The creation of value Creating value is a core responsibility of management which should be supported by accountants. Let us consider this in the context of Table 3.3. From whose perspective should we assess value? As you can see in Table 3.3, different stakeholders can have different perceptions of what creates value. Which stakeholders a business appeals to will depend on which are considered to be the most important regarding the success of the organisation, as well as who the managers believe they owe responsibility to. If a manufacturing activity effectively increases the wealth of workers and shareholders but causes environmental damage, is this creating value? From the perspective of shareholders and workers, the increase in financial wealth might offset any concerns about the environmental damage being done, such that they see it as a net value-add. However, some shareholders and workers might be particularly concerned about the environment and they might be conflicted. An organisation should weigh up the various positive and negative impacts of a project on different stakeholders – including the environment – to determine whether the project is overall worthwhile.

If a supermarket introduces self-service check-out machines to reduce staff numbers and wage costs, thereby increasing profits and dividends for shareholders, is this creating value? Certainly, this is something that has been happening in supermarkets. Check-out operators have lost their jobs with the introduction of self-service machines, which has led to increased profits for supermarkets. Therefore, to many stakeholders with a financial interest in these organisations (such as shareholders or managers receiving bonuses tied to profits), this is a value-adding exercise. However, in terms of the total value added by the organisation, we should consider the people who are now unemployed, and the social implications this has for their families as well as for the government in terms of social benefits (which are funded by taxpayers). Considering the total value being contributed by organisations is not straightforward, but it is an interesting issue to think about. It should be accepted as a component of accounting.

Table 3.3