What Are the Disadvantages of Social Responsibility Accounting?

by Aminah Abdullah; Updated September 26, 2017

Social responsibility accounting is a framework established to monitor and evaluate an organization’s performance to ensure that it conforms to environmental, economic and societal needs. Unlike financial accounting, it focuses on the contribution that the business gives to society and the environment through its behavior and activities. Social responsibility accounting has been developed in response to the government and public’s pressure on large corporations to be more transparent and conscious about the impact of their activities on the environment and society. As this is not a traditional accounting system, the implementation process can be quite difficult and cumbersome for some organizations.

Cost and Workload

The implementation cost of social responsibility accounting is high. It requires a high labor workload, especially at the initial stage of its implementation. Early planning and troubleshooting strategies have to be organized, which could incur massive time and cost to the business. The management has to implement long-term, strategic planning so that the accounting system meets the organization’s profitability objectives while also minimizing the social impact of its activities. Risk awareness as a result of the implementation has to be taken into consideration and monitored.

Business Objective

In contrast to public services which operate to serve the public needs, most private businesses aim to maximize profit and shareholders’ wealth. The nature of their activities may makes it difficult to implement the social responsibility accounting system. For example, although a company’s policy and procedures on disposal of chemical waste is in accordance to the rules and regulation, it may not be sufficient to achieve the target of accommodating environmental and social needs.

Staff Morale

The implementation process, which requires heavy workload, may deteriorate the staff morale. Having to work extra hours and additional workload at the same pay rate can cause employees to seek employment somewhere else. As a result, the business will incur high labor turnover and more cost by needing to recruit and possibly train new staff.

Resources

Unlike a traditional accounting system, which concerns figures, the social responsibility accounting is developed to ensure a business' activities fit the environment and society surrounding it. Resources, such as social cost- benefit analysis and information on pollution impact and destruction of animal resources form part of the implementation process. An organization that wishes to implement this system may face a shortage of resources and therefore may be discouraged to proceed.

About the Author

Aminah Abdullah has been writing articles on finance and other subjects since 2005. She holds a Certified Accounting Technician qualification and is currently pursuing professional status through the Association of Chartered Certified Accountants.

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