Special issue on sustainability accounting
Article Type: Guest editorial From: Pacific Accounting Review, Volume 26, Issue 1/2
Sustainability has become one of the major social issues of the day. Sustainability accounting is but one aspect of sustainability (Milne et al., 2009), and yet even the concept of sustainability accounting offers so many different perspectives (Bebbington and Gray, 2001; Gray, 2010). This is reflected in the different names used for the concept, such as social and environmental accounting, triple bottom line accounting, emissions accounting, and carbon accounting, amongst others. Social and environmental issues are attracting more political and media attention, reflecting increased social awareness (Deegan and Blomquist, 2006). These changes in societal attention to sustainability make sustainability accounting an exciting and dynamic field of research. The field pervades the private sector as well as the public sector; covers both social and environmental issues; among environmental issues covers such diverse matters as carbon emissions and water usage; takes different guises in developed countries and developing countries; can be studied from the perspective of stakeholder engagement or disclosures; can focus on disclosures aimed at different audiences in annual reports, sustainability reports, and web sites (De Villiers and Van Staden, 2011b); can be approached from the perspective of the role of accountants or the role of managers; and can focus on performance (De Villiers et al., 2011), market reaction to disclosures (Liu and De Villiers, 2011; De Klerk and De Villiers, 2012), and motivation for disclosure (Summerhays and De Villiers, 2012) and stakeholder requirements (De Villiers and Van Staden, 2010a, b, 2011a, 2012).
This special issue reflects the complexity of sustainability accounting issues and covers many of the approaches that can be taken. The papers reflect diverse foci and a range of countries and approaches. Specifically, different papers cover the private sector and the public sector (such as universities and local government departments); environmental (including a particular water-related issue) and social issues (such as distributive matters related to conflict mineral regulation); developed countries (such as Australia, the USA, and New Zealand) and developing countries (such as China and Malaysia); a particular focus on stakeholder engagement disclosures and disclosures in general; a focus on annual reports, standalone reports, and web sites; and question the role of management accountants, managers in the private sector and public sector managers. Furthermore, the special issue includes papers focused on performance, market reaction to disclosures, motivation, and product labelling impacts.
Humans (and all other living creatures) need access to (clean) water and therefore water accounting has become an urgent, but still arguably under-researched issue in the field of environmental accounting. In the first paper, James Hazelton explores the potential for the labelling of the water footprint of products in an Australian context and the influence of labelling on consumers and producers (Hazelton, 2014). He argues that water is one of the most important sustainability issues today. Water footprint reporting could make a significant contribution to public water literacy. This paper therefore aims to extend the exploration of corporate sustainability reporting to a new site – that of the product – and explore the extent to which water labelling provides a mechanism for enhancing corporate water accountability. Since not all areas experience water footprint problems, his suggestion of indicating the proportion of the water footprint sourced from water-scarce versus water-abundant areas, could be a useful contribution to the debates on water scarcity and the best use of available water resources. Disclosure will also increase the awareness of water footprint issues, particularly in food production.
Only careful consideration makes us realise to what extent we consume minerals in products and services we take for granted ranging from auto parts, cell phones and earrings to air travel (through aviation parts) and medical equipment. The efforts of some countries (and companies) to remove conflict minerals (minerals mined to support armed conflict and human rights abuses) from the supply chain could therefore have important consequences. In this regard Paul A. Griffin, David H. Lont and Yuan Sun examine the economic cost imposed by capital markets regarding disclosures on conflict minerals by analysing a sample of first-time conflict minerals disclosures made voluntarily by US companies during the 2010-2012 period (Griffin et al., 2014). They find that the negative effects of the disclosures outweigh any positive effects and therefore that investors price supply chain activities related to conflict minerals as an off-balance sheet liability. Their results show that regulators and stakeholders demands for increased transparency can be costly to shareholders when the disclosures induce changes in management decision-making and raise customers social concerns about supply chain sustainability. This paper shows once more that social concerns are not costless.
The public sector plays an important role in most countries and has major sustainability impacts. This issue includes two papers that investigate sustainability accounting in local government settings. In the first paper, Amanpreet Kaur and Sumit K. Lodhia examine the extent of disclosures on stakeholder engagement on sustainability in Australian local councils (Kaur and Lodhia, 2014). They argue that despite stakeholder engagement being regarded as extremely important by the Global Reporting Initiative and Accountability, there has been a little research that demonstrates whether or not organisations engage with their stakeholders for reporting purposes. Their findings highlight that stakeholder engagement is an essential component in the development of sustainability reporting as it informs reporters of material concerns, issues and aspirations of key stakeholders. In the second paper, Corina Joseph, Robyn Pilcher and Ross Taplin examine determinants of the extent of sustainability reporting on Malaysian local authority web sites within an institutional theory framework (Joseph et al., 2014). The lack of web site sustainability reporting research in developing country public sector organisations is the motivation for this study. They find institutional isomorphism – particularly coercive pressure – useful in explaining the extent of sustainability reporting on web sites and that web sites of local authorities are the primary medium for communicating sustainability information.
Universities are also an important part of the public sector and, through educating future generations, potentially play an important role in influencing societal attitudes towards sustainability. Universities views on sustainability accounting are therefore particularly interesting. Anil K. Narayan investigates the strategy, accounting and accountability interface of sustainability implementation in a large public tertiary education organisation in New Zealand (Narayan, 2014). He uses ethnography to explain the real-life enactment of accounting and accountability in advancing or deterring sustainability initiatives and draws on neo-institutional theoretical perspectives to interpret the findings. He finds that a strong ideological commitment from senior management is required to firmly embed sustainability in the tertiary organisations belief systems, values and norms in order to obtain wider organisational acceptance and institutionalisation.
Turning to the role of management accountants in sustainable development, Vinal Mistry, Umesh Sharma and Mary Low examine the perceptions that management accountants have of their roles in accounting for sustainable development in small-medium and large New Zealand organisations (Mistry et al., 2014). They find that the overall goals for achieving sustainable development are closely linked with the roles the organisations management accountants play in accounting for sustainable development. While this has specific relevance for the advancement of accounting for sustainable development within organisations, there are also educational implications, as they question whether todays accounting education provides environmentally literate management accountants.
The relationship between firms environmental performance and environmental disclosure has continued to interest researchers and continue to produce conflicting results. As one of the worlds largest economies, industrial activity in China is having a substantial environmental impact on present and future generations. Chinese corporate environmental disclosure has not been researched to the same extent as in Western countries, leaving a gap in our knowledge regarding Chinese companies. Christina He and Janice Loftus examine whether environmental reporting by Chinese firms engaged in environmentally sensitive industries reflect their environmental performance (He and Loftus, 2014). They find that Chinese companies with better environmental performance provide a higher level of environmental reporting. Better performing companies also include a greater proportion of objective and verifiable items in their environmental disclosures.
Given the immense scope of sustainability accounting as a topic area and the scale of the social implications inherent in this line of study, it stands to reason that this special issue has but scratched the surface. There is room for a major research agenda in sustainability accounting. Some of the areas that are, in our opinion, still under researched are:
* The financial consequences of superior:
* social performance (including all the different types of social performance);
* environmental performance (including different types of environmental performance);
* social disclosures (including all the different types of social disclosure); and
* environmental disclosures (including different types of environmental disclosure).
1. The relationship between performance and disclosure focussing on social performance and social disclosures (including all the different types of social performance and disclosure) and environmental performance and environmental disclosures (including different types of environmental performance and disclosure), i.e. taking account not only of high emission companies and emission based performance measures, but also companies contributing to good environmental performance in clean industries.
2. The interactions between social and environmental performance and disclosure and the effect of these interactions on economic consequences.
3. Country level factors that impact on performance and disclosure and how these relate to the results of multi-country studies and the underlying theoretical perspectives.
4. Governance aspects of sustainability and how corporate governance influence both sustainability reporting and performance.
5. The influence of the integrated reporting initiative on sustainability reporting.
6. Carbon and water accounting and the implications for sustainability.
7. Remediation obligations for contaminated sites and the impacts for sustainability reporting.
We are confident that more and more accounting researchers will take up the challenge of researching these (and other) fascinating sustainability accounting topics. We are also calling for collaboration (or interdisciplinary approaches) with disciplines such as the environmental sciences, geography, and engineering to address true sustainability from new and creative perspectives.
Charl de Villiers and Chris van Staden
Guest Editors
References
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