IntroductionIn an effort to present a concise introduction to
the treatise, this chapter shall move to look into a number of
pertinent areas that would effectively lay the foundation of the
discussion. As a means to an end, the chapter will commence with an
overview of the background of the study before looking at the
statement of the problem which in effect offers an opportunity for
a presentation of the objectives and scope for the research. Having
looked into that, the paper moves to examine some of the key
research questions that form the pillars for the investigation. he
chapter concludes with a view of the structure of the
research.Research Backgroundhe increasing pace of globali!ation
implies that nations need to take stock ofthe manner in which they
take care of the environment and communities in which that
undertake their commercial activities. "ith the increased
monitoring and calls from bodies such as the #nited $ations, it has
now become apparent that companies need to take measure that would
ensure all their commercial activities are sustainable.In essence,
this would then imply that these companies need to make effort
towards social welfare programs %for both its employees and
clients& and protection of the environment from run'off effects
of their commercial activities. (odern economic perspectives point
out that regardless of the industry, companies need to take social
and environmental activities as to being part of their corporate
philosophy in such a manner that it comes up with a sustainable
model for its commerce, the society and more importantly, the
environment. "hereas the short term benefits for such a move may be
deemed as to being minuscule, the increased use of sustainability
index by investors implies that such efforts are designed for the
long haul whereby significant profits will be directly correlated
with the extent in which the company is sustainable. "ith the above
premise in mind, it then follows that the respective board of
management need to develop models that would align their need for
economic gain with that of a sustainable model that is aware of the
need to safeguard the socioeconomic status for posterity. In other
words, the firm needs to be keen to ensure that it places ample
emphasis on environmental impact assessment, effective management
of solid waste, payment of relevant environmental taxes and use of
materials that reduce amount of waste produced. )uch a feat is not
simple as the growth of the global economy has made competition for
limited market become fierce to the extent that firms look towards
short term objectives, that is, maximi!ed profits with little
regard for the environment. Indeed, with lessons from a number of
oil companies such as *+, such short cited measures often lead to
poor standards of operations that results in accidents that
jeopardi!e the environment leading to firms being forced into
parting with compensation fees. In other cases, consumer watch
awareness groups call for the society to boycott the consumption of
products from such companies thus leadingto a drop in profits and
eventually market value. )uch unwarranted risks are viewed as the
major propellant for firms to take social and environmental
accounting more seriously.*ased on the above, it then holds that
the concept of ,)- as a whole serves tooffer linkages between
commerce and the environment. In particular, what it does is that
is connects commerce with socioeconomic polices as well as offer a
linkage between the enterprise with the community. his is achieved
through one of the tenets of ,)- which calls for the enterprise to
adopt clean and environmentally friendly policies that would
essentially reduce production of waste %especially toxic ones&
that would in turn reduce its carbon footprint and thus offer a
first line of mitigation strategy towards climate change. In
addition to the above tenet, ,)- dictates that the firms need to be
open about their business processes in areas such as competition
and manufacturing processes. As such, the above can only be
achieved by first ensuring that the top leadership of the firm
implement internal measures of conformity towards regulationsat all
levels %from state to international&. )uch regulations would
essentially pertain towards business admiration, audit, ethics and
cost accounting. In not so many words,,)- is not a concept that may
be accomplished overnight but one that needs serious investment of
human capital and more importantly the need to learn from past
experiences. "hen such training and learning are underway, the
board of management need to take it a notch higher and move towards
including a ,orporate )ocial -esponsibility -eport and
)ustainability .evelopment resport as part of their annual
corporate reports. )uffice to say that firms that are listed within
various security exchange listing that the above report is now
mandatory and demanding in such a manner that the comprehensiveness
of such a report has a direct bearing on thevalue of share of a
company.In conclusion, this paper posits that whereas the main
function of commerce is generation of profit, socioeconomic
awareness is the pillar that would ensure sustainable development
of the firm and the industry as a whole. /ffectively, firms that
take ,)- seriously are often seen in the eyes of the community as
honorable institutions that the consumer would find it in them to
engage in meaningful commerce. /rgo, for companies looking towards
the long run, there is need to invest in business activities that
are socially responsible, that is, ones that respect both the
society and natural resources.Corporate Social Responsibility in
Chinao fully comprehend the case of corporate social responsibility
in ,hina, one needs top fully comprehend the state of the ,hinese
economy. *ased on 012342 figures, ,hina effectively became the
largest trading power after amassing over #)56.78 trillion in trade
thus making its voice at the "9 ever more pronounced %"hite,
2346&. Its foreign exchange reserves hit the #)52.7: trillion
mark in 012343%IA$), 2344&. /ffectively, the nation received
the highest in 0.I %an estimated #)52:6 billion& albeit its
outward investment was a meager #)5;2.< million in the same
year. *esides the above figures, the nation has seen a number of
its firms become increasingly involved with the #) securities
whereby as of 01233=, the nation become #)> largest holder of #)
public debt standing at #)54.4; trillion worth of #) reasury *onds
%Hornby, 233=&. he robustness of its firms is evident asseen in
the 0orbes 01234< report that =: ,hinese companies formed part
of the :33 largest global firms and that five out of ten of the
largest public firms have their base in ,hina not to mention that
the world>s largest bank %measured by total asset& is her
Industrial and ,ommercial *ank of ,hina %,hen, 234s corporate
social responsibility be measured fromE .o the consumers in
developed nations have adequate exposure to the extent in which
they possess rights that call forfirms to respect their well'being
and that of their environmentE In search for some of the above
answers, it is revealed that the application of the ,)- policy to
the firm ought to be based on a top'down approach but of coursebe
contingent on the number of persons that are being served within
the firm>s market. /rgo, it then follows that the firm may
result to applying different ethical rules when serving a different
number of clients all together.aking a step back, it is important
to take note of the fact that firms may not be entirely ready to
invest in ,)- in nations where the industry lacks the relevant
legal framework to facilitate as much. Indeed, if the events of the
23th century are anything to go by, firms were often lost in the
cause to amass huge profit instead of thinking of investing their
profits on the community, well, voluntarily that is. ,onsequently,
nations moved too slowly begin to develop policies that towards
this end albeit only resulting in a series of laws that were
overlapping at the various levelsof government %from the
ministerial level to the county council levels&. 0or full
implementation, there has always been the huge task of getting a
single regulator to try and piece together all these policies,
considering that different government agencies issued different
requirements. (ore importantly, it is very important to take note
of the fact that the polices are often designed to affect
large'scale enterprises as the government often assumes that they
are often the ones that are more likely to have a huge impact on
the community and environment. (oreover, going after the
small'scale enterprise may be easily be misconstrued as the
government creating an uncomfortable environment for business
activities. (ore so, for the case of ,hina, whose economy was still
largely centrally planned only a few decades ago, it lacks adequate
legal framework for full scale implementation.he fact that the
,hinese economy has been in a constant state of transition from a
planned economy, communist, implies that the situation presented a
gap in thegovernment when it came to trying to keep up with the
emergence and growth of a free market economy. Indeed, the .eng
Fiaoping open market reforms were good forthe overall promotion of
commerce but detrimental for the consumers and environment. ,ase in
point, there is visible evidence to show the extent of disregard
for environmental sustainability in *eijing where residents are
even seen to be walking with nose masks to protect them from the
heavily polluted air. All these was a result of *eijing failing to
regulate the market thus allowing competition to take an
unprecedented turn whereby oversight takes a back seat. )uch then
places her exports in a precarious position whereby it often
receives a lot of quality complaints. /ffectively, the mode of
accounting practices in ,hina, that is, traditional, need to
undergo massive reforms, especially taking note of the fact that
the nation is a member of global trading organi!ations such as "9
and A)/A$. In addition to this, the increased growth and
profitability of ,hinese firms to the extent that a number of them
are in operation abroad implies that the nation has an ideal
opportunity to shape it commercial philosophy and show the world
that its firms can indeed engage in sustainable business
operations. /rgo, firms need to be cogni!ant ofthe fact that
reducing cost of operations need not be a reason to lower quality
standardsA the nation needs to understand that it being among the
largest economy faces competition from the #)A who would be ready
to present them as cut'throat business people.Objectives of
Research*ased on the ideas presented above, it then follows that
the ensuing research possess two key objectivesG%a& o
investigate the level of awareness on ,)- and )ocial and
/nvironmental Accounting in the context of ,hinese commerceA%b&
o understand the current status of ,)- and )ocial and /nvironmental
Accounting in the context of ,hinese doctrines of commerce.Scope of
the Research *ased on the research topic, the research variables
are evident. he research intends to cover the concept of social and
environmental accounting within the context of ,hinese and foreign
companies operating within ,hina. (oreover, it undertakes a case
study approach of investigating the manner in which
Arcelor(ittal,$ippon )teel, $ucor and #) )teel have adopted ,)-.
/mphasis will be placed on demystifying the level of awareness,
benefits and problems. he object of the research will be based on
collection and analysis of secondary data spanning a periodof three
months %Bune 234: to )eptember 234:&.Research Questionso aid
the development of the study and the full reali!ation of the
hypothesis, six core research questions have been
formulatedG%i& "hat is ,)-E%ii& "hat is environmental and
social accountingE%iii& "hy are they important to business
activitiesE%iv& o what extent are ,hinese companies aware of
the importance of environmental and social accounting issues in the
commercial activitiesE%v& How do ,hinese companies implement
,)- and environmental and social accounting in realityE%vi& How
are foreign companies in the iron and steel industry working
towards environmental and social accountingEStructure of Research
his research paper is divide into five key areas.%i& ,hapter 4
H Introduction%ii& ,hapter 2 H Iiterature -eview%iii&
,hapter 6 H he )tatus of )/A in ,hinese ,ompanies%iv& ,hapter
< H he )tatus of )/A in 0oreign ,ompanies%v& ,hapter : H
,onclusionIn the first chapter, a background that offers the
rationale to the research paperis offered thus setting out the
objective and scope of the research. ,onsequently, ,hapter wo
offers a literature review of accounting theory with regards to
,)-, the triple bottom line and the importance of ,)- on business
activities. (oreover, the section will deal with particulars on
social and environmental accounting. In the thirdchapter, the focus
shifts to understanding the awareness, benefits and problems faced
by ,hinese accounting when it comes to ,)-. he same focus is then
offered in ,hapter 0our albeit towards foreign companies with
particular emphasis on Arcelor(ittal, $ippon )teel, $ucor and #)
)teel. he last chapter provides a conclusion for the research
alongside recommendations and limitations of the study besides
suggestions for further research. "ith the complete research paper
in place, an Abstract is presented thereby offering a concise
summary to the discussionIntroduction he ensuing section seeks to
make headways into offering a literature review on corporate social
responsibility and that of social and environmental accounting.
/mphasis will also be placed on making an understanding on the
manner in which the above concepts and applied in practice. Cey to
note is the fact that the review places a premium on ensuring that
it correlates with the background of the research. Corporate Social
Responsibility0or the sake of clarity, this review is divided into
three key sections so as to increase its depth of research. hese
sections areG%a& .efinition of ,)-A%b& he riple *ottom Iine
and %c& he Importance of ,)- on business activities.efinition
of CSRhe term ,)- may take up a myriad number of definitions all
pointing to form of self'regulations that corporations integrate
within their business models. Darious developed nations have their
own blue print on what exactly it entails. 0or example, within the
/uropean #nion, it is understood as to being Ja concept
wherebycompanies integrate social and environmental concerns in
their business operations and in their interactions with their
stakeholders on a voluntary basisK. /vidently, the above
definitions brings out the notion of non'coercion into complying
with such a task. (oreover, it points out to the fact that the core
function of the concept goes beyond sustaining the social and
environmental setup but also goes on to make mention of the need to
include the stakeholders in their endeavors in such a manner that
points out that the endeavor goes beyond the need to make a company
profitable.In other words, ,)- is all about how companies can be
able to be profitable whilst still being able to align itself with
a measure of social and environmental responsibilities.Indeed
(c"illians L )iegel %2334& point out that ,)- activities ought
to go beyond the need for an enterprise to satisfy a legal need
thus again emphasi!ing the fact that the endeavor is purely
voluntary. $evertheless, there are those that object to the entire
notion. 0riedman %4=83& points to the fact that Jthe social
responsibility of business is to increase its profitsK. In other
words, his thesis argues that a company can only be able to help
the community by being able to accrue huge profits that would in
turn spur economic growth. However, with the increase growth in the
concept of globali!ation, *lowfield L (urray %2337& suggest
that it has led to the development of a new kind of relationship
between the corporation and society. )uch a relationship is one in
which the enterprise is willing to listen to the desires and
callsfrom the society %Ammenberg, 2342&. In conclusion, there
is overwhelming literature to support the earlier conjecture on ,)-
whereby it ought to then be perceived as an activity that is goal
oriented and one that is based on the norms of both the society and
the enterprise. )uch a norm is said to be built on a series of
dialogue that is in turn expressed or achieved through the firm
implementing codes of conduct or standards and certification
systems.According to Danclay:, *I is a philosophy or a way of
thinking about ,)- but nota method of accounting. In his
investigation on implementing *I, too many agencies and companies
inappropriately appreciate the philosophy of *I and only response
to the reporting requirements. (oreover, the implementation of *I
gets struggled due to the social and environmental indicators have
not been determined.!he Importance of CSR in Commerce,)- is the
responsibility of the companies for acting in socially responsible
manner,in which it is expected that a company go further than
required by law so as toG reat employees fairly and with respectA
9perate with integrity and in an ethical manner in all its
businessA -espect human rightsA )ustain the environment for future
generationsA *e a responsible neighbour in the community and a
goodMcorporate citi!en .+ratik and ,handan further comment that
business enterprises have introduced ,)- reports to their operation
to against the damage on their sales and reputations becausethe
attacks from the activist groups who have highlighted wrong doing
of the enterprisesN activities. he ,)- report might be included in
the annual report or separate corporate social responsibility
report such as social and environmental report or sustainability
report. hese reports indicate a company s commitmenttoward ethical
behaviour and highlight their progress towards achieving their
strategic ,)- objectives.According to +ratik and ,handan:, the
company who performs ,)- well will be abletoG4. "in new business.
2. Increase customer retention. 6. .evelop and enhance
relationships with customers, suppliers andnetworks.