Green Accounting

Journal of

J. of Acc. Ed. 24 (2006) 35–66

www.elsevier.com/locate/jaccedu

AccountingEducation

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 reading assignment for a principles or intermediate account-ing 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 allo-cating precious class time to environmental reporting, and (2) a much fuller exposition for studentsof 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 account-ing and reporting into their courses without the need for extensive advance preparation.� 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, andimpending ecological disaster and despite a spate of literature suggesting how educationcan focus accountancy’s contribution to solutions, forward progress toward changing cor-porate 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

0748-5751/$ - see front matter � 2006 Elsevier Ltd. All rights reserved.

doi:10.1016/j.jaccedu.2006.04.001

q We define ‘‘green accounting’’ as both an awareness of environmental issues on the part of business enterprisesand the forthright disclosure, either in annual or stand-alone reports, of corporate performance in areas suggestedby these issues.

* Corresponding author. Tel.: +1 216 397 4443.E-mail addresses: [email protected] (R.K. Fleischman), [email protected] (K. Schuele).

1 Tel.: +1 216 397 4606.

mailto:[email protected]

mailto:[email protected]

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

incorporating environmental accounting (EA)2 across the curriculum (Gray, Collison,French, McPhail, & Stevenson, 2001; Sefcik, Suderstrom, & Stinson, 1997), to electivecourses specific to the subject (Mathews, 2001; Grinnell & Hunt, 2000), to substantialcomponents of a theory course (Gordon, 1996, 1998). Currently, accounting studentsreceive little or no exposure to EA issues in most institutions of higher learning aroundthe globe (Gray et al., 2001). This article urges and provides a primer for a modest intro-duction to EA for undergraduate accounting students.

This article is in two parts – an introduction for educators and a primer on greenaccounting for classroom use. The educators’ introduction includes an overview of the rec-ommendations of governmental and professional societies with respect to the inclusion ofEA in accounting education. Additionally, we examine the academic research that hasbeen 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 aresource that affords instructors an opportunity to incorporate EA into their courses. Min-imally, the primer provides students a significant, collateral reading assignment. There arealso questions in Appendix B that may serve as the basis for in-class discussion and/orshort writing assignments. Finally, the references that are provided, both to publishedmaterials and to internet sources, could support more extensive student research papersand projects.

While the education requirements for entry into the accounting profession, the proac-tivity of government in promoting environmental awareness, and the acceptability of envi-ronmental research on the part of accounting faculty vary widely between the US and theworld at-large, the end result is, unfortunately, the same. Accounting education has notsuccessfully communicated the message to students entering the profession, either as pub-lic or managerial accountants, that environmentalism is an ethical issue which requiresthem to consider the interface between the public interest and the well-being of the cli-ents/stockholders they serve. Moreover, in the event that accounting professionals becomemore involved with environmental reporting, it will be necessary for the higher educationsystem to begin the processes of creating a greater awareness of the issues and the addi-tional expertise that may be required.

1.1. Environmentalism and education

Governments in Europe have encouraged attention to environmentalism through theeducation process. In 2002, the European Commission (EC) established the EuropeanMulti-Stakeholder Forum on Corporate Social Responsibility (CSR) (hereafter, theForum). The Forum was charged with promoting CSR and was asked to submit by sum-mer 2004 a report on its work, including a discussion of its conclusions and recommenda-tions. The Forum adopted the EC’s definition of CSR, ‘‘a concept whereby companiesintegrate social and environmental concerns in their business operations and in their inter-actions with their stakeholders . . . ’’ In its final report, issued in June 2004, the Forum(2004, p. 14) noted, ‘‘business schools, universities and other education institutions havean 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.

R.K. Fleischman, K. Schuele / J. of Acc. Ed. 24 (2006) 35–66 37

egies . . . they need to help future managers and employees improve their capacities tocoherently approach CSR’’, and recommended that ‘‘CSR and related topics be mains-treamed into traditional courses, in the curricula of future managers’’. While CSR is abroader, more comprehensive concept than EA, the inclusion of EA in curricula wouldbe a first step toward providing the requisite educational background called for in theForum recommendations.

A call for the inclusion of EA in business school curricula was also contained in a 2004PricewaterhouseCoopers study contracted by the EC to determine the degree to whichcompanies’ annual reports reflected the EC’s recommendations on the inclusion of envi-ronmental issues. The study included surveys of standard setters and national authoritiesand interviews with stakeholders in member states. The results suggested the need forsufficient knowledge about the environment on the part of corporate management, financedepartments, and accountants. A ‘‘multidisciplinary integration in education so thatenvironmental issues are taught at Business Schools’’ was proposed (PwC, 2004, p. 20).

The British government was even more proactive with the promulgation in 1993 of itsposition paper, ‘‘Environmental Responsibility: An Agenda for Further and Higher Edu-cation’’, commonly referred to as the Toyne Report. It was provided that ‘‘every Furtherand Higher Education institution should adopt and implement an appropriately timet-abled and prioritized strategy for the development of environmental education, and alsoa wider strategy for the improvement of all aspects of its environmental performance asan institution’’ (CUSU, 2005, p. 1). The HE 22 project (‘‘Greening Higher Education’’)of 1998 extended this initiative to the professions (Gray et al., 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 ‘pri-vate cost.’ The result is that many social costs in the form of polluted air, water, andsoil, attitudinal views which prevent cooperative effort, and a host of ecological dam-ages are not recognized by the accounting process.

This vision saw light of day in 1986 with the publication of the Bedford Report, FutureAccounting Education: Preparing for the Expanding Profession, by a joint committee ofthe American Accounting Association (AAA) and the American Institute of Certified Pub-lic Accountants (AICPA). In a section entitled ‘‘The Expanding Profession’’, the BedfordReport (AICPA, 1988a, 1988b, Part 1, p. 2) observed that the future of the professionwould be characterized by the ‘‘increasingly diverse demands for services’’, which, if notdeveloped and marketed, would allow other professional groups to avail themselves ofthe opportunity. These ideas were seconded two decades later in the recently concludedCPA Vision Project, jointly undertaken by the AICPA and the state CPA societies. Its fi-nal report (AICPA CPA Vision Project, 2005, p. 11) identified as one of the highest ratedcore services for the year 2010 and beyond the development of ‘‘new, non-traditionalskills, competencies, and services’’.

The AICPA (1988a, 1988b, p. 10), in two pamphlets addressing the educational require-ments 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 theeducation process. Furthermore, under the heading of the legal and social environment ofbusiness, the AICPA allowed that ‘‘attention should be given to social forces that affectbusiness, such as consumer activism, environmentalism, organized labor, urban blight,and minority rights’’ (AICPA, 1992, p. 8). While these initiatives of past decades would


suggest a greater inclusion of environmental issues in the accounting curriculum, substan-tial 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 fund-ing policies and more eclectic doctoral programs. Critical scholars have greater standingoutside 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 underscoresa moral responsibility of practicing accountants to become engaged in the movement.

The education literature stresses the point that critical thinking differentiates a course inEA from the more technically oriented offerings in the curriculum (Gray & Collison,2002). Critical scholars have coined colorful jargon to highlight the differences in educa-tional philosophy needed to instruct an EA course as contrasted to a methods coursebased on accounting standards. Mathews (2001, p. 339), as the lead author of a specialissue of Accounting Education dedicated to a discussion of how EA courses should bestructured, argues for an abandonment of highly technical courses based on accountingstandards in favor of a ‘‘deeper learning’’ which demands from students a range of skillsthat 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 differ-ence being critical thought. As far as environmental issues are concerned, Gray and Col-lison 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 suggestedby Paulo Freire in which ‘‘banking’’ education is decried as representative of the tradi-tional approach where professors serve as the fonts of all knowledge (almost in an‘‘oppressive’’, Dickensian sense), while ‘‘dialogic’’ education techniques are supported asnecessary for making EA offerings a ‘‘transformative’’ experience.

Notwithstanding the greater attention paid to environmental issues in accounting edu-cation evident elsewhere as compared to the US, the results are not much different. A num-ber of surveys have been undertaken to identify the reasons for the disengagement of bothstudents and teachers from environmentally related course offerings. Owen, Humphrey,and Lewis (1994) surveyed UK academics, a majority of whom felt that social and envi-ronmental issues should not be taught since they do not constitute a component of a tra-ditional ‘‘core’’ accounting curriculum. Humphrey, Lewis, and Owen (1996) communicatea rosier view since interviews with British professors generated the conclusion that the cov-erage of social and environmental issues enhanced students’ perceptions of corporateresponsibilities. Stevenson’s (2002) survey of UK accounting educators reveals their hesi-tancy 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 thepoint, the time and effort required to prepare for such a course is significantly greater thanpreparing for a more traditional offering. Incentives do not exist to induce professors tomake that commitment.

Survey data have shown that many students in Britain do not select an EA electivebecause it is not seen as beneficial for their career aspirations and because it is perceivedas difficult and unstructured (Collison, Gray, Owen, Sinclair, & Stevenson, 2000; Gray


et al., 2001; Stevenson, 2002). Students who opt for such a course do so because of theethical issues addressed and for other personal reasons, such as the anticipation that thesubject matter will be interesting and thought provoking (Collison et al., 2000). How-ever, as Collison et al. have further measured, students who do not choose the EAoption have a greater conviction about their decision than those who do. Bebbingtonand Thomson (2001) suggest that the issues of faculty and student resistance cannotbe ignored. Similar surveys have not been undertaken in the US where EA coursesare rare since that material is not identified as a subject area to be tested on the CPAexam (Gray et al., 2001).

Bleak as the past has been, the future appears brighter that accounting education maybecome less technically oriented as the profession continues to call for a more diversifiedmenu of skills. The Enron debacle and other similar fiascos necessitate an introspectionthat will heighten the prominence of ethics across the accounting curriculum and the studyof accounting and reporting in a broader business context. This focus alone will augmentthe opportunities for case study, critical thinking, and the honing of communication skills.Within these contexts, as well as the prospective dangers from global warming, ‘‘greenaccounting’’ may become more favored within the accounting academic community.

Stevenson’s (2002) survey suggests that accounting educators feel that their willingnessto teach environmentalism is impeded because students are not made aware of environ-mental issues early in their studies. Were this earlier exposure to EA to occur, the chancesthat students would later select an appropriate elective to investigate these issues in greaterdepth might be enhanced.

The ‘‘green accounting’’ primer included in this article, as well as the bulk of the envi-ronmental literature, covers a wide gamut of topics including past and present efforts tofoster environmental awareness and compliance. We will be making arguments in supportof the contention that environmental reporting is good business as well as providing somebasic accounting techniques that practitioners would need to know if involved in EAengagements or reporting. However, our bottom-line intent is to try to convince tomor-row’s practitioners (the Y generation) that accountants have compelling moral responsibil-ities to deal proactively with environmental issues.

1.3. Classroom testing

This ‘‘green accounting’’ primer was tested in seven classes (four sections of accountingprinciples 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 dedi-cated to discussion. Instructors assigned the questions found at the end of the primer toindividual 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 administeredafter the students had read the primer, but before class discussion of the material (hereaf-ter referred to as the ‘‘after reading’’ survey). This instrument was designed to measure anychange in the students’ awareness of and concern for environmental issues, and their per-ceptions of the primer’s value added. A third survey was administered after the class dis-cussion (hereafter referred to as the ‘‘after discussion’’ survey) to measure any additionalchange in the students’ awareness of and concern for environmental issues. A total of 164

Table 1Students’ 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 implications of environmentalism

Understandablea 2.34Interestingb 2.66

The implications of environmentalism for accountants

Understandable 2.31Interesting 2.62

The history of past environmental efforts


The case that environmentalism is good for business


To what degree did the class discussion further enhance your understanding of the following issues?c

The moral implications of environmentalism 2.20The implications of environmentalism for accountants 2.26The history of past environmental efforts 2.66The case that environmentalism is good for business 2.28

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


students completed all three surveys, 92 students from the accounting principles I sectionsand 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 issuesin 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 inhigh school only, 32 in college only, and 26 in both high school and college. Notwithstandingthe 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’sunderstandability and interest, while the after discussion survey attempted to measurethe extent to which class discussion enhanced student understanding of the various issuesaddressed 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 readingunderstandable (1) or not understandable (5) and interesting (1) or not interesting (5). Ingeneral, the students found the information in the primer on each of several identified top-ics 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 oneach successive survey. The numbering system ensured confidentiality for survey respondents but allowed for dataanalysis comparing responses by a particular student across the three successive surveys. A small number ofstudents did not complete all three surveys; these were not included in the results.


The after reading and after discussion surveys included questions designed to measurestudent perceptions of the value of assigning the primer and using class time for discussionof EA. The after reading survey asked students to rate the value of the primer on a one-to-five continuum (1 = valuable, 5 = not valuable). The mean rating was 2.20, with only7.3% of the students indicating a 4 or 5 on the rating scale.

Each of the three surveys contained identical Likert-scaled items designed to measurestudent awareness of and concern for environmental issues, and student opinion on theneed for and chance of various parties taking action on these issues. The scale for eachof these survey items ranged from one to five, with one representing the positive end ofthe scale. Table 2 contains the results of these surveyed items. The first column of Table

Table 2Students’ 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 Afterreading

Afterdiscussion

Beforeto afterreading

After readingto afterdiscussion

Beforeto afterdiscussion

How would you rate yourawareness of environmentalconcerns (pollution of air andwater, global warming, acidrain, toxic waste)?b

3.17 2.68 2.19 �0.49 �0.49 �0.98

How would you rate yourpersonal concern about theseissues?c

2.80 2.56 2.15 �0.24 �0.41 �0.65

Do you feel young people of yourgeneration are more aware of/concerned aboutenvironmental issues?d

3.42 2.65 2.27 �0.77 �0.38 �1.15

Do you believe that environmental action should be mandatory ethically fore

Every individual 2.66 2.31 2.10 �0.35 �0.21 �0.56Business 1.85 1.67 1.59 �0.18 �0.08a �0.26Public accountants 2.65 2.16 1.97 �0.49 �0.19 �0.68Management accountants 2.54 2.02 1.80 �0.52 �0.22 �0.74Governments 1.40 1.30 1.22 �0.10a �0.08a �0.18

How would you rate the chances of the following institutions to achieve a betterment of environmentalconditionsf

Accountants 3.15 2.48 2.26 �0.67 �0.22 �0.89Big business 2.50 2.18 1.99 �0.32 �0.19 �0.51US government (EPA) 1.76 1.56 1.42 �0.20 �0.14 �0.34International organizations(UN)

2.26 1.92 1.85 �0.34 0.07a �0.41

Private agencies (Greenpeace) 2.03 1.87 1.77 �0.16 �0.10a �0.26

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


2 details the questions asked. Columns 2–4 report the mean responses to these questionsbefore reading, after reading but before class discussion, and after class discussion, respec-tively. Columns 5–7 chart the mean change in the student responses across the threesurveys.

The results reported in Table 2 indicate that, overall, both the reading and class discus-sion increased students’ awareness of and concern for environmental issues, and strength-ened their beliefs that the surveyed constituencies should be active in the environmentalarena with some chance of making a difference. After reading the primer and participatingin the class discussion, students reported a statistically significant higher level of belief thatenvironmental action should be mandatory ethically for all the surveyed constituencies. Inaddition, students rated the chance of all surveyed constituencies achieving a betterment ofenvironmental conditions at a statistically significant higher level after the reading and dis-cussion. The most substantial changes in means for these two sections of the surveys werefor accountants. Prior to reading the primer, the students, on average, believed that publicand management accountants, as well as individuals, were far less responsible for environ-mental action than are business and government. The largest increase in mean score asso-ciated with the issue of whether environmental action should be ethically mandatoryspecifically identified accountants. Prior to reading the primer, students, on average, didnot believe accountants could play a significant role in the betterment of environmentalconditions. After completing the reading and discussion, however, the largest increasein the mean rating related to the perceived chances that accountants could contribute tothe betterment of environmental conditions.

The after reading and after discussion surveys also included sections for the students tosupply written comments on their perceptions on having the article assigned and the use ofclass time for discussion of environmental accounting, respectively. Overall, most studentsmade very favorable comments after reading and after discussion. After reading, 53% ofrespondents reported that the primer was interesting and/or informative, and 44% of theintermediate and cost accounting students indicated that the topic was relevant to thecourse. Nine students indicated some level of concern that the topic may not be relevantfor an accounting class; nine students in the accounting principles classes indicated com-prehension difficulties; and five students thought the topic should be included in a moreadvanced accounting class (rather than principles). After discussion, many students indi-cated that the discussion of the primer was informative (50% of respondents) and anappropriate 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 corpo-rations to participate proactively in cleaning and sustaining the environment and, more-over, to describe fully and forthrightly their environmental activities in either theirannual reports or in stand-alone environmental disclosures. Gray (1993) characterizes par-ticipants 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 exceedsthe number of students responding to the survey.


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 UnitedNations World Commission on Environment and Development (1987, p. 8) in a publica-tion that has become popularly known as the Brundtland Report. Sustainable develop-ment ‘‘meets the needs of the present without compromising the ability of futuregenerations to meet their own needs’’. In other words, businesses operating today mustleave the world no worse off environmentally than when they began operations.

Milne (1996) provides an excellent description of various points of environmental com-mitment and activism that run the gamut from ‘‘exploitationism’’ to ‘‘extentionist preser-vationism’’. The first step is self-evident; the last is defined as a protection of the interestsof nature for itself, transcending human values. With environmental researchers and schol-ars coming from so many different directions, it is difficult to avoid confusion about thestate 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 juniorpartner to the other themes. The stress was on the obligation of business enterprises toprovide 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 businesscan demonstrate a higher morality than its competitors and thereby gain favor with inves-tors and consumers.

By the 1990s, advances had been made on many health and safety issues, and environ-mentalism 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-linenet income as a measure of success to also include information about social and environ-mental performance. Elkington (1998) wrote in Cannibals without Forks that TBLmeasured economic prosperity, environmental quality, and social justice.

TBL is a buzzword in critical literature today. Critical scholars are typically those whoseagenda is to expose societal wrongs and to protest proactively the status quo. In terms ofenvironmentalism, the issue being fought for is ‘‘sustainability’’. However, achieving sus-tainability is very far away in the future; many preliminary steps have to be taken beforethis radical, environmental outcome becomes even a remote possibility. Consequently, thisprimer will focus on meaningful environmental reporting (ER), which, although a muchlighter shade of green, is currently a more attainable ambition than sustainability. For ashort 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 environmentalinformation, either in stand-alone reports or as components of annual reports. Very fewreports of either variety are subject to outside verification of any kind. Researchers havehypothesized that the motivation for voluntary ER by businesses has run the gamut fromself-serving to environmentally responsible. Without reporting standards and outside val-idation, it is difficult, if not impossible, to gauge the accuracy of these reports or even thecriteria used in their preparation (Deegan, 2002; Harte & Owen, 1991; Larrinaga-Gonzales& Bebbington, 2001; Larsen, 2000; Milne, 1996). Thus, in addition to more traditionalroles of gathering environmental data and preparing reports, accountants have the


opportunity to move ER forward by lobbying for the articulation of reporting standardsand by developing the expertise necessary to serve as external auditors on reports preparedaccording to established standards.

Public and managerial accountants have a role to play in educating corporate manage-ment with regard to environmental responsibility. Accountants are in a position to helpdevelop 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 account-ing literature and environmentalism. Many articles have also been written with a greatermicro-level attention to specific components of environmentalism. Some of these articleswill be discussed later in this primer and are detailed by topical area in Appendix D. Stu-dents 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 toreport on their actions. Numerous constituencies have called for entities to provide stake-holders with information to enable an evaluation of their environmental (and social) per-formance. The level and breadth of business reporting on environmental matters hasincreased dramatically over the past 20 years or so as a result of governmental regulations,accounting standard setting, and voluntary reporting. Today, external reporting on envi-ronmental performance occurs primarily through Pollution Release and Transfer Regis-ters (PRTR), as components of traditional financial reports or in stand-alone, corporateenvironmental reports. The major milestones impacting the current state of externalreporting on environmental performance are presented on a timeline that appears asFig. 1.

2.2.1. Pollution release and transfer registersA 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 report-ing entities. The development of national PRTRs has resulted from governmental regula-tion. PRTR reporting requirements are not uniform in that the system is based on theneeds and reporting environment of each particular country. National databases are com-piled from annual reports submitted by companies that have released and/or transportedany of the designated chemicals (OECD, 2006).

The US was the first country to create a PRTR, and its system, the Toxic ReleaseInventory (TRI), is currently the most sophisticated and broadest in existence. In1986, following the Bhopal disaster in India, the Emergency Planning and CommunityRight-to-Know Act charged the Environmental Protection Agency (EPA) and stateagencies to collect annual information from businesses and federal facilities on therelease and transfer of certain toxic chemicals and to make those data available tothe public. Reporting is currently required for approximately 650 chemicals. The TRIhas provided communities with information to enable them to hold local businessesaccountable for their environmental performance related to chemical release andtransfers.

First ISO 14000 Standard issued

Select company sites in Denmark required to issue

"Green Account"

Companies in Sweden required to include environmental disclosures

in annual report

1980Superfund program enacted

1969EPA

established

1994

1995

Companies in Spain required to include

environmental disclosures in annual report

1987SustainAbility

formed

1988

1997

19981986

Toxic Release Inventory

(TRI) program

established

1989Select company sites in

Sweden required to issue environmental report

1993SAB 92 issued

EMAS program inaugurated

GRI formed

2000

2002

Companies in Denmark and Portugal required to include environmental

disclosures in annual report

CERES formed

Term "triple bottom line"

coined

1996

SOP 96-1 issued

Joint Task Force on Sustainability Reporting

formed

2003

2004

European PRTR

created

UK Reporting Standard 1 exposure draft issued

2005

European Pollutant Emission Register created

2001Companies in France

required to include environmental disclosures in

annual report

EC recommendation on environmental

disclosures in annual reports

issued

EC Modernisation

Directive effective

SOP 96-1 issued

AA1000 Framework launched by

AccountAbility

Selected company sites in Netherlands required to produce environmental

report Companies in Finland required to include environ-

mental disclosures in annual report

1999

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


The development of PRTRs internationally has been slow. An international body, theOrganization for Economic Co-operation and Development (OECD), has attempted toconvince its member countries to develop PRTR systems consistent with the guidancemanual it has developed. Currently, only 13 of 30 OECD member countries (Australia,Canada, Denmark, France, Ireland, Japan, Korea, The Netherlands, Norway, the SlovakRepublic, Switzerland, the UK, and the US) have PRTR systems in place that conform toOECD guidelines (OECD, 2006).

As a first step toward the development of a European-wide PRTR, the EC in 2000created the European Pollutant Emission Register (EPER) which required reportingevery three years on the release of some 50 chemicals into the air and water by com-panies in member states operating in one of 56 industries. The first reporting cycle forthe EPER occurred in 2003, disclosing 2001 emissions. In October 2004, the EC votedto replace the EPER with a European PRTR that would require, by 2007, annualreporting by 65 industries on the release of more than 90 substances to the air, water,or land.

2.2.2. Stand-alone corporate reportsCurrently, 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 astand-alone report at the site level. Since 1996, companies in Denmark with significantenvironmental impact have been required to publish a ‘‘green account’’, detailing signifi-cant consumption of energy, water, and raw materials. Also, the types and quantities of


pollutants discharged into the air, water, or soil, as well as those included in products orwaste, are to be disclosed.

While there is no requirement that the ‘‘green account’’ be subject to attest, the regula-tions were amended in 2001 to include the requirement that the report contain a statementby local authorities indicating whether the information in the green account is consistentwith knowledge possessed by that authority, based on its issuance of permits and controlof the work environment. In legislation introduced in 1989 in Sweden, all operations sitesthat require special permits due to the presence of environmental hazards must submit anannual environmental report to the authorities. The Netherlands, in 1999, began requiringthat companies with substantial environmental impacts produce environmental reports forboth the government and public on identified operating sites. The contents of the govern-ment report, which are verified by governmental authorities, are specified and includeinformation on emissions, soil pollution, soil clean up, and the company’s environmentalpolicy. 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 envi-ronmental performance information has been increasing as has the diversity of the types ofreports 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 thelevel of reporting health, safety, social, and/or environmental issues by the top 250 com-panies 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 sometype of stand-alone corporate report. As seen in Table 3, most companies prepared anHSE report. Only 27% and 29% of the top 100 and GFT 250 reports, respectively, hadthird-party verification.

2.2.3. Mandated ER within traditional annual reports

Information included in traditional, annual financial reports is mandated by nationalgovernments, accounting standard-setting bodies, and, for public companies, stock exchangeregulatory agencies. In the realm of environmental disclosure, intervention by govern-mental 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 coun-tries worldwide, one or more regulating bodies have issued new rules or amended existingones requiring some level of ER in the annual report. Nearly all of this additional disclo-sure has focused on the impact of environmental issues on a company’s financial resultsand position, requiring separate reporting on such items as expenditures for pollutionprevention, clean up, and fines; actual and contingent liabilities for environmental clean

Table 3Type of stand-alone corporate sustainability reports

Type of report GFT 250 Top 100a

HSE reports 73% 65%Sustainability reports 14 12Environmental and social reports 10 11Social reports 3 12

Source. KPMG (2002).a Top 100 companies from 19 countries.


ups from past operations; and assets related to the environment. In addition, some coun-tries also mandate disclosures on resource consumption and pollutant emissions in annualreports.

In 1980, the EPA5 spearheaded the passage of the Comprehensive EnvironmentalResponse, Compensation, and Liability Act (CERCLA), commonly known as Superfund,establishing a program to identify and clean up sites where hazardous substances had beenor might be released into the environment.6 One of the steps associated with cleaning up asite 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 State-ment of Position (SOP) 96-1, issued by the AICPA in 1996, specifically address the finan-cial reporting issues associated with Superfund clean up. These directives resulted fromlarge disparities in the timing of the recognition of liabilities for environmental remedia-tion 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 mustaccrue a liability if it is reasonably estimable. The liability should include the direct cost ofremediation efforts as well as the cost of compensation and benefits of employees who willdevote significant time to the project. The amount of the liability can be discounted for thetime value of money if the timing of the payments can be reliably estimated. Potentialrecoveries cannot be used to reduce the liability but can be recognized as assets if theyare deemed probable. Expenses related to the remediation should appear in the operatingsection of the income statement. If other PRPs have been identified and the companybelieves these other PRPs will be unable to pay their portion of the clean up costs, thecompany must include these amounts in its liability. Thus, throughout the remediationprocess, the company must continually monitor the financial health of other PRPs.

In addition, for publicly-traded companies in the US, reporting related to environmen-tal issues within a company’s financial reports is also required by Rule S-K, Items 103 and303 of the Securities Act of 1933. Item 103 mandates that companies disclose either pend-ing proceedings or those known to be contemplated by governmental authorities related toenvironmental issues (SEC, 2003). Item 303 requires a publicly-traded company to disclosein the management discussion and analysis section of its annual report instances ‘‘where atrend, demand, commitment, event or uncertainty is both presently known to managementand reasonable likely to have a material effect on the registrant’s financial condition orresults of operation’’ (SEC, 1989, section B, para 5).

Even with these accounting rules in place, inconsistencies in reporting and disclosure byUS firms still exist. For example, in a 1998 study, the EPA’s Office of Enforcement andCompliance Assurance found that 74% of companies facing potential environmental finesin excess of $100,000 do not make the necessary disclosures related to these items in theirSEC 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 ofdepartments, 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 harmfuleffects of pollution and on methods to control it, and to advise the president on new policies for the protection ofthe environment (US EPA, 2002b).

6 In 1986, CERCLA was amended by the Superfund Amendments and Reauthorization Act (SARA).


reports filed with the SEC, the US Government Accountability Office (GAO) recom-mended that the SEC take steps to track more efficiently the results of its reviews of com-panies’ filings to evaluate current environmental disclosures and to explore superior waysto utilize EPA data for their improvement.

Given this failure to conform to existing accounting rules, what are the possibilities thataccounting standard-setting bodies will endeavor to insure greater compliance? Accordingto 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, duringthe 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 potentialliabilities associated with environmental clean ups, and the AICPA had already embarkedon 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 includedpractitioners who were experts in the area. The FASB reviewed the AICPA recommenda-tion 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 thearea of environmentalism. The Joint Task Force on Sustainability Reporting of theAICPA and the Canadian Institute of Chartered Accountants (CICA) was formed in2002 to explore issues related to sustainability reporting. The initial focus of the task forcewas on greenhouse gas (GHG) emissions, and in late 2003, SOP 03-2, ‘‘Attest Engage-ments on Greenhouse Gas Emissions Information’’, appeared. SOP 03-2 provides CPAswith guidance for attest engagements examining and reporting on (1) GHG emissions dur-ing a compliance year, (2) baseline GHG emissions, and/or (3) GHG emissions reductionsrecorded in a registry or involved in a trade or credit. This guidance notes that an attestengagement on GHG emissions requires technical knowledge in a specialized field otherthan accounting and auditing. While the CPA may use the work of a specialist with therequisite specialized knowledge, the CPA must possess sufficient knowledge to evaluatethe specialist’s work. According to Beth Schneider, chair of the joint task force, any poten-tial SOP on attestation of sustainability reporting lies in the more distant future, if andwhen suitable criteria for sustainability reporting exist.8

In 1989, Norway became the first European nation to enact legislation requiring disclo-sure of environmental matters in annual reports. Currently, a company that is subject tothe Annual Accounts Act is required to include in its directors’ report disclosures on theenvironmental impact of the company’s operations and the use and disposal of its prod-ucts. Additionally, firms are to report those measures in place to prevent or reduce nega-tive environmental impact, as well as their energy and raw materials usage.

In 1996, based on a recommendation by a committee of the Swedish government, theSwedish Accounting Act was amended to include reporting on environmental impact bycompanies whose operations pose serious environmental threats. Beginning in 1998, allSpanish companies had to include specific environmental information in the footnotesto their annual reports. The environmental disclosures included accounting policies relatedto 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 histhoughts to us on this subject via e-mail.

8 The authors are grateful to Beth Schneider who kept us informed via telephone communication of theprogress of the joint committee throughout 2003 and 2004.


current expenditures on projects related to environmental protection and energy conserva-tion; provisions to cover risks and expenses associated with environmental action; andenvironmental contingent liabilities. In a study examining the 1999 annual reports of 70companies, Larrinaga, Carrasco, Correa, Llena, and Moneva (2002) found that nearly80% of the companies did not include any of the mandatory disclosures, and that thosewhich did disclose, most frequently reported only on the environmental provisions.

In May 2001, the EC published a recommendation encouraging member states to pro-mote increased levels of environmental disclosures within conventional annual reports.The recommendation addressed issues of recognition and measurement of environmentalliabilities, assets, expenses, and contingent liabilities. Disclosures regarding the extent towhich environmental protection formed an integral part of a company’s policies and itsenvironmental protection improvements, resource consumption, and emissions were alsoencouraged. A 2004 study to assess the extent of implementation of the EC recommenda-tion concludes that legislation in most member countries wholly or partially met the rec-ognition and measurement portion of the recommendation (PwC, 2004). By contrast, thestudy found that only Denmark, Finland, France, and Portugal had introduced legislationrelated to the additional disclosure portion of the recommendation. (As noted above, Nor-way, Sweden, and Spain had legislation in place requiring some disclosure beyond recog-nition 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 manage-ment review section a description of the company’s impact on the environment and mea-sures undertaken for the prevention, reduction, or remediation of environmental damage.The exact form and nature of the disclosures are intentionally vague with the expectationthat a company’s management, in its assessment of the need for and extent of environmen-tal disclosures, will take into consideration that Danish annual reports serve the publicinterest, as well as investor interests. Further, beginning in 2004, companies must disclosecertain non-financial information including information related to environmental mattersso 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 rec-ommendation was issued in 2002 by the standard-setting body in Portugal. In Finland in2003 similarly, a general statement on the treatment of environmental issues in a com-pany’s financial statements was issued in response to the EC recommendation. The state-ment applies to all companies whose financial position and results are impacted byenvironmental issues (PwC, 2004).

In 2001, as part of a law passed by the French legislature to update France’s companylaw framework, corporations listed on the premier marche are required to include disclo-sures on environmental issues, effective 2002. The required disclosures include ‘‘emissionsto air, water and ground; consumption of energy, water, and raw materials; implementa-tion of management systems; and compliance with mainstream standards of practice orcertification’’ (Arese, 2002).

In May 2005, the UK Accounting Standards Board issued Reporting Standard 1: Oper-ating and Financial Review (OFR). The standard requires the preparation by companymanagement of an OFR as part of its annual report and accounts beginning with fiscalyears ending on or after April 1, 2005. The standard requires the inclusion of informationabout environmental matters where appropriate. The implementation guide accompanying


the standard acknowledges that the appropriate level of disclosure on environmental mat-ters is industry-specific, but suggests that, minimally, all companies face issues associatedwith 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 accor-dance with international accounting standards. The Directive notes that the annual reportmust include a ‘‘fair review’’ of the business, and that this review should include, whereappropriate, an analysis of environmental aspects, consistent with the EC’s 2001 recom-mendation (discussed above).

Australia also has recently passed legislation related to mandatory environmentalreporting within annual reports. Currently, all companies listed on the Australian StockExchange that are subject to environmental regulation are required by law to disclose theircompliance 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 inNew Zealand.

In summary, the level of mandatory environmental disclosures in traditional annualreports has increased dramatically in the past ten years. In the US, disclosure requirementsfocus primarily on the impact of environmental issues on the financial results and positionof the company, while regulations in many European countries and those mandated by theEU require disclosure on resource consumption and environmental policy in addition tothe financial disclosures.

2.2.4. Non-governmental organizations and ER initiatives

A number of non-governmental and, in some cases, member-based organizations andinitiatives exist worldwide that require or encourage ER by companies. The Coalitionfor Environmentally Responsible Economies (CERES) is a US-based coalition, formedin 1988, whose goal is to provide a forum for discussion and action on environmentalissues. The group includes environmental organizations, socially responsible investorsand analysts, public interest and community groups, and over 60 companies (including13 Fortune 500 firms) that have endorsed the ‘‘CERES Principles’’, a ten-point code ofconduct on environmentally responsible behavior. Companies endorsing these principlessubmit an annual report that adheres to the CERES Report Form, detailing their progresstoward 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 availableonly 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 environmen-tal audit, and prepare a statement of environmental performance outlining its progress onpreviously established objectives. The review, EMS, audit, and statement must beapproved by an accredited EMAS verifier (EUROPA, 2003).

In 1996, the International Organization for Standardization (IOS) issued the first of theISO 14000 family of standards. The IOS is a worldwide federation that establishes stan-dards to facilitate the international exchange of goods and services. In 1987, the IOS issuedISO 9000, a standard primarily concerned with quality management. ISO 9000 compliance


has become a prerequisite worldwide for establishing business relationships. ISO 14000 isprimarily concerned with environmental management, with ISO 14001 addressing envi-ronment management systems specifically. It remains to be seen whether ISO 14000 stan-dards will become as well-established for business as is ISO 9000.

AccountAbility, founded in 1996, is an international, member-based organization thatfocuses on providing support to encourage social responsibility. In 1999, the organizationlaunched the AA1000 Framework, which provides guidance on engaging stakeholders inthe process of planning, accounting, auditing, and reporting on sustainability issues. Build-ing on the AA1000 Framework and recognizing the need for assurance related to social per-formance disclosures to improve credibility, AccountAbility issued the AA1000SAssurance Standards in 2003. The standards, the first of their kind worldwide, requireassurance providers to consider to what extent the reporting entity demonstrates compli-ance 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 thisstage in the development of ER may be premature (Burritt, 2002; Nyquist, 2003). Theyargue 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 thatthere are so many stakeholder groups that the information needs are more diverse. In thecurrent environment where most ER is voluntary, companies are able to experiment withformat and content with a goal of providing information to satisfy the greatest number ofstakeholders. Further, multiple reporting formats allow for the identification of best prac-tices 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 com-panies worldwide has reached a level where standardization is necessary in order for thesereports to be credible and comparable. If ER is voluntary and companies are permitted toselect what they report, some companies may opt to report only the ‘‘good news’’, andfirms that present the good with the bad will be disadvantaged. The introduction of stan-dards 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 aninternational level, however, tends to be a slow process as evidenced by the frustrations ofthe International Accounting Standards Board in its attempts to achieve agreement on itsfinancial reporting standards.

The initial establishment of financial accounting standards began at a time when mostbusiness activities did not cross national boundaries. Thus, it was natural that accountingstandards were highly country-specific. The business environment has changed dramati-cally, and most companies now participate in the global marketplace. As a result, interna-tional financial accounting standards are being developed, albeit slowly, and, to somedegree, are being accepted worldwide. Is it unrealistic to hope that similar possibilitiesfor 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 reg-ulatory enactments and by the limited scope of standards provided by professional


accounting bodies. It is not difficult to understand why. Many managers perceive that vol-untary expenditures made on environmental conservation and ER beyond that which ismandatory will not be cost-beneficial and will leave environmentally responsible firmsat a competitive disadvantage (Epstein & Birchard, 1999). However, this perception isreflective of a short-term, financial accounting orientation. Admittedly, the price tag forvoluntary action, irrespective of its positioning on an environmental continuum, is highand would cause net income to suffer accordingly. In today’s world, with stockholderfocus 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 pre-serving the environment, whether mandated by existing regulation or anticipated for thefuture, should be allocated to current products if firms hope to achieve accurate pricingand product line decision making (Epstein, 1996).

The attitudes of current and potential stockholders are central in a business environ-ment where the ethos is to place stockholders’ interests above societal needs. Burrittand Welch (1997, p. 542), citing Gray, Bebbington, and Walters (1993), speak of the ‘‘awe-some indifference’’ of financial markets to environmental issues. Some academic research,however, suggests that the magnitude of stockholder apathy may be overstated. Surveydata show that investors want information on firms’ environmental performance, eventhough it does not impact their decision making to the extent that traditional financialmeasures do (Deegan & Rankin, 1997; Hughes, Anderson, & Golden, 2001). Solomon(2000) demonstrates with empirical testing that stakeholders such as employees, legisla-tors, and regulators are more concerned about environmental issues than shareholdersand potential investors.

There are investors, however, whose investment dollars go into the securities of envi-ronmentally aware companies. Sometimes these investors are participants in investmentclubs (e.g., church groups), pension plans, and mutual funds whose investment deci-sions are linked to corporate positions on social and environmental issues. Epsteinand Birchard (1999) note that the number of mutual funds with social and/or environ-mental criteria in their investment strategies tripled from 1995 to 1997. One potent,international amalgamation of perceived ethical companies is the Dow Jones Sustain-ability Group Index (DJSGI), a group of 2,000 companies, in 64 industries, from 34countries, collectively listed since 1999. As Knoepfel (2001) points out, the DJSGIhas 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 aware-ness of its members or whether ethical behavior is a function of better managed com-panies that would attract investment irrespective of their individual commitment tosocial issues.

The Alliance for Environmental Innovations concludes, after reviewing 70 researchstudies, that companies which outperform their competition environmentally also did soin terms of stock market returns (Meyer, 2000). The reciprocal (e.g., environmentallystrong firms underperforming their competition) was never found to be true. It is wellknown that environmental disasters can precipitate substantial losses of capitalizationfor their perpetrators. Examples include the stock market performance of Exxon in theaftermath of the Exxon Valdez oil spill and Union Carbide following the Bhopal, Indiadisaster. Firms with low pollution control rankings typically suffer negative returns theday this information becomes publicly available (Deegan & Rankin, 1997). Meanwhile,Thomas (2001) finds excess positive stock market returns for firms upon the adoption


of an environmental policy and significantly negative returns for companies upon theannouncement of their prosecution by environmental agencies.

Robert Jonardi, formerly the US Director of Environmental Assurance Services forDeloitte & Touche LLP, informed us of his knowledge that one prominent Fortune500 company with a solid reputation for social and environmental responsibility sawa significant payback in its ability to recruit its most favored candidates for entry-levelpositions on the basis of this reputation. The company recognizes that the current gen-eration of college graduates is environmentally aware and that attracting several of itstop recruits goes a long way toward defraying the costs of doing the ethically rightthing. Meyer (2000) confirms that this company is not alone in its forward thinkingin that environ-mental responsibility pays dividends in the recruitment process.

Ultimately, it might be argued that environmentalism is good for business if stock-holders view it as a proxy for good management. A proactive environmental policy con-notes a management team with a long-term vision and an appreciation for thecomplexities of accurate product costing. It also reflects good risk management whichcan 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 thatbring their pollution under control through the reduction of waste and energy usage.Effective environmental awareness and reporting can also contribute to reputation build-ing, although this feature can cut both ways if the firm uses its reporting to legitimizequestionable practices. In these post-Enron days, ER serves as a mechanism by whicha company enhances its visibility, whether it is to stockholders or to less immediatestakeholders, 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 esti-mation, stand-alone reports are mere glossy, propaganda tools; they are too simplisticand devoid of content. Adams et al. (2004, p. 25) second that judgment but do holdout as exceptions those companies (e.g., the chemical industry) that have a ‘‘publiclyobservable environment impact’’. We think that the future of ER can be viewed moreoptimistically as voiced by Medley’s (1997, p. 599) description of how the roles of threebranches of accounting professionals might some day combine to alleviate this disturb-ing situation:

For the financial accountant, the vision is to understand environmental assets, liabil-
ities and contingencies, and to be able to identify and report them accurately, usingsome standardized process. For the management accountant, the vision is a fullunderstanding of all the environmental costs and benefits within an organization,from both an operational and product perspective. This would allow rational deci-sions 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 con-trols, processes and systems, which will enable an auditor to provide a true verifica-tion of environmental accounts.


2.4.1. Public accountancy

While it is true that the volume of ER, both in terms of stand-alone reports and as com-ponents of annual reports, has increased in recent years, public accountancy in the US andmany parts of the world has been only tangentially engaged. In three significant ways, theprofession has failed to maximize its potential for leadership – sufficient expertise to par-ticipate in environmental partnerships remains undeveloped; the attestation to environ-mental reports is still not regarded solely as an accountant’s function; and officialstandards with respect to most ER issues and/or verification engagements continue tobe lacking (Beets & Souther, 1999).

Engineering firms are more directly involved than public accountants in many pro-cesses related to ER. Consulting engineers are needed to advise firms on how to be inconformity with regulations. However, these same engineering firms are more fre-quently preferred for verification because of their greater expertise with the nuts andbolts of environmental compliance, their lower fees, and their need not to conformto any required attestation standards (Beets & Souther, 1999). However, there are verydefinite independence issues involved when engineering firms advise clients as to whatthey need to do to achieve compliance with regulations and then provide assurance thatthey have done so.

The Modernisation Directive of the EU and the OFR standard in the UK (both dis-cussed above) mandate environmental disclosures, albeit unspecified as to content, inannual reports. These annual reports are required to be subjected to attestation by pub-lic accountants. As more standard-setting bodies worldwide require the inclusion ofenvironmental performance information in annual reports, public accountants will needto develop the necessary expertise to audit these disclosures. Further, in the US, therecent GHG emissions SOP provides guidance as to how measurement of emission isto be audited and, as noted above, acknowledges that practitioners must possess spe-cialized knowledge beyond accounting and auditing to participate in these types ofengagements.

The AICPA’s Committee on Assurance Services suggested in its 1997 report thataccountants needed to think outside the box. In recent years, major public accountingfirms have advertised themselves as ‘‘all-purpose business advisors’’. It would seem thatan expansion of operations into ER would be a natural way in which to ‘‘grow’’ the busi-ness. At this point in time, however, even the largest firms do not have sufficient expertiseon staff to respond to a substantial increase in demand either for assurance services in theenvironmental area or for advising clients as to the information systems required to collectER data. The profession has demonstrated in the past (e.g., mergers and acquisitions, lit-igation support) that it is able to move quickly in hiring in the expertise needed to respondto demand. The recent expansion of ER requirements abroad will force global accountingfirms to expand operations in this area. When the demands on US-based public account-ing firms to participate in the Sarbanes-Oxley compliance of their clients diminish, thedevelopment of the required expertise should occur.

An effort to increase public accounting’s share of the ER business would be immeasur-ably enhanced if external verification becomes required as it is with financial statements.However, professional accounting organizations and environmental activist groups aredivided on the issue as to whether such validation should be made mandatory in the firstplace and, if so, the appropriate professionals to provide the service. The Institute of Char-tered Accountants of England and Wales and the AICPA have been supportive, as has the


European Federation of Financial Analysts Societies (1994). However, CERES continuesto be satisfied with an annual self-evaluation from its members, while EMAS is content tolimit external validation to certain specific sites. (See Solomon, 2000 for a fuller discussionof the external validation question.)

Support for external validation is gaining strength among external stakeholders, butmuch 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 thesame time, increasing the volume of voluntary environmental disclosures, in the absenceof standards promulgated by regulatory bodies, could lead to litigation, increased regula-tory 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, financialaccounting firms to develop the expertise needed for environmental assurance. He notedthe following advantages for the task:

� Public accounting is organized into large, multidisciplinary firms which could comfort-ably 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 littlesupport for accountants being the sole providers of ER verification. Were accountants tobe pressed into greater service in ER, it would either be in partnership with engineering/environmental consulting firms or with a wide internal expansion of appropriateexpertise.

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 orderto accomplish the comparability of ER worldwide. Theoretically, at least, internationalstandards would be desirable because current ER varies so markedly from country to coun-try based upon a panoply of factors such as history, geography, political systems, businessand legal environments, structure of the accounting profession, etc. (Buhr & Freedman,2001). Even two countries as seemingly homogeneous as the US and Canada are signifi-cantly different in approach on as basic an issue as which environmental aspects shouldbe disclosed voluntarily and which should be mandatory.

In today’s business climate, where the ethical priorities of environmentalism are not theconsensus, 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 inthe absence of standard specificity is problematic because auditors and clients would needto reach agreement as to verification criteria. Wallage (2000) claims that the situationwould widen the ‘‘expectations gap’’ in that the public would come to rely on the verifica-tion of such a report as a guarantee of ethical behavior, typically far transcending the


auditor’s intent. External validation of an environmental report without defining stan-dards would create an independence dilemma.

2.4.2. Managerial accountancy

Epstein (1996) and Milne (1996) have written extensively about the negative impact ondecision making and product costing when managers fail to take into account environ-mental costs. A first step along the path toward improved ER lies with the education ofmanagerial accountants and an effort on their part to inform upper management ofER’s importance and benefits. Many of the most significant forward strides internationallyin environmental awareness have come in industrial sectors, such as chemicals, paper, andelectronics (Kolk et al., 2001; Krut & Moretz, 2000). To be sure, these sectors are poten-tially the worst environmental polluters, but the development of environmental codesacross international boundaries is reflective of strong managerial associations. Ultimately,however, corporate managers are going to be one of the last groups to buy into environ-mentalism given the current focus on bottom-line economic income and the enhancementof shareholder wealth.

Management accountants, in many instances, can provide a great service to theircompanies if they are able to influence upper management to embrace environmental-ism. While most cost accounting textbooks do not even address environmental issues,Hansen and Mowen (2003) have constructed a model for inducing action. They suggestthe preparation of a report in which costs are presented in four categories – environ-mental prevention costs (those aimed at preventing pollution and waste), environmentaldetection costs (those associated with determining compliance with regulations), envi-ronmental internal failure costs (those incurred in preventing pollution and waste frombeing discharged into the environment), and environmental external failure costs (thoseincurred in cleaning the environment if pollutants are released). This latter cost cate-gory 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 environmen-tal income statement where they are compared to the estimated annual benefits ofexpanded environmental action (‘‘eco-efficiency’’). This document would communicate anumber of vital messages to upper management. First, it would reveal the savings forth-coming from reduced waste, fewer materials required, and less energy utilized. Second, itwould show decision makers that the initial high price tag on prevention could berecouped by the benefits in a reasonably short period of time. Finally, even if managementis not convinced to undertake the investment, either in response to economic or ethicalarguments, it should recognize that environmental costs are so substantial that they mustbe factored into product pricing. For a company with relatively few product lines or ser-vices, an allocation of these costs may be done in the traditional ways, based on directlabor or machine hours. For those with a greater diversity of products, activity-based cost-ing with its greater variety of cost drivers would better differentiate the product lines withrespect to their environmental impacts.

There is one further piece of ammunition available to management accountants tryingto provoke a greater proactivity on environmental issues. In the early 1990s, Kaplan andNorton (1992) articulated the concept of the ‘‘balanced scorecard’’, wherein a company’sperformance is to be measured across four parameters. More recently, Kaplan and Norton


(1996) have introduced environmentalism as a fifth category within the new managerialphilosophy known popularly as ‘‘total quality management’’.

In summary, the advancement of ER qualitatively and quantitatively necessitatespartnering between public and managerial accountants and their participation on envi-ronmental teams with expertise beyond what accountants have traditionally possessed.Laughlin and Varangu (1991) write that accountants cannot hope to do it alone, butmust accept a role as part of a multidisciplinary team that would include engineers, sci-entists, futurists, etc. Krut and Moretz (2000), likewise urging a joint-venturingapproach, cited British Petroleum as an example of one company that retains both amajor public accounting firm for attestation and a consulting firm to solicit feedbackon its environmental performance.

2.5. Some concluding remarks

It is quite likely that accounting’s recognition of its role in making a meaningful con-tribution to environmental solutions may be a generation away. A vision for the futureis one in which accountants and other business leaders embrace environmentalism. Moreenvironmentally aware public accountants will come to influence the managers of clientfirms to accept responsibility for a greater participation in a worldwide clean up. Internalaccountants, working in concert with environmental engineers, will be schooled in themethodologies required for environmental accountability and the statistical techniquesneeded to measure compliance with ER regulations. Corporate boards of directorsand/or audit committees will be staffed by individuals committed to the TBL conceptwhere traditional economic measures coexist with social and environmental consider-ations. The ‘‘balanced score card’’ will come to incorporate measures of environmentalresponsibility.

The times have brought accountants’ ethics into question, a threatening developmentfor a profession whose major product is based on trust. One way in which accountancymay re-establish its reputation is to serve once again as the moral conscience of businessby moving industry in the direction of ethical behavior with respect to the environment.

The contemporary environment in the US creates some interesting possibilities andunanswered questions for ER and accountancy’s role. On the positive side, the public’soutrage at Enron and other fiascos will generate a demand for greater accountabilityand a corresponding insistence that businesses pay more attention to societal needs. Ifso, ER might be viewed as sufficiently important to the public interest and/or society’s def-inition of corporate accountability that the public will demand action. Negatively, theincreased accounting fees associated with Sarbanes-Oxley, coupled with the possibilitythat deeper fraud investigation will be demanded, will exhaust corporate dollars thatmight have been channeled into expanded ER. Likewise, the wide expansion of accountingservices mandated by Sarbanes-Oxley may leave those firms with SEC clients stretchedthin in terms of personnel that expansion into ER assurance is unrealistic, at least inthe 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 theglobe. There exists the opportunity for the accounting profession to demonstrate that itis on top of contemporary issues. It is up to the profession to grab the ball that thisnew opportunity provides and run with it.


Acknowledgements

The authors acknowledge with gratitude the substantial contribution of Robert Jonar-di, formerly with Deloitte & Touche LLP and now founder/principal of Phoenix Environ-mental Strategy, and Beth Schneider, a Director in Quality Assurance with Deloitte &Touche LLP. Valuable suggestions for improvement of previous drafts were forthcomingfrom Jim Rebele, editor, and two anonymous JAE reviewers. Funding support for thisproject was provided by the KPMG Professorship and the Jack Wasmer Fellowship atJohn Carroll University.

Appendix A. Acronyms

AICPA American Institute of Certified Public AccountantsASB Accounting Standards BoardCERES Coalition for Environmentally Responsible EconomiesCICA Canadian Institute of Chartered AccountantsEA Environmental accountingEC European CommissionEMAS Eco-Management and Audit SchemeEMS Environmental management systemEPA Environmental Protection AgencyER Environmental reportingEU European UnionFASB Financial Accounting Standards BoardGHG Greenhouse gasHSE Health, safety, and environmentalICAEW Institute of Chartered Accountants in England and WalesISO International Organization for StandardizationOECD Organization for Economic Co-operation and DevelopmentPRP Potentially responsible partyPRTR Pollution Release and Transfer RegisterSAB Staff Accounting BulletinSEC Securities and Exchange CommissionSOP Statement of PositionTBL Triple bottom lineTRI Toxic Release Inventory

Appendix B. Questions on environmentalism

1. Does the urrent ‘‘Y Generation’’ hold out greater hope for a more proactive stance onenvironmental responsibility? What has to be done to generate greater concern? Ismeaningful action 20–30 years in the future, if then?

2. Contrast light and dark green environmentalism. What types of issues determine anindividual’s position on the continuum?

3. To what extent is environmental responsibility an ethical issue?


4. Are you personally concerned, looking at the timeline of environmental reform overthe past 30 years, that the pace has been too slow? Are you convinced that issues suchas global warming, pollution, and other threats constitute an impending ecologicaldisaster?

5. How would you rate the relative chances of effective environmental reform emanatingfrom the following interested groups: private action groups (e.g., CERES, Account-Ability, IOS), organizations of professional accountants (e.g., AICPA, CICA,ICAEW), national standard setters (e.g., FASB, UK ASB), international standardsetters (e.g., IASB), government (e.g., EPA, EC/EMAS)?

6. What information should a company disclose related to its environmentalperformance?

7. What are the advantages and disadvantages of environmental reporting for businessenterprises?

8. One major difference that has been identified between financial and environmentalreporting is the breadth of constituent stakeholders. What groups, with littleinterest in financial statements, are vitally impacted by environmentalperformance?

9. Has regulatory legislation and standard setting been slower in coming in the US thanin 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 toother countries mentioned in this primer.

11. Can environmental reporting be effective in the absence of standards? What advanta-ges and disadvantages might be expected if these standards were to be setinternationally?

12. What are the potential roadblocks to the international development of environmentalreporting standards?

13. What roadblocks must be overcome before CPAs can provide services and assurancerelated to environmental reporting?

14. Do you think that you personally would be more likely to invest in or go to work for acompany with a good track record of environmental responsibility? How would youjudge a company’s environmental track record?

15. Will corporate managers ever buy into responsible environmental action if suchaction does not prove cost-beneficial as measured by bottom-line net income andavailable tax incentives?

16. What is the role of accounting and accountants in finding solutions to ecologicalproblems? With which groups must they partner in efforts to clean up theenvironment?

17. What kind of services can CPAs provide in the sustainability area (see the AICPA’swebsite)?

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 educationalphilosophies.


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

Appendix C. A note on sustainability

As defined previously in the words of the Brundtland Report, sustainability is a goal ofthose imbued with a deeper shade of green accounting than the degree of commitment thisprimer advocates, at least for the short tem. Sustainability as a concept has been aroundfor decades, but critical scholars (e.g., Wallage, 2000; Gray et al., 2001) seem agreed that itcontinues to be an ‘‘exceptionally demanding notion’’, with no real consensus as to whatfull sustainability would entail.

Sustainability has become closely linked to the ‘‘triple bottom line’’ (TBL) reporting ini-tiative, an approach named by John Elkington in 1994. In point of fact, Elkington hadearlier formed in 1987 a consulting practice called SustainAbility which in 1994 partneredwith the United Nations Environment Programme (UNEP) to provide benchmarkingassistance 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 sus-tainability reporting. In 2000, the GRI released Sustainability Reporting Guidelines(SRG) which provides a company with a set of measures useful for reporting on its eco-nomic, environmental, and social performance. Following its release, the SRG was usedby over 110 companies worldwide in developing sustainability reports. In April 2002, theGRI was formally launched as a permanent, independent, global, standard-setting bodywhose mandate is to make sustainability reporting as routine as financial reporting. InJuly 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 2000version.

Models are out there to be sure, but few companies have even attempted sustainabilityreporting. Chapman and Milne (2004) evaluate New Zealand enterprises based upon aframework for TBL reporting they provide. The results are disappointing, but the authorshasten to point out that while elsewhere in the world there are more attempts at compli-ance with TBL models, the quality is universally poor.

Bebbington and Gray (2001) report the case study of a New Zealand firm engaged inland-care research that attempted a total sustainability program for all phases of its oper-ations. Not only did the project fail because it was too costly, but the company found thattheoretically sustainable courses of action were unavailable in practice even if the cost datacould be generated to know what those courses of action might be.

In conclusion, Gray and Milne (2004, p. 76) summarize the difficulty of the transitionfrom environmental to sustainability reporting:

Unfortunately, the TBL report remains something of a mirage, and will continue tobe so as long as the debate about, and the practice of social and environmentalreporting continue to owe more to rhetoric and ignorance than to practice andtransparency.

http://www.sustainability.com




Appendix D. Additional readings

Topic References

Environmentalism and highereducation

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 andBebbington (2001)Deegan, Rankin, and Tobin (2002)Yuen and Yip (2002)Chapman and Milne (2004)

Cultural/political/socialdifferences in nationalenvironmental policies

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

Environmental standard settingand 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 toenvironmental 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)

Appendix D (continued)

Topic References

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

Environmentalism andmanagerialism

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

Environmentalism and theinternet

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. <http://www.accountability.org.uk> 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. <www.globalreporting.org/feedback/pubcomments.asp> Accessed23.06.03.

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.

http://www.accountability.org.uk

http://www.frc.org.uk./images/uploaded/documents/ACF345.pdf

http://www.globalreporting.org/feedback/pubcomments.asp

http://www.aicpa.org/innovations/baas/environ/index.htm

http://www.aicpa.org/innovations/baas/environ/ghg_emission.htm


American Institute of Certified Public Accountants. (2005). CPA vision project: final report. Available fromwww.cpavision.org/final_report.htm.

Arese. (2002). Mandatory sustainability reporting for French corporations. Press Release, 5 March 2002.<www.arese-sa.com> 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://www-

green.cusu.cam.ac.uk/archive/a700y/contexts.htm.CERES. (2002). About us: history. <http://www/ceres/org/about/history.htm> 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 ofcompanies. Official Journal of the European Communities, L156, 33–42 <http://europa.eu.int/eur-lex/pri/en/oj/dat/2001/1_156/1_15620010613en00330042.pdf>. Accessed 08.01.03.

Cormier, D., & Magnan, M. (1997). Investors’ assessment of implicit environmental liabilities: an empiricalinvestigation. Journal of Accounting and Public Policy, 16(2), 215–241.

Deegan, C. M. (2002). Introduction: the legitimizing effect of social and environmental disclosures – a theoreticalfoundation. 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 environmentaldisclosures 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 <http://europa.eu.int/eur-lex/pri/en/oj/dat/2003/1_178/1_17820030717en00160022.pdf>.Accessed 18.06.03.

Elkington, J. (1998). Cannibals with forks: The triple bottom line of 21st century business. Stony Creek, CT: NewSociety 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). <europa.eu.int/comm./environment/emas/

index_en.htm> Accessed 08.01.03.

http://www.cpavision.org/final_report.htm

http://www.arese-sa.com

http://www.interscience.wiley.com

http://www-green.cusu.cam.ac.uk/archive/a700y/contexts.htm

http://www-green.cusu.cam.ac.uk/archive/a700y/contexts.htm

http://www/ceres/org/about/history.htm

http://europa.eu.int/eur-lex/pri/en/oj/dat/2001/1_156/1_15620010613en00330042.pdf



http://europa.eu.int/comm./environment/emas/index_en.htm

http://europa.eu.int/comm./environment/emas/index_en.htm


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. <http://www.euro-

pa.eu.int/comm/enterprise/csr/documents/29062004/EMSF_final_report.pdf> 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 CharteredAccountants 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 onenvironmental 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 researchnote. 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 indetermining 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 socialrelevance 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 pulltechniques. 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<www.

wimm.nl>. 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.

http://www.europa.eu.int/comm/enterprise/csr/documents/29062004/EMSF_final_report.pdf

http://www.europa.eu.int/comm/enterprise/csr/documents/29062004/EMSF_final_report.pdf

http://www.accaglobal/pdfs/environment/newsletter/0604_hibbit_collison.doc

http://www.accaglobal/pdfs/environment/newsletter/0604_hibbit_collison.doc

http://www.wimm.nl

http://www.wimm.nl


Larrinaga, C., Carrasco, F., Correa, C., Llena, F., & Moneva, J. M. (2002). Accountability and accountingregulation: 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 non-accountants. Accounting, Auditing & Accountability Journal, 4(3), 43–50.

Lawrence, C. M., & Khurana, I. K. (1997). Superfund liabilities and governmental reporting entities: an empiricalanalysis. Journal of Accounting and Public Policy, 16(2), 155–186.

Li, L. (2001). Encouraging environmental accounting worldwide: a survey of governmental policies andinstruments. 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 tocelebrate? 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 <www.interscience.wiley.com>. 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 <appli1.oecd.org/olis/2006doc.nsf/43bb6130e5e86e5fc12569fa005-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. <http://www.fee.be/secretariat/PDFs/Temp/Environmental%20Issues%20in%20Financial%20Reporting/PwC%20report.pdf> Accessed 12.01.05.

Rahaman, A., Lawrence, S., & Roper, J. (2004). Social and environmental reporting at the VRA: institutionalisedlegitimacy 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 financiallysignificant environmental liabilities and compliance with existing material financial disclosures. Revised

Petition SEC File # 4-463. <http://www.sec.gov/rules/petitions/petn4-463.htm> 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. <http://web.lexis-nexis.com/universe/document?_m=bc2340b01a4908deb3e222b1c576214> Accessed07.11.02.

http://www.interscience.wiley.com

http://appli1.oecd.org/olis/2006doc.nsf/43bb6130e5e86e5fc12569fa005d004c/b117c930895a19b9c1257109004fbfde/&dollar;FILE/JT00200406.PDF

http://appli1.oecd.org/olis/2006doc.nsf/43bb6130e5e86e5fc12569fa005d004c/b117c930895a19b9c1257109004fbfde/&dollar;FILE/JT00200406.PDF

http://www.fee.be/secretariat/PDFs/Temp/Environmental%20Issues%20in%20Financial%20Reporting/PwC%20report.pdf

http://www.fee.be/secretariat/PDFs/Temp/Environmental%20Issues%20in%20Financial%20Reporting/PwC%20report.pdf

http://www.sec.gov/rules/petitions/petn4-463.htm

http://web.lexis-nexis.com/universe/document?_m=bc2340b01a4908deb3e222b1c576214


Securities and Exchange Commission (1993). Staff accounting bulletin No. 92. Federal Register, 58(112),32843–32847.

Securities and Exchange Commission (2003). Regulation S-K, item 103 – legal proceedings. The securities lawyer’s

deskbook. <http://www.law.uc.edu/CCL/regS-K/SK103.html> Accessed 27.01.03.Sefcik, S. E., Suderstrom, N. S., & Stinson, C. H. (1997). Accounting through green-colored glasses: teaching

environmental accounting. Issues in Accounting Education, 12(1), 129–140.Shepherd, K., Abkowitz, M., & Cohen, M. A. (2001). Online corporate environmental reports: improvements and

innovation to enhance stakeholder value. Corporate Environmental Strategy, 8(4), 307–315.Shields, D., & Boer, G. (1997). Research in environmental accounting. Journal of Accounting and Public Policy,

16(2), 117–123.Solomon, A. (2000). Could corporate environmental reporting shadow financial reporting? Accounting Forum,

24(1), 30–55.Stevenson, L. (2002). Social and environmental accounting teaching in UK and Irish universities: a research note

on changes between 1993 and 1998. Accounting Education, 11(4), 331–346.Thomas, A. (2001). Corporate environmental policy and abnormal price returns: an empirical investigation.

Business Strategy and the Environment, 10, 125–134.Thomson, I., & Bebbington, J. (2004). It doesn’t matter what you teach? Critical Perspectives on Accounting,

15(5), 609–628.Thomson, I., & Bebbington, J. (2005). Social and environmental reporting in the UK: a pedagogic evaluation.

Critical Perspectives on Accounting, 16(5), 507–533.United Nations World Commission on Environment and Development (1987). Our common future. Oxford:

Oxford University Press.United States Environmental Protection Agency (EPA). (2002a). CERCLA overview. <www.epa.gov> Accessed

25.11.02.United States Environmental Protection Agency (EPA). (2002b). The guardian: origins of the EPA.

<www.epa.gov> Accessed 25.11.02.United States Government Accountability Office (GAO). (2004). Environmental disclosure: SEC should explore

ways to improve tracking and transparency of information. Available from http://www.gao.gov/new.items/d04808.pdf.

Wallage, P. (2000). Assurance on sustainability reporting: an auditor’s view. Auditing: A Journal of Practice &

Theory, 19(supplement), 53–65.Yuen, C. P., & Yip, D. (2002). Corporate environmental reporting – the CLP Power experience. Corporate

Environmental Strategy, 9(1), 95–100.

http://www.law.uc.edu/CCL/regS-K/SK103.html

http://www.epa.gov

http://www.epa.gov

http://www.gao.gov/new.items/d04808.pdf

http://www.gao.gov/new.items/d04808.pdf

Green Accounting

Documents

accounting curriculum

accounting educationwww

accounting faculty

environmental accounting

dene green accounting

intermediate accounting

environmental reporting

ea issues