Task Solutions-Sustainability Accounting System for Pela: ACT302

Task Solutions-Sustainability Accounting System for Pela: ACT302

Running head: STRATEGIC MANAGEMENT ACCOUNTING
Strategic Management Accounting
Name of the Student
Name of the University
Author ’sNote
1 S …

Preview text

Running head: STRATEGIC MANAGEMENT ACCOUNTING
Strategic Management Accounting
Name of the Student
Name of the University
Author ’sNote
1 STRATEGIC MANAGEMENT ACCOUNTING
Table of Contents
Executive Summary ……………………………………………………………………………………………………. 2
Introduction ……………………………………………………………………………………………………………….. 3
Activity-Based-Costing (ABC) Framework to Measure Costs ………………………………………….. 3
Performance Measurement Matrix for Managers using GRI Framework …………………………… 5
Using BSC Framework to Report Financial and Non-Financial Metrics …………………………….. 6
UN Sustainable Development Goals Framework …………………………………………………………… 7
Conclusion ………………………………………………………………………………………………………………… 8
References ……………………………………………………………………………………………………………… 10
2 STRATEGIC MANAGEMENT ACCOUNTING
Executive Summary
The main purpose of this report is to design asustainability accounting system for Pela who
has sustainability as its core enterprise model. The aim of the first part was to design an
ABC framework for measuring the costs. This part of discussion shows that the application
of this particular costing method is important to cost and monitor the activities that the
company perform to manufacture its products. The second part aims at developing a
performance measurement matrix for the managers for supporting its core sustainability
model. While developing this matrix, the GRI framework is considered because this
framework helps in identifying and considering the relevant measures in the economic,
environment and social context. Consideration of these aspects is useful in assessing the
performance of the mangers. The aim of the third part of the report is to use the BSC
framework for reporting both financial and non-financial matrices. Instead of the traditional
BSC, the SBSC has more appropriateness to Pela as this framework considers the
environmental and social perspectives of the company ’s performance. Measures under
these perspectives are crucial to disclose both financial and non-financial performance of the
company. The last part of the report aims at developing a UN Sustainable Development
Goals framework for Pela. Discussion shows that the most relevant UN SDGs of Pela are
SDG 3, 6, 11, 12 and 13. It is important to disclose both favourable and unfavourable
information on these SDGs.
3 STRATEGIC MANAGEMENT ACCOUNTING
Introduction
Sustainability accounting can be regarded as the practice to measure, analyse and
report the social and environmental impacts of acompany to its key stakeholders to maintain
transparency. Different stakeholders have various interests, and sustainability accounting
assists the companies to account for these interests rather the considering only the
shareholders ’interests (“Sustainability Accounting and Accountability 2nd ed.”, 2015).
Peaceful and harmonising existing is something all beings must relish across generations,
and the companies can contribute to this noble cause by adopting sustainable practices. The
main aim of this report is to design asustainability accounting system for acompany where
sustainability is its core business model. Therefore, the company selected for this report is
Pela which makes phone cases to protect the phones. The company was established in
2010 and the owner was concerned about the impact of plastic in the ocean. Therefore, the
aim of the company is to create a waste free future by making 100% compostable phone
cases. Its goal is to keep 1billion pounds of waste from being made. These cases are tested
to be free from BPA, lead, cadmium and phthalates (“Our Story and Mission”, 2022). The
report is divided into four parts. The first part designs an activity-based costing (ABC)
framework for measuring costs. The second part develops a performance measurement
matrix for the managers for supporting the core sustainability model. The third part uses the
Balanced Scorecard (BSC) model for reporting the financial and non-financial metrics to
support the core sustainability model. The last part develops a UN Sustainability
Development Goals framework.
Activity-Based-Costing (ABC) Framework to Measure Costs
The activities in a company are identified by the ABC method and the costs are
assigned to production on the basis of actual consumption (Hooz ée & Hansen, 2017). It is
an approach to cost and monitor the activities involving tracing the consumption of resources
and assigning costs to final outputs. This objective is achieved by the ABC method on the
basis of consumption estimates by using cost drivers for attaching costs to outputs (Ni ñerola
et al., 2021).
The main operation of Pela is to manufacture phone cases. Therefore, the ABC
framework for measuring cost is based on the production of these phone cases.
The proposed ABC framework considers two usual manufacturing activities of the
company, which are the setting up of aproduction machine to run batches of products and
the actual production of the units of product. Itis assumed that the $2,000,000 is the annual
manufacturing costs of Pela, of which, $200,000 is directly used to set up the machines for
production. Performing 400 machine setups is the company ’sexpectation during the year. It
is also assumed that there is considerable variation in the batch size, but the each machine ’s
setup efforts are similar.
Manufacturing overhead costs assigned to setup ($) 2,00,000
Number of Setups (in number) 400
Manufacturing overhead cost per setup ($) 500
Total manufacturing overhead costs ($) 20,00,000
Less: Cost traded to machine setup ($) 2,00,000
Manufacturing overhead costs allocated to machine hours ($) 18,00,000
Machine Hours (in hours) 1,00,000
Manufacturing overhead costs per machine hour ($) 18
4 STRATEGIC MANAGEMENT ACCOUNTING
Allocation of manufacturing overhead cost
Setup cost of $500 per
batch +$18 per
machine hour
Table 1
Manufacturing overhead for setting up machine ($) 500
Number of units in batch (in numbers) 5,000
Manufacturing overhead caused by Setup per Unit ($) 0.1
Manufacturing overhead costs per machine hour ($) 18
Number of units produced per machine hour (in numbers) 50
Manufacturing overhead caused by Production per Unit 0.36
Total manufacturing overhead allocated per unit 0.46
Table 2
Manufacturing overhead for setting up machine ($) 500
Number of units in batch (in numbers) 50,000
Manufacturing overhead caused by Setup per Unit ($) 0.01
Manufacturing overhead costs per machine hour ($) 18
Number of units produced per machine hour (in numbers) 50
Manufacturing overhead caused by Production per Unit 0.36
Total manufacturing overhead allocated per unit 0.37
Table 3
As per Table 1, $500 is the cost per setup. ABC method requires considering
$200,000 of the overhead as the batch-level cost. It implies that the company will first
allocate $200,000 to the batches of products to be manufactured, as shown in Table 1, and
then, itwill be assigned to the units of product in each batch, as shown in Table 2and Table
3. As per Table 2, $0.10 will be the setup cost per unit if the batch contains 5,000 units,
whereas the cost per unit for setup will be $0.01 ifthe batch contains 50,000 units (Zamrud
& Abu, 2020).
5 STRATEGIC MANAGEMENT ACCOUNTING
Performance Measurement Matrix for Managers using GRI Framework
The main objective of Global Reporting Initiative (GRI) is to provide information
related to sustainability on the social, economic and environmental aspects of a company
and the impact of its operations on the society and environment (“GRI -About GRI”, 2022).
Under GRI, there are the sustainability performance indicators or sustainability development
indicators which are used to measure and monitor the performance of the managers so that
a business ’s core sustainability model can be supported (Nigri & Del Baldo, 2018 ). The
business model of Pela is based on sustainability development. Therefore, the performance
measurement matrix must be prepared in such amanner so that itmeasures the managers ’
performance in the economic, environment and social context. The proposed performance
measurement matrix or framework is shown below:
Economic Environment Social
Impacts on
Shareholder Net Profit
Renewable
resource
productivity
Sales per Unit
of Renewable
Energy
Consumption
Health and
Safety
ROCE
Sales per Unit
of Renewable
Material Input
Training and
Education
EPS Recycle
Percentage
Reused
Component per
Product
Employee
Productivity
Turnover per
Employee
Impacts on
Employees
Remuner
ation
Percentage
Recycled
Material
Average
Year of
Services
Benefits
Percentage
Energy Reuse
Employee
Cost per Unit
Profit
Impact on
Governments
Tax
Breaks
Waste
Management
Waste per
Product Quotas
Percentage
of Women in
Higher
Management
Taxes
Scrap per
Product
Employee
Profile
according to
Race
Subsidie
s
Emission/Poll
ution Intensity
CO2 Emission
per Unit of Sale
Customer
Satisfaction Market Share
CO2 Emission
per Unit of
Electricity
Customer
Complaints
Community
Initiatives
Involvement
in Local
Communities
Grants and
6 STRATEGIC MANAGEMENT ACCOUNTING
Donations
Table 4: Performance Measurement Matrix of Pela
(Source: As created by Author)
The GRI Framework focuses on the economic, environmental and social aspects for
measuring performance, and therefore, the proposed matrix incorporates all these three
aspects to measure managerial performance in Pela. It is important to consider all these
aspects for managerial performance measurement.
It is shown in Table 4 that the managerial performance in Pela will be measured in
the economic, environmental and social contexts. Under each context, certain measures are
suggested which will be used to assess how the managers are performing against these
measures. Under the economic context, managerial performance will be measured basis the
impact on the shareholders, employees and government. For example, net profit, Return on
Capital Employed (ROCE) and Earnings per Share (EPS) will be used to measure the
managerial performance. Under the environmental perspective, the focus will be how the
managers are conducting the business operations by considering Pela ’s core business
model of sustainability. As a result, the managerial performance will be measured against
the aspects like using renewable resources to manufacture phone cases, managing the
intensity of waste and pollution, and others (Kumar et al., 2018). Under the social context,
the performance of the managers will be measured on the basis of health and safety,
productivity of the employees, contribution towards community and others (Sampong et al.,
2018).
Using BSC Framework to Report Financial and Non-Financial Metrics
It is not possible to use the traditional balanced scorecard (BSC) to assess the
overall performance of a company like Pela where sustainability is incorporated in the core
business model as the traditional BSC is often dedicated to the financial performance.
Therefore, these measures lack the effectiveness to assess the company ’s holistic
performance. Therefore, a sustainability balanced scorecard (SBSC) is used for Pela for
reporting its financial and non-financial matrices in order to support its core sustainability
model (Eklund, 2020). The SBSC of Pela consistes of six perspectives, which are financial
perspective, customer perspective, learning and growth perspective, internal process
perspective, environmental perspective and social perspective (Chen et al., 2020).
Financial Perspective
Objectives Measures
Improvement in the Short-Run Profit Share Price
Measures of Profitability
Cash Flows
Improvement in the Long-Run Profit Market Value Added
Economic Value Added
Customer Perspective
Objectives Measures
Increase in the Market Share Company Market Share
Improvement in Customer Loyalty Number of New Customers Acquired
Customer Satisfaction
Learning and Growth Perspective
Objectives Measures
Improvement in the Employees ’Skills and
Knowledge
Number of Training and Learning Programs
Improvement in the structuring of the Board Diversity among the members of the Board
7 STRATEGIC MANAGEMENT ACCOUNTING
of Directors of Directors
Internal Process Perspective
Objectives Measures
Improvement in the Product Quality and
Productivity
The Yield
Reduction in the Delivery Time to
Customers
Delivery Cycle Time
New Products Number of New Products
Environmental Perspective
Objectives Measures
Improvement in the Environmental
Performance
Consumption of Resources
Emissions to Water, Air and Natural
Environment
Rate of Reuse and Recycle
Rate of Waste Management
Number of Products for Decomposition and
Recycling
Social Perspective
Objectives Measures
Improvement in the Environmental and
Social Performance
Sustainability Performance of the Suppliers
Creation of Jobs
Benefits to the Employees
Health and Safety Performance
Size of Disclosure on Sustainability Issues
Number of Breaches
Compliance to Rules and Regulations
Sustainability Audit and Communication
Table 5: SBSC of Pela
(Source: As created by Author)
The main aim of the financial perspective is to measure the financial performance of
Pela both for short-term and long-term basis. Itis crucial to measure financial performance
to ensure the future sustainability of the business. Customer perspective measures like
company market share, customer satisfaction and new customers will help the company to
test its business model to satisfy the needs of the customers. The measures proposed under
the learning and growth perspective are crucial to measure the growth of the employees and
other organizational people. The measures related to internal processes are key to measure
the efficiency of the company in delivering its products to the end customers (Falle et al.,
2016).
Now, the two most important perspectives are the environment and social
perspective which are in line with the core business model of Pela. It is critical to the
management of the company to follow the measures proposed under these two perspectives
in order to maintain sustainability as its core business model. Measures like reuse and
recycle rate, waste management, recycling and others will help the company to measure its
performance towards keeping 1billion pounds of waste from ever being made (Jassem et al.,
2018). Therefore, the proposed SBSC incorporates both financial and non-financial
measures for supporting Pela ’score sustainability model.
UN Sustainable Development Goals Framework
The UN Sustainability Goals (SDGs) can be regarded as acollection of 17 interlinked
global goals and these goals have been designed to be the plan to attain abetter and more
sustainable future for all (un.org, 2022). The development of aUN Sustainable Development
8 STRATEGIC MANAGEMENT ACCOUNTING
Goals framework in Pela requires considering the vision, mission and goals of the company.
The aim of the company is to create and nurture the team and community needed to make
the waste free future a reality. The key sustainability issues faced by the company include
carbon emission, water usage and waste production (“Our Sustainability Strategy”, 2022).
Therefore, the framework requires identifying the UN SDGs relevant to the company. They
are as follows:
(Source: sdgs.un.org, 2022)
It can be seen from the above that five UN SDGs are most relevant to the
sustainability model of Pela. These UN SDGs include SDG 12 Responsible Consumption
and Production ,SDG 13 Climate Action ,SDG 6 Clean Water and Sanitation ,SDG 11
Sustainable Cities and Communities ,and SDG 3 Good Health and Well-Being .After the
selection of the relevant UN SDGs, the framework requires the company to set targets on
yearly basis in order to achieve the goals. It is an important aspect to consider that the
company is needed to report both favourable and unfavourable results towards achieving the
goals.
Conclusion
The above discussion shows that the development of ABC method requires Pela to
consider the manufacturing overheads and number of machine setups which are needed to
manufacture the products. ABC is costing method which helps in costing and monitoring the
key activities needed to manufacture the products. While developing the performance
measurement matrix for the managers, itis akey to consider the GRI framework because it
helps in identifying the measures which should be considered for managerial performance
measurement. It is a key to consider the economic, environment and social measures for
measuring the performance of the managers. Consideration of all these matters is important
to ensure that equal emphasis is given on both financial and non-financial measure for
managerial performance measurement. Since the business model of Pela is sustainability
based, traditional BSC is not applicable because of its ineffectiveness in assessing the
holistic performance of the entity. As a result, it is needed to consider a SBSC which
requires considering two additional perspectives related to sustainability, which are
environmental perspective and social perspective. SBSC considers both the financial and
non-financial measures of measuring and reporting performance. Itis also important for the
company to identify and select the UN SDGs which are most relevant to Pela ’s core
9 STRATEGIC MANAGEMENT ACCOUNTING
sustainability model, as identification of these UN SDGs makes the sustainability reports
more reliable and relevant. While reporting the company ’sperformance against the chosen
UN SDGs, it is crucial for the company to disclose information on both favourable and
unfavourable performance.
10 STRATEGIC MANAGEMENT ACCOUNTING
References
#Envision2030: 17 goals to transform the world for persons with disabilities |United Nations
Enable . Un.org. (2022). Retrieved 14 May 2022, from
https://www.un.org/development/desa/disabilities/envision2030.html.
Chen, N., Yang, X., & Shadbolt, N. (2020). The Balanced Scorecard as a Tool Evaluating
the Sustainable Performance of Chinese Emerging Family Farms — Evidence from
Jilin Province in China. Sustainability , 12 (17), 6793.
https://doi.org/10.3390/su12176793
Eklund, M. (2020). Future Prospects in Balanced Scorecard Research: Sustainability
Perspective. Indonesian Journal Of Sustainability Accounting And Management ,4(2),
192. https://doi.org/10.28992/ijsam.v4i2.263
Falle, S., Rauter, R., Engert, S., & Baumgartner, R. (2016). Sustainability Management with
the Sustainability Balanced Scorecard in SMEs: Findings from an Austrian Case
Study. Sustainability ,8(6), 545. https://doi.org/10.3390/su8060545
GRI – About GRI . Globalreporting.org. (2022). Retrieved 14 May 2022, from
https://www.globalreporting.org/about-gri/.
Hooz ée, S., & Hansen, S. (2017). A Comparison of Activity-Based Costing and Time-Driven
Activity-Based Costing. Journal Of Management Accounting Research ,30 (1), 143-
167. https://doi.org/10.2308/jmar-51686
Jassem, S., Azmi, A., & Zakaria, Z. (2018). Impact of Sustainability Balanced Scorecard
Types on Environmental Investment Decision-Making. Sustainability ,10 (2), 541.
https://doi.org/10.3390/su10020541
Kumar, R., Pande, N., & Afreen, S. (2018). Developing a GRI-G4-based persuasive
communication framework for sustainability reporting (SR). International Journal Of
Emerging Markets ,13 (1), 136-161. https://doi.org/10.1108/ijoem-01-2017-0015
Nigri, G., & Del Baldo, M. (2018). Sustainability Reporting and Performance Measurement
Systems: How do Small- and Medium-Sized Benefit Corporations Manage
Integration?. Sustainability ,10 (12), 4499. https://doi.org/10.3390/su10124499
Ni ñerola, A., Hern ández-Lara, A., & Sánchez-Rebull, M. (2021). Is Time-Driven Activity-
Based Costing Coming out on Top? A Comparison with Activity-Based Costing in the
Health Field. Healthcare ,9(9), 1113. https://doi.org/10.3390/healthcare9091113
Our Story and Mission . Pela Case. (2022). Retrieved 14 May 2022, from
https://pelacase.com/pages/our-story?msclkid=21fc4828c62f11ec92feff31dbf49a3c.
Our Sustainability Strategy . Pela Case. (2022). Retrieved 14 May 2022, from
https://pelacase.com/sustainability-strategy/our-footprint.
Sampong, F., Song, N., Boahene, K., & Wadie, K. (2018). Disclosure of CSR Performance
and Firm Value: New Evidence from South Africa on the Basis of the GRI Guidelines
for Sustainability Disclosure. Sustainability , 10 (12), 4518.
https://doi.org/10.3390/su10124518
Sustainability Accounting and Accountability 2nd ed. (2015), 6(1), 103-106.
https://doi.org/10.1108/sampj-09-2014-0054
THE 17 GOALS |Sustainable Development .Sdgs.un.org. (2022). Retrieved 14 May 2022,
from https://sdgs.un.org/goals.
Zamrud, N., & Abu, M. (2020). COMPARATIVE STUDY: ACTIVITY BASED COSTING AND
TIME DRIVEN ACTIVITY BASED COSTING IN ELECTRONIC INDUSTRY. Journal
11 STRATEGIC MANAGEMENT ACCOUNTING
Of Modern Manufacturing Systems And Technology , 4(1), 68-81.
https://doi.org/10.15282/jmmst.v4i1.3840

Order Now

QUALITY: 100% ORIGINAL PAPER – NO PLAGIARISM – CUSTOM PAPER