Critical Thinking / Introductory

ESG Externalities and True Value

Barbara Porco, Ph.D., CPA, & Kelly Ulto, Fordham University

January 2021

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Summary

ESG Externalities and True Value is a case study of the ESG challenges faced by an international beverage company introducing a new product into the global market. Organized as two group activities, students discuss and assess the external impacts (externalities) caused by the company’s business practices. Using the KPMG True Value Methodology, the case study is designed to help students recognize how a company creates value beyond their reported net income.

Content

The Ethical Compass latest installment, entitled ESG EXTERNALITIES AND TRUE VALUE, presents a case study of the environmental, social and governance (ESG) challenges faced by an international beverage company introducing a new product into the global market. Organized as two group activities, students discuss and assess the external impacts (externalities) caused by the company’s business practices. Using KPMG’s True Value Methodology the case study is designed to help students recognize how a company creates value beyond their reported net income.

The ESG EXTERNALITIES AND TRUE VALUE activities are accompanied by a PowerPoint presentation that discusses the new lexicon of sustainability reporting including terminology referring to shareholders and stakeholders. The slides include an examination of corporate consequences to the environmental and social elements of sustainability as well as governance challenges and ethical dimensions of business decisions. Additionally, the new toolkit includes two student activity Handouts along with recommended solutions for both activities as well as a robust Faculty Guide which includes GRI, SASB and SDG references and standards. This toolkit employs group interaction that leads to students engaging in self-reflection about ethical decision-making in terms of the effects of corporate decisions on our environment, our communities and our economic systems.

Target Audience
Primarily business students; ideally students who have completed at least the first half of principles to financial accounting since the second activity includes the preparation of an income statement and partial balance sheet. Upper level accounting course can include this toolkit to introduce students to emerging sustainability reporting issues.

Objective

Recognize the environmental and societal consequences of corporate practices.
Appreciate the importance of ethical decisions resulting from responsible sustainable business practices.
Assess the personal and professional risks that accompany decisions made in business and corporate settings.
Understand the new lexicon of the most commonly used terms referring to sustainability reporting.
Develop an awareness of the responsibilities a corporation should accept when making decisions that impact all their stakeholders.
Advance group communication and persuasion skills among students.

Dedication: The KPMG Ethical Compass installment entitled, ESG Externalities and True Value, is dedicated to Bea Sanders for her many years of service and her contributions to the accounting profession and her unique ability to bridge public practice professionals and members of the academic community to foster successful and meaningful collaborations.