Social Accounting Still Not a Priority

In the wake of the civil rights and environmental movements, the number of companies reporting their social and environmental impacts on society has increased.

But Rice’s Marc Epstein, one of social accounting’s earliest proponents, believes there is little evidence that the sense of corporate responsibility reflected in these disclosures actually has been integrated into management and capital investment decision-making.

First developed in the 1960s as a way of evaluating the contributions of government-sponsored social programs, social accounting evolved into a mechanism for identifying, measuring, and reporting a company’s social and environmental impacts. “There have been gains in terms of companies paying attention to the need for measuring and reporting their social and environmental impacts,” says Epstein, a distinguished research professor of management at the Jesse H. Jones Graduate School of Management and the author of the largest field-research study on measuring corporate environmental performance. “But we haven’t seen major changes in the way they’ve done business, nor in the way they’ve integrated that information into their business decisions since the 1970s.”

Epstein believes that many companies are concerned about these issues, but they face a fundamental dilemma. “On the one hand, gains made by a corporation focusing on social and environmental issues involve thinking long-term,” he says. “On the other hand, globalization and the emergence of global capital markets have placed greater pressures on companies to produce short-term earnings. If I, as an individual manager, am being asked by my CEO to produce profits in this quarter or this year, I’m not going to start spending money on things that may have yields three or five years from now.”

While he appreciates that setting social priorities is complicated, Epstein believes that by doing so, companies will be able to make decisions more carefully and will better understand the likely consequences of those decisions. “Until corporations shift their rewards systems from just profits to profits and social issues,” he concludes, “social accounting will not continue.”

Epstein’s recent paper, “The Identification, Measurement, and Reporting of Corporate Social Impacts: Past, Present, and Future,” was published in Advances in Environmental Accounting and Management.