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Role of sustainability in meeting the challenges of environmental climate changes

Introduction
Climate change and rapidly increasing destruction of Earths ecosystem are the greatest challenges facing by the world now days. At the same time, our economies are facing resource scarcity including energy security and food scarcity, population growth and other environmental concerns such as pollution. All these conditions occur in the external environment affects the businesses architecture and lead organization to operate with environmentally, socially and economically sustainable manner. Businesses operations are normally built on products and services provided by ecosystems and other components of natural capital. Organizations are now increasingly focusing on meeting these challenges and moving towards the sustainable growth to help the society as a whole. Accounting provides key role in helping the organizations to operate in sustainable manner and helps to link sustainability initiatives to company strategy to meet the requirements. Companies and governments must take measures to create a global economy that pursues both goals - economic development and maintaining natural capital, simultaneously as stated in The Princes Accounting for Sustainability Project (A4S) 2004. According to the A4S, better information and accounting will be essential to enable the right decisions to be made by companies and other stakeholders in the society in order to attain sustainable growth.

Sustainability accounting and Sustainable Development

The simplest way to define sustainability is meeting the needs of the present without compromising the ability of future generation to meet their own needs defined by United Nations World Commission on Environment and Development, 1987, pg. 8 (Jeffrey, 2007). There are mainly three spheres of sustainability: economic, environmental and social

sustainability. These are spheres are the prerequisite for any organization to survive in the long run and these three areas are necessary because: y y y Economic sustainability provides us with future income and resources. Environmental sustainability provides a stable ecosphere that supports and protects life. Social sustainability provides well-functioning societies that protect and enhance quality life and safeguard human rights. (Anthony, 2010) For an organization to survive, it must attain sustainability in these three areas and if it ignores the need for sustainability in these key areas, than it will place intolerable burden on organization in long run and on future generation. Global warming is causing increasingly climate change which is an important issue for organizations now days, and that increases the importance of the organizations sustainable development. Sustainable development means to focus on how to organize and manage organizations operations in a way that meets the needs without sacrificing the ecological, social and economic base. This climate change- Global warming has a significant influence on the framework of organizations change and management accounting (Zimmerman, 2010) and this environment forces to change the organizations business strategy. To implement the new strategy, organization must adept its architecture, which includes management accounting and also composed of three inter-related processes: decision making, performance evaluation and reward system. Accounting is closely related to the companys strategy development as it provides knowledge for decision making and control (Zimmerman, 2010) and helps to implement organizations business strategy. In other words, organizations accounting system provides significant information for decision making, performance measurement and control of organizations operations. The picture of management accounting system is now changing in big companies from traditional accounting system towards the development of new approaches to accounting that will enable organizations in business, investment and the public sector to better understand and value externalities, and incorporate them into their decision-making processes (A4S). The A4S project helps to identify and address the practical challenges that businesses are facing in developing methodologies to integrate natural capital into decision-making and accounting

systems. The International Integrated Reporting Committee (IIRC), established by A4S in 2010 is working toward the development of Integrated Reporting which demonstrates the linkages between an organizations strategy, governance and financial performance, and the social, environmental and economic context within which it operates. By reinforcing these connections, Integrated Reporting can help business to take more sustainable decisions. Sustainable accounting has received great attention in accounting literature, supported by the work of Gray in 1990s. Accounting for sustainability involves linking sustainability initiatives to businesss strategy and providing measurement, accounting and performance management skills to ensure that sustainability is embedded into the day-to-day operations of the company. In his work, Gray identifies three different methods of sustainable accounting: sustainable cost, natural capital inventory accounting and input output analysis (Gray 1993). By sustainable cost, he means the cost of maintenance of natural capital stocks for the future generation, natural capital inventory accounting involves the recording of stocks of natural capital over time, with changes in stock levels used as an indicator of declining quality of the natural environment. And inputoutput analysis accounts for the flow of materials and energy inputs and product and waste outputs in units (Gray 1993). Organizations are now identifying the need for managing and controlling social and environmental performance of the organisation. Many of the organization are now committed to sustainable development by recognising that sustainability can create financial value through enhanced revenue and lower cost. They are now becoming more sensitive towards the social and environmental issues. For sustainable development the business enterprise must adopt business strategies and activities that meet the needs of the enterprise while protecting, sustaining and enhancing the human and natural resources that will be needed in the future. Managers must make significant changes in their business strategy to manage the impact of the organization on the society by ensure the efficient utilization of the available resource and minimizing the impact on the natural resources. Accounting system provides useful knowledge to managers for the decision making regarding the business strategy and mmanagement accountants have a key role to play in driving sustainable strategic and operational decisions. Management accountants job is to apply targets, key performance indicators (KPIs) and scorecards to ensure their organizations sustainability strategy is delivering results.

Accounting has a variety of roles to play in the effective response to the challenges of balancing financial, environmental and social sustainability at the organization level. It can help to identify the potential future environmental and social impact and benefits from their activities, to formulate and implement strategic solution which can help to improve sustainability and performance of the organization and to give an account of an organizations sustainability policies, practices and impact to which organization is responsible. Underlying all these roles is the potential of accounting to make visible a broad range of financial, environmental and social consequences of organizations strategies, action and implication of economics, environmental and social trends for the organizations financial performance (Anthony, 2010). Many guidelines such as Global Reporting Initiatives sustainability report framework and the AccountAbility 1000 series have been developed to help the organization to communicate their sustainability performance to stakeholders by developing social and environmental reporting.

Sustainability at BMW group

With the issue of sustainable development as a main concern in major industries, the automobile industry is facing the need for change in their operation because of the scarcity of the future resources and fear about the climate change caused by the global warming. BMW, one of the key players in this industry, has achieved significant success in meeting these challenges, being the sector leader in the Dow Jones Sustainability Indices for the last five years. What they did is, they integrate sustainability throughout their entire value chain and its underlying processes creating a benefit for the company, the environment and society. They believe that commitment to environment and social sustainability are important to securing their own future. To identify and manage environmental risks and impacts, they established environmental management systems (EMS) in all of its manufacturing facilities. In their sustainability operation report they mentioned one important goal of sustainability strategy to manage the issue of sustainability centrally and establish it as a core strategy within their organization and incorporated Sustainability and Environmental Protection department directly into Corporate Strategy unit since 2007. Its responsibilities include the continued enhancement of sustainability strategy and the strategy and management of business, environmental and social sustainability.

They implemented large number of structural and organizational innovation to ensure the efficiency in their day-to-day operation by establishing sustainable corporate targets in each group, which will be measured by means of balance scorecard and detailed guidelines have been developed for all BMW Group divisions. In their sustainability report, despite of the increase in their production they were able to reduce the energy consumed per vehicle produced through their technology and innovations. The first task was to develop a framework to ensure that environmental, economic, and social concerns that would be incorporated throughout the organizations decision-making processes. They identified the sustainability issues like the over consumption of resources and need to reduce CO2 emissions and its impact on the environment and to tackle with these issues they established Sustainability Circle, consisting of one representative from each division responsible for developing sustainable strategy and implementing sustainability activities across the Group and the Circle is headed by the Group Representative for Sustainability and Environmental Protection. In their sustainability strategy, they introduced holistic accounting methods to access the sustainability of their process and products across their entire life cycle inline with their sustainability strategy. This accounting system provides them a truly comprehensive view of the impact of their products and production processes are having on the external environment which helped them to achieve maximum resource efficiency with minimum impact on the environment and society. They are working towards the efficient use of resources and minimize emissions across the life cycle of its products and employing a wide range of strategies and measures like innovative materials and construction techniques, increasing resource efficiency across production network, enhancing supply chain by making sustainable purchasing requirements and by surveying suppliers accordingly, recycling or reuse components with the least possible impact on the environment at the end of vehicle life cycle with the help of their holistic accounting methods. The BMW Group places great value on designing products which are optimized for recycling as well as separating and utilizing waste materials which accrue during production. Care is taken, for example, only to transfer waste materials to recovery and cleanup partners who have passed the BMW Group's recovery audit. Their goal was to not accrue waste materials in the first place. Each location has responsible employees who use a waste material information system to optimize processes and procedures. This system enables a precise overview of the flow

of waste materials. This enables the continual development of further strategies for waste reduction and avoidance. For the efficient use of available resource and recycling used cars, they established Recycling and Dismantling Centre (RDZ) in Munich which works continuously to come up with new solutions for vehicle recycling that make accessible to external recycling businesses. In line with the principle of Design for Recycling at BMW, they create vehicles in such a way that their components can be reused or recycled with the least possible impact on the environment once the vehicle reaches at the end of its life cycle. The RDZ is currently trialing recycling concepts for the new vehicle components found in hybrid and electric models. Batteries from vehicles of this kind can either be passed on to existing networks of recycling businesses or they can be used to produce photovoltaic systems. They built an extensive network of recovery centers in Europe where customer can return their used BMW cars. These cars then professionally recycled free of charge. Only 5 % needs to be professionally disposed of, without harming the environment while 95 % of the materials from a BMW Group vehicle can be recycled and reused which can help to maximize the utility of natural resources. Up to 15 % of the plastic parts used in BMW Group vehicles consist of recycled materials obtained from production waste or used parts that have been recycled which ensures efficient utilization of available resources. And when it comes to reduction of CO2 emissions of vehicle they define specific CO2 targets for each product line and each new vehicle project which are communicated to each group through internal accounting system. For years they have been working extremely hard to reduce fleet consumption. Between 1995 and late 2008 they managed to cut the CO2 emissions of vehicles sold in Europe by almost 27 % by developing 32 new BNW group models which produce 140 grams of CO2 or less per kilometer. In 2010 Group-wide environmental protection activities of the BMW Group were able to reduce its energy consumption with the further reductions for other key indicators, such as water consumption, process wastewater and waste reduction, enabled cost savings of some euro 0.7 million. Quantities of waste for disposal, solvents emissions and water used per vehicle produced dropped significantly compared with the previous year. Overall, the environmental efficiency index shows that the efforts to use resources more efficiently have resulted in figures within agreed target range that is the most efficient possible use of resources in intelligent systems.

The BMW has not only focused on the environmental issues but they also take the responsibility to give something to the society where they operate. They started the initiative in education for children and teenagers and they are also committed not only for the safety of their own customers but to that of all road users by promoting maximum road safety. They also established two foundations named the BMW Foundation Herbert Quandt and the Eberhard von Kuenheim Foundation concentrating on social issues to help the local community.

Conclusion
Because of the global warming and climate change, many organizations face the need for developing sustainable strategy to meet the challenging issues and minimizing the impact of their operation on the environment, economy and society. The framework of organizations change and management accounting (Zimmerman, 2010) provides the useful knowledge to accountants to deal with the environmental issues and organization internal accounting system has a significant role to play in this matter. We have seen in BMW Group that they have established the holistic accounting methods to access the sustainability of their company and identify the issues relating to sustainability like the level of CO2 emission and the demand for renewable or alternative source of energy by recycling their vehicles integrated these sustainability issues in their business strategy and accounting. They integrated their sustainability strategy into their production process and their dayto-day operation focusing on the future challenges of the natural resources and entrenched throughout their entire value chain and identify their social responsibility. Sustainability became an integral part of the BMW Group's corporate strategy. As a result of this, since 2005, the BMW Group has been the worlds most sustainable premium automobile manufacturer according to the results of Dow Jones Sustainability Index for last six years and the BMW Group is the only company in the automotive industry to have been listed in this group of sustainability indexes ever since it was established in 1999. The main issues of concern relating to sustainability - CO2 emission, water pollution, air pollution and the demand for renewable source of energy are clearly identified, identifying these is just what any organization can do, but integrating sustainability issues in the business and accounting is not so easy.

References:
y Anthony Hopwood, Jeffrey Unerman & Jessica Fries, Accounting for sustainability: practical insights, Washington, DC, 2010 y BMW, Sustainability by Design, Taking Responsible Action, Aktiengesellschaft, September 2009. y y y y BMW, Sustainability Value Report, Aktiengesellschaft, 2008. BMW, Sustainability Value Report, Aktiengesellschaft, 2010. CIMA, Accounting for climate change, February 2010. Henri, J., and Journeault, M. (2010) Eco-control: The influence of management control systems on environmental and economic performance, Accounting, Organizations and Society. Vol. 35, pp. 6380. y HRH, The Prince of Wales, The Princes Accounting for Sustainability Project (A4S), 2004. y Jan Bebbington, Accounting for sustainable development performance, CIMA 2006, Vol. 2 No. 15. y Jeffrey Unerman, Jan Bebbington & Brendan O'Dwyer, Sustainability accounting and accountability, Routledge 2007. y y R. Gray, Accounting for the environment, Paul Chapman, London, 1993. Zimmerman J. L., 2010, Accounting for decision making and control. 7th ed., McGrawHill