11.pp.0026www.iiste.org call for paper-39

Issues in Social and Environmental Accounting
Vol. 1, No. 1 June 2007
Pp 26-39

Current Debates in Corporate Social
Responsibility: An Agenda for Research

David Crowther,
Department of Accounting and Finance
De Montfort University, UK

Esther Ortiz Martinez
Departamento de Economia Financiera
University of Murcia, Spain
Abstract
Corporate Social Responsibility (CSR) has a particular prominence at this point in time, featur-
ing heavily in the discourses of both academe and business. The understanding of what is
meant by CSR continues to evolve as a consensus is reached. Nevertheless some important
debates continue – or are commencing – which need to be resolved. It is the purpose of this
paper to highlight these as some of the current debates within the CSR community – and hence
form a significant part of an agenda for research in the area. Specifically we focus upon three
key areas for the management of business, namely setting standards for reporting, identifying
and implementing sustainable practice, and the management of risk.

Keywords: corporate social responsibility, corporate reporting, sustainability, regulation,
risk, accountability

Introduction the world. Central to CSR is a concern
for sustainability, particularly for envi-
Corporate Social Responsibility (CSR) ronmental sustainability, as this is cru-
is an important issue in contemporary cial for long term success and even sur-
international debates. In the past two vival – even in the financial terms by
decades, CSR appears to have become which firms normally judge their suc-
more difficult to escape from, being cess. CSR however is more problematic
more relevant to corporations all over as it is often perceived that there is a

David Crowther is Professor of Corporate Social Responsibility at De Montfort University, UK and Visiting Professor
of Corporate Social Responsibility at Yildiz Technical University, Istanbul, Turkey. Esther Ortiz Martinez is Professor
of Accounting at the University of Murcia, Spain. Currently she is on secondment as Director General of Economic
Planning for the Regional Government of Murcia. They have been researching and writing about Corporate Social
Responsibility for some years. Please contact via David Crowther at dcrowther@dmu.ac.uk

D. Crowther, E. Ortiz Martinez / Issues in Social and Environmental Accounting 1 (2007) 26-39 27

dichotomy between CSR activity and further research. The purpose of this pa-
financial performance with one being per is to both review the field of CSR
deleterious to the other and corporations and its current developments and to
having an imperative to pursue share- highlight areas where further research
holder value. Moreover there is no would be beneficial. This is addressed
agreed upon definition of exactly what through the investigation of three areas
constitutes CSR (Ortiz Martinez & which are key to the management of
Crowther, 2005) and therefore no agreed business as far as CSR activity and re-
upon basis for measuring that activity porting are concerned, namely setting
and relating it to the various dimensions standards for reporting, identifying and
of corporate performance. Consequently implementing sustainable practice, and
much of the previous research regarding the management of risk.
CSR deals with this issue and the prob-
lems in development of standards for
definition and reporting for such indeter- Setting Standards for Reporting
minate activity (see Crowther, 2006).
When researching into corporate activity
Although this problem is widely ac- and the reporting of that activity in the
cepted it is equally widely accepted that 1990’s it was necessary to acknowledge
the impact of corporate activity upon (Crowther, 20021) that no measures of
society and its citizens – as well as all social or environmental performance
stakeholders including the environment existed which had gained universal ac-
– is considerable and has an impact not ceptability. Good social or environ-
just upon the present but also upon the mental performance was subjectively
future. Moreover these stakeholders are based upon the perspective of the
increasingly exercising their power not evaluator and the mores of the temporal
just in their own interests but also in the horizon of reporting. Consequently any
interests of long term sustainability. So reporting concerning such performance
it is necessary to develop some methods could not easily be made which would
of analysing and measuring sustainable allow a comparative evaluation between
CSR activity (see Aras & Crowther, corporations to be undertaken. This was
2007a) in such a way that it is univer- regarded as helpful to the image creation
sally understood, and can be evaluated activity of the corporate reporting as the
by interested parties. It will therefore authors of the script were therefore able
become of assistance to societal decision to create an image which could not be
making. refuted through quantificatory compara-
tive evaluation. Instead such images
Developing measures for CSR is an is- could be created through the use of lin-
sue which is considered of great impor- guistic and non-linguistic means. Thus
tance in many parts of the world. But each company was able to select meas-
such research as does exist is based upon ures which created the semiotic of social
the principles of the Anglo-Saxon tradi- concern and environmental responsibil-
tion of corporate operational behaviour, ity and of continual progress, through
accounting and reporting. Little such
work is based in the traditions of other 1
This research was based the investigation of corporate
parts of the world – an obvious area for activity included in their reporting between 1991 and
1997

28 D. Crowther, E. Ortiz Martinez / Issues in Social and Environmental Accounting 1 (2007) 26-39

the selective use of measures which sup- integrate their stakeholder engagement
port these myths. As a consequence of processes into daily activities. It has
the individual selection of measures to been used worldwide by leading busi-
be reported upon, a spatial evaluation of nesses, non-profit organisations and
performance, through a comparison of public bodies. The Framework is de-
the performance with other companies, signed to help users to establish a sys-
was not possible and a temporal evalua- tematic stakeholder engagement process
tion was all that remained. This temporal that generates the indicators, targets, and
evaluation was of course determined by reporting systems needed to ensure its
the authors of the script, through their effectiveness in overall organisational
choice of measures for reporting upon, performance. The principle underpin-
in order to support the myth of continual ning AA1000 is inclusiveness. The
improvement. Because any measure of building blocks of the process frame-
such performance does not have univer- work are planning, accounting and audit-
sal acceptance as a measurement tool, ing and reporting. It does not prescribe
each company must determine its own what should be reported on but rather
priorities for social and environmental the 'how'.
performance and develop appropriate
measures for reporting upon impact. It is According to Accountability the
convenient however that companies, all AA1000 Assurance Standard is the first
undertaking very similar operations, initiative offering a non-proprietary,
chose different measures of performance open-source Assurance standard cover-
which all show their performance as being the full range of an organisation’s
ing not just good but, by implication, the disclosure and associated performance
best that can be achieved. (i.e. sustainability reporting and per-
formance). It draws from and builds on
While this research was being under- mainstream financial, environmental and
taken steps were being taken to change quality-related assurance, and integrates
this and to develop some kind of stan- key learning with the emerging practice
dards for reporting. Thus in 1999 the of sustainability management and ac-
Institute of Social and Ethical Account- countability, as well as associated re-
ability2 published the AA1000 Assur- porting and assurance practices.
ance Standard the aim of fostering
greater transparency in corporate report- At the similar time the Global Reporting
ing. AccountAbility, an international, Initiative (GRI) produced its Sustainabil-
not-for-profit, professional institute has ity Reporting Guidelines have been de-
launched the world's first-ever assurance veloped through multi-stakeholder dia-
standard for social and sustainability logue. The guidelines are claimed to be
reporting. The AA1000 framework closely aligned to AA1000, but focus on
(http://www.accountability.org.uk) is a specific part of the social and environ-
designed to improve accountability and mental accounting and reporting proc-
performance by learning through stake- ess, namely reporting. The GRI aims to
holder engagement. It was developed to cover a full range of economic issues,
address the need for organisations to although these are currently at different
2 stages of development. The GRI is an
The Institute of Social and Ethical Accountability is
probably better known as AccountAbility. initiative that develops and disseminates


voluntary Sustainability Reporting voluntary basis, for several hundred or-
Guidelines. These Guidelines are for ganizations, mostly for-profit corpora-
voluntary use by organisations for re- tions. It claims to be the result of a per-
porting on the economic, environmental, manent interaction with many people
and social dimensions of their activities, that supposedly represents a wide vari-
products, and services. Although origi- ety of stakeholders relative to the impact
nally started by an NGO, GRI has be- of the activity of business around the
come accepted as a leading model for world.
how social environmental and economic
reporting should take place. It aims to GRI and AA1000 provide a set of tools
provide a framework that allows compa- to help organisations manage, measure
rability between different companies’ and communicate their overall sustain-
reports whilst being sufficiently flexible ability performance: social, environ-
to reflect the different impacts of differ- mental and economic. Together, they
ent business sectors. draw on a wide range of stakeholders
and interests to increase the legitimacy
The GRI aims to develop and dissemi- of decision-making and improve per-
nate globally applicable Sustainability formance. Individually, each initiative
Reporting Guidelines. These Guidelines supports the application of the other – at
are for voluntary use by organisations least this is the claim of both organisa-
for reporting on the economic, environ- tions concerned; AA1000 provides a
mental, and social dimensions of their rigorous process of stakeholder engage-
activities, products, and services. The ment in support of sustainable develop-
GRI incorporates the active participation ment, while GRI provides globally ap-
of representatives from business, ac- plicable guidelines for reporting on sus-
countancy, investment, environmental, tainable development that stresses stake-
human rights, research and labour or- holder engagement in both its develop-
ganisations from around the world. ment and content. Part of the purpose of
Started in 1997, GRI became independ- this paper however is to question the
ent in 2002, and is an official collaborat- need for these standards as all the evi-
ing centre of the United Nations Envi- dence concerning standard setting sug-
ronment Programme (UNEP) and works gests that standards are derived by con-
in cooperation with UN Secretary- sensual agreement rather than by the
General Kofi Annan’s Global Compact. actions of a third party.
The guidelines are under continual de-
velopment and in January 2006 the draft
version of its new Sustainability Report- The regulation of standards
ing Guidelines, named the G3, was pro-
duced and made open for feedback. The Much of the broader debate about corpo-
GRI pursues its mission through the de- rate social responsibility can be inter-
velopment and continuous improvement preted however as an argument between
of a reporting framework that can be two positions: greater corporate auton-
used by any organisation to report on its omy and the free market economic
economic, environmental and social per- model versus greater societal interven-
formance. The GRI has become the tion and government control of corpo-
popular framework for reporting, on a rate action. There is clear evidence that


the free market proponents are winning which shows a link between corporate
the argument. They point to the global socially responsible behaviour and eco-
spread of capitalism, arguing that this nomic profitability which is reinforced
reflects recognition that social wellbeing by much of the research into socially
is dependent on economic growth. Op- responsible investment funds. This evi-
ponents concede this hegemony but see dence however suggests that there is a
the balance shifting in their favour, positive relationship between the two if
through for example greater accountabil- a longer term view of corporate perform-
ity and reporting. Some opponents sus- ance is recognised.
pect the corporate team of cheating on
their environments, both ecological and Similarly there have been many claims
social, while others object fundamen- (see Crowther, 2000a) that the quantifi-
tally to the idea that a free market econ- cation of environmental costs and the
omy is beneficial to society. inclusion of such costs into business
strategies can significantly reduce oper-
Resolving these arguments seem intrac- ating costs by firms; indeed this was one
table if not impossible because they as- of the main themes of the 1996 Global
sume divergent philosophical positions Environmental Management Initiative
in the ethics vs regulation debate as well Conference. Little evidence exists that
as in more fundamental understandings this is the case but Pava & Krausz
of human nature. I don’t propose to offer (1996) demonstrate empirically that
any definitive answers since any attempt companies which they define as
to do so would itself involve make value ‘socially responsible’ perform in finan-
judgements. It is possible though to cial terms at least as well as companies
highlight the terrain upon which these which are not socially responsible. It is
arguments roam. Moreover we can look accepted however that different defini-
for evidence of the relationship between tions of socially responsible organisa-
economic growth, as manifest through tions exist and that different definitions
corporate profitability, and socially re- lead to different evaluations of perform-
sponsible behaviour in an effort to re- ance between those deemed responsible
solve this seemingly dichotomous posi- and others. Similarly in other countries
tion. I have argued elsewhere (eg Crow- efforts are being made to provide a
ther & Jatana, 2005) that the creation framework for certification of account-
shareholder value is often not through ants who wish to be considered as envi-
the operational activities of the firm but ronmental practitioners and auditors. For
rather through the externalisation of example the Canadian Institute of Char-
costs, which are passed on to customers, tered Accountants is heavily involved in
employees and other stakeholders in- the creation of such a national frame-
cluding society at large. Examples of work. Azzone et al. (1996) however sug-
this practice are evidenced elsewhere gest that despite the lack of any regula-
and it seems that companies adopt a phi- tory framework in this area a degree of
losophy that any stakeholder does not standardisation, at least as far as report-
matter in isolation. ing is concerned, is beginning to emerge
at an international level, one of the cen-
There is however a growing body of evi- tral arguments of this paper.
dence (eg Crowther & Caliyurt, 2004)


Growth in the techniques offered for is also apparent in many parts of the
measuring social impact, and reporting world however is the tendency of com-
thereon, has continued throughout the panies to produce separate social and
last twenty-five years, during which the environmental reports3. In this context
concept of this form of accounting has such reports are generally termed CSR
existed. However the ability to discuss reports or Sustainability reports, depend-
the fact that firms, through their actions, ing upon the development of the corpo-
affect their external environment and ration concerned. This trend is gathering
that this should be accounted for has momentum as more organisations realise
often exceeded within the discourse any that stakeholders are both demanding
practical suggestions for measuring such more information and are also demand-
impact. At the same time as the technical ing accountability for actions under-
implementation of social accounting and taken. Equally the more enlightened of
reporting has been developing the phi- these corporations are realising that so-
losophical basis for such accounting – cially responsible activity makes busi-
predicated in the transparency and ac- ness sense and actually assists improved
countability principles – has also been economic performance.
developed. Thus some people consider
the extent to which accountants should This realisation obviates any need for
be involved in this accounting and argue regulation and calls into question the
that such accounting can be justified by standards suggested by such bodies as
means of the social contract as benefit- accountability. The more progressive
ing society at large. Others have argued corporations have made considerable
that sustainability is the cornerstone of progress in what they often describe as
social and environmental accounting and their journey towards being fully so-
that auditing should be given promi- cially responsible. In doing so they have
nence. developed an understanding of the pri-
orities for their own business – recognis-
An examination of the external reporting ing that CSR has many facets and needs
of organisations gives an indication of to be interpreted differently for each or-
the extent of socially responsible activ- ganisation – and made significant steps
ity. Such an examination does indeed towards both appropriate activity and
demonstrate an increasing recognition of appropriate reporting of such activity.
the need to include information about The steps towards CSR can be likened to
this and an increasing number of annual increasing maturity as all organisations
reports of companies include some in- progress towards that maturity by pass-
formation in this respect. This trend is ing through the same stages (see below),
gathering momentum as more organisa- although at different paces. The most
tions perceive the importance of provid- mature are indeed recognising that na-
ing such information to external stake- ture of globalisation by recognising that
holders. It has been suggested however the organisational boundary is perme-
that the inclusion of such information able (see Crowther & Duty, 2002) and
does not demonstrate an increasing con- that they are accountable also for the
cern with the environment but rather 3
some benefits – for example tax breaks – Originally these were called environmental reports.
Now they are normally known either as CSR reports or
to the company itself. One trend which as sustainability reports.


behaviour of other organisations in their resources are utilised. An example
value chain. would be an energy efficiency pro-
gramme.
Identifying sustainability
Sustainability is a controversial topic
Despite much of the rhetoric that is used, because it means different things to dif-
sustainability implies that society must ferent people. Nevertheless there is a
use no more of a resource than can be growing awareness (or diminishing na-
regenerated. This can be defined in ivety) that one is, indeed, involved in a
terms of the carrying capacity of the battle about what sustainability means
ecosystem (Hawken, 1993) and de- and, crucially, the extent (if at all) it can
scribed with input – output models of be delivered by MNCs in the easy man-
resource consumption. Thus the paper ner they promise (United Nations Com-
industry for example has a policy of re- mission on Environment and Develop-
planting trees to replace those harvested ment (Schmidheiny, 1992). The starting
and this has the effect of retaining costs point must be taken as the Brundtland
in the present rather than temporally ex- Report (WCED, 1987) because there is
ternalising them. Similarly motor vehi- explicit agreement with that Report and
cle manufacturers such as Volkswagen because the definition of sustainability
have a policy of making their cars al- in there is pertinent and widely accepted.
most totally recyclable. Viewing an or- Equally, the Brundtland Report is part of
ganisation as part of a wider social and a policy landscape being explicitly
economic system implies that these ef- fought over by the United Nations, Na-
fects must be taken into account, not just tion States and big business through the
for the measurement of costs and value vehicles of the WBCSD and ICC, (see
created in the present but also for the for example, Beder, 1997; Mayhew,
future of the business itself. 1997; Gray & Bebbington, 2001).

Such concerns are pertinent at a macro There is a further confusion surrounding
level of society as a whole, or at the the concept of sustainability: for the pur-
level of the nation state but are equally ist sustainability implies nothing more
relevant at the micro level of the corpo- than stasis – the ability to continue in an
ration, the aspect of sustainability with unchanged manner – but often it is taken
which we are concerned in this work. At to imply development in a sustainable
this level, measures of sustainability manner (Marsden, 2000; Hart & Mil-
would consider the rate at which re- stein, 2003) and the terms sustainability
sources are consumed by the organisa- and sustainable development are for
tion in relation to the rate at which re- many viewed as synonymous. Ever since
sources can be regenerated. Unsustain- the Bruntland Report was produced by
able operations can be accommodated the World Commission on Environment
for either by developing sustainable op- and Development in 1987 there has been
erations or by planning for a future lack- a continual debate concerning develop-
ing in resources currently required. In ment (Chambers, 1994; Pretty, 1995)
practice organisations mostly tend to and this has added to the confusion be-
aim towards less unsustainability by in- tween sustainability and sustainable de-
creasing efficiency in the way in which velopment. For us we take the definition


as being concerned with stasis; at the ety makes upon the corporation in
corporate level if development is possi- terms of the social contract and
ble without jeopardising that stasis then stakeholder influence;
this is a bonus rather than a constituent • Environmental Impact, which we
part of that sustainability. define as the effect of the actions of
the corporation upon its geophysical
Most analysis of sustainability (eg Dyl- environment;
lick & Hockerts, 2002) only recognises a • Organisational culture, which we
two-dimensional approach of the envi- define as the relationship between
ronmental and the social. A few (eg the corporation and its internal
Spangenberg, 2004) recognize a third stakeholders, particularly employ-
dimension which is related to organisa- ees, and all aspects of that relation-
tion behaviour. We argue that restricting ship; and
analysis to such dimensions is deficient.
• Finance, which we define in terms
One problem is the fact that the domi-
of an adequate return for the level of
nant assumption by researchers is based
risk undertaken.
upon the incompatibility of optimising,
for a corporation, both financial per-
These four must be considered as the
formance and social / environmental
key dimensions of sustainability, all of
performance. In other words financial
which are equally important. Our analy-
performance and social / environmental
sis is therefore considerably broader –
performance are seen as being in conflict
and more complete – than that of others.
with each other through this dichotomi-
Furthermore we consider that these four
sation (see Crowther, 2002). Conse-
aspects can be resolved into a two-
quently most work in the area of corpo-
dimensional matrix along the polarities
rate sustainability does not recognise the
of internal vs external focus and short
need for acknowledging the importance
term vs long term focus, which together
of financial performance as an essential
represent a complete representation of
aspect of sustainability and therefore
organisational performance this can be
fails to undertake financial analysis
represented as the model as follows (see
alongside – and integrated with – other
the next page). This model provides both
forms of analysis for this research4. Aras
a representation of organisation perform-
& Crowther (2007b) however argue that
ance and a basis for any evaluation of
this is an essential aspect of corporate
corporate sustainability.
sustainability and therefore adds a fur-
ther dimension to the analysis of sustain-
ability. Furthermore they argue that the
The Conflation of Financial, Social
third dimension sometimes recognised
and Environmental Performance
as organisational behaviour need to actu-
ally comprise a much broader concept of One view of good corporate perform-
corporate culture. There are therefore 4 ance is that of stewardship and thus just
aspects of sustainability which need to as the management of an organisation is
be recognised and analysed, namely:
4
Of course the fact that many researchers do not have
• Societal influence, which we define the skills to undertake such detailed financial analysis
even if they consider it to be important might be a
as a measure of the impact that soci- significant reason for this.


Internal focus

FINANCE ORGANISATIONAL
CULTURE

Short term focus Long term focus

SOCIETAL ENVIRONMENTAL
INFLUENCE IMPACT

External focus

MODEL FOR EVALUATING SUSTAINABILITY
From Aras & Crowther (2007b)

concerned with the stewardship of the present as an investment for the future.
financial resources of the organisation so
too would management of the organisa- Not only does such sustainable activity
tion be concerned with the stewardship however impact upon society in the fu-
of environmental resources. The differ- ture; it also impacts upon the organisa-
ence however is that environmental re- tion itself in the future. Thus good envi-
sources are mostly located externally to ronmental performance by an organisa-
the organisation. Stewardship in this tion in the present is in reality an invest-
context therefore is concerned with the ment in the future of the organisation
resources of society as well as the re- itself. This is achieved through the en-
sources of the organisation. As far as suring of supplies and production tech-
stewardship of external environmental niques which will enable the organisa-
resources is concerned then the central tion to operate in the future in a similar
tenet of such stewardship is that of en- way to its operations in the present and
suring sustainability. Sustainability is so to undertake value creation activity in
focused on the future and is concerned the future much as it does in the present.
with ensuring that the choices of re- Financial management also however is
source utilisation in the future are not concerned with the management of the
constrained by decisions taken in the organisation’s resources in the present
present. This necessarily implies such so that management will be possible in a
concepts as generating and utilising re- value creation way in the future. Thus
newable resources, minimising pollution the internal management of the firm,
and using new techniques of manufac- from a financial perspective, and its ex-
ture and distribution. It also implies the ternal environmental management coin-
acceptance of any costs involved in the cide in this common concern for man-


agement for the future. Good perform- cost of capital. This is all established
ance in the financial dimension leads to fact as far as finance theory is concerned
good future performance in the environ- and is recognised in the operating of the
mental dimension and vice versa. Thus financial markets around the world.
there is no dichotomy (Crowther, 2002) Naturally a company which is sustain-
between environmental performance and able will be less risky than one which is
financial performance and the two con- not. Consequently most large companies
cepts conflate into one concern. This in their reporting mention sustainability
concern is of course the management of and frequently it features prominently.
the future as far as the firm is con- Indeed it is noticeable that extractive
cerned.5 The role of social and environ- industries – which by their very nature
mental accounting and reporting and the cannot be sustainable in the long term –
role of financial accounting and report- make sustainability a very prominent
ing therefore can be seen to be coinci- issue. The prime example of this can be
dental. Thus the work required needs be seen with oil companies – BP being a
concerned not with arguments about re- very good example – which make much
source distribution but rather with the of sustainability and are busy redesignat-
development of measures which truly ing themselves from oil companies to
reflect the activities of the organisation energy companies with a feature being
upon its environment. These techniques made of renewable energy, even though
of measurement, and consequently of this is a very small part6 of their actual
reporting, are a necessary precursor to operations.
the concern with the management for the
future – and hence with sustainability. Just as a company which is sustainable
is less risky then one which can claim
sustainable development is even less
The management of risk risky and many companies mention this
concept and imply that it relates to their
It is recognised in the financial world operations. Such a company has a rosy
that the cost of capital which any com- future of continued growth, with an ex-
pany incurs is related to the perceived pectation of continued growth in profit-
risk associated with investing in that ability. An investigation of the FTSE100
company – in other words there is a di- for example (see Aras & Crowther,
rect correlation between the risk in- 2007c) shows that 70% make a feature
volved in an investment and the rewards of sustainability while 15% make a fea-
which are expected to accrue from a suc- ture of sustainable development. So the
cessful investment. Therefore it is gener- cost of capital becomes lower as the cer-
ally recognised that the larger, more es- tainty of returns becomes higher. We
tablished companies are a more certain have shown in this article that the con-
investment and therefore have a lower cept of sustainability is complex and
problematic and that the idea of sustain-
5
Financial reporting is of course premised upon the able development is even more problem-
continuing of the company – the going concern princi-
ple. atic. It is our argument that companies
6
It needs a very careful reading of the annual report to are not really addressing these issues but
discover this. are merely creating an image of sustain-
7
See Crowther 2002 for a full discussion of image
creating in corporate reporting. ability7. The language of the statements


made by corporations tends therefore to tangible benefits which are not easily
be used as a device for corrupting subject to quantification. The comple-
thought (Orwell, 1970) by being used as tion of an environmental audit will en-
an instrument to prevent thought about hance the understanding of the processes
the various alternative realities of organ- involved and will make this easier. In
isational reality. Significantly it creates considering environmental benefits, as
an image of safety for investors and distinct from financial benefits, it is im-
thereby reduces the cost of capital for portant that an appropriate time horizon
such corporations. Such language must is selected which will enable those bene-
be considered semiotically (Barthes, fits to be recognised and accrued. This
1973) as a way of creating the impres- may imply a very different time horizon
sion of actual sustainability. Using such from one which is determined purely by
analysis then the signification is about the needs of financial analysis.
inclusion within the selected audience
for the corporate reports on the assump- Once all the data has been recognised,
tion that those included understand the collected and quantified it then becomes
signification in a common way with the possible to incorporate this data, in fi-
authors. This is based upon an assumed nancial terms, into an evaluation which
understanding of the code of significa- incorporates risk in a more consistent
tion used in describing corporate activity manner. It is important to recognise
in this way. As Sapir (1949: 554) states: benefits as well as costs, and it is per-
haps worth reiterating that many of these
… we respond to gestures benefits are less subject to quantification
with an extreme alertness and are of the less tangible and image
and, one might almost say, related kind. Examples include:
in accordance with an
elaborate and secret code • Enhanced company or product im-
that is written nowhere, age – this in itself can lead to in-
known by none and under- creased sales
stood by all. • Health and safety benefits
• Ease of attracting investment and
It is our argument that the methodolo-
lowered cost of such investment
gies for the evaluation of risk are de-
ceived by this rhetoric and are deficient • Better community relationships –
in their evaluation of risk – particularly this can lead to easier and quicker
environmental risk. In order to fully rec- approval of plans through the plan-
ognise and incorporate environmental ning process
costs and benefits into the investment • Improved relationship with regula-
analysis process the starting point needs tors, where relevant
to be the identification of the types of • Improved morale among workers,
costs and revenues which need to be in- leading to higher productivity, lower
corporated into the evaluation process. staff turnover and consequently
Once these types of costs have been lower recruitment and training costs
identified then it becomes possible to • General improved image and rela-
quantify such costs and to incorporate tionship with stakeholders
qualitative data concerning those less


Many of these benefits are not just intan- rate reports. We do not assume such
gible but will take some time to realise. cynicism, although we note that the ef-
Hence the need to select an appropriate fects are beneficial for corporations and,
time horizon for the evaluation of the in the short term at least, for investors.
risk and associated effects. This time Instead part of our argument is that the
horizon will very likely be a longer one concept of sustainability is insufficiently
than under a traditional financially based understood and therefore any evaluation
evaluation. Obviously cash flows need is flawed and simplistic. Thus there is an
to be considered over that period and an opportunity for further research in this
appropriate method of evaluation (eg a area.
discounted cash flow technique) needs
to be used in the evaluation. None of this One further tentative conclusion from
will change with the incorporation of our research is concerned with the extent
environmental accounting information, of disclosure manifest through the re-
except for assessment of risk and its as- porting of such things as sustainability,
sociated impact upon the cost of capital, and is more in the nature of a prognosis.
which can be expected to rise as the true Crowther (2000b) traces an archaeology
extent of the environmental impact is fed of corporate reporting which shows that,
into the calculation. over time, the amount of information
provided – first to shareholders, then to
The steps involved in the incorporation potential investors (Gilmore & Willmott,
of environmental accounting into the 1992), then to other stakeholders – has
risk evaluation system can therefore be gradually increased throughout the last
summarised as follow: century, as firms recognised the benefit
in providing increased disclosure. Simi-
• Identify environmental implications larly the amount of disclosure regarding
in term of costs and benefits CSR activity has been increasing rapidly
• Quantify those costs and incorporate over the last decade, as firms have rec-
qualitative data regarding less tangi- ognised the commercial benefits of in-
ble benefits creased transparency. Therefore it is rea-
sonable to argue that the amount of in-
• Use appropriate financial indicators
formation regarding sustainability will
• Set an appropriate time horizon also increase, not just as firms gain a
which allows environmental effects clearer understanding of its implications
to be fully realised but also as they understand the benefits
of greater disclosure in this respect.
Conclusions
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