Hi. I am going to do research project in Managemeerial accounting. What i need is to come up with good research question from one of these two articles below. The research project is going to be very big project with almost more than 5000words. Therefor i need someone who can read both of the articles and give me couple of good research question.

VOLUME 12 ISSUE 4 The International Journal of Sustainability in Economic, Social, and Cultural Context ______________________________________________________________________ Accounting for a Sustainable Use of Resources and Capital Maintenance A Value-added Approach ARNE FAGERSTRM AND FREDRIK HARTWIG ONSUSTAINABILITY.COM The International Journal of Sustainability in Economic, Social, and Cultural Context www.onsustainability.com ISSN 2325-1115 (Print) ISSN 2325-114X (Online) doi:10.18848/2325-1115/CGP (Journal) First published in 2016 in Champaign, Illinois, USA by Common Ground www.commongroundpublishing.com Article Submission The International Journal of Sustainability in Economic, Social, and Cultural Context publishes quarterly (March, June, September, December). Please visit www.onsustainability.com/journals/call-for-papers to find out more about the submission process. Abstracting and Indexing Please visit www.onsustainability.com/journals/collection to view a full list of databases in which this journal is indexed. Knowledge Community Membership The International Journal of Sustainability in Economic, Social, and Cultural Context is a peerreviewed, scholarly journal. Editor David Humphreys, The Open University, UK Managing Editor Amanda Sabo, Common Ground Advisory Board Dang Van Bai, Ministry of Culture and Information, Vietnam Michael Cameron, University of Waikato, New Zealand Richard M. Clugston, University Leaders for a Sustainable Future, USA John Dryzek, Australian National University, Australia Steven Engelsman, Rijksmuseum voor Volkenkunde, The Netherlands John Fien, RMIT University, Australia Amareswar Galla, International Institute for the Inclusive Museum, Australia Suzanne Grant, University of Waikato, New Zealand Steve Hamnett, University of South Australia, Australia Olaf Gerlach Hansen, Danish Cultural Institute, Denmark Charles Hopkins, York University, Canada David Humphreys, The Open University, UK Lily Kong, National University of Singapore, Singapore Jim McAllister, Central Queensland University, Australia Helena Norberg-Hodge, The International Society for Ecology and Culture (ISEC), UK Peter Phipps, RMIT University, Australia Spencer S. Stober, Alvernia University,USA Douglas Worts, Toronto, Canada Lyuba Zarsky, Middlebury Institute of International Studies at Monterey, USA Associate Editors Articles published in The International Journal of Sustainability in Economic, Social, and Cultural Context are peer reviewed by scholars who are active participants of the On Sustainability Knowledge Community or a thematically related Knowledge Community. This engagement with the Knowledge Community, as well as Common Ground Publishing's criterion-referenced evaluation system, distinguishes our peer-review process. In recognition of the valuable feedback and publication recommendations that they provide, reviewers are acknowledged as Associate Editors in the volume that includes the article(s) they have reviewed. The Associate Editors listed in the following link have contributed significantly to the overall editorial quality and content of the journal: www.onsustainability.com/journals/editors. Our Model We are working to change the way in which knowledge is valued. Rather than focusing solely on acceptance rates and citation countsstandards that are seriously fraughtwe measure quality by a criterion-based peerreview process, assessing the intellectual excellence and accessibility of the work against clearly articulated disciplinary standards. Please visit www.onsustainability.com/journals/model to find out more. Authors in The International Journal of Sustainability in Economic, Social, and Cultural Context are members of the On Sustainability Knowledge Community or a thematically related Knowledge Community. Members receive access to journal content. Please visit www.onsustainability.com/about/become-a-member to find out more about community membership. Subscriptions The International Journal of Sustainability in Economic, Social, and Cultural Context is available in electronic and print formats. Subscribe to gain access to content from the current year and the entire backlist. Contact us at cg-support@commongroundpublishing.com. Ordering Single articles and issues are available from the journal bookstore at www. ijsesc.cgpublisher.com. Hybrid Open Access By publishing in The International Journal of Sustainability in Economic, Social, and Cultural Context, authors have made their articles available to a large number of scholars who have individual subscriptions or whose institutions subscribe. The International Journal of Sustainability in Economic, Social, and Cultural Context is Hybrid Open Access, meaning authors can also choose to make their articles open access. This allows their work to reach an even wider audience, broadening the dissemination of their research and potentially increasing the incidence of other scholars citing their work. Please visit www.onsustainability.com/journals/hybrid-open-access to find out more about our Open Access option. Disclaimer The authors, editors, and publisher will not accept any legal responsibility for any errors or omissions that may have been made in this publication. The publisher makes no warranty, express or implied, with respect to the material contained herein. Copyright and Copying 2016 (individual papers), the author(s) 2016 (selection and editorial matter) Common Ground All rights reserved. Apart from fair dealing for the purposes of study, research, criticism, or review, as permitted under the applicable copyright legislation, no part of this work may be reproduced by any process without written permission from the publisher. For permissions and other inquiries, please contact cg-support@commongroundpublishing.com. Common Ground is a member of Crossref. Accounting for a Sustainable Use of Resources and Capital Maintenance: A Value-added Approach Arne Fagerstrm, University of Gvle, Sweden Fredrik Hartwig, University of Dalarna, Sweden Abstract: Sustainability reporting to accompany traditional financial reports has momentum, but lack of consistency in preparing sustainability reports inhibits their usefulness. This paper presents a development guide for a consistent and auditable sustainability reporting model based on modified value-added reporting. Value added taken from traditional accounting reports is allocated to five dimensions of sustainability: financial, social, environmental, technological, and a residual value retained in the company. Sustainability indicators based on ratios of allocated amounts to the five dimensions are illustrated for a fictitious company. The underlying idea is that if there is an imbalance among the proportions of value added distributed among the dimensions of sustainability, the company's long-term survival could be at stake. Keywords: Sustainability Reporting, Value Added, Dimensions of Sustainability Introduction A fter the Brundtland Report prepared by the UN World Commission on Environment and Development (1987), there was a greater focus on environmental issues. The report concluded that sustainable development is \"development that meets the needs of the present without compromising the ability of future generations to meet their own needs\" (UN 1987, 41). Subsequently, organisations' needs to report externally their impact on the environment and society have increased. Green accounting, social accounting, \"triple bottom line\" accounting (TBL), and the Global Reporting Initiative (GRI) are examples of models for sustainability reporting. According to Klynveld Peat Marwick Goerdeler International (2014), 71% of 4,100 companies surveyed worldwide included sustainability aspects in their financial reports. One problem for users of sustainability reports is that companies change the content and structure of sustainability reports, which makes it difficult and in some cases impossible to assess changes over time for a given company. To compare companies within the same industry is also difficult or impossible because companies are able to select the various aspects they want to present, and opt out of others, in the sustainability report. The risk with this \"cherry picking\" is that sustainability reports are becoming less useful (Guthrie and Farneti 2008; Milne and Gray 2012; Brown and Dillard 2014). Below, a sustainability model is presented as a guide to continued development of sustainability accounting and reporting. The model is a value-added approach and is based on data readily available in existing accounting systems. One advantage of the model is that, unlike sustainability reporting, it is based on accounting data and is auditable. The model is standardised, i.e., it does not provide for \"cherry picking\" and thus allows comparisons among companies and over time, as discussed in more detail below. The model is divided into five dimensions of sustainability: financial, social, environmental, technological, and residual sustainability. The International Journal of Sustainability in Economic, Social, and Cultural Context Volume 12, Issue 4, 2016, www.onsustainability.com Common Ground, Arne Fagerstrm and Fredrik Hartwig, All Rights Reserved Permissions: cg-support@commongroundpublishing.com ISSN: 2325-1115 (Print), ISSN: 2325-114X (Online) THE INTERNATIONAL JOURNAL OF SUSTAINABILITY IN ECONOMIC, SOCIAL, AND CULTURAL CONTEXT Five Sustainability Dimensions Sustainable business is based on the accounting concept of \"going concern.\" \"Going concern\" is an accounting term for a company that has the resources needed to continue to operate indefinitely. According to Fremgen (1968, 656), the going concern assumption is an effective starting point for analysis and assessments, but only if \"it is justified by evidence in the particular case.\" Indications of a company's going concern must be sought in several sustainability dimensions (Ngwakwe 2012), in addition to financial sustainability as follows. Financial Sustainability Financial sustainability is related to being able to realize and complete financial commitments and can be analysed using data from the traditional financial statements. Social Sustainability Information about social sustainability is given partly in the financial accounts in the form of costs for salary and corporation tax, etc. Environmental Sustainability There is, to a certain extent, data on environmental sustainability in the financial accounts in the form of environmental expenses and amortisation of environmental investments. Technological Sustainability Information about the technological sustainability is indirectly reflected in the financial accounts in the form of research and development expenses and amortisation of research and development investments. Residual Sustainability Information about the residual sustainability is available in the value-added report's bottom line and is related to how much of the value added is retained in the company for later use. Difference between Sustainability Reporting and Sustainability Accounting Current financial accounting and auditing standards have evolved over many years. Accumulated experience from failures and corporate scandals has given the accounting and auditing profession valuable knowledge that has been built into accounting regulation (Clikeman 2009; Carnegie and Napier 2010). It is, therefore, useful to use this experience from traditional accounting when accounting for sustainability is developed. Financial accounting is performed systematically using generally accepted accounting principles. Sustainability reporting, on the other hand, is less structured, and rules and practice have not yet had time to develop. Regulated financial accounting and unregulated sustainability reporting also are related to concepts of audit and assurance. Audit of financial accounting is based in many countries on legal requirements and generally accepted auditing standards. Traditional accounts can be audited because financial accounting is standardised. Sustainability reporting that is not yet adequately developed nor standardised can only be reviewed with limited or negative assurance as outcomes, which is a less systematic procedure (Mock, Rao, and Srivastava 2013). 36 FAGERSTRM AND HARTWIG: ACCOUNTING FOR A SUSTAINABLE USE OF RESOURCES The Origins of Value-added Accounting Value-added accounting is not new. In the 1950s, Suojanen (1954) suggested a value-added accounting concept in the enterprise theory. Enterprise theory is based on the notion that a company is an enterprise or a social unit used by stakeholders. Suojanen (1954, 395) argued that \"if the enterprise is considered to be an institution, its operations should be assessed in terms of its contribution to the flow of output of the community. If the income generated in the enterprise is to be analysed on the basis of social considerations, then the traditional type of income statement is insufficient.\" The value-added concept thus provides more information to stakeholders than is possible from the income statement and balance sheet. Value-added accounting has never been mandatory and not particularly widespread, with some exceptions (Gray and Maunders 1980; Morley 1978; and Rutherford 1978). More recently the value-added concept has been discussed by Haller and van Staden (2014). They propose, essentially, a traditional value-added accounting model in which value added is distributed to owners, employees, government, and society. Using Suojanen (1954) and Haller and van Staden (2014), this research suggests that the value-added model they propose should be further developed. The development is needed because the traditional value-added model has a focus on limited stakeholders that include owners, investors, employees, and society. What is suggested here is a broader stakeholder focus that would also include environmental, technological, and residual sustainability. Traditional Financial Accounting Stretches out a Hand The value-added model here is based on the notion that traditional accounting should \"stretch out a hand\" and connect a value-added accounting model with sustainability reporting. This \"stretching out a hand\" is done by using a modified value-added model. Because the model is standardisedand thus hampers \"cherry picking,\" which is common in sustainability reporting it facilitates comparisons over time and among companies. Information in a value-added model is also verifiable and, therefore, auditable. Lack of comparability, verifiability, and auditability is often highlighted as disadvantages of today's sustainability reporting (Lamberton 2005; Woods 2003). The concept of value added has its origins in the field of economics but is also used when companies are analysed (Burchell, Clubb, and Hopwood 1985; Mouritsen 1998). The sum of all the production values of a country minus the contribution of goods or services necessary for this production is equal to a country's gross domestic product (GDP). An individual company's value added is sales minus external costs, input goods, or input services. When the value added of all companies and other organisations in a nation are summed up, the GDP of that nation is obtained. A Modified Value-added Sustainability Model The value-added model here is a modified version of a traditional value-added model. Its strength is partly because traditional accounting is used, which enables auditing, and it focuses on how much of the value added for a given period is allocated to each sustainability dimension, which allows comparisons. It complements the traditional value-added modelwhich is focused on the distribution of value added among capital (owners), labour (employees), and the state (government)with how much of the value added is allocated to environment, technology, and what remains in the company. Haller and van Staden (2014), for example, present a traditional value-added model shown in the Appendix. As a result, readers can see the difference between the modified model presented here and the traditional model. 37 THE INTERNATIONAL JOURNAL OF SUSTAINABILITY IN ECONOMIC, SOCIAL, AND CULTURAL CONTEXT In the modified value-added model presented here, a stakeholder can see, for example, how much dividend payments, salaries, corporate taxes, environmental costs, etc. relate to value added. Value added in this model is allocated to the five dimensions of sustainability: financial, social, environmental, technological, and residual sustainability. Financial sustainability is about generating sufficient and stable surplus so that the suppliers of capital, owners, and lenders can get a market return on their capital. Social sustainability is about employees' receiving fair wages and that a reasonable part of the added value will be paid in taxes. Environmental sustainability and technological sustainability are about spending resources on environmental and technological investments. Residual sustainability is based on keeping a reasonable portion of the value added in the company so that the company is not drained. The underlying idea is that a company might not survive if, for example, capital suppliers' capital return is below an acceptable level, employees' terms and conditions are not reasonable, new environmental and technological investments are not implemented, or retention of value added is too low. It is important to understand the model's restrictions. The main restriction is that it only measures distribution of value added to different dimensions of sustainability. It provides no information on how effectively value added is used. It measures only input values, not output values. In the modified value added model below consider a fictitious company with revenue of 20,853 million and a value added of 5,803 million. Equity in this fictitious company amounts to 7,340 million. The model clearly shows how the value added is distributed to the various dimensions of sustainability. There are also a number of standardised key ratios based on the information in the modified value-added model. Net sales External expenses Value added Table 1: Distribution Model: Value Added (VA) to the Various Sustainability Dimensions (Million EUR) Distribution of value dadded 1. Financial sustainability Note 1 To owners and lenders Dividend Net interest expense Total 2. Social sustainability Note 2 To employees Management/board Other staff Total To public sector Paid corporation tax Deferred corporation tax Excise duties (not VAT) Total 3. Environmental sustainability Note 3 Environmental expenses Depreciation environmental investments Total 4. Technological sustainability Note 4 R & D-expenses Depreciation R & D Total 5. Residual sustainability Note 5 Depreciation excl. environmental/R & D (from the income statement) For future depreciation on investments Total Total use 38 20 853 -15 050 5 803 % of VA % av net sales 465 248 713 12,3% 3,4% 57 2 100 2 157 37,2% 10,3% 124 335 200 659 11,3% 3,2% 307 150 457 7,9% 2,2% 357 43 400 6,9% 1,9% 1 378 39 1 417 5 803 24,4% 100% 6,8% FAGERSTRM AND HARTWIG: ACCOUNTING FOR A SUSTAINABLE USE OF RESOURCES Note 1: Financial Sustainability Because of operating in a market economy, it is essential that owners and lenders get a return on their investment that is competitive. If the company's activities do not generate value added large enough to be transferred to the owners and lenders, the company will potentially have a difficulty with the future supply of capital. Financial commitments must also be completed Note 2: Social Sustainability It is also important for a company's long-term survival that employees and the public sector receive a fair share of company value added. If not, the unwritten social contract between the company and the employees and the public could be broken. More specifically, the matter of social sustainability is about employees' receiving sustainable wages and the government collecting taxes at a sustainable level. Note 3: Environmental Sustainability If a company does not make environmental investments, the company's long-term survival is affected. Resources devoted to environmental measures can be environmental investments that are amortised and environmental expenses. Note 4: Technological Sustainability It is important that a company makes technological investments in order not to be left behind. For example, companies need to devote resources to research and development of new products and processes in order to survive in the long term. Resources invested in technology can be investments in research and development that are amortised and direct expenses of research and development. Note 5: Residual Sustainability The part of value added that is not allocated to 1, 2, 3, and 4 above is \"other depreciation or amortisation\" as well as an amount for the future depreciation or amortisation of investments. This residual is the amount of value added that remains in the company. Sustainability Indicators Based on the information in the modified value-added model, it is possible to calculate key ratios that, essentially, are based on the model presented above and are indicators of sustainability from five different perspectives. Financial sustainability is important for long-term survival, but so are social, environmental, technological, and residual sustainability. Table 2 below gives some examples of the key ratios or sustainability indicators. Most of the sustainability indicators are in the range of 0% to 100%. 39 THE INTERNATIONAL JOURNAL OF SUSTAINABILITY IN ECONOMIC, SOCIAL, AND CULTURAL CONTEXT Table 2: Examples of Indicators of Sustainability 1. Indicators of Financial Sustainability Dividends paid / Value added = How much of the value added is distributed to the owners. 465/5803 = 8% Dividends paid / Equity = How big a return in the form of dividends in relation to equity is distributed 465 / 7340 = 6% to owners. 2. Indicators of Social Sustainability Salary costs / Value added = How much of the value added is distributed to employees. 2157/5803 = 37% 3. Indicators of Environmental Sustainability Environmental costs / Value added = How much of the value added is distributed to environmental investments 457 / 5803 = 8% (amortisation) and other environmental expenses. 4. Indicators of Technological Sustainability Tech. costs / Value added = How much of the value added is distributed to R&D investments 400 / 5803 = 7% (amortisation) and other R&D expenses. 5. Indicators of Residual Sustainability Remaining value added / Value added = How much of the value added is not distributed to the other four 1417 / 5803 = 24% sustainability dimensions and thus remains in the company. The suggested indicators may give a green light (sustainability is satisfactory in the current situation), amber light (sustainability in the current situation is somewhere between satisfactory and unsatisfactory), or red light (sustainability is not satisfactory in the current situation). If, for example, environmental sustainability indicators show one percent, about one percent of value added would go to environmental costs, and it may be a strong argument for that particular indicator to glow red. Limits within which indicators should be green, amber, or red are, however, empirical questions that should be linked to the actual probability that the company will not survive. One can imagine absolute intervals, for example, zero to twenty percent of the value added going to environmental costs is a red light, and one can also think of relative intervals based on comparisons with other companies in the same industry, for example, more than fifteen percent above or below the industry average is a red light. Summary and Conclusion The modified value-added model presented broadens the opportunity for external stakeholders to assess corporate sustainability. The main idea is that sustainability is not only financial but also social, environmental, technological, and residual. If there is an imbalance among the proportions of value added distributed among the dimensions of sustainability, the company's long-term survival could be at stake. Based on data in the value-added model, indicators of sustainability are obtained. Because the model is standardised, unlike today's sustainability reporting, it enables comparability over time and among companies so it is possible to 1) observe how sustainability indicators change over time in a given company and 2) compare companies within an industry with each other. The information in the value-added model is also verifiable and, therefore, auditable. Finally, the model is based on data already available in the existing accounting system. The modified value-added model and the sustainability indicators presented need further concretisation and operationalisation. The model can be further developed by scholars and practitioners interested in accounting and sustainability. 40 FAGERSTRM AND HARTWIG: ACCOUNTING FOR A SUSTAINABLE USE OF RESOURCES REFERENCES Brown, J., and J. Dillard. 2014. \"Integrated Reporting: On the Need for Broadening out and Opening up.\" Accounting, Auditing, and Accountability Journal 27 (7): 1120-56. Burchell, S., C. Clubb, and A. G. Hopwood. 1985. \"Accounting in Its Social Context: Towards a History of Value Added in the United Kingdom.\" Accounting, Organizations, and Society 10 (4): 381-413. Carnegie, G. D., and C. J. Napier. 2010. \"Traditional Accountants and Business Professionals: Portraying the Accounting Profession after Enron.\" Accounting, Organizations, and Society 35 (3): 360-76. Clikeman, P. M. 2009. Called to Account: Fourteen Financial Frauds that Shaped the American Accounting Profession. New York City, NY: Routledge. Fremgen, J. M. 1968. \"The Going Concern Assumption: A Critical Appraisal.\" Accounting Review 43 (4): 649-56. Guthrie, J., and F. Farneti. 2008. \"GRI Sustainability Reporting by Australian Public Sector Organizations.\" Public Money and Management 28 (6): 361-66. Haller, A., and C. van Staden. 2014. \"The Value Added StatementAn Appropriate Instrument for Integrated Reporting.\" Accounting, Auditing, and Accountability Journal 27 (7): 1190-216. Gray, S. J., and K. T. Maunders. 1980. Value Added Reporting: Uses and Measurement. London: Association of Certified Accountants. Klynveld Peat Marwick Goerdeler International. 2014. \"The KPMG Survey of Corporate Responsibility Reporting 2013.\" Accessed November 11, 2015. www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/corporate -responsibility/Documents/kpmg-survey-of-corporate-responsibility-reporting-2013.pdf. Lamberton, G. 2005. \"Sustainability AccountingA Brief History and Conceptual Framework.\" Accounting Forum 29 (1): 7-26. Milne, M. J., and R. Gray. 2012. \"W(h)ither Ecology? The Triple Bottom Line, the Global Reporting Initiative, and Corporate Sustainability Reporting.\" Journal of Business Ethics 118 (1): 13-29. Mock, T. J., S. S. Rao, and R. P. Srivastava. 2013. \"The Development of Worldwide Sustainability Reporting Assurance.\" Australian Accounting Review 23 (4): 280-94. Morley, M. F. 1978. The Value Added StatementA Review of Its Use in Corporate Reports. London: The Institute of Chartered Accountants of Scotland. Mouritsen, J. 1998. \"Driving Growth: Economic Value Added versus Intellectual Capital.\" Management Accounting Research 9 (4): 461-82. Ngwakwe, C. C. 2012. \"Rethinking the Accounting Stance on Sustainable Development.\" Sustainable Development 20 (1): 28-41. Rutherford, B. A. 1978. \"Examining Some Value Added Statements.\" Accountancy 89 (7): 48- 52. Suojanen, W. W. 1954. \"Accounting Theory and the Large Corporation.\" Accounting Review 29 (3): 391-98. United Nations (UN). 1987. Our Common FutureBrundtland Report. Oxford: Oxford University Press. Woods, M. 2003. \"The Global Reporting Initiative.\" CPA Journal 73 (6): 60-65. 41 THE INTERNATIONAL JOURNAL OF SUSTAINABILITY IN ECONOMIC, SOCIAL, AND CULTURAL CONTEXT Appendix Value-added Model Proposed by Haller and van Staden (2014, 2015) Panel A: Statement of Sources of Value Added (Value Added Generated) Sales Less Cost of related bought-in materials and services (M&S) Less Decreases in finished goods or work in progress progress Sales-based gross operating value added Plus Increases in finished goods or work in progress (minus related bought-in M&S) Plus Self-produced non-current assets (minus related bought-in M&S) Production-based gross operating value added Plus Revenues from intangible assets (minus related bought-in M&S) Plus Other operating revenues (minus related bought-in M&S) Gross operating value added Less Depreciation of tangible fixed assets Less Amortization of intangible assets Net operating value added Plus Income from investments and other financial instruments Net ordinary value added Plus/less Value added from extraordinary items Plus/less Value added from discontinued operations Total value added generated 42 XXX XX XX XXX XX XX XXX XX XX XX XX XX XX XX XXX XXX XXX XXX FAGERSTRM AND HARTWIG: ACCOUNTING FOR A SUSTAINABLE USE OF RESOURCES Panel B: Statement of Value Added Appropriation (Value Added Distributed) Employees' share Net wages Plus Wage taxes withheld Plus Contribution to social security withheld Plus Pension premiums Plus Other additional employees benefits Plus Bonuses Total employees' share Government's and society's share Income taxes Plus Indirect taxes (e.g. VAT, tariffs, duties) Plus Other public charges and duties Less Subsidies (from government) Government's share Plus Other contributions to society, such as donations, social activities, etc. Total contributions to the public and society Capital providers' share Interest paid Plus Dividends and other payments to shareholders Total capital providers' share Value added retained in the organisation Plus/less Additions or reductions to retained earnings Total value added distributed XX XX XX XX XX XXX XX XX XX XX XXX XX XX XX XXX XXX XXX XXX XXX ABOUT THE AUTHORS Dr. Arne Fagerstrm: Professor, Faculty of Education and Business Studies, Department of Business and Economics Studies, University of Gvle, Gvle, Sweden Dr. Fredrik Hartwig: Senior Lecturer, Department of Trade, Industry, and Business, Academy of Economics, Business Administration, and Social Studies, University of Dalarna, Gvle, Sweden 43 Sustainability The International International Journal Journal of ofSocial Sustainability in Economic, Social, and Cultural in Economic, Social, and CulturalContext Contextisis one of four thematically focused focused journals journals ininthe thefamily collection journals thatthe support the Sustainability of journalsofthat support Sustainability knowledge knowledge communityits journals, series, communityits journals, book series, book conference, conference, and online community. The journal and online community. The journal focuses on sociofocuses on socio-cultural and economic analyses cultural and economic analyses of sustainability. of sustainability. In addition to traditional scholarly papers, this journal The International Journal of Sustainability in Economic, invites presentations of sustainability practices Social, and Cultural Context invites research on including documentation of case studies and exegeses sustainability practices, including documentation of analyzing the effects of these practices. case studies and exegeses analyzing the effects of these practices. Journal of Social Sustainability in The International Economic, Social, and Cultural Context is a peerThe International Journal of Sustainability in Economic, reviewed scholarly journal. Social, and Cultural Context is a peer-reviewed, scholarly journal. ISSN 2325-1115 In Good Life for All: Essays on Sustainability Celebrating 60 Years of Making Life Better 2017 Chapter Eight ___________________________________________________________________________ Sustainable enterprise theory: A good life for all ________________________________________________________________ Arne Fagerstrm1 and Gary M. Cunningham2 ________________________________________________________________ Abstract This chapter develops a theory of sustainable enterprises, sustainable enterprise theory (SET), which can only be a valid theory if knowledge about life and nature is complete. Knowledge limitations should not stop enterprises from doing business with a goal of better long-term life on earth. Life demands stewardship of the resources used during one's lifetime. This chapter develops a model influenced by enterprise theory and resource theory that includes more than money in the business activities of an enterprise. The SET model is used in analysis of accountability, management and in discussions about sustainable business organizations activities. Sustainability and 'green' business: A central theme of the 2012 United Nations Conference on sustainable development ('Rio+20') was the 'green economy' motivated by growing realisation that sustainable development is highly contingent on whether the economy and its frameworks can be transformed to a sustainable economy (UNEP 2011). Various organisations, such as the Organization for Economic Cooperation and Development (OECD), have drawn similar conclusions and launched strategies for 'green growth' (OECD 2011). The United Nations Environment Programme (UNEP) developed a working definition for a 'green economy' as \"one that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities. In its simplest expression, a green economy can be thought of as one that is low-carbon, resourceefficient and socially inclusive\" (UNEP). The OECD's definition is very similar (OECD 2011) and its report contrasts a 'green' economy with the economy of the present day. Increasingly, the OECD and the World Business Council for Sustainable Development are discussing the role of entrepreneurship in serving the interests not only of company shareholders, but of society as a whole. In other words, business operations must be a 'fair deal' for a broader group of stakeholders. The major contrasts between the features of the current economy and a 'green' economy, as clarified in Table 1 below, mean that the current economy, its frameworks and incentive structures must be radically reformed to meet to the visions of a 'green' economy, one that promotes sustainable development. Mistra (2011 p.5) argues \"one central conclusion is that adopting the aims of the green economy would entail a shift of perspective in political discourse from viewing sustainable development as an endeavour to achieve a harmonious balance among economic, social and ecological development, as expressed by the Brundtland Report, to a perspective in 1 2 Profesor of accounting, University of Gvle Professor emeritus in accounting, University of Gvle which socially sustainable development is the aim, ecological sustainability is a fundamental requirement and the economy is seen as a tool\". The social dimension is critical for a sustainable development. Development that is socially sustainable, in which the 'social capital', trust, is well developed, is not just an aim. It also appears essential for success in implementing the major changes in technology and economic frameworks and society at large that are needed to obtain a sustainable development. Table 1. Examples of contrasting aims and features (as expressed by UNEP, the OECD etc.) of the current economy and a green economy. (Mistra 2011 p.7) Many aspects of these differences need research and political change; examples are: Jobs and employment: A particularly pertinent question is how a much more efficient use of natural resources, a key component in a green economy, would affect job opportunities. Value creation and stakeholder prosperity. International trade: what changes are required to align e-trading systems with the framework of an inclusive green economy? Technology including sustainability concepts: in particular, the digitalisation of the economy. Cultural and gender perspectives. Ethics, morality and psychological aspects of a transition. The list could be long and filled with different aspects of the transition. So far, discussions of sustainable business have been largely ad hoc. The next step is to develop a comprehensive theory of sustainable enterprises which is the objective of this chapter. Following the lead of Suojanen (1954) and his enterprise theory of accounting, this chapter presents sustainable enterprise theory (SET) from which implications for business and accounting can be developed. This chapter is organised in sections that describe business activities and resource uses, value creation and stakeholders, the SET model and implications of the model. Business activities and resources used Suojanen (1954) developed and discussed enterprise theory (ET) that defined the firm as an enterprise or a social unit used by stakeholders. He argued: If the enterprise is considered to be an institution, its operations should be assessed in terms of its contribution to the flow of output of the community. If the income generated in the enterprise is to be analysed on the basis of social considerations, then the traditional type of income statement is insufficient. (p.395). When considering social considerations from a sustainability perspective, it is important to consider first resource use from a sustainable entity perspective. An enterprise needs resources to produce products and services. The first resource is human and social, the second is ecological (environmental). These two basic resources are the primary resources in a society and in business entities. Without these primary resources, a sustainable life, a good environment and a social sustainability, the enterprise is in danger. Two other resources, technology and financial, are also needed. Technology and financial resources are tools to develop human, social and ecological sustainability. These four basic resources in SET are further developed and discussed light of the Sustainable Accounting Standards Boards (SASB) draft conceptual framework (2016). Human and social resources (HSR) Human beings are social and generally prefer sustainable lives for themselves and for following generations, especially their offspring. In the recent past, resources for enjoyable satisfying lives were plentiful; primary concerns in most 'industrialised' and emerging countries were over financial resources. Now with evolutions in many aspects of life, the scarcity of resources and additional perspectives on how one lives a satisfying life are evolving, thus raising awareness for a need for sustainable enterprises. In a broader context, being social creatures, individuals are part of social networks to achieve sustainable satisfying lives for themselves and generations to come. One essential element of such a network is a sustainable enterprise. The UN works actively to promote companies to 1) operate responsibly in alignment with universal principles, 2) take strategic actions that support the society around them. Then, to push sustainability deep into the corporate identity, companies must (3) commit at the highest level, (4) report annually on their efforts, and (5) engage locally where they have a presence (UN 2016). The proposed framework of the Sustainability Accounting Standards Board (SASB) recognises the importance of the human social dimension as a key item to deliver long-term value. This dimension relates to the perceived role of business in society in delivering benefits to society in return for a license to operate (SASB 2 and 3). Management of an enterprise is a human activity and thus falls under human resources in SET. SASB No. 5 describes leadership and governance, which involve management of issues inherent in business models or common practices in the industry, that are in potential conflict with interests of such broader stakeholder groups as government, community, customers, and employees. Such conflicts create a potential liability or worse, a limitation or removal of a license to operate, including regulatory compliance, lobbying and political contributions. They also include risk management, safety management, supply-chain and resource management, conflict of interest, anticompetitive behaviour, and corruption and bribery, as well as the risk of complicity in human rights violations. Ecological (environmental) resources (ER) Ongoing international activity on different levels works to protect ecological resources. The UN plays an active part. In an annual report, it addresses risks and possibilities for environmental resources (United Nations Global Compact 2016 b). Ecological resources are not endless and there is a need for action on all levels in the world society. Businesses can be an active partner in 'green development, not only by restrictions of use of environmental resources, but also by implementing new business models and approaches with stakeholders. A recent example from the media is: When Walmart sets a goal, companies usually find ways to meet it. In its bid to promote sustainability, for example, Walmart wanted General Mills, a big food company, to fit its Hamburger Helper noodles into a smaller box. General Mills replaced curved noodles with straight ones, which lie flatter. The switch took 500 lorries off the road each year and freed shelf space for other goods. Walmart worked with makers of detergent to develop concentrated versions, in smaller bottles. Over three years the switch saved more than 57,000 tonnes of cardboard, 43,000 tonnes of plastic resin and 400m gallons of water. (The Economist, June 4, 2016) In this situation, Walmart, a large global retailer, worked with a supplier, a large multinational food processing enterprise, to produce a product that enhances ecological sustainability as well as providing business advantages. In the proposed SASB framework No. 1 (SASB 2016), environmental impact is described as the use of non-renewable natural resources as input to the factors of production and environmental externalities or other harmful releases in the environment, such as air and water pollution, waste disposal, and greenhouse gas (GHG) emissions. Enterprises generate environmental capital, either positive for a sustainably operated business, or negative for businesses that do not operate sustainably. Technological resources (TR) Technological resources (TR) represent one human tool kit used to create goods and services. TR are used from raw material extraction, to production and use and later disposal of products. Human and social resources and ecological resources are used in the process. Some technological use damages human and ecological resources. As in the Walmart example, the use of resources depends on business models and innovations. A 'smart' choice is one businesses use to be both sustainable and also generate positive technological capital. In the Walmart example, the choice also enhanced profit potential by reducing costs for General Mills, possibly reducing amounts Walmart paid to General Mills, freeing shelf space for other products, etc. Business model and innovation are included as technical resources in SASB 4, which addresses the impact of sustainability on innovation and business models including integration of environmental, human and social issues in the value chain, as in the Walmart-General Mills example, as well as product innovation, and impacts on financial assets (SASB 2016). Value creation and stakeholders An important element of SET considering the inherent social implications is the perception of value or utility, \"utility\" as used by economists. Values or utility are personal beliefs; they can be expressed on various scales in addition to money. Examples can be illustrated as follows in examples in ancient times, value in a market economy and intrinsic value. In ancient times, a person might think that having a knife would be desirable. The person first needs to find a knife that is desirable and then find someone who would like to trade the knife for something in exchange, for example apples. When the deal is completed with the exchange of the knife for 90 apples, the value of the knife from the buyer's perspective is more than 90 apples and from a seller perspective less than 90 apples. Value could only be expressed in other things before money entered the society. A second example of value is a more modern: Person A has a motorcycle and wants to sell it for 1,000. This means that A believes the value is lower than 1,000. Person B would like to buy the motorcycle for 1,000, which means that B believes the value of the motorcycle is higher than 1,000. Both A and B are satisfied with the sale and purchase of the motorcycle that represents different perceptions of the value of the same item. The selling price is viewed as 'the objective market value' that represents at least two parties with different subjective meanings about the value. The number of willing persons who want to sell represents the supply and the number of persons who want to buy gives the demand on the market, is the basis for the market to function and a perception of value. A third example is value inbuilt in something, intrinsic value. A piece of land could have a production value for a farmer, but from another perspective, land could have other values. It might be situated in a very beautiful place and have a value from an aesthetical point of view. These intrinsic values also exist in business. A difficult issue of these inbuilt values is how to measure them before assets like the land are sold. A significant part of sales prices on companies' shares is based on the idea of goodwill and other intrinsic values. Rogers (2016 p.1) argues: In 1975, tangible assets made up more than 80 percent of Standard & Poor's 500 market value, and intangible assets made up less than 20 percent. By 2015, those numbers had reversed, a trend that's unlikely to change direction. As the industries shaping our economy, such as the internet, media and services, and biotech, increasingly rely on human capital, technology, and innovation, intangible assets will play a growing role in their success. Sustainability is another example of an intrinsic value. As discussed above, value is determined by individual persons. However, a group of persons might have the same value preferences. Stakeholder theory gives directions for which groups surround an enterprise. Donaldson and Preston (1995 p.87) argued that \"the stakeholder theory is managerial and recommends the attitudes, structures, and practices that, taken together, constitute a stakeholder management philosophy. The theory goes beyond the purely descriptive observation that organizations have stakeholders. In stakeholder theory, there is a difference among various groups of stakeholders. One group, the narrow group, have direct transactions with an enterprise and are in that way important both short and long term. A second group, the broader group of stakeholders, do not have an impact from transactions with an enterprise, but often interact on a long-term basis. This social contract between enterprise management and stakeholders needs to be adjusted over time. Contextual changes in society have an impact on social contracts. It is more difficult to make a new social contract compared to maintaining ongoing social contracts (Suchman 1995; O'Donovan 2002). An enterprise must act in an acceptable way for stakeholders in order to gain legitimacy (Gray et al. 1996). This notion is discussed in legitimacy theory in which some light is cast over the issue \"why enterprises voluntarily publish environmental reports\". Enterprise managements do not like to have a legitimacy gap between the business and its stakeholders (Ljungdahl 1999; O'Donovan 2002; Campbell, Craven and Shrives 2003, Hinson et al. 2010). In sustainable enterprise theory, value creation and stakeholders are linked. Suojanen (1954) argued: Recent years have witnessed a considerable discussion by corporate management of the social responsibilities of the institutionalised corporation. A study of the published annual reports of large corporations indicates that there is a definite trend towards a social concept of the firm. (p.391) Suojanen was early in his development of enterprise theory and the notion of an enterprise as a social activity concept. Examples of value from an enterprise from perspectives of various stakeholder perspectives are presented in Table 2: Stakeholder group Shareholders Group Narrow Employees Narrow Creditors Narrow Costumers Narrow Suppliers Narrow Society Narrow Environmental organisations Broader Good value from the enterprise Stable secure return of investment (dividends and value growth) but also a guarantee of sustainable operations ('green' investments) Good working conditions (sustainable) security and good salary - pension etc. and a guarantee of sustainable operations Stable secure payment of interest and amortisation of loans, but also a guarantee of sustainable operations ('green' investments) Good quality products for a good price, but also values like guarantees of sustainable production and products Good quality products for a good price, but also values like guarantees of sustainable production and products, payments on time Good tax payers and high social responsibility, but also sustainable business enterprises Demands for responsible sustainable business enterprises Table 2. Value expectations from different stakeholders As presented in the table, value has different focuses in different stakeholder groups; it is not limited to production and sales. Sustainability responsibility covers the enterprise, but also the sustainable area of the enterprise operations including suppliers, customers, and disposal contractors. From a sustainable enterprise perspective, product value is measured in terms of resources sacrificed that give the product cost compared to market price, which is the revenue for the company, often less sales cost. Revenues less costs result in profit. Revenue (prices) for products is based on customers preferences. Factors other than product quality are included in customers' preferences. A sustainable product might have a higher selling price if sustainability is important for the customer. Some values leave the enterprise when products are sold, but an important part of value creation is not limited to values reflected by actual sales. Some value creation stays inside the enterprise or is shared with stakeholders. These intrinsic assets are hard to quantify, but in a good enterprise, values like human capital, social capital, ecological capital, technological capital and financial capital are present. This internal value creation has a long-term impact on the value of the enterprise and its products. The Sustainable Enterprise Theory Model The SET model is presented below. A business enterprise uses resources in the production of goods and services. The output is delivered to a market in which customers buy the output and give a flow of monetary resources back to the enterprise. Some of the value creation stays within the company as intrinsic assets: human, social, ecological and different types of technological capital are some examples. There is an obvious a need for development of a model that is broader than traditional financial and managerial accounting to include sustainable indicator accounting both for internal and external information purposes. Also in the traditional financial accounting, steps can be made. Suojanen argued; \"If the enterprise is considered to be an institution, its operations should be assessed in terms of its contribution to the flow of output of the community. If the income generated in the enterprise is to be analysed on the basis of social considerations, then the traditional type of income statement is insufficient.\" (1954 p.395). As a supplement to the income statement (profit and loss statement), enterprises also present a value added statement. This statement shows how values generated during the period are distributed for different purposes such as purchase from suppliers, employee remunerations, dividends and net interest paid, tax payments, cost and investments for environment, costs for research and development and retained in the company. Figure 1. The sustainable enterprise theory model As presented in the model, resources are used in the enterprise in a lean mix. During the production process, values are created, some leave the company in terms of sold goods and services; other values stay in the company as intrinsic values of various types. The output of goods and services meets clients' desires and sales transactions occur. Revenue generated provides enterprises monetary resources. Stakeholders have their shares of the values the enterprise generated. The value the enterprise generated is in short-term monetary resources and also in different kinds of intrinsic capital or values. In a longer term, these intrinsic values have an impact on monetary flows for enterprises and their stakeholders. A final point in the SET model is sustainability is inbuilt not only in enterprises' own operations but also includes full responsibility for all activities in the sustainable area described below. Implications of the SET model The SET model is an extension of the theory of the firm from enterprise theory presented by Suojanen (1954). His model used stakeholders as a part of value creation and not limited to human capital. The sustainability demand on business gives the SET model an even broader base than views on ownership, i.e. shareholders', vs. stakeholders' influence. It includes responsibility and benefits from activity areas inside and outside an enterprise. An enterprise that applies SET theory finds solutions to many areas of concern. Some examples are: Make good contracts will all major stakeholders and agree to include a new dimension, sustainability. Make agreements with suppliers to work in a sustainable way and also to share information about sustainability as in the case of Walmart and General Mills. Build a sustainability information system based on accounting concepts including sustainability information after the sale of a product or service during the full product use including recycling and disposal. Focus both on short-term value generation and on long-term value generation of intrinsic capital in the enterprise. To make contracts with stakeholders on sustainability is not an easy task. To change a political tradition of debate among various stakeholders about their share of the value generation in enterprises takes some effort. It is outside the scope of this paper to go further on this issue. SET demands enterprises take sustainability responsibility over the full life cycle of its products. The full lifecycle includes both risks and opportunities. New demands create new business opportunities. The lifecycle is illustrated in the figure below: Figure 2. Product life cycle As an example, the figure shows a life cycle of 21 years of sustainability responsibility, but actual life cycles could be longer or shorter. Another difficult issue is that many parts of the product life cycle are outside the direct control of the enterprise. Lack of direct control requires enterprises to use indirect control over suppliers, customers, recycling and disposal firms. The SET model has implications for both management of businesses and accountability to all stakeholders. Financial reporting business activities are based on assumptions (postulates) about the way enterprises' activities are measured in accounting systems. SET changes these assumptions and introduces accounting and management systems for 'green' enterprises. The first assumption is the going concern postulate based on the premise that an enterprise continues its activities for the foreseeable future, is able to complete its planned financial activities and meet its financial obligations. The concept affects the valuation of assets and liabilities. When the going concern assumption does not apply, other valuation methods must be used. Continuity can be interrupted voluntarily by closure of the business or voluntary bankruptcy and involuntarily through legal action. Sustainability in principle is based on the same concept as the traditional continuity postulate, but the period is extended to include the time necessary to complete sustainability objectives including product service and disposal, environmental clean up, etc. If an enterprise has trouble meeting its obligations related to the resources that are linked to the enterprise's sustainability in terms of social and human resources, environmental resources, and technological resources, the business cannot continue for the foreseeable future. The continuity postulate in a sustainability context is defined by Fagerstrm et al. (2016) as: The continuity postulate is based on the idea that operations should continue for the foreseeable future and that the enterprise can meet its commitments, both financial and sustainability, including but not limited to product life cycle, recycling, disposal, and clean up. This postulate means that the focus of sustainability accounting is to provide a basis for professional assessments of an enterprise's risks and opportunities concerning all aspects of its activities. This period would sometimes be longer than the period of continuity for financial reporting, especially if there is a long product life cycle and requirements for clean up, disposal, and restoration at the end. The continuity postulate also has an impact on capital maintenance. Companies must have enough capital to cover both financial risks and sustainability risks. Financial and management accounting's postulate of accounting unit is based on ownership and control. The accounting entity postulate gives focus to the accounting unit. In financial accounting, an entire enterprise is treated as an accounting entity and usually is a consolidated group. Financial accounting's entity concept provides a basis for methods used in traditional financial reporting including assessing risks associated with assets, liabilities and liquidity. In sustainability accounting, which is focused on assessment of risk associated with an enterprise's use of resources, the same concepts as in financial accounting cannot always be used. Risks regarding an enterprise's use of resources start with raw materials and proceed to transportation of raw materials and production. After production, products are used and ultimately are disposed of, often recycled, and may require clean up, which are also associated with risk. The entire life cycle is an area with different types of risks, called the sustainable responsibility area. To make a systematic assessment of risk and opportunities possible, the following definition of sustainable business entity is made by Fagerstrm et al. (2016): A sustainable business entity includes all activities over which an enterprise has some form of control. Control regarding sustainability can be exercised directly by an enterprise's or group's own operations and indirectly through an enterprise's responsibility to choose suppliers that meet its demands for sustainability. Indirect control also means that an enterprise or group is responsible for products the enterprise or group has sold. The responsibility covers products' life cycles, which include recycling and disposal. The sustainable responsibility business area requires that an enterprise contract with its suppliers and recycling companies to exchange information regarding sustainability indicators. Furthermore, products in use among customers must be followed up. The follow-up of products being used is one part of an enterprise's sustainability responsibility, which is why product use must be followed until disposal, any recycling and any environmental clean up. This information then forms the basis for sustainability disclosures regarding the sustainable responsibility area. Figure 3 below illustrates the entity concept of sustainable business: Figure 3. Sustainable business enterprise, a sustainable enterprise concept Because the life cycle of many products is long, it may be difficult to implement the 'costs attach' principle3 of resources for different parts of the life cycle from raw material to disposal, recycling and clean up. To aggregate all aspects of sustainability from raw materials to recycling, extension in time and space can be difficult. Management and stakeholders of enterprises need an additional accounting system in order to get information about possibilities and risks in the sustainable way of running an enterprise, often using values other than money. Even \"soft\" values can be measured and accounted for. Rogers (2016 p.2) argues: \"Sustainability accounting can help complete the picture that conventional accounting has begun. It can extend accounting structure to capture the sustainability factors that are likely to have material impacts on a company\". Steps are taken in sustainability reporting by organisations such as GRI and SASB in the US. However, there is a lack of a systematic accounting approach of sustainable indicators. An outline to a systematic accounting approach is presented below: 3 The costs attach principle means that all different types of cost should be attached to the total product cost Figure 4. Sustainable indicator accounting SIA (Fagerstrm et al. 2016) In the figure, the function of sustainable indicator accounting (SIA) is visible. This system outline is presented by Fagerstrm et al. 2016. Accounting for sustainable indicators is not enough, however; as Suojanen (1954) suggested there is a need for a complement to the profit and loss statement in the financial accounting system, a value added statement that shows the distribution of financial capital among different stakeholders. Stakeholders are the major interest groups and it is time for a shift from shareholder value to stakeholder value with a sustainable emphasis. From Table 2 it is possible to see expectations of the transition of business to a sustainability focus. A major demand is change of focus of SET to include not only financial capital but also intrinsic capital including sustainability. Maximisation of return is changed to maximisation of stakeholder wellbeing over the long term. Prosperity is the aim of the business as benefit to the society. In SET theory, efficiency is not only measured in monetary items but also by multiple criteria. To conclude, the SET model gives directions how to organise business in a reformed circular business model based on Suojanen (1954) in which he argues that an enterprise is a social institution. His model is further developed by sustainable responsibility for the enterprise and by thoughts on intrinsic values and their importance for long-term prosperity of business and their stakeholders. 1. 2. 3. 4. Discussion questions Identify and describe values, both objective and intrinsic, that can be generated by sustainability in enterprises. Divide values generated by sustainability activities into categories: those controlled by the enterprise and those controlled by other stakeholders. Explain how the SET model can be used to describe a circular economic view of activities of a sustainable enterprise. Describe the sustainable responsibility area of an enterprise. References Brundtland Report (1987) UN World commission on environment and development. Our common future. Campbell, D., Craven, B, and Shrives, P. (2003). Voluntary social reporting in three FTSE sectors: A comment on perception and legitimacy. Accounting, Auditing & Accountability Journal, 16(4) 558-581. Cunningham, G., Fagerstrm, A. and Hassel, L. (2012) Financial Reporting and Auditing in Accounting for Sustainability: Challenges and Pitfalls, working paper presented at the BAA section Financial Reporting and Business Communications annual meeting, Bristol, UK, July 2012. Donaldson, T. and Preston, L.E. (1995). The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications, The Academy of Management Review, 20(1) 65-91 Eccles, R. and Serafeim, G. (2013) Innovating for a sustainable strategy, Harvard Business Review, May 2013 51-60. Evan, W. and Freeman. R. (1993) A Stakeholder Theory of the Modern Corporation: Kantian Capitalism, in T. Beauchamp and N. Bowie (eds.), Ethical Theory and Business: Englewood Cliffs, NJ, USA: Prentice Hall. Fagerstrm, A., Hartwig, F. and Cunningham, G. (2016) Accounting and Auditing of Sustainability: A Model. Working paper presented at the BAI conference, Nagoya, Japan, July, 2016. Flint, D. (1988). Philosophy and Principles of Auditing. London, UK: MacMillan. Gray, R., Owen, D