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Sustainability in Action

By Eric Lee, Ph.D., CPA, CGMA, CFE
August 1, 2020
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With the world struggling to address climate change, sustainability education has become increasingly important.

 

Back in 2004, the Association to Advance Collegiate Schools in Business (AACSB), in the report Ethics Education in Business Schools, emphasized the need of “minimizing negative social and environmental impacts” as well as for business and students alike to “understand the symbiotic relationship between business and society, especially in terms of the moral dimensions of the power placed in the hands of the owners and managers” (bit.ly/2Ypo1WE). In spite of this 16-year-long call to action, recent cases involving corporate sustainability malfeasance have once again renewed the urgent need for sustainability education in the business curriculum.

 

In response, the Sustainability Accounting Standards Board (SASB), a U.S.-based organization established in 2011 to develop a unifying framework of global reporting standards for corporate sustainability accounting, recently formed an Education Review Committee to provide guidance on the development of its education programs. Members of this committee represent a wide range of SASB stakeholders from different industries.

 

The United Nations also highlighted the importance of sustainability in academia by dedicating 2005-2014 as the Decade of Education for Sustainable Development. The United Nations Educational Scientific and Cultural Organization (UNESCO) was further appointed to integrate sustainability education into all academic subjects in order to link sustainable development to education through its impact in social, environmental, and economic terms.

 

This shift toward sustainability comes at an opportune moment from the perspective of business education. Particularly in the field of accounting, as increasing attention is paid to the societal impact of companies’ financial decisions, there are opportunities to incorporate sustainability teaching into almost every subdiscipline of accounting. The accounting educators’ community has in recent years and in varying degrees undertaken the initiative of training the next generation of accountants toward a greater awareness in accounting matters related to sustainability.

 

With the relatively recent interest and educational momentum in teaching sustainability, it’s essential to reorient the conventional, pedagogical mind-set in order to incorporate principles such as systemic, integrative thinking and moral reasoning. The current generation of undergraduate students may have grown up with a greater awareness or understanding of the importance of sustainability, possibly from such elementary, middle, and high school courses as economics, geography, or social studies.

 

Yet there’s still a lack of standardization in course offerings involving the infusion of sustainability concepts at the college accounting curricular level. Accounting educators should take advantage of this window of opportunity to guide the new generation of accountants toward a greater awareness of how sustainability could play an important role in business accounting and corporate decisions.

 

EXPERIENTIAL LEARNING PROJECT

 

As an accounting professor with a research interest in sustainability, I’ve always wanted to incorporate environmental sustainability concepts in my teaching. While attending a community event a few years ago, I had a chance encounter with a local entrepreneur in the curbside recycling business. I suggested to him the idea of having my cost accounting students, as part of their class project, volunteer as “consultants” to conduct a cost-benefit study on the different operations of his business, helping to identify and capitalize on areas with the most financial as well as environmental sustainability impact.

 

The aim was not only to help the business identify ways to maximize profit, but also to realize its environmental and social objectives. Likewise, for the students, this project would allow them, as outsiders, to apply their accounting knowledge and to exercise their critical-thinking skills in devising alternative strategies, thereby observing firsthand how a company’s sustainability-based actions could yield both positive financial and social outcomes.

 

Sustainability Topic Areas

 

The business owner liked the idea and gladly accepted my offer. Over several more meetings, we discussed the different aspects of his business in greater detail, brainstorming and discussing all the revenue and cost centers of operations. In the end, we identified six cost and managerial accounting topic areas within which the students would use a cost-benefit analysis approach to address sustainability issues. The students were divided into six groups, and each group was randomly assigned to report on one of these areas:

 

  1. Commodity trends and pricing strategy: This area examined how the business generated income through storing and selling the different commodities gathered from the environmental recyclables received. It had always been a challenge for the business to decide between warehousing (that is, selling only when the commodity prices were favorable at the expense of cash flow arising from warehousing cost) and selling the commodities as and when they were received (generating greater cash flow and lesser warehousing cost, though the company may have less control over how much the commodities may yield at the time of sale).

 

Students analyzing this topic formulated appropriate warehousing and exit-pricing strategies for conversion of the commodities. They researched the business practice in this area, examined competitors’ actions, and suggested other potential profit-generating environmental recyclables that may become resalable commodities for the company in the future. This exercise helped generate ideas for the business to potentially broaden its commodity stockpiling into other environmental recyclables of sustainable values.

 

  1. Budgeting and operations: Typical of a small business enterprise, staffing constraints had resulted in the business employing one part-time bookkeeper to manage all of its finances. This had caused budgeting problems to arise on numerous occasions. Students analyzing this topic used scenario analysis to formulate possible alternative budgets with different outcomes. Not only did the students verify numerical accuracies, they also provided suggestions on improvements in the different operational areas, with an eye particularly on water and energy usage, thereby ensuring efficient use of sustainable resources.

 

  1. Performance measurement: One important aspect of performance measurement that often gets neglected in a small business is sustainable human resource management. Students tackling this topic examined the company’s current human resources practices and formulated a proposal that would entail an appropriate wage and bonus incentive plan, taking into consideration employees’ environmental, health, and safety concerns.

 

  1. Breakeven point analysis: With the business owner looking at new ways to expand the current revenue source, students working on this topic formulated a territorial expansion plan and determined the price to charge for individual service, taking into consideration different competitors’ business models in neighboring cities. Students also helped to identify other environmental-related services the company could potentially expand into and how these services could impact both the company’s breakeven point and sustainability objectives in the future.

 

  1. Costing and operations: With the bulk of revenue coming from the monthly dues that homeowners pay for the curbside recycling services, students analyzing this topic formulated a plan for route optimization in order to positively impact the bottom line. As part of their analysis, students also discussed how environmental sustainability considerations may impact the company’s quest for route optimization.

 

  1. Budgeting and performance measurement: Students tackling this topic determined whether hiring permanent employees or utilizing temporary employment services would provide optimal outcomes in the long run. Students analyzed and took into consideration how public policies concerning sustainability, environmental regulations, and employees’ health and safety issues could impact these decisions.

 

Given the knowledge they had acquired of the business as well as all of the issues related to environmental sustainability, each group of students also devised a conceptual framework or model that outlined an integrated reporting system that the company could adopt for future implementation. Integrated reporting essentially goes beyond the traditional financial information provision by showing the relationship between financial and nonfinancial performance.

 

By assimilating the complexity and interconnectedness of the ecosystems, integrated reporting serves to rebalance the conventional financial performance metrics with an all-encompassing set of performance factors that will, together, have a longer-term implication for the company. Ultimately, the goal is to ensure that the company succeeds both in competing profitably and in creating long-term sustainable growth through its social and environmental capital.

 

Managing the Project

 

As the course instructor, I facilitated each group’s structure throughout the learning process so as to fulfill the broad objectives of positive interdependence, individual accountability, face-to-face interaction, social skills, and group processes. At the end of the semester, each group submitted a written report and presented its findings and recommendations to the class.

 

To measure the extent of how the course project may have affected the students’ intended behavior toward actions related to environmental sustainability, each student completed a pre- and post-project survey. Relying on the theory of planned behavior, the survey was based on items related to one’s attitude, subjective norm, perceived behavioral control, intention, and behavior. Results from the survey showed that engaging students more directly in such an experiential pedagogical approach within the sustainability domain can, through a combination of action and reflection, help develop a greater appreciation of environmental sustainability. Overall, experiential projects help improve students’ critical thinking and communication skills because they require students to work with one another through complex issues, negotiate team dynamics, and interact with working professionals.

 

Feedback from the students also generally showed that experiential learning provides an excellent avenue for the students to apply what they have learned in their coursework regarding accounting and sustainability. Comments included: “fun experience, allowed me to apply what I have learned to a real-world scenario,” “all group members have to work hard together to make the project a success,” “first time taking a class that requires me to work so closely with an outside firm,” “researching from different sustainability angles to help solve the firm’s problems were time-consuming but possible,” “provided some great ideas on how I could use in my own business in [the] future,” and “business can make money and do good at the same time.”

 

BRINGING SUSTAINABILITY INTO THE CLASSROOM

 

The experiential project provided my students an immediate, in-depth perspective on how sustainability issues could impact a business. As sustainability grows in prominence, there will be more potential opportunities to demonstrate sustainability within the context of finance and accounting. At the college level, state- and federal-funded grants have already helped to jump-start various sustainability-related programs that were previously unheard of. On a campus-wide level, many institutions have started actively pursuing (and achieving) gold-, silver-, or bronze-star ratings in campus sustainability and have similarly taken up the aim of pollution reduction, even carbon neutrality, as one of their core missions.

 

Business course offerings are also due for a revamp. Accounting professors, for instance, can start by modifying some courses in order to incorporate a greater sustainability component. Courses like managerial and cost accounting, which deal with companies’ reporting of sustainability-related product information, or taxation, which advocate tax incentives related to “green” initiatives, are prime candidates for such initial changes. A course in environmental auditing could also introduce students to attestation and assurance practice in corporate sustainability.

 

Financial accounting courses could incorporate a more detailed discussion of how the disclosures of nonfinancial sustainability metrics can impact a company’s long-term financial performance, thereby providing incrementally relevant and reliable information to the capital markets’ decision makers. The accounting curriculum in general could also incorporate a greater technical competency component that includes ethics and professional values.

 

Besides teaching through a pedagogical combination of lecture and experiential methods during the semester, instructors could consider initiating a sustainability accounting boot camp during the intersession periods or a student exchange program in order to better appreciate how peer institutions teach and practice sustainability throughout the nation as well as in other parts of the world.

 

One hopes that all of these pedagogical efforts can yield success toward molding a new generation with a greater awareness of their roles in promulgating the continued importance of sustainability in the 21st Century world of business, with success measured in both financial and nonfinancial terms.


SUGGESTIONS FOR INSTRUCTORS

 

There are many benefits in going beyond the traditional lecture-based curriculum to include an experiential-learning component, but the process presents numerous challenges. Here are some suggestions to keep in mind:

 

  1. Preparation is key to limit any problems that may arise. Considerable effort is needed to manage the collaboration with the host partner. Strive for realistic goals to achieve at different time points during the semester.

 

  1. From the beginning, clearly define and communicate the objectives and scope of the project to the students.

 

  1. Be careful with the scope of the project. Aim to accomplish a few key learning objectives.

 

  1. Collect and gather as much information from the host company at the onset, categorize the information into different folders, and keep all of these folders in a central data repository site. This will prevent the host partner from receiving repetitive questions throughout the semester.

 

  1. Include some form of peer evaluation in the project grading rubric that will allow students to rate their team members on team involvement, time management, and professional etiquette.

 

  1. Apply for some type of teaching grants or small-project funds to help defray the logistical expenses that may arise from running an experiential project, such as transportation costs and stipends for student helpers to collect research data.

 

  1. Be proactive in discussing the project with your supervisor regarding departmental support, particularly if there’s no current reward or evaluative structure for these kinds of projects.

 

  1. Be patient in dealing with any problems that may arise and be open to possibly adjusting your expectations.

RESOURCES FOR TEACHING SUSTAINABILITY

 

A number of professional organizations with strong academic affiliations could provide invaluable resources for anyone interested in doing more research prior to bringing sustainability education into the classroom:

 

  • The Association for the Advancement of Sustainability in Higher Education (AASHE) was formed with the objective of furthering educational innovation in sustainability. Teaching and research resources across all aspects of sustainability in higher education are available on the AASHE’s Campus Sustainability Hub at bit.ly/3dKHF3Z.

 

AASHE has provided numerous special recognitions to honor the accomplishments of students and faculties, such as the campus sustainability achievement, campus sustainability research, student sustainability leadership, and lifetime achievement awards. Details on past winning projects are available at bit.ly/2VooOp1.

 

  • Campus Compact provides civic engagement resources for instructors and students in eliciting a high-impact learning experience for the public good. Campus Compact’s civic and community development learning resources are available at compact.org.

 

Campus Compact also bestows a variety of community engagement awards and civic fellowships in recognition of individuals and institutions that have demonstrated outstanding work pursuing the public purposes of higher education. Details on the various state- and institution-based public impact awards are available at bit.ly/3id5Aws.

 

  • To stay abreast of emerging issues and global trends in climate change and sustainability development, practitioners and academics can contact the Association of Climate Change Officers (ACCO) at bit.ly/2BLI88O to explore the opportunity of earning a host of sustainability-related professional credentials.

 

Eric Lee, Ph.D., CPA, CGMA, CFE, is an associate professor of accounting and the Accounting Alumni Faculty Fellow in the College of Business Administration at the University of Northern Iowa in Cedar Falls, Iowa. He is a member of IMA’s Waterloo-Cedar Falls Chapter. Eric can be reached at eric.lee@uni.edu.
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