Focusing on accounting’s ‘social role’

by Tracey J. Niemotko, JD, CPA-NY, CFE

A focus on sustainability in academia seems to go a long way in helping younger students overcome the stereotype of isolated accountants crunching numbers. Students view sustainability concerns as a component of accounting that focuses on societal goals and priorities, which leads to a more favorable view of the accounting profession. This more desirable “social role” for the accounting profession appeals to Millennials and Generation Z. Sustainability may expand the accounting pipeline by attracting future accounting professionals. The challenge is that change is not readily embraced, especially by academic faculty.

Sustainability education can be promoted in accounting classes at every level. In introductory accounting courses, students can become acquainted with sustainability concepts by reviewing the sustainability reports of familiar publicly traded companies. Without being overwhelmed by unfamiliar financial statements and accounting data, students can quickly grasp and relate to sustainability goals regarding the environment, social capital, human capital, business models, and governance. Reviewing the concept of “stakeholders,” as outlined in Exhibit 1, allows students to connect how different groups are impacted by a company and how stakeholders, in turn, can influence how companies operate and make business decisions.

Many students in introductory courses are pleasantly surprised when sustainability issues are considered; many feel compelled to learn more about the topic and are drawn to careers that promote these priorities. Because students can easily relate to sustainability topics, they become more open to learning about corporations holistically by embracing financial reporting and the accounting process. Sustainability helps students overcome the notion that accounting is a compartmentalized task. Instead, if sustainability is presented, they can appreciate the importance of recording transactions and reporting outcomes, applicable to both financial as well as nonfinancial sustainability data.

Moreover, students can reflect upon which data should be recorded and how it should be recorded. Instead of debits and credits being a roadblock, they can be viewed in context as a tool to facilitate data organization. Ideally, if introductory college accounting courses included sustainability topics and an overview of financial statements before focusing on the introduction of journal entries, perhaps more students would embrace accounting.

Students today are passionate about sustainability goals. They quickly grasp how nonfinancial sustainability outcomes affect how companies are perceived. Students appreciate how stake-holders can become a market force that directs how businesses operate. It means a great deal to students that companies operate in an ethical manner and serve as responsible environmental stewards. They are concerned about human capital issues, such as how employees are treated and the importance of diversity, equity, and inclusion in the workplace; sustainability helps students see accounting as a worthwhile profession that addresses these societal needs.

Studying the historical role of the accounting profession can provide students with perspective regarding the importance of accounting and how it has evolved. A good starting point is the role of accounting in the 20th century: students can research the forces that led up to the 1929 stock market crash and U.S. Great Depression. Students learn that this crisis precipitated a need for uniform accounting standards, especially after Congress enacted the Securities Act of 1933 and the Securities Exchange Act of 1934 to safeguard investors and regulate financial markets.

It is valuable for students to appreciate the accounting profession’s role in answering the call for financial reporting reform when the country was in crisis. For example, problematic accounting practices in the years before the crash, whereby companies typically adjusted their fixed assets to reflect desired fair market valuations, led to the earliest GAAP addressing historical costing. By studying the evolution of GAAP and its oversight, students can appreciate how accounting may become a more meaningful profession with a current focus sustainability accounting and reporting.

The role of accounting can also be viewed in the context of the forces that have affected businesses and stakeholders at different points in history. Students can be asked to consider how American businesses were affected by historical events at the turn of the 20th century, such as World War I (1914-1918), the Spanish Flu epidemic (1918-1919), the Great Depression (1929-1941), and World War II (1939-1945). Students can appreciate how Americans suffered, but they can also begin to understand stakeholders’ impact on businesses as Americans struggled to regroup. Specifically, students can grasp how this backdrop could explain why so many invested with urgency and focused on immediate returns after financial devastation and losses; stakeholders were driven to recoup and re-establish their holdings. Connecting the dots, students can appreciate how businesses were affected by this sense of urgency from their stakeholders.

Perhaps this is why, by the end of the 20th century, many corporations focused on satisfying their investors by maximizing profits in the short run, often sacrificing environmental, social, and human capital instead of implementing a sustainability agenda focusing on generating long-term value. It is not that investors would necessarily have opposed a sustainability agenda. Instead—perhaps unlike today—the dire economic backdrop would have made sustainability concerns an unlikely priority for contemporary businesses and stakeholders.

Although American students experienced a pandemic that disrupted their lives and set back their goals, they are generations removed from the many devastating events that their parents and grandparents endured in the 20th century. Today, American students tend to focus on a better quality of life—often using the term “living your best life”—making them open to embracing a sustainability agenda.

Thus, students can grasp how stakeholders affect businesses and how the accounting profession must respond accordingly with new GAAP and resilient accounting oversight. Hopefully, seeing the more prominent role of accounting will make students realize that an accounting position can be more than a paycheck. Rather, they are being trained to become trusted professionals—members of a valuable profession with an essential role in our global society.

Tracey J. Niemotko, JD, CPA-NY, CFE, FSA is chair of the department of accounting and director of the MS program in professional accountancy at Marist College, Poughkeepsie, N.Y.

Reprinted with permission from the New York CPA Society. Read the original publication here