Incidents that are related to customer safety, employee regulation, and environment have a significant impact on the market prices which turns the sustainability issue into a business issue. These impacts cause an effect on cash flows and risks that are associated. For example, when Chipotle had many E. coli incidents reported people stopped going there which made their sales go down. They had a drastic change in sales because the prior year they were a very popular fast food place and they made a lot of profit.
Growing investor demand, early implementation, and looking ahead are very important factors that a company should look into and have a plan for just in case there is a sustainability issue that arises.
Growing investor demand is an important factor because it allows companies to see how they are performing on issues related to sustainability. In the CPAJournal it was stated, “These investors want sustainability performance data that are clearly linked to financial performance and are thus useful for making investment decisions”(Hales, 2018).
The sustainability performance data would be really beneficial for companies to make their investment decisions. If companies had access to the markets history of food safety incidents they would get a better understanding of how their future performance would be based on their past financial performance. Accountingtoday article made a point about millennials, “From the perspective millennials, issues regarding quality of life, the environment and social responsibility are important considerations above and beyond the ‘bottom line’ in their overall perspective and in the assessment of firms”(Niemotko 2017).
Millennials are now part of the decision making since more and more millennials are graduating and joining the work force. They have different opinions on how firms should operate compared to the older people that are working in the company.
Early implementation allows companies to address the societal changes while they increase the organizations bottom line since they know that the sustainability performance is linked with the financial performance. The CPAJournal stated that, “More than 1,300 companies, representing $25 trillion in market capitalization, have voluntarily adopted targets for reducing greenhouse gas (GHG) emissions, and automakers have begun phasing out conventional engines and embracing electric vehicles, which posted 63% year-over-year sales growth in the third quarter of 2017. In addition, food companies are pouring resources into the organic market, where growth is outpacing the overall food market by 1,400%”(Hales 2018). These companies are increasing risk management, operational efficiency, and their strategic focus they are doing this to strengthen their brand. This strategy also allows them to achieve sustainable competitive advantage. Tracey Niemotko discussed that, “Accordingly, sustainability accounting and reporting is not only on the horizon as an upcoming mandate for businesses in the United States, but it also seems to be in alignment with the priorities of millennials who are next generation of accounting professionals”(Niemotko 2017). Millennials are coming up as the new accounting professionals and they want sustainability accounting and reporting to be a big part of a firms operation. They want to emphasize sustainability into each companies lifestyle.
Looking ahead is a way for companies to determine what they need to work on in order for their company to be successful. They need to complete many different types of research to come up with a plan for every scenario that they are put into. Jeffrey Hales mentioned in the CPAJournal that, “This ongoing due process will involve internal research, external outreach, technical agenda-setting, public comment, and transparent oversight”(Hales, 2018). There is a lot that will go into this process but it will be very helpful for the companies future. Janice Nunziato an accounting student researched sustainability she concluded that, “Perhaps a concise explanation is that sustainability accounting and reporting allows companies to present qualitative, as well as quantitative, data about the management of the environment, social and human capital, and the priorities of corporate governance.
This information provides information for investors, creditors and management that can be used to fairly assess the performance of a firm”(Niemotko 2017). Janice who is a millennial gives her insight on what she thinks the definition of sustainability is. Her definition gives the point of view of a millennials thinking on sustainability accounting. Journal of Accountancy describes how CPA’s can be a big role in the future of corporate sustainability, “of external and internal stakeholders, more organizations are measuring and reporting on their social and environmental performance. CPAs can play an important role in providing the needed information and helping to verify its accuracy”(Ballou, Heitger, and Landes 2006). CPA’s can help firms tremendously by gathering the information needed and verifying if it is correct information. There will be a larger job outlook in the future for CPA’s because they are needed in the corporate sustainability field.
In conclusion, growing investor demand, early implementation, and looking ahead is a great way to monitor environmental, customer safety, and employee regulation. Companies get the opportunity to determine what their markets future looks like and they have the ability to make a plan if things don’t go right. If these factors are analyzed in the same order sustainability issues can be avoided. The chipotle issue could have been avoided if these steps were taken into accountability by the franchise.