Does Corporate Environmental Accounting Make Business Sense?

Part of the Eco-Efficiency in Industry and Science book series (ECOE, volume 24)

Abstract

Businesses do not operate in a vacuum. They are subject to legal requirements and industry practices; they require resources to manufacture products and/or render services; they operate in an environment from which they draw their resources and which may be affected by their activities; and they operate in a community from which they draw their work force and which may also be impacted by their activities. Corporate environmental accounting is one of the tools that can be used by businesses to address these challenges. For an organisation to apply environmental accounting it must make business sense. Implementing environmental accounting may require resources. Therefore, a business must weigh up the benefits and costs thereof.

This paper discusses the four elements of corporate environmental accounting, i.e. environmental management accounting, environmental financial accounting, environmental reporting and environmental financial auditing. The potential benefits that can be derived from each of these elements are discussed. Many benefits can be reaped from implementing different elements of corporate environmental accounting. Some benefits enhance internal efficiency and competitive advantage, whilst others enhance legitimisation and stakeholder relations.

This paper also argues that for the full benefits of corporate environmental accounting to be reaped the elements of environmental accounting should be integrated with each other and in the day-to-day business of an organisation. The linkages and interactions among the elements of corporate environmental accounting as well as the linkages between corporate environmental accounting and the broader business processes of the company are discussed based on a diagrammatic model.

Keywords

Nickel Dioxide Posit Product Line Nigeria 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Bibliography

  1. 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). London: Earthscan.Google Scholar
  2. Bebbington, J. (1997). Engagement, education and sustainability: A review essay on environmental accounting. Accounting, Auditing, and Accountability Journal, 10(3), 365–381.CrossRefGoogle Scholar
  3. Benn, S., & Probert, J. (2006). Incremental change towards sustainability. In S. Schaltegger & M. Wagner (Eds.), Managing the business case for sustainability (pp. 542–552). Sheffield: Greenleaf.CrossRefGoogle Scholar
  4. Berman, S. L., Wicks, A. C., Kotha, S., & Jones, T. M. (1999). Does stakeholder orientation matter? The relationship between stakeholder management models and firm financial performance. Academy of Management Journal, 42(5), 488–506.CrossRefGoogle Scholar
  5. Berry, M. A., & Rondinelli, D. A. (1998). Proactive corporate environmental management: A new industrial revolution. Academy of Management Executive, 12(2), 1–13.Google Scholar
  6. Buhr, N. (2002). A structuration view on the initiation of environmental reports. Critical Perspectives on Accounting, 13, 17–38.CrossRefGoogle Scholar
  7. Carpentier, C. L., Patterson, Z., & Malthouse, J. (2003). Environmental disclosures in financial statements: New developments and emerging issues. New York: Commission for environmental co–operation.Google Scholar
  8. Cerin, P. (2002). Communication in corporate environmental reports. Corporate Social Responsibility and Environmental Management, 9(1), 46–66.CrossRefGoogle Scholar
  9. Clarke, J., & Gibson-Sweet, M. (1999). The use of corporate social disclosures in the management of reputation and legitimacy: A cross-sectoral analysis of UK top 100 companies. Business Ethics: A European Review, 18(1), 5–13.CrossRefGoogle Scholar
  10. Cormier, D., & Magnan, M. (1997). Investors’: assessment of implicit environmental liabilities: An empirical investigation. Journal of Accounting and Public Policy, 16(2), 215–241.CrossRefGoogle Scholar
  11. De Villiers, C. J. (1998). The willingness of South Africans to support more green reporting. South African Journal of Economic and Management Sciences, 1(1), 145–167.Google Scholar
  12. Ditz, D., Ranganathan, R., & Banks, D. (1995). Green ledgers: Case studies in environmental accounting. Washington, DC: World Resources Institute.Google Scholar
  13. Doane, D. (2004). Good intentions—bad outcomes? The broken promise of CSR reporting. In A. Henriques & J. Richardson (Eds.), The triple bottom line: Does it all add up? (pp. 81–88). London: Earthscan.Google Scholar
  14. Donaldson, T., & Preston, L. E. (1995). The stakeholder theory of the corporation: Concepts, evidence, and implications. Academy of Management Review, 20, 65–91.Google Scholar
  15. Edwards, P., Birkin, F., & Woodward, D. (2002). Financial comparability and environmental diversity: An international context. Business Strategy and the Environment, 11(6), 343–359.CrossRefGoogle Scholar
  16. Elkington, J. (1994). Towards the sustainable corporation: Win-win-win business strategies for sustainable development. California Management Review, 36(2), 90–100.CrossRefGoogle Scholar
  17. Elkington, J. (2004). Enter the triple bottom line. In A. Henriques & J. Richardson (Eds.), The triple bottom line: Does it all add up? (pp. 1–16). London: Earthscan.Google Scholar
  18. Freeman, R. E. (1984). Strategic management: A stakeholder approach. Englewood Cliffs, NJ: Prentice Hall.Google Scholar
  19. Freedman, M., & Stagliano, A. J. (1991). Differences in social-cost disclosures: A market test of investor reactions. Accounting, Auditing and Accountability Journal, 4(1), 68–83.CrossRefGoogle Scholar
  20. Global Reporting Initiative (GRI) (2002). Sustainability reporting guidelines (2nd version). Amsterdam: Global Reporting Initiative.Google Scholar
  21. Global Reporting Initiative (GRI) (2006). Sustainability reporting guidelines (3rd version). Amsterdam: Global Reporting Initiative.Google Scholar
  22. Gray, R., Bebbington, J., & Walters, D. (1993). Accounting for the environment. New York: Markus Wiener.Google Scholar
  23. Gray, R., Kouhy, R., & Lavers, D. S. (1995). Corporate social and environmental reporting: A review of the literature and a longitudinal study of UK disclosure. Accounting, Auditing and Accountability Journal, 8(2), 47–77.CrossRefGoogle Scholar
  24. Hart, S. L. (1995). A natural-resource-based view of the firm. Academy of Management Review, 20(4), 986–1014.Google Scholar
  25. Hedberg, C. J., & von Malmborg, F. (2003). The global reporting initiative and corporate sustainability reporting in Swedish companies. Corporate Social-Responsibility and Environmental Management, 10(3), 153–164.CrossRefGoogle Scholar
  26. Howes, R. (2004). Environmental cost accounting: Coming of age? Tracking organisational performance towards environmental sustainability. In A. Henriques & J. Richardson (Eds.), The triple bottom line: Does it all add up? (pp. 99–112). London: Earthscan.Google Scholar
  27. Institute of Directors (2002). King report on corporate governance for South Africa 2002. Johannesburg: Institute of Directors.Google Scholar
  28. International Accounting Standards Board (IASB) (2004). Framework for the preparation and presentation of financial statements in International Accounting Standards Board. International Financial Reporting Standards, 1A, 19–46.Google Scholar
  29. IAASB (1998). International audit practice statement 1010: The consideration of environmental matters in the audit of financial statements. New York: International Auditing and Assurance Standards Board.Google Scholar
  30. International Federation of Accountants (IFAC) (2005). International guidance document: Environmental management accounting. New York: International Federation of Accountants.Google Scholar
  31. Julian, F. W., & Nel, C. (2003). Managerial accounting, vol. 1 (2nd ed.). Centurion: Imprenta.Google Scholar
  32. King, A., & Lenox, M. (2002). Exploring the locus of profitable pollution reduction.Management Science, 48(2), 289–299.CrossRefGoogle Scholar
  33. KPMG (2005). KPMG international survey of corporate responsibility reporting 2005. Amsterdam: KPMG Global Sustainability Services.Google Scholar
  34. Lee, K. H., & Ball, R. (2006). Achieving sustainable corporate competitiveness. In S. Schaltegger & M. Wagner (Eds.), Managing the business case for sustainability (pp. 378–397). Sheffield: Greenleaf.Google Scholar
  35. Li, Y, & McConomy, B. J. (1999). An empirical examination of factors affecting the timing of environmental accounting standard adoption and the impact on corporate valuation.Journal of Accounting, Auditing and Finance, 14(3), 279–319.Google Scholar
  36. Lindblom, C. K. (1993). The implications of organisational legitimacy for corporate social performance and disclosure Paper presented at Critical Perspectives on Accounting conference, New York.Google Scholar
  37. Madsen, H., & Ulhøi, J. P. (2003). Have trends in corporate environmental management influenced companies’ competitiveness? Greener Management International, 44(Winter), 75–88.Google Scholar
  38. Maxwell, J. W. (1996). What to do when win-win won’t work: Environmental strategies for costly regulation. Business Horizons, 39(5), 60–63.CrossRefGoogle Scholar
  39. Monaghan, P. (2004). Put up or shut up. In A. Henriques & J. Richardson (Eds.), The triple bottom line: Does it all add up? (pp. 142–154). London: Earthscan.Google Scholar
  40. Nehrt, C. (1996). Timing and intensity effects of environmental investments. Strategic Management Journal, 17(1), 535–547.CrossRefGoogle Scholar
  41. Nehrt, C. (1998). Maintainability of first-mover advantages when environmental regulations differ between countries. Academy of Management Review, 23(1), 77–97.Google Scholar
  42. Newton-King, N. (2004). Sustainable development investments. In: The Enviropaedia 2004, p. 266.Google Scholar
  43. Palmer, K., Oates, W. E., & Portney, P. R. (1995). Tightening environmental standards: The benefit-cost or the no-cost paradigm? Journal of Economic Perspectives, 9(4), 119–132.CrossRefGoogle Scholar
  44. Patten, D. M. (1992). Intra-industry environmental disclosures in response to the Alaskan oil spill: A note on legitimacy theory. Accounting, Organisations and Society, 17(5), 471–475.CrossRefGoogle Scholar
  45. Porritt, J. (2004). Locating the government’s bottom line. In A. Henriques & J. Richardson (Eds.), The triple bottom line: Does it all add up? (pp. 59–69). London: Earthscan.Google Scholar
  46. Porter, M. E. (1991). America’s green strategy. Scientific American, 264, 168.CrossRefGoogle Scholar
  47. Porter, M. E., & Van der Linde, C. (1995). Toward a new conception of the environment-competitiveness relationship. Journal of Economic Perspectives, 9(4), 97–118.CrossRefGoogle Scholar
  48. Preston, L. E. and Post, J. E. (1975), Private Management and Public Policy. Englewood Cliffs, N.J: Prentice-Hall, Inc.Google Scholar
  49. Repetto, R., MacSkimming, A., & Isunza, G. C. (2002). Environmental disclosure requirements in the securities regulations and financial accounting standards of Canada, Mexico and the United States. New York: Commission for environmental co-operation.Google Scholar
  50. Rogers, G. (2006). A looming environmental Enron? Environmental Finance, Dec 2005–Jan 2006, 21.Google Scholar
  51. Schaltegger, S., & Sturm, A. (1990). Ökologische Rationalität. Die Unternehmung, 44(4), 273–290 (available only in German).Google Scholar
  52. Schaltegger, S., & Wagner, M. (2006). Managing and measuring the business case for sustainability. Capturing the relationship between sustainability performance, business competitiveness and economic performance. In S. Schaltegger & M. Wagner (Eds.), Managing the business case for sustainability (pp. 1–27). Sheffield: Greenleaf.CrossRefGoogle Scholar
  53. Schaltegger, S., Bennett, M., & Burritt, R. (2006). Sustainability accounting and reporting. Dordrecht: Springer.CrossRefGoogle Scholar
  54. Shah, R. (2004). What a fine mess! Moving beyond simple puzzle-solving for sustainable development. In A. Henriques & J. Richardson (Eds.), The triple bottom line: Does it all add up? (pp. 89–98). London: Earthscan.Google Scholar
  55. Shocker, A. D., & Sethi, S. P. (1974). An approach to incorporating social preferences in developing corporate action strategies. In S. P. Sethi (Eds.), The unstable ground: Corporate social policy in a dynamic society (pp. 67–80). Los Angeles, CA: Mellville.Google Scholar
  56. Thorpe, J., & Prakash–Mani, K. (2003). Developing value: The business case for sustainability in emerging markets. Greener Management International, 44(Winter), 17–32.CrossRefGoogle Scholar
  57. Tilt, C. A. (1994). The influence of external pressure groups on corporate social disclosure: Some empirical evidence. Accounting, Auditing and Accountability Journal, 7(4), 47–72.CrossRefGoogle Scholar
  58. UNDSD (2001). Environmental management accounting: Policies and linkages. New York: United Nations Division for Sustainable Development.Google Scholar
  59. Wagner, M., Schaltegger, S., & Wehrmeyer, W. (2001). The relationship between the environmental and economic performance of companies: What does theory propose and what does empirical evidence tell us? Greener Management International, 34, 95–108.Google Scholar
  60. Walley, N., & Whitehead, B. (1994). It’s not easy being green. Harvard Business Review, 72(3), 46–52.Google Scholar
  61. Winter, G. (1988). Business and the Environment. Hamburg: McGraw-Hill.Google Scholar

Copyright information

© Springer Science + Business Media B.V. 2008

Authors and Affiliations

  1. 1.Faculty of Economics and FinanceTshwane University of TechnologyPretoriaSouth Africa

Personalised recommendations