      3. employees’ deciding to have lunch before dealing with the pressure buildup inside the tank and bribes paid to the government employees who inspected the plant
      4. a combination of low staff levels, numerous safety issues, and a lack of immediate employee attention to the problem as pressure built up inside the tank
    2. Nestlé’s reputation was damaged when the company was accused of which of the following?
      1. forcing mothers to buy baby formula within days of delivering their babies
      2. promoting inadequate nutrition in developing countries
      3. providing cheap formula to mothers in developing countries, but more expensive to mothers in developed countries
      4. selling poor quality bottled water to developing countries


    1. Which form of energy is renewable?
      1. solar
      2. oil
      3. coal
      4. nuclear
    2. Which of the following types of reporting does the Triple Bottom Line not incorporate?
      1. management
      2. social
      3. environmental
      4. economic


    1. Which of the following best defines stakeholders?
      1. investors and lenders
      2. environmental groups
      3. anyone directly or indirectly affected by the organization
      4. groups or individuals financially impacted by the organization
    2. Which of the following statements is most often the case?
      1. Socially responsible businesses tend to post higher profits than those not focused on social responsibility.
      2. Companies that are not socially responsible will have better profits, but have a moral obligation to society.
      3. Socially responsible investing gives poorer returns than non-socially responsible investing.
      4. Investors are more short termed focus and so socially responsible investing should not be a factor in their investment portfolio.


    1. Which standards are considered universal under the GRI?
      1. economic, environmental, social
      2. foundation, general disclosures, management approach
      3. foundation, economic, general disclosures
      4. management approach, economic, social
    2. The SASB view on materiality has been adapted from which of the following?
      1. the U.S. Executive branch
      2. the GRI definition
      3. a determination by U.S. Congress
      4. the U.S. Supreme Court


    1. The fundamental tenets of SASB’s Approach are considered ________.
      1. evidence-based, industry-specific, and market-informed
      2. industry-specific, interest-based, and value creating
      3. consensus-based, industry-specific, and actionable
      4. interest-based, value creating, and market-informed
    2. How many broad categories of capital are identified by the Integrated Reporting Framework?
      1. \(2\)
      2. \(4\)
      3. \(6\)
      4. \(8\)



    1. What is sustainability and how might corporations incorporate sustainability practices into their business?

    Sustainability is meeting the needs of the present generation without compromising the ability of future generations to meet their own needs. Corporations can incorporate sustainability practices into their businesses in a variety of ways; through the reduction of greenhouse gas emissions, through efficient use of water and scarce resources, and by ensuring that employees have access to a safe working environment, adequate health care and that they are not exploited with an imbalance of power between the employer and employee. Responses may include a variety of suggestions.

    1. What is the value of triple bottom line reporting to users? What is the cost to the company to provide this extra information?
    2. What type of information do you think an oil company should include in their sustainability report? What about a car manufacturer? A large retailer?

    An oil company might include measures as to how they would sequester excess carbon emissions in their production phase. They may also include information about both environmental and employee safety measures implemented. The company may also provide information on how they have improved the communities in which they operate. A car manufacturer might include a good deal of information on employee well-being as well as community outreach and philanthropy. The company may also provide information on moves toward more environmentally sustainable new automobiles. A large retailer might provide information on GHG reductions through improved energy in their value chain as well as employee well-being programs. The company might also demonstrate its community outreach, and that products are sourced from ethically sustainable suppliers. For example, Walmart has announced that they will no longer sell cage eggs, selling only barn-laid and free-range eggs.

    1. Identify four different stakeholders in need of sustainability information and show how their actions might affect a business.
    2. How might a business interact with each of the four different stakeholders you identified in the previous exercise?

    With the exception of lenders and major shareholders, the majority of these stakeholders are not able to command tailor made sustainability information and so are reliant upon disclosures by the organization. At present there is little legal requirement of non-financial disclosures related to sustainability unless there are material factors which may affect the investment decision-making of a user.

    1. Contrast the investment risk potentials of an electric vehicle manufacturer whose shares have a PE ratio of 10:1 and a coal company whose stock has a PE ratio of \(2.5\) to \(1\).
    2. There are currently no formal mandatory environmental accounting standards firms must adhere to. Given the lack of regulation, should accountants even bother with preparing sustainability reports? Why or why not?

    Answers will vary. Sample answer: without a mandatory framework for sustainability disclosures, companies can produce “boilerplate reports” that look attractive and claim a lot without saying too much of real substance. However, there is increasing evidence that investors are looking for more than just financial reports and want to know an organization’s environmental philosophy and strategy. Therefore, accountants should prepare sustainability reports.

    1. Explain the role and purpose of the Global Reporting Initiative.
    2. Explain the role and purpose of the Sustainability Accounting Standards Board.

    The SASB is a private sector Sustainability Accounting Standards body that aims to enhance capital market efficiency by encouraging high-quality disclosure of material sustainability information that meets user needs.

    1. Explain the role and purpose of the Integrated Reporting Framework.

    Thought Provokers

    1. Obtain the 2016/2017 sustainability report for Ford Motor Company. Prepare a report that addresses the following issues:
      1. How do the vision and mission statement on the company’s website relate to its definition of sustainability, if at all?
      2. Who are Ford’s stakeholders? Do you think that the company has addressed the information needs of each stakeholder group?
      3. What type of governance processes are in place to ensure that the Board of Directors’ values are aligned with sustainability?
      4. How does Ford tie sustainability to its risk-management system? What potential risks does Ford face that could harm the company, the environment, or the community?

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