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How can organizations do good (help the environment) while doing well (boosting economic growth)? While both worthy goals, they can be at odds with each other, creating a dilemma for organizations who wish to both contribute to environmental sustainability while maintaining economic growth.  DOING GOOD WHILE DOING WELL: THE CASE OF BUSINESS IT INITIATIVES How can organizations do good (help the environment) while doing well (boosting economic growth)? While both worthy goals, they can be at odds with each other, creating a dilemma for organizations who wish to both contribute to environmental sustainability while maintaining economic growth. All that glitters is not green Information technology (IT) is a major driver of economic and social development, but such advancement comes at a high environmental cost. Organizations’ reliance on IT has led to increased computing power and the development of large data centers that provide analytics and cloud computing services. These result in increased energy consumption, higher carbon emissions, and more electronic waste. This has led to the development of green IT initiatives to address the environmental consequences, meaning IT products and services that reduce the negative impact and improve sustainability. The existing research supports the idea that launching green IT efforts can improve sustainability outcomes, for example by managing energy consumption. Other examples of green IT initiatives include powering data centers with renewable energy sources, reducing waste from out-of-date computing equipment, and encouraging telecommuting/remote administration for reduced transportation-related emissions. There are a number of ways to go about a green IT initiative, but they all require a concerted effort from staff and involving IT processes and IT products. This is likely to be a significant technological trend with wide-reaching social implications. However, all that glitters is not green, and implementing green IT measures comes with complications such as disruption to existing systems, unpredictable returns and market demand, cost, and how stakeholders will react. This leads to the dilemma between doing good while doing well: while companies may wish to do good by implementing green IT initiatives, they may have legitimate concerns about how this will affect their bottom line (doing well). Indeed, much of the research has focused on the sustainability implications and less on the economic ones. This dilemma led the researchers to examine the drivers that impact an organization’s motivation to adopt green IT initiatives and their link to this reconciliation between sustainability and profit. What drives this process? To explore this question, the researchers conducted a qualitative study on eight organizations in China and Singapore, as it is crucial to explore how green IT implementation plays out in the real world as opposed to an experimental setting. The companies operated in telecommunications and IT-related industries. All eight were large companies with over 3000 employees, and all eight were pioneers of green technology. The research team used a multi-prong data collection approach, conducting interviews and clarifying information via emails and phone calls, field observations, and archival data. They looked at both internal and external drivers, separating them into three categories: competitiveness, legitimation, and ecological responsibility. Internal drivers, or organizational drivers, include factors like stakeholders’ attitudes, economic considerations, and technology skills. External drivers include factors like policy and industry pressures, like regulations on waste disposal and energy consumption. Breaking it down further, competitiveness is the link between ecological actions and long-term profitability; legitimation is the organization’s drive to align its actions within a certain set of norms or regulations; and ecological responsibility refers to an organization’s thoughts about its duty to society and its values. Looking at the results, the researchers found that green IT practices were seen as essential strategic considerations for these companies. They also found that organizations did not always manage to reconcile the gap between sustainability and profit through meeting the objectives of competitiveness, legitimation, and ecological responsibility. For companies that noted a significant amount of government pressure, an external driver, only a middling level of reconciliation was achieved. Organizations tended to have one main driver, like government pressure for Chinese companies and corporate social responsibility for the Singaporean companies, but were also motivated by the other drivers. Overall, the organizations tended to be most motivated by cost reduction, market drivers, government pressure, and corporate social responsibility. For reconciliation of sustainability and profit, the researchers found that the time frame matters: while IT initiatives tend to require a short-term investment, they will bring long-term benefits that surpass the initial investment. The strategy deployed also plays a role: one company invested in hybrid cloud computing, which set them apart from the competition, which will ultimately improve profits. Having a green image is also a competitive advantage, as it can boost customer satisfaction. Additionally, the dilemma becomes less of an issue in cases where companies experience external pressure, like from the government or external stakeholders. If going green is essential for market success, the financial investments become less of a consideration and more of a requirement. This shows that the dilemma can play out in different ways, and it is important to consider how both internal and external factors will impact the implementation of a green IT strategy. Takeaways IT services are ubiquitous in business and management, meaning that organizations and managers need to prioritize the implementation of green IT. Organizations may have different motivations for doing so, motivations that may fall into the categories of competitiveness (economic pressure), legitimation (shifting norms) or ecological responsibility (doing the right thing). These categories can include both external and internal factors. In practice, this highlights two main ways to motivate companies to implement green IT practices: A combination of pressure from the government and corporate social responsibility obligations Aligning green IT measures with the goal of improving profits by satisfying market demand and reducing operating costs The researchers note that the latter is more sustainable, but that the former may be able to stimulate progress by implementing incentives (tax breaks) or punishments (high energy costs). The climate crisis is increasingly urgent, and helping the environment requires an “all-hands on deck” approach. With soaring IT needs and their accompanying environmental consequences, green IT processes are likely to be a trend that won’t go away any time soon. With this research, we gain a better understanding of what motivates organizations to take on green IT initiatives and how they can reconcile “doing good” with “doing well”, enriching our understanding of the drivers of business IT initiatives, an understanding that can help organizations seeking to take such initiatives themselves. Further reading Yang, X., Li, Y., & Kang, L. (2020). Reconciling “doing good” and “doing well” in organizations’ green IT initiatives: A multi-case analysis. International Journal of Information Management, 51, 102052. by Yan Li , 17.05.21 Source : Knowledge Lab Essec

Can larger firms face and survive the challenge of startups? The one question that comes to mind these days is whether they are still capable of fostering innovation. Many large companies try to adapt to this new challenging environment by behaving like startups, which, as the researchers point out, is not the key to successful innovation for incumbent firms. BIG DATA AND THE LEAN STARTUP APPROACH AS TOOLS FOR INNOVATION IN LARGE FIRMS Can larger firms face and survive the challenge of startups? The one question that comes to mind these days is whether they are still capable of fostering innovation. Many large companies try to adapt to this new challenging environment by behaving like startups, which, as the researchers point out, is not the key to successful innovation for incumbent firms. Adapt or… Die Trying Previous research shows that incumbent firms find it difficult to adapt their business models (and thus their strategy) for various reasons including the complexity of the organization, a focus on short-term rather than long-term gains, and competition for resources among managers. Large companies often suffer from innovation blindness caused by the very fact that they hold onto outdated models and assumptions on how the world works. This difficulty in changing the business model makes it extremely challenging for firms to respond to the new forms of competition brought forth by startups. While changing the business model is often necessary, if not vital, there are no clear best practices and many firms have followed the route of trying to behave like a startup. This approach, however, is doomed to fail as it does not recognize the fundamental differences between the two types of organizations in areas such as resources, speed of decision-making, focus etc. Adapt. Do not adopt! There has been research encouraging large companies to adopt the lean startup methodology[1] for product innovation, suggesting that in this way, legacy companies would be able to quickly adjust and adapt the business model to create and appropriate the most value. But while a startup is by definition “an organization formed to search for a repeatable and scalable business model”, a legacy firm already has a business model. Therefore, to be economically competitive, incumbent firms need to be ambidextrous. In other words, they should be able to execute in present markets while innovating for new ones. According to Steven Seggie and his peers, incumbent firms should leverage advantages such as big data and adapt (not adopt) the lean startup methodology. Let us not forget that big firms have clear advantages in big data both through the amount that is available to them and also through the resources they have to analyze the data and act upon the results of the analysis. It is not the Size of Your Data that Matters but What You Do with it The real question then is: “How should firms leverage big data and adapt the lean startup methodology as a means of changing the business model to allow for successful innovation and successful competition with startups?” Traditionally, big data analysts have talked about the 3Vs of big data: volume, variety, and velocity.Each of these characteristics creates a learning challenge, which can then be addressed through use of parts of the lean startup methodology. Volume Volume refers to the increasing amount of data that is available. This volume leads to confirmation bias as a greater amount of data provides opportunities to confirm prior beliefs that inform decision-making. The solution provided by the lean startup methodology is to use the analysis of big data not to reach conclusions but instead to develop hypotheses, which can subsequently be tested through experimentation. Variety Variety means that firms have access to data from very different sources that were not available in the past. Although variety is seen as a good thing, it leads to an increased complexity of both the data and analysis, thus making it difficult to communicate insights for decision-making. The lean startup methodology suggests the introduction of a concept called innovation accounting[2]. It requires regular reporting on the progress of an innovation project with a decision to quit, persevere with, or pivot. The advantage is that it facilitates the access to insights throughout the process. Velocity Velocity refers to the fact that firms are getting real-time data. The richness and timeliness of the data suggest an increased ability to predict the future, and thus creates an illusion of control. The solution offered by the lean startup methodology is to include a build-measure-learn loop into the innovation process as this allows firms to engage in validated learning on an incremental basis. The risk is minimized, as all innovations are incremental in nature. So even if managers have the illusion of control, they will not be able to take large risks that may come back to haunt them in case of unexpected occurrences. Let Us Call a Spade a Spade With unprecedented amounts of Venture Capital money being invested in startups, incumbent firms are under greater pressure than ever before to maintain their status as leaders in their fields. Some of them have adopted, recklessly, the lean startup methodology with generally disastrous results. In sum, a startup is not a small version of a legacy company, neither is a legacy company just a large version of a startup. Therefore, incumbent firms should adapt the lean startup methodology instead of adopting it as it is. Firms should leverage the resource advantages they have regarding big data and combine these advantages with the adapted lean startup methodology to enable large companies to adjust their business models to allow for successful innovation. −−− [1] The lean startup methodology is a quick and iterative process that requires minimal resources compared to more traditional models of innovation (Blank, S. (2013). Why the lean startup changes everything. Harvard Business Review May, 4–9.) [2] A measurement process used to evaluate innovation throughout the innovation process by Steven Seggie , 04.10.21 Source : Knowledge Lab Essec

For entrepreneurs to flourish, they need funding: venture capital is financial capital provided to early-stage, high-potential, high-risk, growing entrepreneurial companies. Venture capital is particularly attractive for new companies with a limited operating history that are too small to raise capital in the public markets, and have not reached the point where they are able to secure a bank loan or complete a debt offering The role of venture capital securities in entrepreneurship For entrepreneurs to flourish, they need funding: venture capital is financial capital provided to early-stage, high-potential, high-risk, growing entrepreneurial companies. Venture capital is particularly attractive for new companies with a limited operating history that are too small to raise capital in the public markets, and have not reached the point where they are able to secure a bank loan or complete a debt offering. In exchange for the high risk that venture capitalists (VCs) shoulder by investing in smaller and less mature companies, venture capitalists usually get a significant portion of the company's ownership (and consequently their value). Once a VC decides to invest in a venture, the involved parties need to settle on a deal structure. When negotiating the deal structure, parties need to keep a few considerations in mind: The deal structure needs to protect the VC against losses and should encourage entrepreneurs to work hard to make the venture a success. Most VC investments are illiquid, which means that unlike shares of listed companies, they cannot be sold very easily. Finally, most investments are characterized by asymmetric information. In general, the entrepreneur knows more about the venture than the investor. VCs typically use convertible preferred equity to finance ventures. As the name suggests there are two important features of these securities: conversion and preferred. Investors of convertible preferred equity have the option of either holding a debt-like claim -preferred equity or converting into common equity. Converting into common equity implies sharing ownership in the venture with the entrepreneur. Preferred terms make it similar to a loan (debt), gives holders a right to interest payment (dividends) and additionally gives preference in payments over common equity. In other words, the preferred feature ensures that preferred investors are paid before common equity holders. In a typical deal, VCs would hold preferred equity and the entrepreneur common equity, thus the VC can get paid before the entrepreneur if the venture does not do well. However, if the venture succeeds and its value increases, the VC would convert the preferred equity into common equity and share the fruits of this success with the entrepreneur. AAnother feature of VC investments is that they are done in stages. VCs would never provide all the capital upfront to a venture; instead, they would only provide sufficient capital to reach the next milestone. Once the capital has been used up, the entrepreneur has to raise another round of financing to reach the next milestone. The advantage of staging is that VCs can stop financing if the venture is not doing well. It can also be advantageous for the entrepreneur, as the terms can be made more favorable to them if their venture is successful. Staging also helps reconcile the aforementioned asymmetric information levels between entrepreneurs and VCs, since future investments are only made based on past outcomes. Finally, in addition to providing capital, VCs also monitor and guide the venture. The structure of most deals is designed to ensure the monitoring role of VCs. While VCs do not hold the majority of shares, they would have the right to nominate members to the board of directors. These rights help the VC monitor progress and guide the venture and gives them the power to replace managers if operations are not going smoothly. Having discussed the general features of VC investments, we will now explore details of some specific securities used in VC contracting. It must be noted that convertible preferred securities come in various flavors. Dr. Arcot analyzes one such security called participating convertible preferred security (PCP), used widely in venture capital contracts (Arcot, 2014). Participating convertible preferred stock gives its holders the right to be paid first (before common shareholders generally held by the entrepreneurs) and at the same time, allows them to participate in excess earnings (i.e., the cash flow after all debt and preferred claims have been satisfied) along with the common stockholder. PCP holders thus concurrently hold both a debt-like claim (preferred equity) as well as an equity claim (participation rights). However, PCP holders lose their preferred rights if they convert this PCP stock into common stock. His research explores why venture capitalists are willing to convert their PCP stock into common equity and give up their preferred rights. He proposes a signaling model for PCP stock based on its role in venture capital exits. The two major forms of exits observed in venture capital are the initial public offerings (IPOs) and the trade sale. IPOs are exits where shares of the venture are sold to investors and then listed on the stock market and trade sale is a transaction in which a venture is sold to another company. Typically, a PCP stake is converted into common equity during an IPO exit, but is not converted in a trade sale exit. The model shows that VCs can signal the quality of their venture in an IPO by converting their PCP stake into common equity and giving up some of their cash flow rights. By giving up something during an IPO, VCs are signaling to investors that the venture is of a high quality. Signaling is of particular importance in an IPO, because in an IPO shares are sold to new investors who do not have access to documents to analyze the venture’s performance. Investors in an IPO typically have to rely on a bank to perform the due diligence and hence are thus relatively uninformed about the venture. In contrast, potential trade buyers are given access to documents, which they can analyze to reach conclusions about the venture’s quality. Since trade buyers typically come from the same industry as the venture, they are likely to have industry knowledge and are better equipped to interpret the information provided. When exit is through an IPO, the entrepreneur retains control of the firm. Thus, when the firm value is high, an IPO exit rewards the entrepreneur and should be the preferred exit route. However, the VC may be reluctant to take that route, given that investors in an IPO are less informed and the VC may not get the full value for his stake. When the firm value is high, the VCs may prefer to target investors who are more informed and get a higher value for their stake. In other words, exit through a trade sale. However, the interests of VCs and entrepreneurs are more easily aligned when the VCs convert their PCP stakes into common shares and exit through an IPO. Venture capitalists investing in start-ups use sophisticated financial instruments to structure their investments. This article provides a rationale for the use of one such instrument, PCP stock, based on the venture capitalist’s exit strategy. In doing so, it makes a connection between the exit route and entrepreneurial effort. This highlights factors that have direct implications for the incentives of venture capitalists to invest in ventures and entrepreneurs to exert effort to make them a success. by Sridhar Arcot , 04.01.22 Source: Knowledge Lab

It is estimated that by year 2025, individuals and businesses alike will produce about 463 exabytes of data per day globally and there will be an estimated 175 zettabytes of data in the global datasphereBusinesses use data for a variety of reasons; including but not limited to analyzing customer behavior, providing relevant ads, customer centric product trends and analyzing market value. A DAWN OF DATA REVOLUTION AND WHAT'S AT STAKE? It is estimated that by year 2025, individuals and businesses alike will produce about 463 exabytes of data per day globally and there will be an estimated 175 zettabytes of data in the global data sphere. Businesses use data for a variety of reasons; including but not limited to analyzing customer behavior, providing relevant ads, customer centric product trends and analyzing market value. Thus today data is imperative to a business. As a result most companies are increasingly focusing on their data policies, individuals and businesses are increasingly concerned about ethics surrounding data and privacy laws. But even as these laws emerge, the time taken to comply with these laws officially or unofficially is not very promising. In fact, in a report recently added to the net, it was disclosed that it takes companies about 62 days to discover a high severity data breach and another 71 days to disclose the said breach. Thus, purely relying on a business to do the right thing when it comes to data breaches and data privacy ethics is not enough. Kuber Signal is a company that wants companies to be held accountable/responsible by the individual for their data related decisions. The company quantifies privacy policies for other companies into a standard 4-point metric and a final Goodness score that's comparable across board and then shows these scores to the individual so they can decide what companies keep their data safe. The metrics are: 1. Personal Data Privacy Goodness Score 2.Behavioral Data Privacy Goodness Score 3.Technical Data Privacy Goodness Score 4. Data Sharing Goodness Score Each metric measures how much of an individual data is stored, used and shared by the Company, that individual is a customer of the company then shows what companies in the same industry, selling the same product, rank higher than the individual's company of choice. The company can also track public information around other companies and aims to provide users with the right tools and information so an individual can stay up to date with their specific security concerns, be it companies or other security threats and make better informed choices. Kuber Signal ultimately provides the user with a privacy score that can help them evaluate them online behavior and help mitigate their data related threats. Kuber Signal is founded by a Data Scientist and a cyber-security expert whose expertise lies in investigating brands for their security posture using AI algorithms. The mission of the company is to ensure an individual is aware of their security posture and a know-how into how to improve it. The company also provides individual security assessment, cyber news and information on relevant scams in the individual's playground. In conclusion, data privacy and ethics have never had more value than in recent and coming years. Today a data breach is nothing less than a home invasion of yesterday. This may sound extreme but almost every bit of useful information about a person is somewhere on the internet with some company whose 'terms and conditions' the customer didn't read and if a malicious actor gets access to that data, the consequences for the individuals can be devastating. by P. Observer, 07.12.22 Source : Factiva

Employees who take a proactive approach at work – who speak up with suggestions, try to bring about improvements, and take initiative – generally perform better, are more satisfied with their job, and progress more quickly in their career. For organizations, a proactive workforce which anticipates changes and is willing to contribute to innovation is seen as a competitive advantage. So how can organizations encourage employees to be more proactive?  HOW TO BUILD A PROACTIVE WORKFORCE: TRAINING PROBLEM SOLVERS OR STRATEGIC CHANGE AGENTS? Employees who take a proactive approach at work – who speak up with suggestions, try to bring about improvements, and take initiative – generally perform better, are more satisfied with their job, and progress more quickly in their career. For organizations, a proactive workforce which anticipates changes and is willing to contribute to innovation is seen as a competitive advantage. So how can organizations encourage employees to be more proactive? Previous research has highlighted two potential avenues for organizations wishing to increase the proactivity of their workforce: hiring new human resources with particular personalities and skills sets, or changing the work context, for example by enriching existing employees’ work. However, these strategies often encounter two issues that may block their implementation: the lack of opportunity to hire due to difficult economic or budgetary contexts, and the lack in means and resources to enrich job roles. It therefore falls to training and development to offer a feasible approach to promoting employee proactivity. Indeed, in the United States alone, organizations spent over $165 billion on employee training and development in 2013. But how should training approaches aimed at encouraging proactivity in the workforce be designed? And which training approaches are most effective for employees with different needs and priorities? Karoline Strauss, together with Sharon K. Parker of the University of Western Australia, decided to carry out research to address these questions. “It was clear to us that the training approach an organization should take would depend on the type of proactivity it is looking for in its employees”, says Prof. Strauss. The researchers suspected that a different training approach would be needed to encourage employees to become proactive in solving problems they encountered in their day-to-day work, or to encourage them to involve themselves in strategic change and become proactive in shaping the future of the organization. The researchers developed two distinct training interventions focused on encouraging these two types of proactivity. The researchers then recruited 112 volunteers from a police force in the North of England. The volunteers were randomly allocated to one of the two training approaches, or to a third group that received no training whatsoever. “To test whether the training approaches were effective in promoting proactivity, we compare employees who took part in the training to employees in this third group”, explains Prof. Strauss. “This means that we can rule out that employees throughout the organization became more or less proactive because of other changes that took place during the time of our study”. The researchers then tracked employees over 9 months to see if their proactivity increased. The findings showed that both training approaches were potentially effective in encouraging employees to be more proactive, but that employees’ needs and preferences determined whether the training worked for them. Prof. Strauss’s findings showed that employees faced with a high workload were most likely to respond positively to the training approach aimed at encouraging them to be proactive problem solvers. “These employees felt swamped by the demands they were facing”, states Prof. Strauss. “We succeeded in training them to approach their job in a more proactive way and take charge of challenges and obstacles they were facing”. Training these employees to identify problems in their job and to develop ways to address these problems helped them to find more efficient ways of completing their day-to-day tasks. On the other hand, the training approach aimed at encouraging employees to become more proactive in shaping the future of the organization was most effective for those who are generally more focused on long-term rather than short-term benefits. Employees who were more interested in the short-term did not respond to the training approach in the same way – they did not become more proactive. “Our findings really show that there is no one-size-fits-all approach to proactivity training”, explains Prof. Strauss. “For organizations who want to enhance proactivity in their workforce this has two important implications. First, what kind of proactivity do they expect? Do they want employees to become proactive in overcoming obstacles and finding more efficient ways of working, or do they want employees who think about the long-term future and about strategic change at the organization level? Second, organizations need to consider the situation the employee is in. What are the employee’s needs and preferences? Pushing somebody who is generally not very interested in the long-term to contribute to bringing about a vision of the organization in the future is unlikely to be effective in making them more proactive, and our findings suggest that it can even backfire”. Prof. Strauss’s work has been recognized for the strength of its experimental design which rules out alternative explanations for changes in employee proactivity. However, she suggests that more research is needed on the effects of training interventions on employee proactivity. “Our study is an important first step in determining which type of training approach can be effective in encouraging employees to be more proactive, and who is most likely to respond positively to the training. But can we, for example, combine the different training approaches, and are there other ways in which employees and organizations can benefit from proactivity training?” Further research will need to explore these questions in other organizational settings. by Karoline Strauss , 03.10.16 Source : Knowledge Lab Essec

Corporate social responsibility is an increasingly popular topic in the corporate world and beyond, highlighting a need for best practices and a stronger understanding of what it really means to be a sustainable business. For this to occur, we need ways of measuring corporate sustainability: social accounting is one way of doing so. Adrian Zicari, professor at ESSEC, explains its merits, as well as its limitations, in a recent chapter in the Handbook on Ethics in Finance. SOCIAL ACCOUNTING: A TOOL FOR MEASURING CORPORATE SUSTAINABILITY Corporate social responsibility is an increasingly popular topic in the corporate world and beyond, highlighting a need for best practices and a stronger understanding of what it really means to be a sustainable business. For this to occur, we need ways of measuring corporate sustainability: social accounting is one way of doing so. Adrian Zicari, professor at ESSEC, explains its merits, as well as its limitations, in a recent chapter in the Handbook on Ethics in Finance. First, a primer: social accounting refers to the measurement of an organization’s social and environmental performance, recognizing the need to go beyond measuring economic impact only. There are a number of indicators that can be used, for example the disclosure of pollution information or the composition of the company’s workforce, among others. The list of indicators goes on, as assessing social and environmental information is a complex matter. This makes the scope of social accounting quite broad, and also leads to the question of balancing comprehensiveness and comprehension: more information is not necessarily better, as it can make reports hard to understand. Many of these indicators are not measurable in financial terms, so practitioners of social accounting need to go beyond conventional accounting and gather information from different sources. This requires a significant investment. As a result, social reports are more common in bigger companies. Dr. Zicari explored five issues (1): The motivation behind corporate disclosure of social & environmental information The use of social accounting internally for management purposes The link between social accounting and financial performance Whether or not regulation contributes to sustainability The potential that social accounting has for contributing to sustainable practices Disclosure on social and environmental information Today, the disclosure of social and environmental information is usually voluntary, though some European countries have recently implemented regulations. For instance, some companies in France have to present a “déclaration de performance extra-financière”. This means that in many cases, companies can pick and choose what, how, and when they disclose. This makes it difficult to compare companies, as there are many different frameworks in use. If it is not mandatory, why do companies disclose this kind of information? One reason is to show their legitimacy, i.e. living up to social expectations. Others may have a more “defensive” strategy in play, like if they are under fire from environmental agencies. If they do produce social reports, their motivations may impact the content. Researchers have noted that companies with poorer environmental performance tend to talk more about their environmental projects (2) and use more optimistic language (3). In other words, companies tend to be strategic when deciding what they share and how they share it, and their motivation is often based on protecting or enhancing the company’s reputation. This does not necessarily mean that companies are acting in bad faith, but it does mean that they may not disclose all their social and environmental indicators. Dr. Zicari notes that this can lead to tensions between companies and stakeholders: companies may not disclose all information, while stakeholders may seek more transparency. Should disclosure be mandatory? Corporate social responsibility initiatives and social accounting alike are typically voluntary, but there are increasingly calls for more mandatory reporting. This would be beneficial in that it could increase comparability, standardize reporting, boost the scope of information shared, result in better-informed consumers. One way to increase regulation is through “soft-law” initiatives, meaning the use of frameworks that are voluntary, but provide structure, like GRI, SASB, and Integrated Reporting. If a company says that it complies with one of those, then it has to abide by that and provide the according data. This could also boost stakeholder engagement by providing a reference point and also make it easier to compare companies, as currently comparisons are hindered by the many different frameworks out there. Another option is the use of “hard-law”, legally-binding regulations. One example of this is the Directive 2014/95/EU of the European Union, under which companies with over 500 employees disclose non-financial information. Some initial research suggests that this could have a negative impact on information quality, as companies prefer to share good news (4). Increased regulations on social reporting could help, but regulation alone will not ensure disclosure, nor does increased disclosure lead to increased sustainability. This suggests that while regulation could be useful, it does not replace the need for stakeholders to advocate for sustainability. Using social accounting internally Much of the discussion has focused on disclosure to external parties. What about the goings-on inside the company? Internal indicators can help managers make decisions that align with CSR indicators. However, since the indicators can be hard to decipher, managers may struggle to work with them, especially as CSR work can be siloed within the organization. Companies use different approaches when using social accounting internally. An “inside-out” approach highlights the use of internal social accounting information by managers in their decision-making processes; this can be combined with the “outside-in” perspective, wherein external stakeholders use report information to inform their decisions (5). Both of these perspectives are important in striving for sustainability. To facilitate this process and also help managers interpret the information, CSR discussions should be integrated into corporate performance and dealt with across the organization, rather than being the responsibility solely of a specialized team. What is the link between social accounting and financial performance? Social accounting is not interchangeable with conventional accounting: how exactly do they relate? Their scopes are different, but there is a lot of overlap, both in content and in audience. For example, perhaps a firm makes an expenditure to make a process greener: this will be reported in Profit and Loss Statements (the cost) and in social reports (the effect of the green initiative). An investor may read both these statements, as the financial statements help evaluate the company’s potential and social reports show its environmental impact. The research is mixed when it comes to how sustainability actually impacts financial performance; as a result, managers may be unsure about the profitability of sustainable policies, even if they think the ethical rationale is strong. When measuring the situation, managers thus need to carefully consider the framework they use, and whether or not it is appropriate for the situation. Can social accounting lead to organizational change? Even if the link between sustainability and financial performance is unclear, sustainability remains a worthy goal. This means that social accounting, too, is useful, as a tool for achieving sustainability. What can it actually achieve? Some scholars (cf. 6) suggest that social accounting can inform better decision-making and facilitate teamwork. Others are less certain (cf. 7), who argue that it is mainly symbolic and may not lead to significant change. One thing is true: realizing true improvements is difficult, and the mere implementation of social accounting processes will not automatically improve sustainability. Further, over-reliance on social accounting may lead to a focus on the “small picture”, rather than truly revisiting conventional business models. While social accounting is not a silver bullet, it has shown success; the KPMG Survey of Corporate Reporting (2017) (8), studying reporting practices in 50 countries, found that social reporting is widespread, and there is a community dedicated to its improvement and implementation. Social accounting could also help with the “big picture”: while reports may highlight smaller, incremental improvements, these could inform long-term changes to conventional business practices. For example, mining: by definition a polluting activity, but nevertheless one that is necessary for industrial production. Using social accounting could give managers and stakeholders information that could help reduce the environmental impact as a short-term strategy, while preserving the need to look for long-term solutions that are better for the planet. Social accounting is necessary and helpful for improving business models. Increased disclosure illuminates managers how the company can improve and informs the company’s efforts to be socially responsible. More transparency will benefit stakeholders and empower the public. We need to remember that social accounting remains a means to an end, and it will be tested by how effectively it creates measurable change in corporate practices. Key points and takeaways Tension exists between companies and stakeholders, as the former may not share all information and the latter seek greater transparency. Regulation could improve report quality, but will not automatically improve disclosure. Managers may find it challenging to work with social and environmental indicators, leading us back to the first point: some information may not be disclosed because it is not well understood or not readily available. We still do not have a clear picture of the link between sustainability and financial performance. We must be clear-eyed on the promise of social accounting. It can help improve existing business models, but does not create new ones, and managers should be encouraged to use complementary tools. All things considered: social accounting is an increasingly helpful tool for managers and stakeholders, and can help improve corporate sustainability. References Zicari, A. (2020). The many merits and some limits of Social Accounting: Why disclosure Is not enough. Handbook on Ethics in Finance, 541–557. https://doi.org/10.1007/978-3-030-29371-0_14 Cho, C. H., & Patten, D. M. (2007). The role of environmental disclosures as tools of legitimacy: A research note. Accounting, Organizations and Society, 32(7-8), 639-647. Cho, C. H., Roberts, R. W., & Patten, D. M. (2010). The language of US corporate environmental disclosure. Accounting, Organizations and Society, 35(4), 431-443. Costa, E., & Agostini, M. (2016). Mandatory disclosure about environmental and employee matters in the reports of Italian-listed corporate groups. 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