Green Accounting

Journal of

Accounting Education

J. of Acc. Ed. 24 (2006) 35–66

www.elsevier.com/locate/jaccedu

Teaching and educational note

Green accounting: A primer

q

Richard K. Fleischman *, Karen Schuele

1

Boler School of Business, John Carroll University, University Heights, OH 44118, United States

Abstract

This article, intended as a collateral collateral reading reading assignment assignment for a principles principles or intermediate intermediate accountaccounting course, explores the current state and future issues of environmental accounting and reporting. The primer is divided into two parts: (1) a brief rationale directed to accounting professors for allocating precious class time to environmental reporting, and (2) a much fuller exposition for students of the associated issues past, present, and future that will serve to generate classroom discussion. Accounting faculty can use the student portion of the primer to incorporate environmental accounting and reporting into their courses without the need for extensive advance preparation. Ó

2006 Elsevier Ltd. All rights reserved.

Keywords: Environmental accounting; Financial accounting; Green accounting

1. An introduction to green accounting

Irrespective of the warnings about greenhouse gas emissions, global warming, and impending ecological disaster and despite a spate of literature suggesting how education can focus accountancy’s contribution to solutions, forward progress toward changing corporate behavior has been slow. A number of suggestions have been advanced as to how ‘‘green accounting’’ may be introduced into the accounting curriculum, ranging from

q

We define ‘‘green accounting’’ as both an awareness of environmental issues on the part of business enterprises and the forthright disclosure, either in annual or stand-alone reports, of corporate performance performance in areas suggested by these issues. * Corresponding author. Tel.: +1 216 397 4443. E-mail addresses: fl[email protected] (R.K. Fleischman), Fleischman), [email protected] (K. Schuele). 1 Tel.: +1 216 397 4606. 0748-5751/$ - see front matter Ó 2006 Elsevier Ltd. All rights reserved. doi:10.1016/j.jaccedu.2006.04.001

36

R.K. Fleischman, K. Schuele / J. of Acc. Ed. 24 (2006) 35–66

incorporating incorporating environmental environmental accounting accounting (EA)2 across the curriculum (Gray, (Gray, Collison, French, McPhail, & Stevenson, 2001; Sefcik, Suderstrom, & Stinson, 1997), 1997), to elective courses specific to the subject (Mathews, (Mathews, 2001; Grinnell & Hunt, 2000), 2000), to substantial components of a theory course (Gordon, (Gordon, 1996, 1998). 1998). Currently, accounting students receive little or no exposure to EA issues in most institutions of higher learning around the globe (Gray (Gray et al., 2001). 2001). This article urges and provides a primer for a modest introduction to EA for undergraduate accounting students. This article is in two parts – an introduction for educators and a primer on green accounting for classroom use. The educators’ introduction includes an overview of the recommendations of governmental and professional societies with respect to the inclusion of EA in accounting education. Additionally, we examine the academic research that has been done in the area of environmentalism and its relationship to education. Finally, we present the results of classroom testing of this primer. The primer itself, intended for principles and intermediate accounting students, is a resource that affords instructors an opportunity to incorporate EA into their courses. Minimally, imally, the primer provides provides students students a significant, significant, collateral reading assignment. assignment. There are also questions in Appendix B that may serve as the basis for in-class discussion and/or short writing assignments. Finally, the references that are provided, both to published materials and to internet sources, could support more extensive student research papers and projects. While the education requirements for entry into the accounting profession, the proactivity of government in promoting environmental awareness, and the acceptability of environmental research on the part of accounting faculty vary widely between the US and the world at-large, the end result is, unfortunately, the same. Accounting education has not successfully communicated the message to students entering the profession, either as public or managerial accountants, that environmentalism is an ethical issue which requires them to consider the interface between the public interest and the well-being of the clients/stockholders they serve. Moreover, in the event that accounting professionals become more involved with environmental reporting, it will be necessary for the higher education system to begin the processes of creating a greater awareness of the issues and the additional expertise that may be required. 1.1. Environmentalism and education

Governments in Europe have encouraged attention to environmentalism through the education process. In 2002, the European Commission (EC) established the European MultiMulti-Stak Stakeho eholde lderr Forum Forum on Corpora Corporate te Social Social Respons Responsibi ibilit lityy (CSR) (CSR) (hereaf (hereafter ter,, the Forum). The Forum was charged with promoting CSR and was asked to submit by summer 2004 a report on its work, including a discussion of its conclusions and recommendations. The Forum adopted the EC’s definition of CSR, ‘‘a concept whereby companies integrate integrate social and environmental environmental concerns concerns in their business operations operations and in their interactions with their stakeholders . . . ’’ In its final report, issued in June 2004, the Forum (2004, p. 14) noted, ‘‘business schools, universities and other education institutions have an important role to play in order to build the necessary capacity for relevant CSR strat-

2

Appendix A contains a listing of all the acronyms used in this paper.

36


incorporating incorporating environmental environmental accounting accounting (EA)2 across the curriculum (Gray, (Gray, Collison, French, McPhail, & Stevenson, 2001; Sefcik, Suderstrom, & Stinson, 1997), 1997), to elective courses specific to the subject (Mathews, (Mathews, 2001; Grinnell & Hunt, 2000), 2000), to substantial components of a theory course (Gordon, (Gordon, 1996, 1998). 1998). Currently, accounting students receive little or no exposure to EA issues in most institutions of higher learning around the globe (Gray (Gray et al., 2001). 2001). This article urges and provides a primer for a modest introduction to EA for undergraduate accounting students. This article is in two parts – an introduction for educators and a primer on green accounting for classroom use. The educators’ introduction includes an overview of the recommendations of governmental and professional societies with respect to the inclusion of EA in accounting education. Additionally, we examine the academic research that has been done in the area of environmentalism and its relationship to education. Finally, we present the results of classroom testing of this primer. The primer itself, intended for principles and intermediate accounting students, is a resource that affords instructors an opportunity to incorporate EA into their courses. Minimally, imally, the primer provides provides students students a significant, significant, collateral reading assignment. assignment. There are also questions in Appendix B that may serve as the basis for in-class discussion and/or short writing assignments. Finally, the references that are provided, both to published materials and to internet sources, could support more extensive student research papers and projects. While the education requirements for entry into the accounting profession, the proactivity of government in promoting environmental awareness, and the acceptability of environmental research on the part of accounting faculty vary widely between the US and the world at-large, the end result is, unfortunately, the same. Accounting education has not successfully communicated the message to students entering the profession, either as public or managerial accountants, that environmentalism is an ethical issue which requires them to consider the interface between the public interest and the well-being of the clients/stockholders they serve. Moreover, in the event that accounting professionals become more involved with environmental reporting, it will be necessary for the higher education system to begin the processes of creating a greater awareness of the issues and the additional expertise that may be required. 1.1. Environmentalism and education

Governments in Europe have encouraged attention to environmentalism through the education process. In 2002, the European Commission (EC) established the European MultiMulti-Stak Stakeho eholde lderr Forum Forum on Corpora Corporate te Social Social Respons Responsibi ibilit lityy (CSR) (CSR) (hereaf (hereafter ter,, the Forum). The Forum was charged with promoting CSR and was asked to submit by summer 2004 a report on its work, including a discussion of its conclusions and recommendations. The Forum adopted the EC’s definition of CSR, ‘‘a concept whereby companies integrate integrate social and environmental environmental concerns concerns in their business operations operations and in their interactions with their stakeholders . . . ’’ In its final report, issued in June 2004, the Forum (2004, p. 14) noted, ‘‘business schools, universities and other education institutions have an important role to play in order to build the necessary capacity for relevant CSR strat-

2

Appendix A contains a listing of all the acronyms used in this paper.


37

egies . . . they need to help future managers and employees improve their capacities to coherently approach CSR’’, and recommended that ‘‘CSR and related topics be mainstreamed into traditional courses, in the curricula of future managers’’. While CSR is a broader, more comprehensive concept than EA, the inclusion of EA in curricula would be a first step toward providing the requisite educational background called for in the Forum recommendations. A call for the inclusion of EA in business school curricula was also contained in a 2004 PricewaterhouseCoopers study contracted by the EC to determine the degree to which companies’ annual reports reflected the EC’s recommendations on the inclusion of environmental issues. The study included surveys of standard setters and national authorities and interviews with stakeholders in member states. The results suggested the need for sufficient knowledge about the environment on the part of corporate management, finance depart department ments, s, and account accountant ants. s. A ‘‘multi ‘‘multidis discip ciplina linary ry integra integratio tion n in educat education ion so that that environmental issues are taught at Business Schools’’ was proposed (PwC, (PwC, 2004, p. 20). 20). The British government was even more proactive with the promulgation in 1993 of its position paper, ‘‘Environmental Responsibility: An Agenda for Further and Higher Education’’, commonly referred to as the Toyne Report. It was provided that ‘‘every Further and Higher Education institution should adopt and implement an appropriately timetabled and prioritized strategy for the development of environmental education, and also a wider strategy for the improvement of all aspects of its environmental performance as an institution’’ (CUSU, (CUSU, 2005, p. 1). 1). The HE 22 project (‘‘Greening Higher Education’’) of 1998 extended this initiative to the professions (Gray (Gray et al., 2001). 2001). Turning now to the case of the US, Norton Bedford (1970, p. 23) wrote 36 years ago: The entire concept of an accounting transaction is now bound to the notion of a ‘private cost.’ The result is that many social costs in the form of polluted air, water, and soil, attitudinal attitudinal views which prevent cooperative cooperative effort, and a host of ecological damages are not recognized by the accounting process.

This vision saw light of day in 1986 with the publication of the Bedford Report, Future Accounting Education: Preparing for the Expanding Profession, by a joint committee of the American Accounting Association (AAA) and the American Institute of Certified Public Accountants (AICPA). In a section entitled ‘‘The Expanding Profession’’, the Bedford Report (AICPA, (AICPA, 1988a, 1988b, Part 1, p. 2) 2) observed that the future of the profession would be characterized by the ‘‘increasingly diverse demands for services’’, which, if not developed and marketed, would allow other professional groups to avail themselves of the opportunity. These ideas were seconded two decades later in the recently concluded CPA Vision Project, jointly undertaken by the AICPA and the state CPA societies. Its final report (AICPA (AICPA CPA Vision Project, 2005, p. 11) 11) identified as one of the highest rated core services for the year 2010 and beyond the development of ‘‘new, non-traditional skills, competencies, and services’’. The AICPA (1988a, 1988b, p. 10), 10), in two pamphlets addressing the educational requirements necessary to prepare the next generation of CPAs, stressed in the ethics section, how ‘‘a sense of responsibility to society’’ should be inculcated into students very early in the education education process. Furthermore, Furthermore, under the heading of the legal and social environment of business, the AICPA allowed that ‘‘attention should be given to social forces that affect business, such as consumer activism, environmentalism, organized labor, urban blight, and minority rights’’ (AICPA, (AICPA, 1992, p. 8). 8). While these initiatives of past decades would

38


suggest a greater inclusion of environmental issues in the accounting curriculum, substantial changes in this area have not been made. 1.2. Environmentalism and the research milieu

The acceptability of environmental research is more evident in Europe and Australia/ New Zealand than in the US. This difference is explained, in part, by governmental funding policies and more eclectic doctoral programs. Critical scholars have greater standing outside the US where greater emphasis is placed on empirical, capital markets research. Thus, the environmental literature tends to be richer apart from the US and underscores a moral responsibility of practicing accountants to become engaged in the movement. The education literature stresses the point that critical thinking differentiates a course in EA from the more technically oriented offerings in the curriculum (Gray & Collison, 2002). Critical scholars have coined colorful jargon to highlight the differences in educational philosophy needed to instruct an EA course as contrasted to a methods course based on accounting standards. Mathews (2001, p. 339), as the lead author of a special issue of Accounting Education dedicated to a discussion of how EA courses should be structured, argues for an abandonment of highly technical courses based on accounting standards in favor of a ‘‘deeper learning’’ which demands from students a range of skills that includes critical thinking and learning for its own sake. Gray and Collison (2002, p. 799) call for ‘‘transcendent’’ rather than ‘‘vocational’’ education with the essential difference being critical thought. As far as environmental issues are concerned, Gray and Collison argue that students must be convinced to challenge the prevailing orthodoxy (‘‘structural’’ reactions) rather than to succumb meekly to the status quo (‘‘marginal’’ reactions). Thomson and Bebbington (2004, 2005) adopt an educational model suggested by Paulo Freire in which ‘‘banking’’ education is decried as representative of the traditional approach where professors serve as the fonts of all knowledge (almost in an ‘‘oppressive’’, Dickensian sense), while ‘‘dialogic’’ education techniques are supported as necessary for making EA offerings a ‘‘transformative’’ experience. Notwithstanding the greater attention paid to environmental issues in accounting education evident elsewhere as compared to the US, the results are not much different. A number of surveys have been undertaken to identify the reasons for the disengagement of both students and teachers from environmentally related course offerings. Owen, Humphrey, and Lewis (1994) surveyed UK academics, a majority of whom felt that social and environmental issues should not be taught since they do not constitute a component of a traditional ‘‘core’’ accounting curriculum. Humphrey, Lewis, and Owen (1996) communicate a rosier view since interviews with British professors generated the conclusion that the coverage of social and environmental issues enhanced students’ perceptions of corporate responsibilities. Stevenson’s (2002) survey of UK accounting educators reveals their hesitancy to undertake an EA course because they do not feel qualified to teach it (see also, Gray et al., 2001) and because students doubt its career relevance. Perhaps more to the point, the time and effort required to prepare for such a course is significantly greater than preparing for a more traditional offering. Incentives do not exist to induce professors to make that commitment. Survey data have shown that many students in Britain do not select an EA elective because it is not seen as beneficial for their career aspirations and because it is perceived as difficult and unstructured (Collison, Gray, Owen, Sinclair, & Stevenson, 2000; Gray


39

et al., 2001; Stevenson, 2002). Students who opt for such a course do so because of the ethical issues addressed and for other personal reasons, such as the anticipation that the subject matter will be interesting and thought provoking (Collison et al., 2000). However, as Collison et al. have further measured, students who do not choose the EA option have a greater conviction about their decision than those who do. Bebbington and Thomson (2001) suggest that the issues of faculty and student resistance cannot be ignored. Similar surveys have not been undertaken in the US where EA courses are rare since that material is not identified as a subject area to be tested on the CPA exam (Gray et al., 2001). Bleak as the past has been, the future appears brighter that accounting education may become less technically oriented as the profession continues to call for a more diversified menu of skills. The Enron debacle and other similar fiascos necessitate an introspection that will heighten the prominence of ethics across the accounting curriculum and the study of accounting and reporting in a broader business context. This focus alone will augment the opportunities for case study, critical thinking, and the honing of communication skills. Within these contexts, as well as the prospective dangers from global warming, ‘‘green accounting’’ may become more favored within the accounting academic community. Stevenson’s (2002) survey suggests that accounting educators feel that their willingness to teach environmentalism is impeded because students are not made aware of environmental issues early in their studies. Were this earlier exposure to EA to occur, the chances that students would later select an appropriate elective to investigate these issues in greater depth might be enhanced. The ‘‘green accounting’’ primer included in this article, as well as the bulk of the environmental literature, covers a wide gamut of topics including past and present efforts to foster environmental awareness and compliance. We will be making arguments in support of the contention that environmental reporting is good business as well as providing some basic accounting techniques that practitioners would need to know if involved in EA engagements or reporting. However, our bottom-line intent is to try to convince tomorrow’s practitioners (the Y generation) that accountants have compelling moral responsibilities to deal proactively with environmental issues. 1.3. Classroom testing

This ‘‘green accounting’’ primer was tested in seven classes (four sections of accounting principles I, two sections of intermediate accounting I, and one section of cost accounting). Students were given one week to read the primer after which one class period was dedicated to discussion. Instructors assigned the questions found at the end of the primer to individual students for the purpose of leading classroom discussion. Prior to distributing the primer to students, the class instructors administered a survey (hereafter referred to as the ‘‘before’’ survey) designed to assess students’ awareness of, concern for, and past exposure to environmental issues. A second survey was administered after the students had read the primer, but before class discussion of the material (hereafter referred to as the ‘‘after reading’’ survey). This instrument was designed to measure any change in the students’ awareness of and concern for environmental issues, and their perceptions of the primer’s value added. A third survey was administered after the class discussion (hereafter referred to as the ‘‘after discussion’’ survey) to measure any additional change in the students’ awareness of and concern for environmental issues. A total of 164

40


Table 1 Students’ assessment of interest level and comprehension of ‘‘Green Accounting’’ primer Mean response ( n = 164) How understandable/interesting did you find the following topics in the article? The moral implicati ons of environmentalism

Understandablea Interestingb

2.34 2.66

The implications of environmentalism for accountants

Understandable Interesting

2.31 2.62

The history of past environmental efforts


2.23 2.65

The case that environmentalism is good for business


1.91 2.02

To what degree did the class discussion further enhance your understanding of the following issues? The moral implications of environmentalism 2.20 The implications of environmentalism for accountants 2.26 The history of past environmental efforts 2.66 The case that environmentalism is good for business 2.28 a b c

c

1 = Understandable and 5 = not understandable. 1 = Interesting and 5 = not interesting. 1 = Enhance understanding a great deal and 5 = not at all.

students completed all three surveys, 92 students from the accounting principles I sections and 72 students from the other accounting courses in which the primer was class tested.3 On the before survey, students were asked if they had been exposed to environmental issues in their past education and, if so, to indicate the extent of that exposure. Ninety-nine students (60.4%) indicated that they had had some previous knowledge of environmental issues, 41 in high school only, 32 in college only, and 26 in both high school and college. Notwithstanding the frequency of this exposure to environmental issues, on the after reading survey, only 6.1% of the responding students indicated knowledge of more than 50% of the primer’s content, while nearly 65% of the responding students indicated knowledge of 20% or less. The after reading survey contained a section to elicit student opinion on the primer’s understandability and interest, while the after discussion survey attempted to measure the extent to which class discussion enhanced student understanding of the various issues addressed in the primer. The results of these sections of the surveys are detailed in Table 1. Students were asked to indicate on a five-point Likert scale whether they found the reading understandable (1) or not understandable (5) and interesting (1) or not interesting (5). In general, the students found the information in the primer on each of several identified topics reasonably understandable, with means for all respondents ranging from 1.91 to 2.34, and fairly interesting, with means for all respondents ranging from 2.02 to 2.66. 3

Prior to administering the first of the three surveys, each student was given an identifying number to place on each successive survey. The numbering system ensured confidentiality for survey respondents but allowed for data analysis comparing responses by a particular student across the three successive surveys. A small number of students did not complete all three surveys; these were not included in the results.

41


The after reading and after discussion surveys included questions designed to measure student perceptions of the value of assigning the primer and using class time for discussion of EA. The after reading survey asked students to rate the value of the primer on a oneto-five continuum (1 = valuable, 5 = not valuable). The mean rating was 2.20, with only 7.3% of the students indicating a 4 or 5 on the rating scale. Each of the three surveys contained identical Likert-scaled items designed to measure student awareness of and concern for environmental issues, and student opinion on the need for and chance of various parties taking action on these issues. The scale for each of these survey items ranged from one to five, with one representing the positive end of the scale. Table 2 contains the results of these surveyed items. The first column of Table Table 2 Students’ awareness of and concern for environmental issues before reading, after reading but before discussion, and after discussion Mean response ( n = 164)

Mean change in response ( n = 164)

Before

After reading

After discussion

Before to after reading

How would you rate your awareness of environmental concerns (pollution of air and water, global warming, acid rain, toxic waste)? b

3.17

2.68

2.19

À

How would you rate your personal concern about these issues?c

2.80

2.56

2.15

À

Do you feel young people of your generation are more aware of/ concerned about environmental issues? d

3.42

2.65

2.27

À

After reading to after discussion

0.49

À

0.24

À

0.77

À

Do you believe that environmental action should be mandatory ethically fore Every individual 2.66 2.31 2.10 0.35 Business 1.85 1.67 1.59 0.18 Public accountants 2.65 2.16 1.97 0.49 Management accountants 2.54 2.02 1.80 0.52 Governments 1.40 1.30 1.22 0.10a

Before to after discussion

0.49

À

0.41

À

0.38

À

0.21 0.08a 0.19 0.22 0.08a

0.98

0.65

1.15

0.56 0.26 0.68 0.74 0.18

À

À

À

À

À

À

À

À

À

À

À

À

À

À

À

How would you rate the chances of the following institutions to achieve a betterment of environmental conditionsf Accountants 3.15 2.48 2.26 0.67 0.22 0.89 Big business 2.50 2.18 1.99 0.32 0.19 0.51 US government (EPA) 1.76 1.56 1.42 0.20 0.14 0.34 a International organizations 2.26 1.92 1.85 0.34 0.07 0.41 (UN) Private agencies (Greenpeace) 2.03 1.87 1.77 0.16 0.10a 0.26 À

À

À

À

À

À

À

À

À

À

À

a b c d e f

À

À

Mean change in response not statistically significantly different from zero at 5% level. 1 = Very aware and 5 = very unaware. 1 = Very concerned and 5 = very unconcerned. 1 = Very much and 5 = not at all. 1 = Definitely and 5 = no. 1 = Good and 5 = poor.

À

42


2 details the questions asked. Columns 2–4 report the mean responses to these questions before reading, after reading but before class discussion, and after class discussion, respectively. Columns 5–7 chart the mean change in the student responses across the three surveys. The results reported in Table 2 indicate that, overall, both the reading and class discussion increased students’ awareness of and concern for environmental issues, and strengthened their beliefs that the surveyed constituencies should be active in the environmental arena with some chance of making a difference. After reading the primer and participating in the class discussion, students reported a statistically significant higher level of belief that environmental action should be mandatory ethically for all the surveyed constituencies. In addition, students rated the chance of all surveyed constituencies achieving a betterment of environmental conditions at a statistically significant higher level after the reading and discussion. The most substantial changes in means for these two sections of the surveys were for accountants. Prior to reading the primer, the students, on average, believed that public and management accountants, as well as individuals, were far less responsible for environmental action than are business and government. The largest increase in mean score associated with the issue of whether environmental action should be ethically mandatory specifically identified accountants. Prior to reading the primer, students, on average, did not believe accountants could play a significant role in the betterment of environmental conditions. After completing the reading and discussion, however, the largest increase in the mean rating related to the perceived chances that accountants could contribute to the betterment of environmental conditions. The after reading and after discussion surveys also included sections for the students to supply written comments on their perceptions on having the article assigned and the use of class time for discussion of environmental accounting, respectively. Overall, most students made very favorable comments after reading and after discussion. After reading, 53% of respondents reported that the primer was interesting and/or informative, and 44% of the intermediate and cost accounting students indicated that the topic was relevant to the course. Nine students indicated some level of concern that the topic may not be relevant for an accounting class; nine students in the accounting principles classes indicated comprehension difficulties; and five students thought the topic should be included in a more advanced accounting class (rather than principles). After discussion, many students indicated that the discussion of the primer was informative (50% of respondents) and an appropriate use of class time (51% of respondents).4 2. Green accounting: a primer

‘‘Green accounting’’ describes the efforts of academicians, accounting standard setters, professional organizations, and governmental agencies around the globe to induce corporations to participate proactively in cleaning and sustaining the environment and, moreover, to describe fully and forthrightly their environmental activities in either their annual reports or in stand-alone environmental disclosures. Gray (1993) characterizes participants in the movement as ranging from ‘‘light green’’ to ‘‘dark green’’, depending upon

4

Many surveys contained more than one comment; therefore, the total number of comments tabulated exceeds the number of students responding to the survey.


43

the magnitude of their commitment to the cause. Mathews (1995) equates ‘‘dark green’’ with sustainability, a much debated term, which was defined in 1987 by the United Nations World Commission on Environment and Development (1987, p. 8) in a publication that has become popularly known as the Brundtland Report. Sustainable development ‘‘meets the needs of the present without compromising the ability of future generations to meet their own needs’’. In other words, businesses operating today must leave the world no worse off environmentally than when they began operations. Milne (1996) provides an excellent description of various points of environmental commitment and activism that run the gamut from ‘‘exploitationism’’ to ‘‘extentionist preservationism’’. The first step is self-evident; the last is defined as a protection of the interests of nature for itself, transcending human values. With environmental researchers and scholars coming from so many different directions, it is difficult to avoid confusion about the state of the art. In the 1980s, the literature focused on reporting issues, specifically health, safety, and environmental (HSE) reporting. Environmentalism at that point was a junior partner to the other themes. The stress was on the obligation of business enterprises to provide evidence of good citizenship by charting their performance in health and safety. These areas are vastly cheaper than environmental reporting as ways in which a business can demonstrate a higher morality than its competitors and thereby gain favor with investors and consumers. By the 1990s, advances had been made on many health and safety issues, and environmentalism had become the dominant component of HSE (Adams, Frost, & Webber, 2004; Owen et al., 1994). In point of fact, Elkington coined the phrase ‘‘triple bottom line’’ (TBL) to suggest that financial reporting should expand beyond traditional bottom-line net income as a measure of success to also include information about social and environmental performance. Elkington (1998) wrote in Cannibals without Forks that TBL measured economic prosperity, environmental quality, and social justice. TBL is a buzzword in critical literature today. Critical scholars are typically those whose agenda is to expose societal wrongs and to protest proactively the status quo. In terms of environmentalism, the issue being fought for is ‘‘sustainability’’. However, achieving sustainability is very far away in the future; many preliminary steps have to be taken before this radical, environmental outcome becomes even a remote possibility. Consequently, this primer will focus on meaningful environmental reporting (ER), which, although a much lighter shade of green, is currently a more attainable ambition than sustainability. For a short narrative on the sustainability movement, the reader is referred to Appendix C. 2.1. Environmental overview

Currently, very few countries worldwide have any substantial ER requirements. Furthermore, there are no standardized formats for the presentation of environmental information, either in stand-alone reports or as components of annual reports. Very few reports of either variety are subject to outside verification of any kind. Researchers have hypothesized that the motivation for voluntary ER by businesses has run the gamut from self-serving to environmentally responsible. Without reporting standards and outside validation, it is difficult, if not impossible, to gauge the accuracy of these reports or even the criteria used in their preparation (Deegan, 2002; Harte & Owen, 1991; Larrinaga-Gonzales & Bebbington, 2001; Larsen, 2000; Milne, 1996). Thus, in addition to more traditional roles of gathering environmental data and preparing reports, accountants have the

44


opportunity to move ER forward by lobbying for the articulation of reporting standards and by developing the expertise necessary to serve as external auditors on reports prepared according to established standards. Public and managerial accountants have a role to play in educating corporate management with regard to environmental responsibility. Accountants are in a position to help develop information necessary for managers to make environmentally informed decisions, those that take into account each firm’s ‘‘environmental footprint’’. The foregoing discussion is intended as a broad overview of the intersection of accounting literature and environmentalism. Many articles have also been written with a greater micro-level attention to specific components of environmentalism. Some of these articles will be discussed later in this primer and are detailed by topical area in Appendix D. Students who wish to consult more extensive bibliographies are referred to Milne (1996), Mathews (1997, 2001), and Gray and Collison (2002). 2.2. Today’s environmental reporting

One method for holding businesses responsible for their behavior is to require them to report on their actions. Numerous constituencies have called for entities to provide stakeholders with information to enable an evaluation of their environmental (and social) performance. The level and breadth of business reporting on environmental matters has increased dramatically over the past 20 years or so as a result of governmental regulations, accounting standard setting, and voluntary reporting. Today, external reporting on environmental performance occurs primarily through Pollution Release and Transfer Registers (PRTR), as components of traditional financial reports or in stand-alone, corporate environmental reports. The major milestones impacting the current state of external reporting on environmental performance are presented on a timeline that appears as Fig. 1. 2.2.1. Pollution release and transfer registers

A PRTR is a publicly accessible database of potentially harmful chemical releases into the air, water, or land, as well as transfers of waste to treatment or disposal sites by reporting entities. The development of national PRTRs has resulted from governmental regulation. PRTR reporting requirements are not uniform in that the system is based on the needs and reporting environment of each particular country. National databases are compiled from annual reports submitted by companies that have released and/or transported any of the designated chemicals (OECD, 2006). The US was the first country to create a PRTR, and its system, the Toxic Release Inventory (TRI), is currently the most sophisticated and broadest in existence. In 1986, following the Bhopal disaster in India, the Emergency Planning and Community Right-to-Know Act charged the Environmental Protection Agency (EPA) and state agencies to collect annual information from businesses and federal facilities on the release and transfer of certain toxic chemicals and to make those data available to the public. Reporting is currently required for approximately 650 chemicals. The TRI has provided communities with information to enable them to hold local businesses accountable for their environmental performance related to chemical release and transfers.

45

R.K. Fleischman, K. Schuele / J. of Acc. Ed. 24 (2006) 35–66 First ISO 14000 Standard issued

Joint Task Force on Sustainability Reporting formed

Select company sites in Denmark required to issue "Green Account"

Companies in Denmark and Portugal required to include environmental disclosures in annual report 2002

Companies in Sweden required to include environmental disclosures in annual report

Toxic Release Inventory (TRI) program established 1986

SOP 96-1 issued

European Pollutant Emission Register created

1996

2000

UK Reporting Standard 1 exposure draft issued

CERES formed

Term "triple bottom line" coined

Companies in Spain required to include environmental disclosures in annual report

European PRTR created

1988

1994

1998

2004

1969

1980

1987

1993

1997

2001

2005

EPA established

Superfund program enacted

SustainAbility formed

SAB 92 issued

GRI formed

Companies in France required to include environmental disclosures in annual report

EC Modernisation Directive effective

1989

Select company sites in Sweden required to issue environmental report

1995

EMAS program inaugurated

EC recommendation on environmental disclosures in annual reports issued 1999

2003

Selected company sites in Netherlands required to produce environmental report

SOP 96-1 issued

AA1000 Framework launched by AccountAbility

Companies in Finland required to include environmental disclosures in annual report

Fig. 1. Major milestones in the development of external reporting on environmental performance.

The development of PRTRs internationally has been slow. An international body, the Organization for Economic Co-operation and Development (OECD), has attempted to convince its member countries to develop PRTR systems consistent with the guidance manual it has developed. Currently, only 13 of 30 OECD member countries (Australia, Canada, Denmark, France, Ireland, Japan, Korea, The Netherlands, Norway, the Slovak Republic, Switzerland, the UK, and the US) have PRTR systems in place that conform to OECD guidelines (OECD, 2006). As a first step toward the development of a European-wide PRTR, the EC in 2000 created the European Pollutant Emission Register (EPER) which required reporting every three years on the release of some 50 chemicals into the air and water by companies in member states operating in one of 56 industries. The first reporting cycle for the EPER occurred in 2003, disclosing 2001 emissions. In October 2004, the EC voted to replace the EPER with a European PRTR that would require, by 2007, annual reporting by 65 industries on the release of more than 90 substances to the air, water, or land. 2.2.2. Stand-alone corporate reports

Currently, no first world country has regulations in place requiring companies to is sue a company-wide, stand-alone report on environmental performance. Three countries (Denmark, Sweden, and The Netherlands) do, however, require the preparation of a stand-alone report at the site level. Since 1996, companies in Denmark with significant environmental impact have been required to publish a ‘‘green account’’, detailing significant consumption of energy, water, and raw materials. Also, the types and quantities of

46


pollutants discharged into the air, water, or soil, as well as those included in products or waste, are to be disclosed. While there is no requirement that the ‘‘green account’’ be subject to attest, the regulations were amended in 2001 to include the requirement that the report contain a statement by local authorities indicating whether the information in the green account is consistent with knowledge possessed by that authority, based on its issuance of permits and control of the work environment. In legislation introduced in 1989 in Sweden, all operations sites that require special permits due to the presence of environmental hazards must submit an annual environmental report to the authorities. The Netherlands, in 1999, began requiring that companies with substantial environmental impacts produce environmental reports for both the government and public on identified operating sites. The contents of the government report, which are verified by governmental authorities, are specified and include information on emissions, soil pollution, soil clean up, and the company’s environmental policy. In contrast, the content specifications for the public report are much less detailed. The number of companies which voluntarily issue stand-alone reports that include environmental performance information has been increasing as has the diversity of the types of reports issued. Many reporting companies prepare a HSE report; however, in recent years, companies are also focusing on social issues. In a 2002 survey, KPMG (2002) analyzed the level of reporting health, safety, social, and/or environmental issues by the top 250 companies in the Global Fortune 500 (GFT 250) and the top 100 companies from 19 countries. Twenty-three percent of the top 100 companies and 43% of the GFT 250 produced some type of stand-alone corporate report. As seen in Table 3, most companies prepared an HSE report. Only 27% and 29% of the top 100 and GFT 250 reports, respectively, had third-party verification. 2.2.3. Mandated ER within traditional annual reports

Information included in traditional, annual financial reports is mandated by national governments, accounting standard-setting bodies, and, for public companies, stock exchange regulatory agencies. In the realm of environmental disclosure, intervention by governmental or profession regulators is necessary since, critical scholars (e.g., Gray & Milne, 2004) argue, voluntary ER will just not work. Since the late 1980s, in a number of countries worldwide, one or more regulating bodies have issued new rules or amended existing ones requiring some level of ER in the annual report. Nearly all of this additional disclosure has focused on the impact of environmental issues on a company’s financial results and position, requiring separate reporting on such items as expenditures for pollution prevention, clean up, and fines; actual and contingent liabilities for environmental clean

Table 3 Type of stand-alone corporate sustainability reports Type of report

GFT 250

Top 100 a

HSE reports Sustainability reports Environmental and social reports Social reports

73% 14 10 3

65% 12 11 12

Source. KPMG (2002). a

Top 100 companies from 19 countries.


47

ups from past operations; and assets related to the environment. In addition, some countries also mandate disclosures on resource consumption and pollutant emissions in annual reports. In 1980, the EPA5 spearheaded the passage of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), commonly known as Superfund, establishing a program to identify and clean up sites where hazardous substances had been or might be released into the environment.6 One of the steps associated with cleaning up a site under the Superfund legislation is the identification of potentially responsible parties (PRP) who, in most cases, ultimately bear the cost (EPA, 2002a). Staff Accounting Bulletin (SAB) #92, issued by the Securities and Exchange Commission (SEC) in 1993, and Statement of Position (SOP) 96-1, issued by the AICPA in 1996, specifically address the financial reporting issues associated with Superfund clean up. These directives resulted from large disparities in the timing of the recognition of liabilities for environmental remediation and the presentation of these liabilities in financial reports (AICPA, 1996; SEC, 1993). SOP 96-1 requires that if a company is identified as a PRP at a Superfund site, it must accrue a liability if it is reasonably estimable. The liability should include the direct cost of remediation efforts as well as the cost of compensation and benefits of employees who will devote significant time to the project. The amount of the liability can be discounted for the time value of money if the timing of the payments can be reliably estimated. Potential recoveries cannot be used to reduce the liability but can be recognized as assets if they are deemed probable. Expenses related to the remediation should appear in the operating section of the income statement. If other PRPs have been identified and the company believes these other PRPs will be unable to pay their portion of the clean up costs, the company must include these amounts in its liability. Thus, throughout the remediation process, the company must continually monitor the financial health of other PRPs. In addition, for publicly-traded companies in the US, reporting related to environmental issues within a company’s financial reports is also required by Rule S-K, Items 103 and 303 of the Securities Act of 1933. Item 103 mandates that companies disclose either pending proceedings or those known to be contemplated by governmental authorities related to environmental issues (SEC, 2003). Item 303 requires a publicly-traded company to disclose in the management discussion and analysis section of its annual report instances ‘‘where a trend, demand, commitment, event or uncertainty is both presently known to management and reasonable likely to have a material effect on the registrant’s financial condition or results of operation’’ (SEC, 1989, section B, para 5). Even with these accounting rules in place, inconsistencies in reporting and disclosure by US firms still exist. For example, in a 1998 study, the EPA’s Office of Enforcement and Compliance Assurance found that 74% of companies facing potential environmental fines in excess of $100,000 do not make the necessary disclosures related to these items in their SEC filings (Ratner, 2002). Further, in its 2004 study of environmental disclosures within

5

Prior to 1970, the US federal government’s environmental efforts were carried out by a hodge-podge of departments, bureaus, councils, commissions, and offices. In late 1969, a study, commissioned by the president, recommended that all federal environmental activities be gathered under a single agency, subsequently the EPA, with the charge to establish and enforce environmental protection standards, to conduct research into the harmful effects of pollution and on methods to control it, and to advise the president on new policies for the protection of the environment (US EPA, 2002b). 6 In 1986, CERCLA was amended by the Superfund Amendments and Reauthorization Act (SARA).

48


reports filed with the SEC, the US Government Accountability Office (GAO) recommended that the SEC take steps to track more efficiently the results of its reviews of companies’ filings to evaluate current environmental disclosures and to explore superior ways to utilize EPA data for their improvement. Given this failure to conform to existing accounting rules, what are the possibilities that accounting standard-setting bodies will endeavor to insure greater compliance? According to Dennis Beresford, former chair of the Financial Accounting Standards Board (FASB), the FASB has not been quick to tackle the question of ER for two reasons. First, during the last decade, the FASB faced too many pressing issues for it to add ER to its agenda. Second, the most pressing ‘‘accounting issue’’ related to ER was the disclosure of potential liabilities associated with environmental clean ups, and the AICPA had already embarked on a project to examine this issue, resulting in the release of SOP 96-1 (discussed above). The FASB was happy to let the AICPA take the lead since the AICPA committee included practitioners who were experts in the area. The FASB reviewed the AICPA recommendation prior to the issuance of SOP 96-1 and concurred with its conclusions.7 The AICPA, however, envisions an active role for accounting standard setters in the area of environmentalism. The Joint Task Force on Sustainability Reporting of the AICPA and the Canadian Institute of Chartered Accountants (CICA) was formed in 2002 to explore issues related to sustainability reporting. The initial focus of the task force was on greenhouse gas (GHG) emissions, and in late 2003, SOP 03-2, ‘‘Attest Engagements on Greenhouse Gas Emissions Information’’, appeared. SOP 03-2 provides CPAs with guidance for attest engagements examining and reporting on (1) GHG emissions during a compliance year, (2) baseline GHG emissions, and/or (3) GHG emissions reductions recorded in a registry or involved in a trade or credit. This guidance notes that an attest engagement on GHG emissions requires technical knowledge in a specialized field other than accounting and auditing. While the CPA may use the work of a specialist with the requisite specialized knowledge, the CPA must possess sufficient knowledge to evaluate the specialist’s work. According to Beth Schneider, chair of the joint task force, any potential SOP on attestation of sustainability reporting lies in the more distant future, if and when suitable criteria for sustainability reporting exist.8 In 1989, Norway became the first European nation to enact legislation requiring disclosure of environmental matters in annual reports. Currently, a company that is subject to the Annual Accounts Act is required to include in its directors’ report disclosures on the environmental impact of the company’s operations and the use and disposal of its products. Additionally, firms are to report those measures in place to prevent or reduce negative environmental impact, as well as their energy and raw materials usage. In 1996, based on a recommendation by a committee of the Swedish government, the Swedish Accounting Act was amended to include reporting on environmental impact by companies whose operations pose serious environmental threats. Beginning in 1998, all Spanish companies had to include specific environmental information in the footnotes to their annual reports. The environmental disclosures included accounting policies related to the recognition and valuation of environmental current expenses, assets, and liabilities; 7

The authors wish to thank Professor Beresford, now at the University of Georgia, who communicated his thoughts to us on this subject via e-mail. 8 The authors are grateful to Beth Schneider who kept us informed via telephone communication of the progress of the joint committee throughout 2003 and 2004.


49

current expenditures on projects related to environmental protection and energy conservation; provisions to cover risks and expenses associated with environmental action; and environmental contingent liabilities. In a study examining the 1999 annual reports of 70 companies, Larrinaga, Carrasco, Correa, Llena, and Moneva (2002) found that nearly 80% of the companies did not include any of the mandatory disclosures, and that those which did disclose, most frequently reported only on the environmental provisions. In May 2001, the EC published a recommendation encouraging member states to promote increased levels of environmental disclosures within conventional annual reports. The recommendation addressed issues of recognition and measurement of environmental liabilities, assets, expenses, and contingent liabilities. Disclosures regarding the extent to which environmental protection formed an integral part of a company’s policies and its environmental protection improvements, resource consumption, and emissions were also encouraged. A 2004 study to assess the extent of implementation of the EC recommendation concludes that legislation in most member countries wholly or partially met the recognition and measurement portion of the recommendation (PwC, 2004). By contrast, the study found that only Denmark, Finland, France, and Portugal had introduced legislation related to the additional disclosure portion of the recommendation. (As noted above, Norway, Sweden, and Spain had legislation in place requiring some disclosure beyond recognition and measurement before the EC recommendation.) The Danish Financial Statement Act, effective for annual reports beginning in 2002, requires that each listed company, as well as some other companies, include in its management review section a description of the company’s impact on the environment and measures undertaken for the prevention, reduction, or remediation of environmental damage. The exact form and nature of the disclosures are intentionally vague with the expectation that a company’s management, in its assessment of the need for and extent of environmental disclosures, will take into consideration that Danish annual reports serve the public interest, as well as investor interests. Further, beginning in 2004, companies must disclose certain non-financial information including information related to environmental matters so that annual report users may gain an understanding of the company’s development, performance, or position in its industry (Hibbit & Collison, 2004; PwC, 2004). A national accounting standard applicable to all companies implementing the EC recommendation was issued in 2002 by the standard-setting body in Portugal. In Finland in 2003 similarly, a general statement on the treatment of environmental issues in a company’s financial statements was issued in response to the EC recommendation. The statement applies to all companies whose financial position and results are impacted by environmental issues (PwC, 2004). In 2001, as part of a law passed by the French legislature to update France’s company law framework, corporations listed on the premier marche´ are required to include disclosures on environmental issues, effective 2002. The required disclosures include ‘‘emissions to air, water and ground; consumption of energy, water, and raw materials; implementation of management systems; and compliance with mainstream standards of practice or certification’’ (Arese, 2002). In May 2005, the UK Accounting Standards Board issued Reporting Standard 1: Operating and Financial Review (OFR). The standard requires the preparation by company management of an OFR as part of its annual report and accounts beginning with fiscal years ending on or after April 1, 2005. The standard requires the inclusion of information about environmental matters where appropriate. The implementation guide accompanying

50


the standard acknowledges that the appropriate level of disclosure on environmental matters is industry-specific, but suggests that, minimally, all companies face issues associated with water and energy use, waste, and climate change (ASB UK, 2005). The Modernisation Directive 2003/51/EC mandates that by 2005 all European Union (EU) member states require listed companies to prepare their financial reports in accordance with international accounting standards. The Directive notes that the annual report must include a ‘‘fair review’’ of the business, and that this review should include, where appropriate, an analysis of environmental aspects, consistent with the EC’s 2001 recommendation (discussed above). Australia also has recently passed legislation related to mandatory environmental reporting within annual reports. Currently, all companies listed on the Australian Stock Exchange that are subject to environmental regulation are required by law to disclose their compliance to the regulations in their annual directors’ reports (Burritt, 2002). Meanwhile, Milne and his co-authors (Chapman & Milne, 2004; Milne, Owen, & Tilt, 2001; Milne, Tregidga, & Walton, 2003) have kept us apprised of a corresponding lack of progress in New Zealand. In summary, the level of mandatory environmental disclosures in traditional annual reports has increased dramatically in the past ten years. In the US, disclosure requirements focus primarily on the impact of environmental issues on the financial results and position of the company, while regulations in many European countries and those mandated by the EU require disclosure on resource consumption and environmental policy in addition to the financial disclosures. 2.2.4. Non-governmental organizations and ER initiatives

A number of non-governmental and, in some cases, member-based organizations and initiatives exist worldwide that require or encourage ER by companies. The Coalition for Environmentally Responsible Economies (CERES) is a US-based coalition, formed in 1988, whose goal is to provide a forum for discussion and action on environmental issues. The group includes environmental organizations, socially responsible investors and analysts, public interest and community groups, and over 60 companies (including 13 Fortune 500 firms) that have endorsed the ‘‘CERES Principles’’, a ten-point code of conduct on environmentally responsible behavior. Companies endorsing these principles submit an annual report that adheres to the CERES Report Form, detailing their progress toward the environmental goals embodied in the CERES Principles (CERES, 2002). Established in June 1993 by the EC, the Eco-Management and Audit Scheme (EMAS) is a voluntary program which provides a management tool for organizations to evaluate, report, and improve their environmental performance. Initially, the program was available only to manufacturing companies operating in the EU and the European Economic Area. To receive EMAS registration, an organization must conduct an environmental review, establish an effective environmental management system (EMS), carry out an environmental audit, and prepare a statement of environmental performance outlining its progress on previously established objectives. The review, EMS, audit, and statement must be approved by an accredited EMAS verifier (EUROPA, 2003). In 1996, the International Organization for Standardization (IOS) issued the first of the ISO 14000 family of standards. The IOS is a worldwide federation that establishes standards to facilitate the international exchange of goods and services. In 1987, the IOS issued ISO 9000, a standard primarily concerned with quality management. ISO 9000 compliance


51

has become a prerequisite worldwide for establishing business relationships. ISO 14000 is primarily concerned with environmental management, with ISO 14001 addressing environment management systems specifically. It remains to be seen whether ISO 14000 standards will become as well-established for business as is ISO 9000. AccountAbility, founded in 1996, is an international, member-based organization that focuses on providing support to encourage social responsibility. In 1999, the organization launched the AA1000 Framework, which provides guidance on engaging stakeholders in the process of planning, accounting, auditing, and reporting on sustainability issues. Building on the AA1000 Framework and recognizing the need for assurance related to social performance disclosures to improve credibility, AccountAbility issued the AA1000S Assurance Standards in 2003. The standards, the first of their kind worldwide, require assurance providers to consider to what extent the reporting entity demonstrates compliance in the areas of materiality, completeness, responsiveness, evidence, and credibility. 2.2.5. Standards for ER

Some in the environmental arena suggest that mandatory reporting requirements at this stage in the development of ER may be premature (Burritt, 2002; Nyquist, 2003). They argue that while government regulation would certainly increase the level of reporting, it would most likely serve to stifle creativity in the development of ER best practices. ER standards are more difficult to develop than standards for financial reporting in that there are so many stakeholder groups that the information needs are more diverse. In the current environment where most ER is voluntary, companies are able to experiment with format and content with a goal of providing information to satisfy the greatest number of stakeholders. Further, multiple reporting formats allow for the identification of best practices which could ultimately serve as useful input for the development of standards. Others have long argued (e.g., Beets & Souther, 1999) that the amount of ER by companies worldwide has reached a level where standardization is necessary in order for these reports to be credible and comparable. If ER is voluntary and companies are permitted to select what they report, some companies may opt to report only the ‘‘good news’’, and firms that present the good with the bad will be disadvantaged. The introduction of standards into a system of voluntary reporting would serve to level the playing field. Further, without standards, verification of ER is problematic. The development of standards at an international level, however, tends to be a slow process as evidenced by the frustrations of the International Accounting Standards Board in its attempts to achieve agreement on its financial reporting standards. The initial establishment of financial accounting standards began at a time when most business activities did not cross national boundaries. Thus, it was natural that accounting standards were highly country-specific. The business environment has changed dramatically, and most companies now participate in the global marketplace. As a result, international financial accounting standards are being developed, albeit slowly, and, to some degree, are being accepted worldwide. Is it unrealistic to hope that similar possibilities for ER may some day eventuate? 2.3. Green accounting and the bottom line

In the US, little ER is done beyond that which is specifically required by the EPA’s regulatory enactments and by the limited scope of standards provided by professional

52


accounting bodies. It is not difficult to understand why. Many managers perceive that voluntary expenditures made on environmental conservation and ER beyond that which is mandatory will not be cost-beneficial and will leave environmentally responsible firms at a competitive disadvantage (Epstein & Birchard, 1999). However, this perception is reflective of a short-term, financial accounting orientation. Admittedly, the price tag for voluntary action, irrespective of its positioning on an environmental continuum, is high and would cause net income to suffer accordingly. In today’s world, with stockholder focus on earnings per share and with managerial bonuses often based on the bottom line, environmentalism is a tough sell. It is just as clear, however, that long-term costs for preserving the environment, whether mandated by existing regulation or anticipated for the future, should be allocated to current products if firms hope to achieve accurate pricing and product line decision making (Epstein, 1996). The attitudes of current and potential stockholders are central in a business environment where the ethos is to place stockholders’ interests above societal needs. Burritt and Welch (1997, p. 542), citing Gray, Bebbington, and Walters (1993), speak of the ‘‘awesome indifference’’ of financial markets to environmental issues. Some academic research, however, suggests that the magnitude of stockholder apathy may be overstated. Survey data show that investors want information on firms’ environmental performance, even though it does not impact their decision making to the extent that traditional financial measures do (Deegan & Rankin, 1997; Hughes, Anderson, & Golden, 2001). Solomon (2000) demonstrates with empirical testing that stakeholders such as employees, legislators, and regulators are more concerned about environmental issues than shareholders and potential investors. There are investors, however, whose investment dollars go into the securities of environmentally aware companies. Sometimes these investors are participants in investment clubs (e.g., church groups), pension plans, and mutual funds whose investment decisions are linked to corporate positions on social and environmental issues. Epstein and Birchard (1999) note that the number of mutual funds with social and/or environmental criteria in their investment strategies tripled from 1995 to 1997. One potent, international amalgamation of perceived ethical companies is the Dow Jones Sustainability Group Index (DJSGI), a group of 2,000 companies, in 64 industries, from 34 countries, collectively listed since 1999. As Knoepfel (2001) points out, the DJSGI has outperformed the general stock market (see also, Adams et al., 2004). However, one wonders whether the success of the DJSGI is linked to the environmental awareness of its members or whether ethical behavior is a function of better managed companies that would attract investment irrespective of their individual commitment to social issues. The Alliance for Environmental Innovations concludes, after reviewing 70 research studies, that companies which outperform their competition environmentally also did so in terms of stock market returns (Meyer, 2000). The reciprocal (e.g., environmentally strong firms underperforming their competition) was never found to be true. It is well known that environmental disasters can precipitate substantial losses of capitalization for their perpetrators. Examples include the stock market performance of Exxon in the aftermath of the Exxon Valdez oil spill and Union Carbide following the Bhopal, India disaster. Firms with low pollution control rankings typically suffer negative returns the day this information becomes publicly available (Deegan & Rankin, 1997). Meanwhile, Thomas (2001) finds excess positive stock market returns for firms upon the adoption


53

of an environmental policy and significantly negative returns for companies upon the announcement of their prosecution by environmental agencies. Robert Jonardi, formerly the US Director of Environmental Assurance Services for Deloitte & Touche LLP, informed us of his knowledge that one prominent Fortune 500 company with a solid reputation for social and environmental responsibility saw a significant payback in its ability to recruit its most favored candidates for entry-level positions on the basis of this reputation. The company recognizes that the current generation of college graduates is environmentally aware and that attracting several of its top recruits goes a long way toward defraying the costs of doing the ethically right thing. Meyer (2000) confirms that this company is not alone in its forward thinking in that environmental responsibility pays dividends in the recruitment process. Ultimately, it might be argued that environmentalism is good for business if stockholders view it as a proxy for good management. A proactive environmental policy connotes a management team with a long-term vision and an appreciation for the complexities of accurate product costing. It also reflects good risk management which can pay rich dividends in terms of lower insurance costs and a lower cost of capital (Aston, 2002; Thomas, 2001). Substantial economic benefits can accrue to firms that bring their pollution under control through the reduction of waste and energy usage. Effective environmental awareness and reporting can also contribute to reputation building, although this feature can cut both ways if the firm uses its reporting to legitimize questionable practices. In these post-Enron days, ER serves as a mechanism by which a company enhances its visibility, whether it is to stockholders or to less immediate stakeholders, such as the community in which it operates. Perhaps most importantly, an honest environmental program identifies an ethical corporation (Epstein & Birchard, 1999). 2.4. The role of the profession in green accounting

Gray and Milne (2004) characterize current ER as virtually meaningless. In their estimation, stand-alone reports are mere glossy, propaganda tools; they are too simplistic and devoid of content. Adams et al. (2004, p. 25) second that judgment but do hold out as exceptions those companies (e.g., the chemical industry) that have a ‘‘publicly observable environment impact’’. We think that the future of ER can be viewed more optimistically as voiced by Medley’s (1997, p. 599) description of how the roles of three branches of accounting professionals might some day combine to alleviate this disturbing situation: For the financial accountant, the vision is to understand environmental assets, liabilities and contingencies, and to be able to identify and report them accurately, using some standardized process. For the management accountant, the vision is a full understanding of all the environmental costs and benefits within an organization, from both an operational and product perspective. This would allow rational decisions to be made about the way that the organization should develop in the future. For the auditor, the vision is an understanding of environmental management controls, processes and systems, which will enable an auditor to provide a true verification of environmental accounts.

54


2.4.1. Public accountancy

While it is true that the volume of ER, both in terms of stand-alone reports and as components of annual reports, has increased in recent years, public accountancy in the US and many parts of the world has been only tangentially engaged. In three significant ways, the profession has failed to maximize its potential for leadership – sufficient expertise to participate in environmental partnerships remains undeveloped; the attestation to environmental reports is still not regarded solely as an accountant’s function; and official standards with respect to most ER issues and/or verification engagements continue to be lacking (Beets & Souther, 1999). Engineering firms are more directly involved than public accountants in many processes related to ER. Consulting engineers are needed to advise firms on how to be in conformity with regulations. However, these same engineering firms are more frequently preferred for verification because of their greater expertise with the nuts and bolts of environmental compliance, their lower fees, and their need not to conform to any required attestation standards (Beets & Souther, 1999). However, there are very definite independence issues involved when engineering firms advise clients as to what they need to do to achieve compliance with regulations and then provide assurance that they have done so. The Modernisation Directive of the EU and the OFR standard in the UK (both discussed above) mandate environmental disclosures, albeit unspecified as to content, in annual reports. These annual reports are required to be subjected to attestation by public accountants. As more standard-setting bodies worldwide require the inclusion of environmental performance information in annual reports, public accountants will need to develop the necessary expertise to audit these disclosures. Further, in the US, the recent GHG emissions SOP provides guidance as to how measurement of emission is to be audited and, as noted above, acknowledges that practitioners must possess specialized knowledge beyond accounting and auditing to participate in these types of engagements. The AICPA’s Committee on Assurance Services suggested in its 1997 report that accountants needed to think outside the box. In recent years, major public accounting firms have advertised themselves as ‘‘all-purpose business advisors’’. It would seem that an expansion of operations into ER would be a natural way in which to ‘‘grow’’ the business. At this point in time, however, even the largest firms do not have sufficient expertise on staff to respond to a substantial increase in demand either for assurance services in the environmental area or for advising clients as to the information systems required to collect ER data. The profession has demonstrated in the past (e.g., mergers and acquisitions, litigation support) that it is able to move quickly in hiring in the expertise needed to respond to demand. The recent expansion of ER requirements abroad will force global accounting firms to expand operations in this area. When the demands on US-based public accounting firms to participate in the Sarbanes-Oxley compliance of their clients diminish, the development of the required expertise should occur. An effort to increase public accounting’s share of the ER business would be immeasurably enhanced if external verification becomes required as it is with financial statements. However, professional accounting organizations and environmental activist groups are divided on the issue as to whether such validation should be made mandatory in the first place and, if so, the appropriate professionals to provide the service. The Institute of Chartered Accountants of England and Wales and the AICPA have been supportive, as has the


55

European Federation of Financial Analysts Societies (1994). However, CERES continues to be satisfied with an annual self-evaluation from its members, while EMAS is content to limit external validation to certain specific sites. (See Solomon, 2000 for a fuller discussion of the external validation question.) Support for external validation is gaining strength among external stakeholders, but much less so among internal constituents. It is not difficult to understand the disparity. Verification by internal rather than public auditors would save professional fees. At the same time, increasing the volume of voluntary environmental disclosures, in the absence of standards promulgated by regulatory bodies, could lead to litigation, increased regulatory scrutiny, and/or an increased demand for further disclosures (Beets & Souther, 1999). Wallage (2000) makes a strong case in support of the potential for large, financial accounting firms to develop the expertise needed for environmental assurance. He noted the following advantages for the task: 





  

Public accounting is organized into large, multidisciplinary firms which could comfortably add competencies without sacrificing their cultures. Public accounting, on occasions when it has not expanded its expertise internally, has historically partnered with other firms in joint ventures. The evidence gathering techniques necessary for ER assurance parallel accounting’s auditing methodology. Accounting practitioners are guided by strict independence rules. Public accountants have developed expertise in the processes of assurance. Public accounting has the backing of well-developed and influential professional organizations.

Notwithstanding these seeming advantages, Solomon’s (2000) survey reveals very little support for accountants being the sole providers of ER verification. Were accountants to be pressed into greater service in ER, it would either be in partnership with engineering/ environmental consulting firms or with a wide internal expansion of appropriate expertise. Many in the ER arena call for the establishment of standards (e.g., Beets & Souther, 1999; Epstein, 1996; Kolk, Walhain, & van de Wateringen, 2001; Larsen, 2000; Li, 2001; Wallage, 2000). Many of these supporters specify international standard setting in order to accomplish the comparability of ER worldwide. Theoretically, at least, international standards would be desirable because current ER varies so markedly from country to country based upon a panoply of factors such as history, geography, political systems, business and legal environments, structure of the accounting profession, etc. (Buhr & Freedman, 2001). Even two countries as seemingly homogeneous as the US and Canada are significantly different in approach on as basic an issue as which environmental aspects should be disclosed voluntarily and which should be mandatory. In today’s business climate, where the ethical priorities of environmentalism are not the consensus, voluntary accountability will not be successful in either the short- or long-term, thereby making standard setting all the more imperative. Moreover, even voluntary ER in the absence of standard specificity is problematic because auditors and clients would need to reach agreement as to verification criteria. Wallage (2000) claims that the situation would widen the ‘‘expectations gap’’ in that the public would come to rely on the verification of such a report as a guarantee of ethical behavior, typically far transcending the

56


auditor’s intent. External validation of an environmental report without defining standards would create an independence dilemma. 2.4.2. Managerial accountancy

Epstein (1996) and Milne (1996) have written extensively about the negative impact on decision making and product costing when managers fail to take into account environmental costs. A first step along the path toward improved ER lies with the education of managerial accountants and an effort on their part to inform upper management of ER’s importance and benefits. Many of the most significant forward strides internationally in environmental awareness have come in industrial sectors, such as chemicals, paper, and electronics (Kolk et al., 2001; Krut & Moretz, 2000). To be sure, these sectors are potentially the worst environmental polluters, but the development of environmental codes across international boundaries is reflective of strong managerial associations. Ultimately, however, corporate managers are going to be one of the last groups to buy into environmentalism given the current focus on bottom-line economic income and the enhancement of shareholder wealth. Management accountants, in many instances, can provide a great service to their companies if they are able to influence upper management to embrace environmentalism. While most cost accounting textbooks do not even address environmental issues, Hansen and Mowen (2003) have constructed a model for inducing action. They suggest the preparation of a report in which costs are presented in four categories – environmental prevention costs (those aimed at preventing pollution and waste), environmental detection costs (those associated with determining compliance with regulations), environmental internal failure costs (those incurred in preventing pollution and waste from being discharged into the environment), and environmental external failure costs (those incurred in cleaning the environment if pollutants are released). This latter cost category is itself divided into two components – costs that the company will have to bear (e.g., clean ups mandated by Superfund) and costs that are passed on to society (e.g., acid rain). The costs classified above are then transferred to what might be called an environmental income statement where they are compared to the estimated annual benefits of expanded environmental action (‘‘eco-efficiency’’). This document would communicate a number of vital messages to upper management. First, it would reveal the savings forthcoming from reduced waste, fewer materials required, and less energy utilized. Second, it would show decision makers that the initial high price tag on prevention could be recouped by the benefits in a reasonably short period of time. Finally, even if management is not convinced to undertake the investment, either in response to economic or ethical arguments, it should recognize that environmental costs are so substantial that they must be factored into product pricing. For a company with relatively few product lines or services, an allocation of these costs may be done in the traditional ways, based on direct labor or machine hours. For those with a greater diversity of products, activity-based costing with its greater variety of cost drivers would better differentiate the product lines with respect to their environmental impacts. There is one further piece of ammunition available to management accountants trying to provoke a greater proactivity on environmental issues. In the early 1990s, Kaplan and Norton (1992) articulated the concept of the ‘‘balanced scorecard’’, wherein a company’s performance is to be measured across four parameters. More recently, Kaplan and Norton


57

(1996) have introduced environmentalism as a fifth category within the new managerial philosophy known popularly as ‘‘total quality management’’. In summary, the advancement of ER qualitatively and quantitatively necessitates partnering between public and managerial accountants and their participation on environmental teams with expertise beyond what accountants have traditionally possessed. Laughlin and Varangu (1991) write that accountants cannot hope to do it alone, but must accept a role as part of a multidisciplinary team that would include engineers, scientists, futurists, etc. Krut and Moretz (2000), likewise urging a joint-venturing approach, cited British Petroleum as an example of one company that retains both a major public accounting firm for attestation and a consulting firm to solicit feedback on its environmental performance. 2.5. Some concluding remarks

It is quite likely that accounting’s recognition of its role in making a meaningful contribution to environmental solutions may be a generation away. A vision for the future is one in which accountants and other business leaders embrace environmentalism. More environmentally aware public accountants will come to influence the managers of client firms to accept responsibility for a greater participation in a worldwide clean up. Internal accountants, working in concert with environmental engineers, will be schooled in the methodologies required for environmental accountability and the statistical techniques needed to measure compliance with ER regulations. Corporate boards of directors and/or audit committees will be staffed by individuals committed to the TBL concept where traditional economic measures coexist with social and environmental considerations. The ‘‘balanced score card’’ will come to incorporate measures of environmental responsibility. The times have brought accountants’ ethics into question, a threatening development for a profession whose major product is based on trust. One way in which accountancy may re-establish its reputation is to serve once again as the moral conscience of business by moving industry in the direction of ethical behavior with respect to the environment. The contemporary environment in the US creates some interesting possibilities and unanswered questions for ER and accountancy’s role. On the positive side, the public’s outrage at Enron and other fiascos will generate a demand for greater accountability and a corresponding insistence that businesses pay more attention to societal needs. If so, ER might be viewed as sufficiently important to the public interest and/or society’s definition of corporate accountability that the public will demand action. Negatively, the increased accounting fees associated with Sarbanes-Oxley, coupled with the possibility that deeper fraud investigation will be demanded, will exhaust corporate dollars that might have been channeled into expanded ER. Likewise, the wide expansion of accounting services mandated by Sarbanes-Oxley may leave those firms with SEC clients stretched thin in terms of personnel that expansion into ER assurance is unrealistic, at least in the short run. Notwithstanding the current shortage of accountants in the US, what Medley (1997) wrote several years ago has even greater potential today in both the US and around the globe. There exists the opportunity for the accounting profession to demonstrate that it is on top of contemporary issues. It is up to the profession to grab the ball that this new opportunity provides and run with it.

58


Acknowledgements

The authors acknowledge with gratitude the substantial contribution of Robert Jonardi, formerly with Deloitte & Touche LLP and now founder/principal of Phoenix Environmental Strategy, and Beth Schneider, a Director in Quality Assurance with Deloitte & Touche LLP. Valuable suggestions for improvement of previous drafts were forthcoming from Jim Rebele, editor, and two anonymous JAE reviewers. Funding support for this project was provided by the KPMG Professorship and the Jack Wasmer Fellowship at John Carroll University. Appendix A. Acronyms

AICPA ASB CERES CICA EA EC EMAS EMS EPA ER EU FASB GHG HSE ICAEW ISO OECD PRP PRTR SAB SEC SOP TBL TRI

American Institute of Certified Public Accountants Accounting Standards Board Coalition for Environmentally Responsible Economies Canadian Institute of Chartered Accountants Environmental accounting European Commission Eco-Management and Audit Scheme Environmental management system Environmental Protection Agency Environmental reporting European Union Financial Accounting Standards Board Greenhouse gas Health, safety, and environmental Institute of Chartered Accountants in England and Wales International Organization for Standardization Organization for Economic Co-operation and Development Potentially responsible party Pollution Release and Transfer Register Staff Accounting Bulletin Securities and Exchange Commission Statement of Position Triple bottom line Toxic Release Inventory

Appendix B. Questions on environmentalism

1. Does the urrent ‘‘Y Generation’’ hold out greater hope for a more proactive stance on environmental responsibility? What has to be done to generate greater concern? Is meaningful action 20–30 years in the future, if then? 2. Contrast light and dark green environmentalism. What types of issues determine an individual’s position on the continuum? 3. To what extent is environmental responsibility an ethical issue?


59

4. Are you personally concerned, looking at the timeline of environmental reform over the past 30 years, that the pace has been too slow? Are you convinced that issues such as global warming, pollution, and other threats constitute an impending ecological disaster? 5. How would you rate the relative chances of effective environmental reform emanating from the following interested groups: private action groups (e.g., CERES, AccountAbility, IOS), organizations of professional accountants (e.g., AICPA, CICA, ICAEW), national standard setters (e.g., FASB, UK ASB), international standard setters (e.g., IASB), government (e.g., EPA, EC/EMAS)? 6. What information should a company disclose related to its environmental performance? 7. What are the advantages and disadvantages of environmental reporting for business enterprises? 8. One major difference that has been identified between financial and environmental reporting is the breadth of constituent stakeholders. What groups, with little interest in financial statements, are vitally impacted by environmental performance? 9. Has regulatory legislation and standard setting been slower in coming in the US than in some parts of the world such as Scandinavia, the UK, Europe, and Australia? If so, do you have any idea why? 10. Contrast the quality and quantity of environmental reporting in the US compared to other countries mentioned in this primer. 11. Can environmental reporting be effective in the absence of standards? What advantages and disadvantages might be expected if these standards were to be set internationally? 12. What are the potential roadblocks to the international development of environmental reporting standards? 13. What roadblocks must be overcome before CPAs can provide services and assurance related to environmental reporting? 14. Do you think that you personally would be more likely to invest in or go to work for a company with a good track record of environmental responsibility? How would you judge a company’s environmental track record? 15. Will corporate managers ever buy into responsible environmental action if such action does not prove cost-beneficial as measured by bottom-line net income and available tax incentives? 16. What is the role of accounting and accountants in finding solutions to ecological problems? With which groups must they partner in efforts to clean up the environment? 17. What kind of services can CPAs provide in the sustainability area (see the AICPA’s website)? 18. What will be the long-tem impact of Sarbanes-Oxley on US environmental reporting? 19. What proposals have been made for the introduction of environmentalism into the accounting curriculum? Which of these have the best chance of success? 20. Compare the opportunities for environmental education in the US and the UK. Consider factors such as licensure requirements and educational philosophies.

60


21. Report to the class on the Sustainability website (www.sustainability.com). How would you rate the possibilities of achieving sustainability in the foreseeable future?

Appendix C. A note on sustainability

As defined previously in the words of the Brundtland Report, sustainability is a goal of those imbued with a deeper shade of green accounting than the degree of commitment this primer advocates, at least for the short tem. Sustainability as a concept has been around for decades, but critical scholars (e.g., Wallage, 2000; Gray et al., 2001) seem agreed that it continues to be an ‘‘exceptionally demanding notion’’, with no real consensus as to what full sustainability would entail. Sustainability has become closely linked to the ‘‘triple bottom line’’ (TBL) reporting initiative, an approach named by John Elkington in 1994. In point of fact, Elkington had earlier formed in 1987 a consulting practice called SustainAbility which in 1994 partnered with the United Nations Environment Programme (UNEP) to provide benchmarking assistance for ‘‘corporate responsibility and sustainable development’’ (www. sustainability.com). In 1997, CERES and UNEP joined forces to create the Global Reporting Initiative (GRI). The goal of the GRI is to develop a globally accepted set of guidelines for sustainability reporting. In 2000, the GRI released Sustainability Reporting Guidelines (SRG ) which provides a company with a set of measures useful for reporting on its economic, environmental, and social performance. Following its release, the SRG was used by over 110 companies worldwide in developing sustainability reports. In April 2002, the GRI was formally launched as a permanent, independent, global, standard-setting body whose mandate is to make sustainability reporting as routine as financial reporting. In July 2002, the GRI released a new version of the SRG based on input from advocacy, labor, and governmental organizations and feedback from companies using the 2000 version. Models are out there to be sure, but few companies have even attempted sustainability reporting. Chapman and Milne (2004) evaluate New Zealand enterprises based upon a framework for TBL reporting they provide. The results are disappointing, but the authors hasten to point out that while elsewhere in the world there are more attempts at compliance with TBL models, the quality is universally poor. Bebbington and Gray (2001) report the case study of a New Zealand firm engaged in land-care research that attempted a total sustainability program for all phases of its operations. Not only did the project fail because it was too costly, but the company found that theoretically sustainable courses of action were unavailable in practice even if the cost data could be generated to know what those courses of action might be. In conclusion, Gray and Milne (2004, p. 76) summarize the difficulty of the transition from environmental to sustainability reporting: Unfortunately, the TBL report remains something of a mirage, and will continue to be so as long as the debate about, and the practice of social and environmental reporting continue to owe more to rhetoric and ignorance than to practice and transparency.


61

Appendix D. Additional readings

Topic

References

Environmentalism and higher education

Gordon (1996, 1998) Bebbington (1997) Sefcik et al. (1997) Collison et al. (2000, 2001) Grinnell and Hunt (2000) Mathews (2001) Gray and Collison (2002) Stevenson (2002) Thomson and Bebbington (2004, 2005)

Case studies

Harte and Owen (1991) Burritt and Welch (1997) Krut and Moretz (2000) Larrinaga-Gonzales and Bebbington (2001) Deegan, Rankin, and Tobin (2002) Yuen and Yip (2002) Chapman and Milne (2004)

Cultural/political/social differences in national environmental policies

Buhr and Freedman (2001) Karagozoglo (2001) Kolk et al. (2001) Rahaman, Lawrence, and Roper (2004)

Environmental standard setting and government

Lawrence and Khurana (1997) Mishra, Newman, and Stinson (1997) Shields and Boer (1997) Beets and Souther (1999) Li (2001) Adams (2004) Everett (2004) Ball (2005)

Investor reaction to environmental reporting

Cormier and Magnan (1997) Deegan and Rankin (1997) Hughes et al. (2001) Knoepfel (2001) Thomas (2001) Aston (2002)

The role of public accountants/ auditors

Laughlin and Varangu (1991) Power (1991) Medley (1997) (continued on next page)

62


Appendix D (continued )

Topic

References Solomon (2000) Wallage (2000) Mobus (2005)

Environmentalism and managerialism

Epstein (1996) Milne (1996) Lober, Bynum, Campbell, and Jacques (1997) Epstein and Birchard (1999) Meyer (2000) Thomas (2001)

Environmentalism and the internet

Isenmann and Lenz (2001, 2002) Shepherd, Abkowitz, and Cohen (2001) Scott and Jackson (2002)

Sustainability

Elkington (1998) Bebbington and Gray (2001) Ball (2004) Henriques and Richardson (2004)

References AccountAbility. (2003). The AA1000 assurance standard . Accessed 11.02.03. Accounting Standards Board (UK). (2005). Reporting standard 1, operating and financial review. Available from http://www.frc.org.uk./images/uploaded/documents/ACF345.pdf . Adams, A. (2004). The ethical, social and environmental reporting performance portrayal gap. Accounting, Auditing & Accountability Journal, 17 (5), 731–757. Adams, C., Frost, G., & Webber, W. (2004). Triple bottom line: a review of the literature. In A. Henriques & J. Richardson (Eds.), The triple bottom line: Does it all add up? (pp. 17–25). Sterling VA: Earthscan. AICPA/CICA Joint Task Force on Sustainability Reporting (2002). Comment letter on draft GRI 2002 sustainability reporting guidelines . Accessed 23.06.03. American Accounting Association (1986). Future accounting education: Preparing for the expanding profession . Sarasota, FL: AAA [The Bedford Report]. American Institute of Certified Public Accountants (1988a). Education requirements for entry into the accounting profession (2nd ed.). New York: AICPA. American Institute of Certified Public Accountants (1988b). Education requirements for entry into the accounting profession. New York: AICPA. American Institute of Certified Public Accountants (1992). Academic preparation to become a certified public accountant . New York: AICPA. American Institute of Certified Public Accountants (1996). Statement of position 96-1: Environmental remediation liabilities. New York: AICPA. American Institute of Certified Public Accountants. (2002a). Sustainability reporting . Retrieved September 2002 from http://www.aicpa.org/innovations/baas/environ/index.htm. American Institute of Certified Public Accountants. (2002b). Greenhouse gas emissions trading . Retrieved September 2002 from http://www.aicpa.org/innovations/baas/environ/ghg_emission.htm . American Institute of Certified Public Accountants (2003). Statement of position 03-2: Attest engagements on greenhouse gas emissions information. New York: AICPA.


63

American Institute of Certified Public Accountants. (2005). CPA vision project: final report. Available from www.cpavision.org/final_report.htm . Arese. (2002). Mandatory sustainability reporting for French corporations . Press Release, 5 March 2002. Accessed 05.06.03. Aston, A. (2002). Brainpower on the balance sheet. Business Week, 26 (August), 110–111. Ball, A. (2004). A sustainability accounting project for the UK local government sector? Testing the social theory mapping process and locating a frame of reference. Critical Perspectives on Accounting, 15 (8), 100– 135. Ball, A. (2005). Environmental accounting and change in UK local government. Accounting, Auditing & Accountability Journal, 18 (3), 346–373. Bebbington, J. (1997). Engagement, education and sustainability. Accounting, Auditing & Accountability Journal, 10(3), 365–381. Bebbington, J., & Gray, R. (2001). An account of sustainability: failure, success and a reconceptualization. Critical Perspectives on Accounting, 12 (5), 557–587. Bebbington, J., & Thomson, I. (2001). Commentary on: some thoughts on social and environmental accounting education. Accounting Education, 10 (4), 353–355. Bedford, N. M. (1970). The future of accounting in a changing society . Champaign, IL: Stipes Publishing Co. Beets, S. D., & Souther, C. C. (1999). Corporate environmental reports: the need for standards and an environmental assurance service. Accounting Horizons, 13 (2), 129–145. Buhr, N., & Freedman, M. (2001). Culture, institutional factors and differences in environmental disclosure between Canada and the United States. Critical Perspectives on Accounting, 12 (3), 293–322. Burritt, R. L. (2002). Environmental reporting in Australia: current practices and issues for the future. Business Strategy and the Environment, 11 (6), 391–406 www.interscience.wiley.com , accessed 08.01.03. Burritt, R. L., & Welch, S. (1997). Accountability for environmental performance of the Australian Commonwealth public sector. Accounting Auditing & Accountability Journal, 10 (4), 532–561. Cambridge University Students’ Union. (2005). Another 700 years: contexts. Available from http://wwwgreen.cusu.cam.ac.uk/archive/a700y/contexts.htm. CERES. (2002). About us: history . Accessed 21.06.02. Chapman, R., & Milne, M. J. (2004). The triple bottom line: how New Zealand companies measure up. International Journal for Sustainable Business, 11 (2), 37–50. Collison, D., Gray, R., Owen, D., Sinclair, D., & Stevenson, L. (2000). Social and environmental accounting and student choice: an exploratory research note. Accounting Forum, 24 (2), 170–186. Collison, D., Stevenson, L., Gray, R., French, J., & McPhail, K. (2001). The professional accountancy bodies and the provision of education and training in relation to environmental issues . Edinburgh: ICAS. Commission of the European Communities (2001). Commission recommendation of 30 May 2001 on the recognition, measurement and disclosure of environmental issues in the annual accounts and annual reports of companies. Official Journal of the European Communities, L156 , 33–42 . Accessed 08.01.03. Cormier, D., & Magnan, M. (1997). Investors’ assessment of implicit environmental liabilities: an empirical investigation. Journal of Accounting and Public Policy, 16 (2), 215–241. Deegan, C. M. (2002). Introduction: the legitimizing effect of social and environmental disclosures – a theoretical foundation. Accounting, Auditing & Accountability Journal, 15 (3), 282–311. Deegan, C. M., & Rankin, M. (1997). The materiality of environmental information to users of annual reports. Accounting, Auditing & Accountability Journal, 10 (4), 562–583. Deegan, C. M., Rankin, M., & Tobin, J. (2002). An examination of the corporate social and environmental disclosures of BHP from 1983–1997: a test of legitimacy theory. Accounting, Auditing & Accountability Journal, 15 (3), 312–343. Directive 2003/51/EC of the European Parliament and of the Council (2003). Official Journal of the European Union, L178, 16–22 . Accessed 18.06.03. Elkington, J. (1998). Cannibals with forks: The triple bottom line of 21st century business . Stony Creek, CT: New Society Publishers. Epstein, M. J. (1996). Measuring corporate environmental performance . Chicago: Irwin. Epstein, M. J., & Birchard, B. (1999). Counting what counts . Reading, MA: Perseus Books. EUROPA. (2003). Eco-management and audit scheme (EMAS) . Accessed 08.01.03.

64


European Federation of Financial Analysts Societies (1994). Environmental reporting and disclosures: The financial analysts view. Edinburgh: EFFAS. European Multi-stakeholder Forum on CSR (2004). Final results and recommendations . Accessed 29.06.04. Everett, J. (2004). Exploring (false) dualisms for environmental accounting praxis. Critical Perspectives on Accounting, 15 (8), 1061–1064. Global Reporting Initiative (2000). Sustainability reporting guidelines on economic, environmental and social performance . Boston: Author. Gordon, I. M. (1996). Towards an appreciation of social responsibility accounting. Accounting Educators Journal, 8(1), 135–160. Gordon, I. M. (1998). Enhancing students’ knowledge of social responsibility accounting. Issues in Accounting Education, 13 (1), 31–46. Gray, R. H. (1993). Accounting for the environment . London: PCP Publishers. Gray, R., Bebbington, J., & Walters, D. (1993). Accounting for the environment: The greening of accountancy Part II . London: Paul Chapman. Gray, R., & Collison, D. (2002). Can’t see the wood for the trees, can’t see the trees for the numbers? accounting education, sustainability and the public interest. Critical Perspectives on Accounting, 12 (5/6), 797–836. Gray, R., Collison, D., French, J., McPhail, K., & Stevenson, L. (2001). The professional accountancy bodies and the provision of education and training in relation to environmental issues . Edinburgh: The Institute of Chartered Accountants of Scotland. Gray, R., & Milne, M. (2004). Towards reporting on the triple bottom line: mirages, methods and myths. In A. Henriques & J. Richardson (Eds.), The triple bottom line: Does it all add up? (pp. 70–80). Sterling, VA: Earthscan. Grinnell, D. J., & Hunt, H. G. (2000). Development of an integrated course in accounting: a focus on environmental issues. Issues in Accounting Education, 15 (1), 19–42. Hansen, D., & Mowen, M. (2003). Cost management: Accounting and control (4th ed.). Mason, OH: Thomson, South-Western. Harte, G., & Owen, D. (1991). Environmental disclosure in the annual reports of British companies: a research note. Accounting, Auditing & Accountability Journal, 4 (3), 51–61. Henriques, A., & Richardson, J. (Eds.). (2004). The triple bottom line: Does it all add up? Sterling, VA: Earthscan. Hibbit, C., & Collison, D. (2004). Corporate environmental disclosure and reporting: developments in Europe. Social and Environmental Accounting Journal, 24 (1). Available fromhttp://www.accaglobal/pdfs/environment/ newsletter/0604_hibbit_collison.doc . Hughes, S. B., Anderson, A., & Golden, S. (2001). Corporate environmental disclosures: are they useful in determining environmental performance? Journal of Accounting and Public Policy, 20 (1), 217–240. Humphrey, C., Lewis, L., & Owen, D. (1996). Still too distant voices? conversations and reflections on the social relevance of accounting education. Critical Perspectives on Accounting, 7 (1/2), 77–99. Isenmann, R., & Lenz, C. (2001). Customized corporate environmental reporting by Internet-based push and pull techniques. Eco-Management and Auditing, 8 , 100–110. Isenmann, R., & Lenz, C. (2002). Internet use for corporate environmental reporting: current challenges – technical benefits – practical guidance. Business Strategy and the Environment, 11 , 181–202. Kaplan, R. S., & Norton, D. P. (1992). The balanced scorecard – measures that drive performance. Harvard Business Review (January–February), 71–79. Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard . Boston: Harvard Business School Press. Karagozoglo, N. (2001). Economic development and environmental management: comparing environmental management practices in Turkey and the United States. Mid-Atlantic Journal of Business, 37 (2/3), 80–122. Knoepfel, I. (2001). Dow Jones Sustainability Group Index: a global benchmark for corporate sustainability. Corporate Environmental Strategy, 8 (1), 6–15. Kolk, A., Walhain, S., & van de Wateringen, S. (2001). Environmental reporting by the Fortune Global 250: exploring the influence of nationality and sector. Business Strategy and the Environment, 10 , 15–28. KPMG (2002). KPMG international survey of corporate sustainability reporting 2002 . Maasland: Author. Accessed 20.06.03. Krut, R., & Moretz, A. (2000). The state of global environmental reporting: lessons from the Global 100. Corporate Environmental Strategy, 7 (1), 85–91. Larrinaga-Gonzales, C., & Bebbington, J. (2001). Accounting change or institutional appropriation? – a case study of the implementation of environmental accounting. Critical Perspectives on Accounting, 12 (3), 269–292.


65

Larrinaga, C., Carrasco, F., Correa, C., Llena, F., & Moneva, J. M. (2002). Accountability and accounting regulation: the case of the Spanish environmental disclosure standard. European Accounting Review, 11 (4), 723–740. Larsen, L. B. (2000). Strategic implication of environmental reporting. Corporate Environmental Strategy, 7 (3), 276–287. Laughlin, B., & Varangu, L. K. (1991). Accounting for waste or garbage accounting: some thoughts from nonaccountants. Accounting, Auditing & Accountability Journal, 4 (3), 43–50. Lawrence, C. M., & Khurana, I. K. (1997). Superfund liabilities and governmental reporting entities: an empirical analysis. Journal of Accounting and Public Policy, 16 (2), 155–186. Li, L. (2001). Encouraging environmental accounting worldwide: a survey of governmental policies and instruments. Corporate Environmental Strategy, 8 (1), 55–64. Lober, D. J., Bynum, D., Campbell, E., & Jacques, M. (1997). The 100 plus corporate environmental report study: a survey of an evolving environmental management tool. Business Strategy and the Environment, 6 , 57–73. Mathews, M. R. (1995). Social and environmental accounting: a practical demonstration of ethical concern. Journal of Business Ethics, 14 , 663–671. Mathews, M. R. (1997). Twenty-five years of social and environmental research: is there a silver jubilee to celebrate? Accounting, Auditing & Accountability Journal, 10 (4), 481–531. Mathews, M. R. (2001). Some thoughts on social and environmental accounting education. Accounting Education, 10 (4), 335–352. Medley, P. (1997). Environmental accounting – what does it mean to professional accountants? Accounting, Auditing & Accountability Journal, 10 (4), 594–600. Meyer, H. (2000). The greening of corporate America. Journal of Business Strategy (January/February), 38–43. Milne, M. J. (1996). On sustainability: the environment and management accounting. Management Accounting Research, 7 , 135–161. Milne, M. J., Owen, D. L., & Tilt, C. A. (2001). Corporate environmental reporting: are New Zealand companies left behind? University of Auckland Business Review, 3 (2), 24–36. Milne, M. J., Tregidga, H. M., & Walton, S. (2003). The triple bottom line: benchmarking New Zealand’s early reporters. University of Auckland Business Review, 5 (2), 36–50. Mishra, B. K., Newman, D. P., & Stinson, C. H. (1997). Environmental regulation and incentives for compliance audits. Journal of Accounting and Public Policy, 16 (2), 187–214. Mobus, J. (2005). Mandatory environmental disclosure in a legitimacy theory context. Accounting, Auditing & Accountability Journal, 18 (4), 492–517. Nyquist, S. (2003). The legislation of environmental disclosures in three Nordic countries – a comparison. Business Strategy and the Environment, 12 (1), 12–25 . Accessed 08.01.03. Owen, D., Humphrey, C., & Lewis, L. (1994). Social and environmental accounting education in British universities . London: Chartered Association of Certified Accountants. Organisation for Economic Co-Operation and Development (OECD) (2006). Comparison of emission estimation methods used in pollutant release and transfer registers and emission scenario documents: Case study of pulp and paper and textile sectors. Paris: OECD
d004c/b117c930895a19b9c1257109004fbfde/$FILE/JT00200406.PDF> . Accessed 15.03.06. Power, M. (1991). Auditing and environmental expertise: between protest and professionalisation. Accounting, Auditing & Accountability Journal, 4 (3), 30–42. PricewaterhouseCoopers (PwC). (2004). Implementation in member states of the commission recommendation on treatment of environmental issues in companies’ financial reports . Accessed 12.01.05. Rahaman, A., Lawrence, S., & Roper, J. (2004). Social and environmental reporting at the VRA: institutionalised legitimacy or legitimation crisis? Critical Perspectives on Accounting, 15 (1), 35–56. Ratner, J. (2002). Request for rulemaking for clarification of material disclosures with respect to financially significant environmental liabilities and compliance with existing material financial disclosures. Revised Petition SEC File # 4-463 . Accessed 09.10.02. Scott, P., & Jackson, R. (2002). Environmental, social and sustainability reporting on the web: best practices. Corporate Environmental Strategy, 9 (2), 193–202. Securities and Exchange Commission. (1989). Interpretive release: management’s discussion and analysis of financial condition and results of operations; certain investment company disclosures. Federal Register, 54 : 22427. Accessed 07.11.02.

Green Accounting

Recommend Documents