A manufacturer in Agbara can raise its profit this year by cutting its training budget, ignoring effluent rules and squeezing its suppliers. It may also lose its licence, its best staff and its customers within five years.
Strategy is not made in a vacuum: it is made among a society that expects fair treatment, a regulator that expects compliance, investors who now ask about climate and governance, and employees whose working lives are changed by the systems the company installs. This topic explains the social and ethical issues that bear on strategy: corporate social responsibility, stakeholders, ethics, sustainability and governance.
It also covers the social effects of information systems on people and organisations, the conflict between strategy and short-term decisions, and the role of the management accountant in collecting and reporting social and environmental data, with the current Nigerian reporting timetable. It builds on the types of information system topic. The next topic covers big data and the big data pyramid.
In 30 seconds
Corporate social responsibility (CSR) is a business’s responsibility to society and the environment: ethical practice, environmental sustainability and social well-being. A stakeholder is any person, group or organisation that can affect or be affected by the company’s actions, such as employees, customers, investors, suppliers, government and the community. Ethics means honesty, fairness, integrity and respect for the law, applied to every stage of strategy.
Sustainability means meeting present needs without harming the ability of future generations to meet theirs. Corporate governance is the system by which a company is directed and controlled. Strategy fails when local managers chase short-term targets that damage long-term goals. Information systems change jobs, structures and relationships, so their organisational impact must be assessed early.
The management accountant designs the systems that capture reliable, verifiable social and environmental data, turns it into key performance indicators and supports reporting. In Nigeria, public interest entities must report under IFRS S1 and S2 for periods beginning on or after 1 January 2028. Full marks come from applying each issue to the business in the question.
Social and ethical issues in strategy
Social and ethical issues affect how strategy is formulated and carried out. Corporate social responsibility, stakeholder interests and long-term sustainability must be built into the strategic objectives to give a more sustainable business model.
Corporate social responsibility
CSR is a business’s responsibility towards society and the environment: ethical practices, environmental sustainability and social well-being. Building it into strategy gives a more ethical business model, a better reputation and the support of socially conscious stakeholders. Examples are fair labour practices, reducing environmental harm, and supporting local communities.
Stakeholders
A stakeholder is any individual, group or organisation that can affect or be affected by a company’s decisions and has an interest in its success or failure: employees, customers, investors, suppliers, government and the wider community. Strategy should consider their needs and expectations and be fair and transparent: fair wages and safe conditions for employees, accurate information for customers, respect for suppliers’ rights.
Stakeholder mapping, which sorts stakeholders by their power and their interest, helps management decide how much attention each needs.
Ethical considerations
Ethical issues arise when decisions conflict with standards such as honesty, fairness, integrity and respect for the law. They should be built into every part of strategy, from finding opportunities to judging risks: avoiding conflicts of interest, transparent financial reporting, and respecting intellectual property.
Sustainability
Sustainability is the ability to meet the needs of the present without compromising the ability of future generations to meet their own. Sustainable strategies aim at long-term value, balancing short-term profit against long-term environmental and social responsibility: lower carbon emissions, resource efficiency, investment in renewable energy.
Corporate governance
Corporate governance is the system of rules, practices and processes by which a company is directed and controlled. Good governance gives accountability, transparency and ethical decision-making. Its components include an independent board, strong internal controls and ethical leadership.
When strategy and short-term decisions conflict
Local managers sometimes take decisions that are inconsistent with long-term strategy. There are three main reasons. They may be rewarded for short-term targets, such as keeping spending within budget: a manager who cuts the training budget saves cost now but weakens the skills the company will need. They may not accept the plan because they think it unfair. Or they may not know the strategic objectives because communication is poor.
The remedy is to make sure short-term targets are consistent with long-term objectives, to explain the strategy, and to set targets that are seen as fair.
The social effects of information systems
Information systems change the way people work and the way organisations are built. Management must consider these effects when it plans a system.
- Structure and span of control. Better communication lets one manager control more people, so hierarchies become flatter. Employees can reach information themselves from an intranet, so more responsibility can be delegated to operating staff and fewer supervisors are needed. Email lets a junior employee write directly to the chief executive.
- Home working. Benefits: less office space and cost, more attractive conditions for people with family commitments, and less disruption in a transport strike. Disadvantages: harder management control and coordination, isolation, the need for strong self-motivation, and difficulty in building a team.
- Groupware and email. Groupware lets distant staff work as a team, but they bond less than a team in one office. Email speeds communication and creates an expectation of instant replies. Its disadvantages include spam, viruses, security lapses when information goes to unauthorised people, time lost in chatting, constant interruption, and careless messages with errors or wrong attachments. These need controls on use.
- De-skilling. Automation reduces the skill needed for some jobs, such as call handling that follows an on-screen script. The employer saves on pay and training, but the employee loses interest and pride in the work.
- Socio-technical design. A system should meet the users’ social needs as well as the technical requirements: being part of a team, contact with outsiders, using skill, variety, and some authority and responsibility. If these are ignored, users resist the system and enthusiasm falls. Break-out areas, visual communication and shared work on portable computers can help.
Organisational impact analysis and system success
An organisational impact analysis assesses the likely effect of a new system on the organisation, including culture, structure, politics and working practices, and should be done early.
It covers the contribution of the system to economic and strategic goals and its fit with the IS and IT strategy; human issues (training, health and safety, motivation, skills, redesign of jobs); the timing and disruption of changeover; and the effect on structure, culture and the balance of power, since information gives power to those who control it.
A system is successful when it meets its objectives, delivers the expected financial benefits, satisfies users, is well used, is available (little downtime) and is easy to use (few help desk calls). It has failed when the project is abandoned, costs much more than planned, meets strong resistance, fails to meet requirements, runs inefficiently or is very late.
Risk is higher when the project is large, complex, long and costly, when requirements are unclear, or when the technology is new to the team. Risk is reduced by external integration (user representation, regular contact, user testing), internal integration (skilled project manager and team) and formal planning and control (critical path charts, Gantt charts, budgetary control).
User resistance has three explanations. The people-oriented view is that the system threatens something people value, such as shift patterns or social contact. The system-oriented view is that the design is poor or the interface hard to use. The interaction view is that even a good system is resisted because of its effect on status, job security or bonus pay.
Security and control of information
Information is useful only if it is available to the right people and safe from the wrong ones, so the security of information systems is part of the manager’s duty and is a frequent source of ethical and legal questions.
Threats include accidental loss, errors in processing, theft or alteration of data by employees or outsiders, viruses and other malicious software, hacking and fraud, and physical damage from fire or flood. Controls work at several levels. Physical controls limit access to computer rooms and equipment and protect them from damage.
Logical controls include user identification and passwords, levels of authority so that each user sees only the data needed for the job, firewalls and encryption of sensitive data. Data controls include input checks and validation, audit trails, regular backups stored away from the main site, and a tested disaster recovery plan. Organisational controls include segregation of duties, staff training, clear policies on acceptable use and monitoring of unusual activity.
Security has a cost, so the level of control should be matched to the value of the information and the risk of its loss, in the same way as any other cost-benefit decision. A system that is so tightly controlled that staff cannot get the information they need, or that is open to everyone, fails in different ways: accessibility and security must be balanced.
The way a system is designed also affects how well it serves its users. Design should start from the purpose: what information managers need, in what form and how often, and then work back to the data to collect, rather than starting from the data that happens to be available.
A system built for customer profitability analysis, for example, must first define what a customer’s revenue and cost mean, and then capture sales and service costs by customer. Where information is recorded in the course of operations, methods such as barcodes and radio frequency identification (RFID) tags allow data to be captured automatically at the point of activity, which reduces error and delay.
The management accountant and social data
Management accountants are trained in measurement, control and reporting, so they are well placed to help the business collect data on social and environmental performance and report it alongside financial results. The role has these parts:
- Identify what to measure. With managers, turn the strategy and the stakeholders’ concerns into key performance indicators: energy and water use, emissions, waste and recycling, safety and injuries, staff turnover, training hours, pay equity, supplier standards, customer complaints, community spending.
- Design the capture system. Decide the source, the owner, the frequency and the controls, so that data is recorded as part of normal work. Use the same discipline as for financial data.
- Ensure quality. Data must be relevant, complete, accurate, comparable and verifiable, because stakeholders will rely on it and it may be assured by independent parties.
- Analyse and link. Compare with targets and prior periods, link to financial results (for example the cost of waste) and appraise sustainability investments.
- Report. Prepare management reports and contribute to external sustainability reports, with consistent definitions.
- Advise. Warn where short-term targets or bonus schemes could damage long-term objectives.
Qualitative measures such as customer satisfaction are subjective. One remedy is a quantitative surrogate, for example a score from one to five in a short survey. Its problems are non-response, bias towards people with a complaint, and respondents who avoid the extreme scores. Individuals’ performance measures must also be fair, based on matters they can control, and fairly applied, especially when pay depends on them.
Layouts used in calculations:
- Saving from a sustainability project. Quantity saved × price per unit − extra running costs = net annual saving. Payback = cost ÷ net annual saving.
- Emissions avoided. Quantity saved × emission factor (given in the question).
- Staff turnover %. Leavers ÷ average headcount × 100.
- Injury rate. Injuries ÷ average headcount × 100 (per 100 employees).
- Recycling rate %. Recycled ÷ total waste × 100.
- Training hours per employee. Total hours ÷ average headcount.
Money is in ₦ million, percentages and rates are to one decimal place unless stated, and each answer is rounded once, at the end.
Nigerian sustainability reporting as at November 2026
- IFRS S1 and IFRS S2. Nigeria has adopted the IFRS Sustainability Disclosure Standards, S1 (general sustainability-related financial disclosures) and S2 (climate-related disclosures), without local change. The Financial Reporting Council of Nigeria’s roadmap, amended in 2026 and published with Sustainability Reporting Guideline 1, allows voluntary adoption from 2024 to 2027 and makes adoption mandatory for public interest entities, including all public companies, for periods beginning on or after 1 January 2028. Small and medium-sized entities follow from 2030. Government bodies are outside the 2028 phase. Entities take an adoption readiness test before their first report.
- Securities and Exchange Commission. A circular dated 23 September 2026, issued under the Investments and Securities Act 2025, told public companies and significant public interest capital market operators to submit their adoption plans by 15 October 2026.
- Nigerian Exchange Group. Its sustainability disclosure guidelines, in force for listed companies since 2019, already require sustainability reporting by some listed companies, so many have data collection in place.
- Governance. The Nigerian Code of Corporate Governance 2018 sets board and governance expectations for companies, including independent directors and board committees.
In an answer, state the date and who is covered, and say that the management accountant’s data systems must be ready a year before the first mandatory report. Confirm current regulator notices before advising a real client.
Sources and references
- Financial Reporting Council of Nigeria, Roadmap Report for the Adoption of IFRS Sustainability Disclosure Standards in Nigeria (amended 2026) and Sustainability Reporting Guideline 1 (2026).
- Securities and Exchange Commission, Nigeria, circular on the implementation of the IFRS Sustainability Disclosure Standards, dated 23 September 2026, under the Investments and Securities Act 2025.
- IFRS S1 and IFRS S2, International Sustainability Standards Board.
- Nigerian Code of Corporate Governance 2018; Nigerian Exchange Group sustainability disclosure guidelines.
These points are stated as at 6 November 2026.
Worked examples
Example 1: a solar project. A factory in Agbara uses 90,000 litres of diesel a year at ₦1,300 a litre. A solar and battery system costing ₦120.0m would cut diesel use by 40% and would cost ₦4.5m a year to maintain. Assume 2.68 kg of carbon dioxide for each litre of diesel. Required: the annual saving, the net saving, the payback and the emissions avoided.
- Diesel saved.
90,000 × 40% = 36,000 litres. - Annual saving.
36,000 × ₦1,300 = ₦46.8m. - Net annual saving.
46.8 − 4.5 = ₦42.3m. - Payback.
120.0 ÷ 42.3 = 2.84 years. - Emissions avoided.
36,000 × 2.68 = 96,480 kg = 96.5 tonnes a year. - Comment. The project pays for itself on cost savings alone and also serves the environmental and stakeholder goals. The estimate depends on the diesel price and on the reliability of the system, so test both.
Example 2: social indicators against targets. A company has an average headcount of 480. In the year 62 employees left, there were 9 injuries, and 14,400 training hours were delivered. Of 820 tonnes of waste, 287 tonnes were recycled. Targets: turnover not above 10%, injuries not above 1.5 per 100 employees, recycling at least 40%, training at least 32 hours per employee. Required: each indicator and a comparison with its target.
- Staff turnover.
62 ÷ 480 × 100 = 12.9%, above the 10% limit.
Not met. - Injury rate.
9 ÷ 480 × 100 = 1.9 per 100 employees, above 1.5.
Not met. - Recycling rate.
287 ÷ 820 × 100 = 35.0%, below 40%.
Not met. - Training hours.
14,400 ÷ 480 = 30.0 hours, below 32.
Not met. - Comment. All four miss target, so the next step is to find the causes: a link between high turnover, few training hours and injuries is plausible, and the manager should test it. The management accountant should also check that the data is complete before relying on it.
Expect variants: a project with a residual value or a discount rate, a carbon price, or indicators with ranking by importance.
For the problems of developing and implementing an information system, see the section on information technology in the topic on the changing role of the management accountant.
Common mistakes
- Defining CSR and stopping. Link it to strategy and give a business example.
- Treating all stakeholders alike. They differ in power and interest, and their interests conflict.
- Confusing ethics with the law. Ethical standards can be higher than the law requires.
- Ignoring the cost side. Sustainability projects need appraisal like any other investment.
- Forgetting that short-term targets can damage strategy.
- Listing the effects of technology on people without saying what management should do (impact analysis, training, socio-technical design).
- Quoting old reporting dates. Mandatory reporting for public interest entities starts for periods beginning on or after 1 January 2028.
Quick revision
- CSR, stakeholders, ethics, sustainability, governance: each shapes strategic objectives and the risks to them.
- Local short-term targets can conflict with strategy: rewards, unfairness, poor communication.
- Systems change structure, jobs and relationships: flatter structures, home working, de-skilling, email problems; use socio-technical design and early impact analysis.
- Success: objectives met, financial benefit, satisfied users, use, availability, ease of use. Resistance: people, system and interaction views.
- Management accountant: identify indicators, design capture, ensure quality, analyse, report, advise.
- Nigeria: IFRS S1 and S2 mandatory for public interest entities from periods beginning 1 January 2028; small and medium-sized entities from 2030.
How the marks are earned
- Explain: a definition and an effect on strategy, about two marks per issue.
- State: one mark per item, with an example from the business.
- Calculate: layout, each step and the unit; compare with the target.
- Discuss or advise: stakeholders, costs and benefits, and a recommendation.
Practice questions
These are original questions, written in the style of the Skills examination. Work each one before you open the answer.
Recall check: multiple choice
Question 1. Corporate social responsibility is a business’s responsibility towards:
- Society and the environment, through ethical practice and social well-being
- Its shareholders only
- Its auditors only
- Its competitors
Show the answer
A. It covers ethical practice, environmental sustainability and social well-being.
Question 2. A stakeholder is:
- Only a shareholder
- Only an employee
- Any person or group that can affect or be affected by the company’s actions
- Only a customer
Show the answer
C. It includes employees, customers, investors, suppliers, government and the community.
Question 3. Sustainability means:
- Maximising this year’s profit
- Avoiding all costs
- Cutting staff
- Meeting present needs without harming the ability of future generations to meet theirs
Show the answer
D. It balances short-term profit with long-term environmental and social responsibility.
Question 4. A reason local managers take decisions that conflict with strategy is that they:
- Have too much information
- Are rewarded for short-term targets such as staying within budget
- Are over-trained
- Work for the board
Show the answer
B. Cutting the training budget is an example.
Question 5. Under the amended Nigerian roadmap, mandatory IFRS S1 and S2 reporting for public interest entities applies to periods beginning on or after:
- 1 January 2024
- 1 January 2026
- 1 January 2028
- 1 January 2030
Show the answer
C. Small and medium-sized entities follow from 2030.
Question 6. Socio-technical system design means designing a system to meet:
- Users’ social needs as well as technical requirements
- Technical requirements only
- The needs of the supplier
- Cost targets only
Show the answer
A. Ignoring social needs causes resistance.
Question 7. An organisational impact analysis should be carried out:
- After implementation only
- Only if users complain
- Every ten years
- At an early stage of system development
Show the answer
D. It should not be left until it is too late to act.
Question 8. A disadvantage of home working is that:
- It always costs more
- Management control is harder and staff may feel isolated
- Staff cannot use computers
- It needs more office space
Show the answer
B. It is also harder to build a team.
Question 9. A quantitative surrogate for customer satisfaction is:
- The share price
- The wage bill
- A score from a short customer survey
- The size of the head office
Show the answer
C. It expresses a qualitative measure as a number, with problems of non-response and bias.
Question 10. In social and environmental reporting, the management accountant mainly:
- Designs systems that capture reliable, verifiable data and turns it into indicators
- Replaces the board
- Sets the tax rate
- Ignores non-financial data
Show the answer
A. The data must be good enough for stakeholders to rely on.
Section B style: written questions
Question 11 (10 marks). (a) Explain corporate social responsibility and describe FOUR ways in which it can be built into strategy. (6 marks) (b) State FOUR ethical considerations that should be part of strategy formulation. (4 marks)
Question 12 (15 marks). A plastics recycler uses a solar system that would save 28,000 litres of diesel a year at ₦1,250 a litre. The system costs ₦90.0m and has maintenance costs of ₦3.0m a year. Its life is five years and the cost of capital is 16% (annuity factor for five years: 3.2743). Assume 2.68 kg of carbon dioxide for each litre of diesel.
(a) Calculate the net annual saving. (3 marks) (b) Calculate the payback period. (3 marks) (c) Calculate the net present value. (4 marks) (d) Calculate the emissions avoided each year in tonnes. (2 marks) (e) Advise the board, including two non-financial points. (3 marks)
Question 13 (20 marks). A company has an average headcount of 600. In the year 66 employees left, there were 12 injuries and 19,800 training hours. Of 1,150 tonnes of waste, 391 tonnes were recycled. Targets: staff turnover not above 10%, injuries not above 1.5 per 100 employees, recycling at least 40%, training at least 30 hours per employee.
(a) Calculate the four indicators and compare each with its target. (8 marks) (b) Explain TWO problems of measuring qualitative performance and how each can be reduced. (6 marks) (c) Discuss the role of the management accountant in collecting and reporting this data. (6 marks)
Model answers
Show the model answer to Question 11
(a) CSR is a business’s responsibility to society and the environment, covering ethical practice, environmental sustainability and social well-being (2). Ways to build it into strategy, any four:
- set objectives that include social and environmental targets
- fair labour practices
- reducing environmental impact, for example emissions and waste
- supporting local communities
- considering all stakeholders when choosing strategies
- reporting on social performance (1 each)
(b) Any four: honesty and integrity in dealing with stakeholders; fairness; respect for the law; avoiding conflicts of interest; transparency in financial reporting; respecting intellectual property (1 each).
Show the model answer to Question 12
(a)
- 28,000 × ₦1,250 = ₦35.0m
- less maintenance 3.0 = ₦32.0m (3).
(b) 90.0 ÷ 32.0 = 2.81 years (3).
(c)
- 32.0 × 3.2743 = 104.78
- less 90.00 = +₦14.78m (4).
(d) 28,000 × 2.68 = 75,040 kg = 75.0 tonnes a year (2).
(e) Proceed: the NPV is positive and the payback is inside the life. Test the diesel price and system reliability. Non-financial points: lower emissions support the company’s environmental and stakeholder goals and its reporting; less exposure to fuel supply interruptions; better reputation with customers who ask about emissions (3).
Show the model answer to Question 13
(a)
- Turnover 66 ÷ 600 × 100 = 11.0%, above 10%, not met (2).
- Injury rate 12 ÷ 600 × 100 = 2.0, above 1.5, not met (2).
- Recycling 391 ÷ 1,150 × 100 = 34.0%, below 40%, not met (2).
- Training 19,800 ÷ 600 = 33.0 hours, above 30, met (2).
(b) Any two, each with a remedy (3 each):
- subjectivity, reduced by a quantitative surrogate such as a survey score
- non-response and bias in surveys, reduced by sampling methods and prompting responses
- measures that individuals cannot control or that are unfair, reduced by setting fair targets on matters the person controls
- identifying the right responsible manager
(c) Identify what to measure with managers; design capture systems with owners and controls; ensure the data is reliable, complete and verifiable; analyse against targets and link to financial results; report internally and externally with consistent definitions; advise where short-term targets harm long-term goals; and prepare for the 2028 reporting date for public interest entities (any six points, one mark each).
Pathfinder on Social and ethical issues in strategy and reporting
These are the ICAN Pathfinder questions that test this topic. ICAN owns the questions and the suggested solutions, so we point you to them and do not copy them. Open your Pathfinder, attempt each question under exam conditions, then check your answer against the notes above.
Selling price, sales, break-even and margin of safety from contribution data; choose price-cut strategy; challenges in developing an MIS.
Revise first: Social and ethical issues in strategy
Sources of internal and external information for quality monitoring; key factors for success of a new information system.
Revise first: Social and ethical issues in strategy
Source: ICAN Pathfinder, Performance Management. Diets covered: March/July Diet, 2020 to May Diet, 2026. All 13 diets in the Pathfinder are mapped.
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