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Social Accounting as a Measure of Social Performances for SMEs

In this report of social and environmental reporting, the purpose is to make comparison and contrast between the financial accounting and social accounting as well as evaluate the importance of social accounting for the small and medium scale enterprises, critical summary of the theoretical framework of the social and environmental challenges within the business organisation, critical evaluation of the manner in which the business organisation can respond to the social and environmental challenges. Alongside that critical evaluation and analysis of the Corporate Social Responsibility report of Tesla will be conducted on the basis of their major social and environmental challenges as well as their impact on the corporate performance, their corporate responses and the corporate social responsibility measures and targets. (Akakpo et al. 2019)

Small and medium sized enterprises represent the majority of the business organisations in the entire world and are one of the crucial drivers for economic growth and employment, especially in the emerging markets and developing countries. Financial accounting is essential for the SMEs because it is a regulation to be followed by an accounting standards set such as Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). Social accounting for SMEs, on the other hand, consists of measuring and reporting the social performances exhibited by the organisation which represents an effect on society as well as the environment. It is also referred to as the collection of internal data or the social impact measurement. (Corbett 2020)

Social accounting is an essential component in order to understand the economic structure and the relative importance of different sectors and their flows. Social accounting is useful for the classification of transactions of different sorts of transactions and deriving them as national income, savings, investments, national expenditure, consumption expenditure and so on. It is also essential for understanding the economic structure which portrays the national income as well as the size production and consumption level, savings, taxation level and economy’s dependency on foreign trade. It is also crucial to understand the different flows and sectors, in clarifying the relationship between the concepts, in guiding the investigator, in elaborating the trends in the income distribution as well as giving a picture of the working economy. (Sharma 2016)

Some of the challenges which business organisations in today’s world faces are air emissions, air quality, energy utilisation and conservation, wastewater and water quality, water use and conservation, usage of hazardous material, wastes, land contamination, labour and working condition along with occupation health and safety and community health, safety and security. Air pollutants emission can be occurred by the business organisation through a variety the activities during their operation, construction and decommissioning of the operation for the clients. (Almenhali et al. 2021)

The sources of this air pollution can be from the point, fugitive and mobile sources and from substances such as volatile organic compounds particular matter, ozone depleting substances, greenhouse gases or toxic materials such as mercury. Challenge of energy utilisation and conservation can be faced through the operations for clients either through cooling or heating, especially through industry sector related specific processes and challenges of water utilisation can be from operations in various production processes which are typically different in different industrial sectors. The social form of challenges such as labour and working conditions which the organisations faces are for the pursuit of the economic growth where the employment creation as well as income generation needs to be balanced with the protection of the basic workers’ rights. (Artemenko and Yakovliev 2020)

Theoretical Framework of Social and Environmental Challenges for Business Organizations

Human resource is one of the crucial and valued assets for any organisation therefore, maintenance of a sound and stable worker management relationship is the key element for the long term sustainability of the business organisation. By establishing a failed working management, the organisation can undermine their workers’ commitment and retention capabilities which can even result in causing issues with clients’ operations. Another social challenge which the business organisations often come across is the occupational and health and safety issues where they do not implement appropriate measures for possible hazards and providing with a long term and sustainable solution. (Direction 2017)

There are some environmental based challenges that are constantly and steadily creating a substantial influence on the day to day activities of any business organisation and their competitiveness, both in the long run and in the shorter run. Business organisations face the need to protect the environment as well as the interest of the general public from this social and public as well as environmental based concerns. (Pradhan et al. 2021)

The business organisations are constantly motivated to combine their corporate social responsibility events with their environmental and social goals to order gain support from the stakeholders as well as reach market competitiveness. There are certain regulatory forces as well as economic concerns which features with the social and environmental concerns and impact the social performance of the business organisation along with their market competitiveness, marketing strategies and entrepreneurship. (Stringham, Miller and Clark 2015)

In order to deal with their labour and working conditions, the business organisations can maintain a stable and sound worker management relationship which consist of aspects such as following the human resource policies in relation to the size and quality of the workforce and its management where rights as per the national labour as well as employment laws are stated. Other than that the organisation needs to follow the working conditions and the employment terms, have a stable relationship with the worker’s organisation, and provide equal and non-discriminatory opportunities, retrenchment, appropriate grievance mechanism, strict policies against child labour and forced labour as well as their supply chain. (Coiro 2021)

Green innovation is another form of response which the business organisation can take which consist of a variety of innovations such as process innovation, organisational innovation, product innovation and eco-innovation development for market competitiveness and success. Green innovation can be implemented in those areas where a significant impact on the sustainable environment by the constantly changing environmental competitiveness and progress. (Fabac, Kla?mer ?alopa and Šestanj-Peri? 2016)

Major social and environmental challenges

The Corporate and Social Responsibility Report which will be analysed in this report is of Tesla, where the company has faced significant social and environmental challenges such as workplace injury and non-unionisation of the environment. In Tesla, employees face the issue of excessive goals for production which is dictated by their Chief Executive Officer, where they had to manufacture over 500,000 vehicles in the year 2018, which was basically an increase of 495% from the year 2016. (Jennings 2019)

Corporate Social Responsibility Report Analysis of Tesla

Their total recordable incident rate, which is a metric for the workplace safety and the number of injuries that took place within the workplace, in the year 2015 exceeded the entire industry average by almost 31%. Another metric that is used for restricting the duty or the transfer rate, which is a measurement of the total number of working days which the employee is taking a leave from because of workplace industry was almost 103% higher than the entire industry average. Even though in the later years these numbers have decreased which is an improvement sign within their factory environment, although there have been allegations made that the company might have misreported their statistics on the employees’ injury rate at the workplace or putting a wrong label on the injuries or considering their minor. They have also avoided transporting the injured employees or workers in the ambulances and opted for personal vehicles in order to manipulate with the records later. (Mrvica-Ma?arac, Nedovi? and Gali? 2020)

From the environmental perspective, Tesla has been accused of environmental rules violation in the United States as well as Germany by failing to prove their compliance with the federal emission standards for their hazardous air pollutants, The German authorities have fined the company with 12 million euros for their allegedly fail towards fulfilling the obligations around the return of old batteries from the customers. Alongside that, Tesla’s automobiles are contributing to carbon emissions and creating pollution as well regardless of the kind of advertisement they have made relating to their vehicles. (Sandra, NEDOVI? and GALI? 2020)

Through sustainable as well as superior products, Tesla is responding to their social and environmental challenges. They have concentrated on the development of their products to be sustainable and much superior to the fossil fuel alternative vehicles. The all-electric vehicle provided by Tesla is a performance combination of efficiency and safety, while on the other hand their energy generation, as well as storage product power, are both for remote and urban communities which are available at affordable and reliable energy. Alongside that, they have enabled their production employees to participate in the multi-day training program before initiating their work on the factory floor. (Tsai and Tan 2021)

They also provide health care facilities which zero cost and provide benefits to the full-time employees. They also provide employee engagement in the health risk reduction measures on the employees’ suggestion, continuously improved ideas, and good observations which have made the engagement from 3,000 in the year 2017 to 23,000 in the year 2019. Tesla is also known and recognised to be the Best Employer for the Diversity in the year 2019 by the Forbes and their electric vehicles is an attempt to make sure that there is a fair representation of the traditionally under represented communities within their workforce.

Their annual usage of water per vehicle and automobile has reduced from 5.2 cubic metre in the year 2018 to 2.9 cubic metre in the year 2019 which is a reduction of about 45%. In the year 2019, the company has recycled 1,000 tons of the Nickel, 110 tons of Cobalt and 320 tons of Copper. Some of the other responses by the company is that they have served more than 16,000 people through their disaster relied projects in the year 2018 to 2019 and their electric automaker serviced more than 40 individuals sites after their major disaster in the year 2018 and 2019. (Parnell, Parnell and Jones-Sepulveda 2019)

Impact of Social and Environmental Challenges on Corporate Performance

The corporate social responsibilities strategy adopted by the Tesla Inc. has focused on the nature and the product of the business, for instance the electric automobile of the company are largely known as the answer for the negative impact of automobile which uses the internal combustion engines. The condition facilitates for the achievement of the company of their corporate responsibilities. Some if their major stakeholders are the community which is their highest priority, customers, employees, investors or shareholders and government. The interest of community is to make sure that the natural environment is protected and conserved which is fulfilled by the company through their batteries, electric automobiles and solar panels.

Through the corporate citizenship strategy, the interest of this stakeholder is also satisfied by taking advantage of the advanced technologies. In order to address the interest of the customer, they have seek to find newer way to minimise the cost such as instead of purchasing their battery cell from the Panasonic, they have collaborated from them. They have also expanded their charging station network for enhancing their customer accessibility.  (Soucy 2018)

The interest of the employees consist of providing them with a higher compensation as well as significant career oriented opportunities. They have also adopted skill development programs along with leadership development program for their employees. For their investors and shareholders, they have taken a decision to enable the other individuals as well as firms to utilise their technology patent in order to expect a higher demand for the electric vehicles and similar kind of products.

Conclusion

Therefore in order to conclude this report on social and environmental reporting, it can be said that social accounting is important for every form of business organisation because it provides a clear picture of the impact which the business is landing on the society as well as the environment. Here, Tesla’s Corporate Social Responsibility report is also analysed on the basis of the challenges which they have faced previously and their responses as per those challenges as well as the stakeholders to whom they are catering to. 

References

Akakpo, A., Gyasi, E.A., Oduro, B. and Akpabot, S., 2019. Foresight, organization policies and management strategies in electric vehicle technology advances at tesla. In Futures Thinking and Organizational Policy (pp. 57-69). Palgrave Macmillan, Cham.

Almenhali, A., Alhajeri, H., Almansoori, H., Aljneibi, N., Almansoori, N., Alsulaity, N., Mohammed, Y. and Nobanee, H., 2021. Financial Analysis of Tesla. Available at SSRN 3896901.

Artemenko, S. and Yakovliev, A., 2020. The role of social and media communications in modern economy.

Coiro, M., 2021. Tesla: Is Now the Time to Invest? An examination of Tesla, social media, and its effect on stock. An examination of Tesla, social media, and its effect on stock (August 19, 2021).

Corbett, K., 2020. UNDERSTANDING HOW TESLA LEVERAGES TWITTER TO COMMUNICATE ENVIRONMENTAL CORPORATE SOCIAL RESPONSIBILITY.

Direction, S., 2017. With my reputation? Making the most of markets and avoiding risks.

Fabac, R., Kla?mer ?alopa, M. and Šestanj-Peri?, T., 2016. Relationship between CSR and Financial Performance-Companies within ZSE CROBEX10® Index. European Journal of Economics and Management, 3(1), pp.169-182.

Jennings, M.M., 2019. The Social Responsibility of Business Is Not Social Responsibility: Assume That There Are No Angels and Allow the Free Market's Touch of Heaven. Berkeley Bus. LJ, 16, p.325.

Mrvica-Ma?arac, S., Nedovi?, M. and Gali?, M., 2020. Implementation of socially responsible business transactions in trading companies. International Review, (3-4), pp.115-122.

Parnell, J.A., Parnell, J.A. and Jones-Sepulveda, 2019. Nonmarket Strategy in Business Organizations. Springer International Publishing.

Pradhan, S., Bashir, M., Roy, S. and Nguyen, B., 2021. CORPORATE SOCIAL RESPONSIBILITY AND EMPLOYEE VOLUNTEERISM. Sustainable Branding: Ethical, Social, and Environmental Cases and Perspectives.

Sandra, M.M., NEDOVI?, M. and GALI?, M., 2020. Implementation of socially responsible business transactions in trading companies. ISSN 2217-9739 ISBN 979-12-80225-09-2 First Edition December 2020© Copyright 2020 Filodiritto Publisher filodirittoeditore. com InFOROmatica srl, Via Castiglione, 81, 40124 Bologna (Italy), p.115.

Sharma, S., 2016. The Tesla Phenomena A Business Strategy Report.

Soucy, C., 2018. The Changing Tide of Corporate Social Responsibility.

Stringham, E.P., Miller, J.K. and Clark, J.R., 2015. Overcoming barriers to entry in an established industry: Tesla Motors. California Management Review, 57(4), pp.85-103.

Tsai, H.Y. and Tan, T.M., 2021. The impact of artificial intelligence on sustainable corporate brand: a netnography study of Tesla.

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