Appunti Advanced Management control and Sustainable Development

Conclusion

New business opportunities are opening for companies that are able to operate true to a purpose that drives them to be a force for good in societies in which they seek to prosper. An integrated approach - Business2030 - can take into consideration how the interests and the contributions of a series of stakeholders that participate in the execution of the strategy are linked in the business model through innovation, partnership, and sustainable supply chain. Mind-sets, measures and conversations are levers that need to be managed carefully to get there.

Business2030 builds on Integrated Thinking, which is about understanding, measuring, and connecting a comprehensive set of relationships and performances with corporate purpose. It involves identifying, executing, and monitoring business decisions and strategies for long-term value creation. But how can this happen?

Accounting and reporting practices offer tools and engagement platforms that can go beyond

1. Win board and senior management commitment on a selection of SDGs (focus only on those that the business organization can impact).
2. Understand how key sustainability drivers and initiatives contribute to achieving business and financial strategies and goals.
3. Integrate key sustainability drivers and the SDGs into the organization's strategy and business model.
4. Ensure that the SDGs and their connection with the organization's strategy are understood cross-functionally in the business organization.
5. Break down SDG targets and objectives for the organization.

as a whole into targets and objectives that are meaningful for individual subsidiaries, divisions, and departments. 6. Make SDGs a central element of the process of planning, budgeting, and performance measurement, and include sustainability targets and objectives in performance appraisal. 7. Connect SDGs and sustainability drivers with day-to-day decision making. 8. Monitor and report sustainability initiatives and performance toward the SDGs in an integrated way.

Lezione 2: Management Control fundamentals: introducing to the concept (Ch 2-3 Merchant-Van)

Management control system: the current definition

Management control system can be defined as a "package" that includes the design and use of formally and informally control aimed to ensure that the behaviour and actions of business actors are consistent with the organization's objectives and strategies. (Merchant and Riccaboni, 2001; Malmi and Brown 2008)

Management control system and its several forms of control

Merchant and

Riccaboni (2001) and Merchant and Van der Stede (2007) summarize the types of control on which the management control literature has progressively placed the emphasis: - Action control: the physical and administrative activities and mechanisms capable of ensuring that employees perform (or do not) certain actions deemed beneficial (or harmful) for the organization. (important at lower level) - Result control: the mechanisms which link remuneration to the performance achieved based on empowering individuals on the results of their activities. (link performance to rewards) (important at higher level) - Personnel and cultural control: the initiatives, situations and tools capable of ensuring that each employee control its own behaviour or that they control each other. (create the right value system, atmosphere, competences) (important for everybody) Different categories of Management Control: - Results controls: aim to heighten employees' awareness of the consequences of their actions byonly rewarding them for generating results, which the organization deems beneficial. Example: achieving performance targets such as budgeting, sales growth or market share • Action controls: Involve ensuring employees avoid actions detrimental to the organization and perform those known to be beneficial. Example: employees accounting for their actions either to reviewers, superiors or each other • Personnel controls: Selecting and training employees in such a way that they understand the nature of their duties, have the capability to complete their tasks competently as well as performing to the best of their ability. Example: Employee training • Cultural controls: Controls which shape the shared traditions, norms, beliefs, values, ideologies, attitudes and ways of behaving in an organisation. Example: Codes of conduct, socialisation between employees and inspirational leadership Formal and informal controls: - Formal controls include rules, budgets, performance appraisal, rewardcriteria and measures for social and environmental goals. However, it is important to find a balance between the two in order to effectively control results. Feedback loops are an essential part of controlling results in MCS. These loops provide information on the performance of the organization and allow for adjustments to be made if necessary. Feedback can come from various sources, such as performance evaluations, customer feedback, and environmental impact assessments. By analyzing this feedback, organizations can identify areas for improvement and take corrective actions. Feed forward loops, on the other hand, focus on anticipating future outcomes and taking proactive measures to achieve desired results. This involves setting objectives, developing strategies, and implementing actions to ensure that the organization is on track to achieve its goals. Feed forward loops can include activities such as scenario planning, risk assessments, and forecasting. In conclusion, controlling results in MCS requires a combination of formal and informal controls, as well as the use of feedback and feed forward loops. By integrating these elements, organizations can effectively monitor and manage their performance towards social and environmental goals.appropriate quantitative and "objective" measures for social and environmental corporate responsibility, since they are often very judgmental or frothy. Management control is expected to play a key role in shaping processes of sustainability strategy formulation and implementation, often attributed with a high capability to support decision-making. Sustainability management control aims to continuously measure, manage and improve, in an iterative process, the interaction between business, society and environment. Management control systems for sustainability: introducing the concept: The concepts related to sustainability accounting and control began to spread from the early 2000s both in philosophical terms (e.g. Bebbington 2001, Bebbington and Gray 2001, Gray and Bebbington 2000) and in practical developments (e.g. Schaltegger and Wagner 2006, Schaltegger and Burritt 2006). The logic of sustainability has therefore progressively overlapped on traditional managerial practices. For this

Reason: The accounting, control, and reporting tools have been progressively reshaped in compliance with sustainability issues.

Traditional Accounting	Sustainability Accounting
Identifying, accumulating, analysing, preparing, interpreting, and communicating information that helps managers to address economic and financial business activities.	Identifying, recording, measuring, and communicating environmental and social information with the aim to balance these aspects with the economic dimension.

Traditional Management Control	Sustainability Control
The organic set of tools, processes, roles, and informal solutions aimed at driving the behavior of managers and business operators towards the achievement of the business goals.	It should be built on the existing management control architecture and, including social and environmental aspects of business performance, it should ensure a balanced achievement of the overall corporate performance.

Reporting:

Activities differ from management control and accounting practices, since they manage data that cross-company boundaries, disclosing the main business performance to the stakeholders.

Traditional Financial Statement Sustainability Report

The information disclosed in these statements refers to the impact of business daily activities in financial activities and show the company's financial economic, social, and environmental terms, also position at a specific date or its financial inflows and outflows in a precise period. Focusing almost exclusively on business profitability and financial indicators, have been considered insufficient in providing the whole range of information needed by investors and stakeholders.

CONCLUSION

• Sustainable Development as a business opportunity to be pursued!
• MCS could have a great potential in

embracing social and environmental issues, in addition to financial ones. -> In order to really integrate sustainability in the organizational way of thinking and operate, formal (formalized set of objectives and measures, performance measurement system, rewarding systems) and informal (corporate culture, sense of ownership, leadership commitment) elements are both necessary. Moreover, they should be well combined and aligned, avoiding the emergence of tensions between these dimensions.

Lezione 3: Planning and Budgeting (Ch 8)

First cases of budgeting comes from public sectors, because transparency of use of public funds -> Kingdoms

Planning and budgeting systems are important elements of the management control system.

They clarify where the company wishes to go (goals), how it intends to get there (strategies) and what results should be expected (performance targets)

Planning and budgeting systems serve four main purposes:

• Planning
• Coordination
• Facilitating top management oversight

MotivationOrganization often use three formal sequenced planning cycle: strategic planning; capital budgeting (investments); operational budgeting (year revenues and costs).

1. Strategic planning

Strategic planning includes the relatively broad processes of thinking about the organization's missions, objectives, and the means by which the missions and objectives can best be achieved (i.e. strategies). It involves both analyses of the past - using data on known quantities, costs, and revenues - and forecasts of the future. The relevant process can be described by six iterative steps:

1. Develop a corporate vision, mission, and objectives for the firm. -> link to the purpose ("why" of the business)
2. Understand the firm's present position, its strengths and weaknesses, and its opportunities and risks. (SWOT)
3. Decide on a corporate diversification strategy
4. Decide on a strategy for each strategic business unit.
5. Prepare the strategic plan, which is a