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Issues in Social and Environmental AccountingVol. 2, No. 2 Dec 2008/Jan 2009Pp 158-175 Further Thoughts on Mega-Accounting and the Need for Standards M.R. Mathews Faculty of Business Charles Sturt UniversityAbstractThis paper continues previous research (Mathews 1984, 1997b, 2000a, 2000b, 2003) into de-veloping a proposal for a system of comprehensive reporting based on a concept called mega-accounting. The ideas in mega-accounting are similar to those behind GRI (2002) and triplebottom line (TBL) reporting (Elkington 1997), but with a different underlying philosophy, asocial contract approach compared to one based on organisational legitimacy or the need formanagement to drive sustainability and sustainable capitalism which is sometimes called ‘thebusiness case’. The paper attempts to develop the concept of mega-accounting by identifyingthe purpose underlying the reports, identifying the basis of a conceptual framework and provid-ing an indication of the content that social and environmental accounting reports may include inthe future. Of necessity the research perspective is normative and deductive, as is much of theprocess of developing accounting standards, the model upon which it is argued social and envi-ronmental accounting should be based. The paper concludes by reiterating that the way forwardfor social and environmental accounting and reporting is for a conceptual framework to beagreed and standards developed via a normative-pragmatic process that will provide the basisfor comprehensive, audited, corporate reports encompassing the social, environmental and eco-nomic dimension. Furthermore, additional work is needed on the areas of macro-social ac-counting and externalities in order to develop a comprehensive framework.Keywords: Mega Accounting, Social and environmental accounting and reporting, stan-dards for disclosure, Triple Bottom Line (TBL), GRI Guideline1. Introduction tem of comprehensive reporting based on a concept of mega-accounting. TheThis paper continues the work of ideas in mega-accounting are similar toMathews (1984, 1997b, 2000a, 2000b, those behind triple bottom line (TBL)2003) in developing a proposal for a sys- reporting (Elkington 1997), but basedM.R. Mathews is emeritus professor of Accounting at the School of Accounting, Faculty of Business Charles SturtUniversity., email: email@example.com. The author acknowledges the assistance of three anonymous reviewers, anddelegates at conferences where the papers has been presented; The BAA Education SIG, London, 2006, the AnnualConvention of the Accounting and Finance Association of Australia and New Zealand, Wellington, 2006, the APIRAmeeting Auckland, 2007, and the A-CSEAR meeting in Adelaide , December 2008.
M.R. Mathews / Issues in Social and Environmental Accounting 2 (2008/2009) 158-175 159on a social contract approach, in contrast mandatory audits has led to improved,to one based on the need for manage- but by no means perfect, financial state-ment to drive sustainability and sustain- ments and a similar process may assistable capitalism. The paper fits within the in developing similar standards for non-social and environmental paradigm financial disclosures. Recently, state-(Gray and Guthrie, 2007) more than the ments by Alex Malley, the current presi-sustainability accounting and sustain- dent of CPA Australia, indicate that atability paradigm (Unerman et al., 2007). last the profession is beginning to seeA more detailed comparison of these the need for such standards:two approaches is contained in Mathews (1) Accounting standards have had legal(2008). support in Australia since about 1984, however, there is no suggestion that theThe purpose of the paper is to follow-up system is perfect.prior work suggesting a structure for Environmental impact, commu-additional reporting of social and envi- nity building and the like, are allronmental (SEA) variables with more issues that businesses will increas-specific indications of the content of ingly have to factor in as keythose disclosures. The author has also components of their overall per-responded to critics who argue that con- formance.ceptual frameworks and standards haveno place in SEA accounting, because How best to do this is a questionthat would mean accepting too much of the corporate world is still grap-the status quo. pling with. It is absolutely critical that the accounting profession isThe paper provides an indication of the intimately engaged in the devel-content that SEA accounting reports opment of rigorous non-financialmay need to include in the future. Of reporting standards if they’re to benecessity the research perspective is nor- s ucces sf ul l y i mplemented.mative-deductive, as is much of the (Malley, 2008, p.8).process of developing accounting stan-dards, the model upon which it is argued The area of social and environmentalsocial and environmental accounting accounting and reporting has been de-could be based. The author argues that scribed as under-theorised. There havefinancial accounting standard setting is a been relatively few attempts to developnormative-pragmatic process whereby models or proposals for extending thisnormatively constructed proposals are area; Gray et al., 1996 (chapter 10),exposed to a ‘small p’ political process Schaltegger and Burritt (1997), Mathewsto ensure that the final outcome is ac- (1997b and 2000a), Elkington (1997)cepted by the preparer group. This has GRI (2002, 2006) and Burke (1984), arebeen generally successful in improving some of these few examples. These pro-the standard of financial accounting and posals all have different underlying phi-reporting (1) and the process could be losophies. Gray et al., is based on a criti-applied to the future development of cal theory paradigm, Schaltegger andsocial and environmental accounting and Burritt (1997) is close to the businessreporting. The use of a conceptual case in philosophy, Mathews (1997b,framework, legally backed standards and 2000a) has a social contract base, and
160 M.R. Mathews / Issues in Social and Environmental Accounting 2 (2008/2009) 158-175Elkington (1997) is based on either or- drive sustainability and sustainable capi-ganisational legitimacy or the business talism sometimes referred to as ‘thecase (Mathews, 2004). GRI (2002, business case’ (Mathews 2004). Thus,2006) has a complex underlying philoso- this paper is evolutionary rather thanphy probably because it was developed revolutionary in perspective; the eco-by a committee including non- nomic and social status quo is acceptedgovernment agencies. It is closest to as a given in broad outline, but the op-organisational legitimacy. erational details may be changed and fine tuning may take place withoutThis paper continues previous research changing the basic structure of our soci-(Mathews 1984, 1997b, 2000a, 2000b, ety. It is likely that mega-accounting is2003) in developing a proposal for a sys- criticised for supporting the current eco-tem of comprehensive reporting based nomic system, however, implementationon a concept of mega-accounting. The of such a revised reporting regime wouldideas in mega-accounting are similar to have change effects as well, particularlythose behind triple bottom line (TBL) since it is based on a social contract phi-reporting (Elkington 1997), but with a losophy. Mathews (1997b) anddifferent underlying philosophy, a social Mathews (2000a) advocated the mega-contract approach compared to one accounting model and the underlyingbased on the need for management to principles are repeated in full in Table I.Table I Underlying Principle of Mega-Accounting as detailed by Mathews (1997b and 2000a.1. Information is made available to all stakeholders in recognition of the SOCIAL CON- TRACT OF BUSINESS WITH SOCIETY. This implies a willingness to supply informa- tion to stakeholders who do not have a direct financial relationship with the preparer.2. The annual report is a COMPREHENSIVE INFORMATION SYSTEM including sepa- rately reported economic, social and environmental position statements.3. STAKEHOLDERS are defined as all members of society who have RIGHTS TO INFOR- MATION about those entities that are deemed to be significant and liable to publicly report on performance and condition (ASSC, 1976).4. A CONCEPTUAL FRAMEWORK would be required for each area until integration is pos- sible.5. LEGALLY BACKED STANDARDS would be mandated for each area until integration is possible.6. Statement components would have equal status in terms of AUDIT requirements.7. THREE SEPARATE POSITION STATEMENTS together make up the ANNUAL RE- PORT of the entity to account to the other parts of the social and economic system in which the organisation is situated.8. Each report would contain appropriate financial data and non-financial data is used in the social and environmental accounting position statements. Furthermore, raw data could be available as advocated by Wallman (1997, p.108) under the rubric of ‘access accounting’, and thus avoid the problems associated with too great a degree of aggregation.9. Any transfer of financial information from one position statement to another would be made outside of the three individual statements; for example if the impact of the organisation on the social structure of the area or the environment could be reliably determined in financial terms this could be shown as an offset to the income earned, and vice versa. (Mathews, 2000a, p.121).
M.R. Mathews / Issues in Social and Environmental Accounting 2 (2008/2009) 158-175 161Using the mega-accounting approach the receive the same respect and to be giveninformation should be based on a con- the same standing as financial reportingceptual framework, appropriate legally then a similar quality of structurebacked standards and an independent (conceptual framework, standards andaudit modelled on post 1970 financial audits) will be required.accounting. Some progress has beenmade in this direction with the introduc-tion of Triple Bottom Line (TBL) report- 1.1 Criticism of ‘Sustainabilitying (Elkington 1997) and the framework Models’of the Global Reporting Initiative (GRI2002, 2006), although GRI 2002, 2006 In general the GRI proposals, put for-do not claim to be a set of standards they ward and developed over several years,might meet some of the requirements for have received a favourable assessment,a conceptual framework. Some organi- as demonstrated by the number of cita-sations are now having independent au- tions received and the level of influencedits conducted on the SEA aspects of that the GRI guidelines have upon re-their reports, however, this is only at an porters. However, in a recent paperearly stage, excepting where the Euro- Milne et al. (2008) have criticised thepean Community EMAS system is in- GRI approach (and all other proposalsvolved. that might fall under the general heading of triple bottom line accounting) con-The need for standards is accepted by cluding that:the Chief Executive of the GRI who re- We argue that the TBL and GRIcently stated that: are insufficient conditions for or- Without standardised information, ganizations contributing to the investors and the financial mar- sustaining of the Earth’s ecology. kets will be unable to integrate Paradoxically, they may reinforce environmental factors into their business-as-usual and greater lev- decision making (O’Connor, J. els of un-sustainability. (Milne et 2008, p.49). al., 2008, abstract).However, to date GRI has not produced The authors are critical of the GRI andstandards of an accounting type. similar schemes because they support the status quo in business and societyThe legally backed nature of accounting- despite adding to the disclosures tostandards may be controversial when stakeholders, and because they are partapplied to social and environmental dis- of the promethean world view (Dryzek,closures. There are many who would 1997) where there are “benign trendsregard legislation as inappropriate where leading off into a happy future”. Mega-a social contract is invoked, however, accounting would be included in thethere has been a need for legislation with general criticism of TBL because suchfinancial accounting standards and the reports add to the continuing of eco-author cannot see that some form of leg- nomic activity and stimulation of de-islation can be avoided with any other mand for goods and services.form of information sharing. In otherwords, if non-financial disclosures are to The problem with the paper by Milne at
162 M.R. Mathews / Issues in Social and Environmental Accounting 2 (2008/2009) 158-175al. (2008) is that although they very and Bebbington, 2000). It alsocomprehensively address the problems begs the question whether it isof sustainability (or as they would put even fair to suggest that theythem non-sustainability) disclosures, should do so or that there is anythey do not offer alternative models to credence whatsoever in their ownour present position. For example: claims that they are able to do so Depending upon one’s beliefs, we (Gray and Milne, 2002, 2004) face a range of options from do (Milne et al., 2008, p.5). nothing because nothing needs to be done (promethean optimism) to The reader might see this passage as an- do nothing because while things other wasted opportunity to state exactly need to be done, it’s too late and, what solution is within their grasp. as a species, we are incapable of Once again the authors pass up an op- sufficient change (fatalism). Be- portunity that they have created to offer tween these positions lie a great their views of the direction in which to many of us who believe we need progress. to do something, and not just be- cause it will help increase the The authors are concerned about issues likely survival rate of the human of equity and social justice and core is- species. But the question is what sues around sustainability such as scale to do? (Milne et al., 2008, p.3) of development, limits and constraints to that development and effects on futureDespite the build-up, the authors do not generations. The authors are moving inattempt to fill in the space with any al- the direction of limitations on corporateternatives of their own construction. action but fail to specify what actionFurthermore, the issue of reducing or at they would advocate. Without the posi-least maintaining world population is not tion/alternative being stated it is not pos-considered at all. sible to see how this affects mega- accounting proposals.The nub of the problem is clearly statedas follows: The UNEP/Sustainability benchmarking Defining sustainability as the pro- initiative is criticised for attempting to gressive maintenance of the life- build a business case. The authors stat- supporting capacities of the ing that: planet’s ecosystems requires the Getting beyond the business case, subordination of traditional eco- however, we suggest, requires nomic criteria to criteria based on UNEP/Sustainability to return to social and ecological values, and its original conceptions of sustain- this begs the question whether ability, distance itself from the business decision makers operat- critical TBL reporting model its ing within the constraints of a report series (and now the GRI) capitalist system are capable of has developed, and make real de- making sacrifices of profit and so mands for business to re-frame resources, and ecosystems for fu- unsustainable industry and busi- ture generations and other species ness models (Milne et al., 2008, (Gray, 1992; Milne, 1996; Gray p.12).
M.R. Mathews / Issues in Social and Environmental Accounting 2 (2008/2009) 158-175 163The authors note that more accounting lists the problems that the author arguesbodies and business associations are remain to be addressed including thenow engaging with notions of sustain- development of a conceptual frameworkability and sustainable development, to underpin standards, the developmentwhich concerns them because: of the standards themselves, and inde- The concern we have with these pendent audits of SEA disclosures, and initiatives is the same concern as the three dimensions for disclosure so- with business reporters and the cial, environmental and economic infor- reporting frameworks, and that is mation. This is followed by concluding that the notion of sustainability comments and future research. A de- cannot be other than translated tailed list of ideas to be considered for into the logic and language that the development of standards for disclo- already pervades such institutions. sure in the social, environmental and (Milne et al., 2008, p.13). economic dimensions is attached as an appendix.Although Milne et al. (2008) put for-ward a strong case that TBL models areultimately not going to further sustain- 2. Other Normative Modelsability, there is nothing to suggest thateven if they are able to produce alterna- Although normative-deductive ap-tive approaches the need for better and proaches to developing financial ac-more complete reporting does not exist. counting and reporting ceased to be in-An argument can be mounted that a radi- fluential at the end of the General Nor-cal new form of organisation and opera- mative Theory Period in 1970tion can exist alongside the type of re- (Henderson and Peirson, 1983), a num-porting proposed by GRI. The problem ber of important contributions to Socialfor those interested in building models is and Environmental Accounting (SEA)that those who are concerned with the have been based on the Normative-perpetuation of business-as-usual have deductive approach. In addition to thenot put forward their alternatives for mega-accounting model (Mathews,criticism in the same way that they are 1997b) and the Triple Bottom Line ap-free to criticise those putting forward proach (Elkington, 1997), other havemodels of improved disclosure. The case been put forward by Gray et al., (1996,for conceptual frameworks, standards Chapter 10), Schaltegger and Burrittand audits can be made whether to fit the (1996). The set of sustainability guide-status quo or a revised model of social lines put forward by the Global Report-activity involving greater control of eco- ing Initiative (GRI2002, 2006) is anothernomic activity, and restrictions on example of a normative-pragmatic state-growth and demand stimulation. ment which is similar to a conceptual framework rather than a set of standards.The remainder of the paper is structuredas follows. Section 2 describes other Another model for a conceptual frame-normative models, and then discusses work might be aspects of the social ac-possible legal impediments to the expen- counting information system proposedditure of corporate resources on social by Burke (1984, p.109), which statesand environmental disclosures. Section 3 (p.100) that the four primary functions
164 M.R. Mathews / Issues in Social and Environmental Accounting 2 (2008/2009) 158-175of a social accounting information sys- 1982, p.37).tem (SAIS) are: And:1. To systematically survey develop- W h en an o r gan i zat i o n … ments in the social environment (a manufactures a a product that is general surveillance system); inherently dangerous, or when it2. To furnish information with respect pushes its employees beyond rea- to choice of social goals and the se- sonable limits, it deserves moral lection of specific programs which condemnation: the organization include explicitly-stated social ob- has failed to live up to a hypo- jectives; thetical contract – a contract be-3. To provide inputs to specific deci- tween itself and society sions; and (Donaldson, 1982, p.57).4. To evaluate the system’s overall ef- fectiveness. (Burke, 1984, p.100 Organizational legitimacy is the practi- cited in Mathews, 1993, p.68). cal outcome of applying the social con- tract perspective and is often explainedThese models all lie within the account- through the words of Dowling and Pfef-ing discipline which, historically, claims fer (1975):precedence in matters of measurement Organizations seek to establishand the reporting of economic and other congruence between the socialinformation. However, in most cases values associated with or impliedthere is no clear philosophical basis or by their activities and the normsunderlying philosophy, or if there is, it is of acceptable behaviour in thenot a social contract basis as with mega- larger social system of which theyaccounting (Mathews 2004). Elkington are a part. Insofar as these twodoes not give a philosophical basis but is value systems are congruent wegenerally supportive of management can speak of organizational legiti-perspectives, Gray et al. takes a critical macy. When an actual or poten-theorist position, Schaltegger and Burritt tial disparity exists between theare allied to the business case, whilst two value systems, there will existGRI2002 and GRI 2006 are closest to a threat to organizational legiti-organisational legitimacy which is based macy (Dowling and Pfeffer, 1975,on a social contract approach but in p.122).some applications appears to be close tothe business case. The social contract Reynolds and Mathews (2000) at-approach has been explained by tempted to apply the social contract andDonaldson (1982) as follows: organisational legitimacy concepts to the The political social contract pro- accounting profession in commenting on vides a clue for understanding the the lack of movement towards SEA. contract for business. If the politi- Beginning with the views of Shocker cal contract serves as a justifica- and Sethi (1974): tion for the existence of the state, Any social institution… operates then the business contract by par- in society via a social contract, ity of reasoning should serve as expressed or implied, whereby its the justification for the existence survival and growth are based on of the corporation (Donaldson, (a) the delivery of some socially
M.R. Mathews / Issues in Social and Environmental Accounting 2 (2008/2009) 158-175 165 desirable ends to society in gen- 2.1 Legal Concerns about SEA eral and, (b) The distribution of Reporting economic, social, or political benefits to groups from which it Camac (2005) an Australian Discussion derives its power. Paper on Corporate Social Responsibil- ity published by the Corporations and In a dynamic society, neither the Markets Advisory Committee in 2005, is sources of institutional power nor concerned with CSR from a legal per- the needs for its services are per- spective. Section 1.2 “history” exam- manent. Therefore, an organisa- ines the origins of CSR and details a tion must constantly meet the twin number of attempts to provide guide- tests of legitimacy and relevance lines, standards etc. It discusses a legal by demonstrating that society re- basis for not adopting a too liberal ap- quires its services and that the proach to using corporate resources for groups benefiting from its rewards either charitable donations or environ- have society’s approval (Shocker mental protection. Directors are liable and Sethi, 1974, p.67). personally for actions which result in the unnecessary expenditure of shareholdersTogether with the previously stated defi- resources because, in general, there isnition of organisational legitimacy this little legal recognition given to theled Reynolds and Mathews (2000) to ‘rights’ of stakeholders without directwarn that: contractual connections with the corpo- It may also be argued that the fail- ration. Normally, expending resources ure of the accounting profession should have some connection with ad- and the accounting discipline to vancing the future of the corporation. respond to the challenge of envi- ronmental accounting and report- The American Law Institute model ing endangers their professional (Principles of Corporate Governance status in the medium to long term model clause 2.01b(3)) states: (Reynolds and Mathews, 2000, Even if corporate profit and share- p.90). holder gain are not thereby en- hanced, the corporation, in theThis warning may be redundant now that conduct of its business may de-at least one Australian professional ac- vote a reasonable amount of re-counting body has begun to move to- sources to public welfare, humani-wards acceptance of the need for organ- tarian, educational, and philan-ised and regulated non-financial disclo- thropic purposes (ALI, 1994,sures (see pp.3-4 above). p.55).A different approach has been taken by There could be legal limitations to thethe legal fraternity, and a recent report extent that SEA activity can be followeddetails how legal restrictions may influ- unless a connection with corporate ad-ence the normative-deductive models of vantage can be shown. Clearly this isaccountants seeking to improve SEA not a social contract perspective. Thisreporting. position applies to Australia as well as the US. The Australian Stock Exchange
166 M.R. Mathews / Issues in Social and Environmental Accounting 2 (2008/2009) 158-175has issued Principles of Good Corporate Some legal thinking is restrictive as ap-Governance and Best Practice Recom- plied to SEA reporting, if corporate re-mendations that follow a corporate bene- sources are to be used seeking to restrictfit approach: initiatives by management that might Companies have a number of le- lead to the sort of changes favoured by gal and other obligations to non- advocates of mega-accounting reporting. shareholder stakeholders such as More recent legal argument is far closer employee, clients/customers and to that of many accounting theories in- the community as a whole. There cluding mega-accounting theory and is growing acceptance of the view other normative-deductive SEA models. that organisations can create value The relevance of legal thinking to ac- by better managing natural, hu- counting and reporting is clearly impor- man, social and other forms of tant if standards are to be developed that capital (ASX, Best Practice Rec- could be supported by legislation. A ommendation No.10). consideration of legal restrictions is not often included in the accounting litera-Although some legal approaches are ture.more restrictive to SEA developmentthan many accounting academics mightlike, there are other more ethics-based 3. Problems Still to be Addressedapproaches. For example, the ALI Prin-ciples of Corporate Governance model Although a great deal has been achievedclause 2.01(b)(2) states: over the past 30 years (Mathews 1997a) Even if corporate profit and share- in terms of extending the boundaries of holder gain are not thereby en- accounting and reporting, neither social hanced, the corporation, in the nor environmental accounting have a conduct of its business may take conceptual framework, standards, or into account ethical considerations mandatory audits. These are considered that are reasonably regarded as in the following sections. appropriate to the responsible conduct of business. And 3.1 Towards a Conceptual Frame- Ethical considerations necessarily work include ethical responsibilities that may be owed to persons other To produce a conceptual framework, a than shareholders with whom the number of matters need to be resolved; corporation has a legitimate con- What is the objective of the reporting cern, such as employees, custom- process, which organisations should re- ers, suppliers, and members of the port, how should reports be constructed, communities within which the and how should we define the different corporation operates. The content parts of accounting statements? of these responsibilities may vary according to the type of business A suggested objective for mega- in question and the history and accounting (TBL) accounts is given be- established standards of the par- low: ticular corporation. The purpose of a set of mega-
M.R. Mathews / Issues in Social and Environmental Accounting 2 (2008/2009) 158-175 167 accounting (or TBL) accounts is should report ‘the total energy used in a to enable a reader with no prior period’ if there is no specification of experience to gain a full under- how this should be measured and what standing of the practices and poli- units should be used in measurement. cies of the organisation as they The same strictures apply to defining the apply to products, employees, the different parts of the statements. An environment and the general pub- important issue is whether there should lic. The information required will be any attempt to combine the eco- include social, environmental and nomic, social and environmental out- economic disclosures that have comes. In other words, should an eco- been prepared in accordance with nomic positive be used to offset an envi- standards and the reports will ronmental negative? To permit such an have been independently audited. offset would probably be fatal to the sys- tem of reporting advocated by mega-The reader will note that this is an ex- accounting and the TBL.pansion of the position advocated bymega-accounting theory (Mathews Definitions in financial accounting, as-1997b). sets, liabilities etc will need counterparts in SEA, such as measurements of im-The organisations that should report are pacts on labour (employment, earnings,those having major social, economic, or safety, training available), local commu-environmental impacts on society nities (employment creation, payments(ASSC, 1975 limited their attention to to local authorities), and the environ-economic impacts). Note that most ac- ment (discharges to water, air, and land-counting conceptual frameworks and fill, by type and volume compared tostandards refer to legal structures to de- legal requirements).termine which should report. However,the social contract approach indicatesthat it is the social economic and envi- 3.2 The Development of Stan-ronmental impact that is important rather dards and Independent Auditsthan the legal position. Thus large pri-vate companies would be treated no dif- As noted previously there is at least oneferently from large public companies, or set of guidelines (GRI 2002, 2006) thatpublic sector entities, in terms of report- some might accept as providing stan-ing polluting actions or major impacts dards for disclosures in line with theon employment. TBL approach (social, environmental and economic reporting). However,How should reports be constructed? If when assessed against the modern ap-the expanded reports are to earn any proach to financial accountingcredibility amongst users (defined as all (conceptual frameworks, legally backedthose who have ‘rights to informa- standards and independently auditedtion’ (ASSC, 1975) there must be a de- accounts) the GRI guidelines are some-gree of standardisation and uniformity, what lacking. For example GRI 2002which is also required if the reports are does not provide clear procedures forto be audited. It is not sufficient to indi- determining the information to be dis-cate as GRI 2002 does that organisations closed such as the amount of power con-
168 M.R. Mathews / Issues in Social and Environmental Accounting 2 (2008/2009) 158-175sumed during the period. Similarly the value added may be used to assist in pro-conceptual frameworks that have been viding this information. The impact ofproduced have tended to be to support the organisation on the local social struc-sectorial interests (SA8000) and are not ture will be important to the extent touniversal (Deegan, 2000, p.322). GRI which the organisation is regarded as2002 does not address the same areas as legitimate and fulfilling the conditionsthe financial accounting conceptual morally attached to the social contractframeworks such as which organisations argument.should report, how should reports beconstructed, how should we define the 3.2.2 The environmental dimension.different parts of accounting statements? This area has received more attentionUnless and until the conceptual frame- than the social in recent years, evenwork/standards issues are addressed or- though many disclosures have not beenganisations cannot be required to pro- aimed at assisting the general public. Toduce reports that could be independently enable an outsider (the reader) to appre-audited in the accepted manner. ciate the environmental impact of the organisation the report should containSome possible disclosures might include comparative data allowing the reader tothe following. A detailed list is provided assess data provided by the entityin Appendix II. against that required by legislation and the industry average when this data be-3.2.1 The Social dimension. The impact comes available.on employees and the local economy.Details relating to employees; gender, The data would include discharges andlocation, numbers employed, wages, escapes of potentially toxic materialssalaries paid, dividends and interest pay- (discharges are defined as deliberate re-ments paid into the national and local leases, whereas escapes are part of theeconomy. Information about payments production process, such as drippingmade for goods and services received taps and leaking steam valves and notand the extent to which they support the deliberate) as well as those reflecting alocal and national economies. A state- poor degree of efficiency of the plant.ment of value added. The energy consumed by a plant in rela-Clearly the economic impact is impor- tion to output is an important measure oftant whether in a buoyant or depressed efficiency and this measure can be usedeconomy. When an economic downturn in benchmarking against industry aver-is experienced the way in which the or- ages. Standards will be required to en-ganisation attempts to protect the local sure that the measures used are compara-economy is clearly very important ble between organisations and to facili-(Harte and Owen, 1987). In good times tate the audit process. They should bethe extent to which the wealth generated modelled on modern accounting stan-is shared, will be seen as important not dards which go a long way towards en-only in wages paid, but also other bene- suring comparability between disclo-fits including; pension contributions, sures.training, and financial support for hous-ing and education. The statement of Information on the discharge of toxic
M.R. Mathews / Issues in Social and Environmental Accounting 2 (2008/2009) 158-175 169chemicals has to be made to the authori- equal part of the overall disclosures re-ties for inclusion in the Toxic Release quired to inform the general public aboutInventory (US) or National Pollutant organisational performance.Inventory (Australia), and this informa-tion could be included in the environ- Development of all three dimensions atmental section of a comprehensive an- the same time and using the same gen-nual report by corporations. However, eral approach is seen as desirable. Tothe NPI applies to only a limited number develop standards for disclosure in allof organisations. Greenhouse gas legis- the areas listed in Appendix II is clearlylation currently being implemented by a major task for the future and one thatmany countries will make more compre- must be done by professional bodies ashensive reporting acceptable to business they do for financial accounting stan-interests. dards. Recent comments by Malley (2008) on the need for standards for non3.2.3 The Economic Dimension. Tradi- -financial reporting are seen as the be-tional accounting reports are the main ginning of a new initiative by the ac-part of any economic dimension within counting profession in Australia. CPATBL reporting. However, it should be Australia has just announced several daynoted that financial accounting, although -long meetings on International CSR asgreatly improved since the development part of their Continuous Professionalof legally backed standards post-1984, Development (https://www.cpaaustralia/and IFRS requirements since 2005, has com/au).not attempted to address a number offinancially based dimensions, such as Nothing in this paper is intended to de-the disclosure of executory contracts (an tract from the considerable efforts thatextension of the disclosure of leases), have been made to improve and extendinternally generated intangibles (IAS38 corporate disclosures since about 1970,may be regarded as retrograde) to name even though some reports appear to bebut two areas of interest to the author motivated by purely organisational im-and others. Valuation issues have not age needs. Social and environmentalbeen resolved, although in Australia accounting and reporting is no longer anCCA may be gaining more acceptance unusual feature of corporate behaviour,(Miller and Loftus 2000) and the con- especially with larger corporations orceptual frameworks produced generally those operating within traditionally pol-avoid valuation issues. luting industries. However, there is evi- dence (Deegan and Rankin, 1996;Many SEA proponents are not particu- Deegan et al., 2000) that the corporatelarly concerned with the development of disclosure mission is often to presentfinancial accounting, believing perhaps only a positive image of corporate per-that traditional accounting is responsible formance. This was once a feature offor maintaining the status quo and dam- financial accounting and reporting thatage to the environment through short- required concerted action to remedy.term decision-making (Tinker, 1985,Gray et al. 1996). However, both mega- The author argues that similar resoluteaccounting and TBL see the economic action is required in the area of Socialdimension as very important and an and Environmental Accounting and Re-
170 M.R. Mathews / Issues in Social and Environmental Accounting 2 (2008/2009) 158-175porting with a model for standardised There are fundamental differences be-and audited disclosures based upon cause MA is based upon a social con-modern financial accounting with a con- tract of business with society, whereasceptual framework, standards (perhaps TBL is fundamentally a managementin time with legal backing) leading to focussed tool. MA is influenced by thedisclosures that can be independently concepts contained in the Corporate Re-audited. This paper provides at least port (ASSC 1975) with ideas of non-some of the necessary components of contractual stakeholders having ‘rightssuch a system including, a stated objec- to information’. Consequently all citi-tive (page13), a philosophical basis (the zens are entitled to know a great dealsocial contract), some elements of the about the operation of significant social,conceptual framework (figure 1 and Ap- and economic entities regardless of theirpendix I), and a list of potential disclo- legal status or system of ownership andsures to be considered for the standard control. Mathews (1997b) was silent onsetting phase (Appendix II). It is true the need for a conceptual framework andthat this list of ‘things to do’ is lengthy standards for disclosure and audit/and perhaps daunting but the GRI (2002, verification.2006) has a list of potential disclosuresbut it is argued far less structure or un- This paper has built onto and advancedderlying philosophy than mega- the mega-accounting idea by providingaccounting. Elkington (1997) also has an objective for the reports (p.13) and bymatters for management to address if addressing the conceptual frameworkbusiness is to remain sustainable. needed to underlie the formation of stan- dards (Appendix I and figure 1). TheThe development of mega-accounting to list of dimensions to be reported upon isthis point is summarised in Appendix 1. given as Appendix II. The future of thisThe suggested measures listed in Appen- project will lie in attempting to developdix II are all capable of being formulated the standards to fit with the other partsas standards which could be verified and already completed.all would provide useful information tosatisfy the objective given on page 13. The success of recent efforts to developBy redefining the target readership to be internationally accepted accounting stan-outsiders wishing to gain a full under- dards, which have legal backing in manystanding of the practices and policies of countries, points a way forward for non-the organisation in social, environmental financial disclosures. Tentative effortsand economic areas, the report moves by some professional accounting bodiesaway from a short-term financial and in the direction of taking ownership/shareholder only dimension and opens responsibility for the development ofup many additional possibilities. standards and the continued develop- ment of the GRI guidelines (now recog- nised as needing standardisation) should4. Concluding Comments mean continued advances in expanded reporting, regardless of whether newMega-accounting (MA) is an idea that forms of economic structures are pro-was developed by the author in 1997, duced to deal with threats to sustainabil-appearing at the same time as TBL. ity.
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174 M.R. Mathews / Issues in Social and Environmental Accounting 2 (2008/2009) 158-175 Appendix 1 A Schematic for Mega Accounting Reports1. The Underlying Philosophy – The social contract of business with society Refer Appendix I2. The purpose of mega-accounting reports – As stated on page 13.3. The Conceptual Framework i. Which organisations should report? All those of social, economic and environ- mental importance (ASSC 1975). ii. To whom should these organisations report? –all stakeholders with ‘rights to information’ (ASSC 1975). iii. How should mega-accounting reports be constructed? And How should the different parts of the statements relate?—In a manner which standardises the information for both the reader and the auditor. iv. What information should be standardised - for examples see Appendix II. Appendix IIThe lists below are not exhaustive, but suggestive. No individual can determine whatshould be disclosed since this must be determined collectively by many parties en-gaged in extensive dialogue including professional bodies, government agencies andrepresentatives of preparers and stakeholders.Economic Position Statement:Suggested content would include existing IFRS based standards plus standards to ac-commodate the following issues; • Alternative valuations of assets and liabilities using ranges of values around a single point instead of a single point value. • The inclusion of executory contracts as an extension of the capitalisation of leases. • Human Resource Accounting, to provide the value of the human asset. • Internally generated goodwill and other intangible assets. The new IFRS re- gime is a retrograde step in this area.The author has an interest in the above, readers will have other concerns. The openingstatement applies here.Social Position Statement:Data related to employees, products and services provided; community service andrelations with government agencies especially local government. The social contractperspective will require that much of the attention is devoted to employee and localcommunity interests, especially given the opening statement about collective as op-posed to individual development.
M.R. Mathews / Issues in Social and Environmental Accounting 2 (2008/2009) 158-175 175Employee data should include; • the numbers employed, • gross earnings i.e. total wages paid. • Information regarding Trade Union involvement. • Details of training and funded/subsidised study programmes operated by the organisation. • Scholarships provided for employees and their dependents. • Details of lost-time accidents involving serious injuries and time lost by minor accidents analysed by plant or division. • The proportion of value added going to labour. • A measure of net social contribution. • Number of employees by geographical location, and gender. • Total payments for salaries, wages, and other employee benefits. • Official disputes as a proportion of normal working time. • Unofficial disputes involving a cost to the organisation. • The extent to which grievance procedures are utilised. • Details of minority employment where that is relevant to the operation of the organisation. • Numbers of employees employed at different levels including gender and mi- nority data. • Comparisons with similar organisations. • Relationships with the local community including sponsorships, prizes, schol- arships, funding of local communities through employment, local purchases of goods and services, payments to local governments and an estimate of benefits received from local government services such as roads, railways, ports.Environment Position StatementAlthough there has been a lot of discussion in the academic literature (Gray et al.,1993; Schaltegger and Burritt, 2000) related to environmental reporting, examples ofsystematic and comprehensive disclosures are somewhat rare. From a social contractperspective disclosures will concentrate on energy usage and discharges to water, airand landfill, since eventually these will determine sustainability and the acceptabilityof the organisation to society.Suggested disclosures include. • Amount and cost of energy used. • Specific measures of energy used per unit of output. • Energy used related to output at specific plants and production centres. • Details of the research programme if directed towards increased efficiency and a reduction in energy use. • Inputs of materials and outputs of product, waste and by-products. • Discharges to air, water and landfill, especially data supplied for the Toxic Re-
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