Professor Letlhokwa George Mpedi is the Vice-Chancellor and Principal of the University of Johannesburg.

He recently published an opinion article that first appeared in the Daily Maverick on 31 January 2024.

Accounting is not just about number crunching, it has a critical societal impact

Accounting is often erroneously viewed as being simply about numbers — the process of keeping and consolidating financial accounts. Not so, I would argue.

Eva Tsahuridu and Gary Carnegie of the International Federation of Accountants (Ifac) argue that accounting has been grossly misrepresented and that it is not simply a technical practice. Rather, accounting is a social practice that underlies human activity and influences behaviour. The impact of accounting thus reverberates beyond financial statements to individuals, organisations and societies.

As Tsaharidu and Carnegie phrased it, morality is at the core of the practice of accounting, which influences the morality of organisations, societies, and, by extension, individuals.

Based on its moral practice, there is thus an argument to be made for social accounting. This is a shift from assessing not just the influence of their business strategies on financial outcomes, but also their effects on employees, the communities in which they function, and the natural environment. This expands the scope of traditional accounting.

Social impact significance

Accounting ultimately influences trust, ethical conduct, wealth distribution, corporate responsibility, environmental sustainability, economic policy, and technological empowerment.

In Accounting in a Social Context, Orla Feeney argues that accounting is a social phenomenon. As she states, accounting can be understood “as a socially constructed set of actions taking place within the organisation, the landscape of which is constantly transforming”.

This shift reflects a growing recognition of the interconnectedness between business operations, the wellbeing of people and the environment, emphasising a more holistic approach to assessing a company’s overall impact on society — beyond spreadsheets. As the accounting profession evolves, a holistic understanding of its societal implications is essential. Research suggests that through this shift, social-impact accounting processes become as empowering as the data reporting they facilitate.

This paradigm shift calls for a human-centric understanding of accounting — one based on sustainability. In the context of sustainability, accounting transcends organisational boundaries and impacts a broad set of stakeholders, redefining our very conceptions of the field.

Feeney argues that academics have a moral obligation to move this higher up the research agenda. In this field of accounting, she states, “we need to better understand what motivates corporations to pursue different sustainability strategies and how managers implement effective management accounting and control systems to achieve improved sustainability outcomes.”

Quite simply, we are being asked how accounting can play a crucial role in making businesses more environmentally and socially responsible.

While this shift in our understanding of accounting is wholly necessary, we must also be mindful of what the impact of a social-impact lens tangibly means. As Yang et al argue, there is the danger of this becoming a “hembig” concept, which refers to hegemonic, ambiguous, big concepts.

This alludes to the very idea of social impact becoming all-encompassing and potentially stifling alternative perspectives. This shift risks overlooking the diversity of societal values and perspectives, potentially leading to a one-size-fits-all approach.

It also raises concerns about the lack of clarity in its application. Without well-defined parameters, the social-impact lens might become a catch-all term, diluting its effectiveness and impeding actionable insights. Furthermore, the introduction of a social-impact lens may overwhelm practitioners and scholars alike.

Societal impact and decision-making

It thus becomes imperative to strike a balance between a comprehensive understanding of societal impact and a practical, actionable approach that can be effectively integrated into decision-making processes. While Yang et al assure readers that social impact in accounting does not constitute a “hembig” concept yet, they do suggest that it risks becoming one. The authors contend that while efforts so far have primarily centred on improving impact measures and engagement with stakeholders, there are concerns about the potential unintended consequences, such as the encroachment of neoliberal logic into social domains.

They underscore the importance of critically reflecting on the concept to avoid it becoming a “hembig” term and highlight the risks of impact washing and the need for clear communication in research.

Additionally, the authors advocate for intentional efforts to specify the meaning of social impact in different contexts and engage in conversations to avoid the concept becoming a vague and ill-defined catch-all term. This must remain at the fore as we redefine traditional notions.

This shift in rhetoric underscores the call for societal impact throughout the corridors of higher education institutions. There is demonstrable merit in social or societal impact. At the University of Johannesburg (UJ), for instance, we are embracing a learning revolution defined by societal impact.

Social responsibility and accountability 

Through the lens of societal impact, there is an argument to be made for the emergence of not only more socially aware accountants, but more self-aware accountants too. There is an Aristotelian argument to be made based on Nicomachean Ethics that can inform this very approach.

Aristotle’s ethical philosophy encourages accountants to prioritise virtues, consider the broader purpose of their work, contribute to human flourishing, balance competing interests, value community, engage in continuous improvement, and engage in critical reflection.

For instance, Aristotle’s concept of eudaimonia refers to human flourishing or well-being. Accountants can contribute to societal well-being by considering the social consequences of financial decisions and practices. This involves complying with regulations and actively seeking ways to enhance the welfare of individuals and communities affected by financial reporting.

This idea suggests that accounting must be fundamentally rooted in an ethical framework — not just in terms of its practice, but in terms of its scope. Andrew West argues that this Aristotelian approach may be the very route to combat accounting fraud.

If we are to cast our mind to some of the great accounting scandals of recent years in South Africa, perhaps this framework could have served as a deterrent. Perhaps it is not too late to apply some of these glaring lessons to avoid similar scandals. There is a moral component to accounting that must be emphasised. In this evolving landscape, accountants are called to comply with regulations and actively seek ways to enhance societal welfare through their practice — by centring social impact.

Tsahuridu and Carnegie argue that “accounting in modern times is powerful because of its privileged position as a key means of directing and governing organisations, economies and societies. Appreciating accounting’s social dimension enables its moral dimension to emerge and erase the falsehood of accounting as an amoral endeavour.”

This very idea represents the unfolding of accounting as a technical practice and its emergence as a social practice.

*The views expressed in this article are that of the author/s and do not necessarily reflect that of the University of Johannesburg.