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Special issue on accounting for a sustainable future
Article Type: Editorial From: Managerial Auditing Journal, Volume 31, Issue 2
This special edition of Managerial Auditing Journal (MAJ) brings together multiple perspectives on accounting for sustainability gathered from contributors to RMIT’s Accounting for Sustainability Conference, 2014. In each of the five papers presented in this special edition, a different position on accounting for a sustainable future is offered. The basis for the justificatory regimes presented in each of the papers ranges from a capital markets and business case approach to sustainability to a deeper ecological viewpoint. The approach taken in three papers draws on externally reported accounting disclosures and capital markets data, while the other two consider the internal influences of sustainability for ethical decision-making and the extent to which managers take a holistic systems view to examine sustainability performance. As a combined package, the papers apply distinct methods and methodological approaches to help understand the current state of sustainability accountability across different settings.
In positioning each of the papers to describe the multiple conflicting and competing factors that justifies people’s commitment to different world views, the orders of worth framework (Boltanski and Thévenot, 1991, 2006) offers a useful sociological theoretic. Underlying the different ideologies that form the basis of debate are six justificatory regimes including:
1. The industrial world: Justified by efficiency of operations.
2. The civic world: Justified by government regulation to express the collective will.
3. The market world: Justified by market forces and logic that holds in high esteem the company with the highly covered goods.
4. The domestic world: Justified by the hierarchical position held and the chain of interdependencies, protection and support, such as provided by senior management.
5. The inspirational world: Justified on creativity, innovation and daring to be different.
6. The world of renown: Justified on the basis of being famous and held in high esteem Boltanski and Thévenot, 1991, 2006).
To this framework, Thévenot et al. (2000) add the seventh justificatory regime, The Green World, which considers the valuing of nature with the test of worthiness based on renewability and concerns for future generations. This framing helps to understand that sustainability issues can be argued and justifiably presented from any of the seven world views. Each of these world views compete for varying justificatory stances and importantly draw attention to the role of accounting (Annisette and Richardson, 2011; Chenhall et al., 2013).
Whatever the position and dominant justificatory regime, accounting will no doubt face certain criticism, as this field invokes passionate debates about what it is to be sustainable in a capitalist society (Gray, 2010). Accounting, as a valuation and accountability tool, has been contributing to this space for quite some time (Gray, 1992; Gray and Bebbington, 2001; Jones, 1996; Jones and Solomon, 2013). In corporate settings, the green world order of worth is arguably undermined to a certain extent by the efficiency requirement associated with the industrial world and the competitive values associated with the market-based order of worth (Annisette and Richardson, 2011). While many look to governments to lead the sustainability agenda with policies and regulations, the civic world is also competing with the other world forces. It is with this backdrop that we introduce each of the papers selected for this special edition.
We commence this special edition with a paper by Ramiah, Morris, Moosa, Gamgemi and Puican, who introduce environmental finance to the accounting debate. In this paper, environmental regulation and policies (domestic, international and nuclear policies of the UK government) are used to examine the risk and return on equity portfolios. Taking a quantitative econometric approach, Ramiah et al., analyse 2,132 individual stock prices of firms listed on the London Stock Exchange and investigate investor reaction to 75 announcements of green policies. A capital markets approach helps to determine the impact of regulation on improving sustainability. The aim of the paper is to provide evidence of wealth creation/destruction of firms and changes to their perceived risk structure in response to the green policy. In demonstrating the wins to be made by the investor community when environmental policies are announced, Ramiah et al.’s study is also aimed at providing policy makers with insights into the effectiveness of environmental regulation. This paper helps to understand the justificatory decisions made when navigating the competing market and investment community responses with civic world forces.
The second paper also contributes to our understanding of the dominance of the market world in responding to sustainability impacts. Yunus, Eligido-Ten and Abhayawansa investigate the corporate strategic responses to climate change by focusing on carbon management strategy (CMS) and the efforts to prioritise greenhouse gas emissions, direct and indirect by companies listed on the Australian Stock Exchange (ASX 200). For these authors, the winners in the market world are those companies who are responding to sustainability impacts with CMS. These companies are most likely to have voluntarily adopted an environmental management system, have larger board size and greater board independence. The authors also found that highly leveraged firms operating in environmentally sensitive industries were more likely to have CMS in place. This study also positions the market world against the civic world with the data collected from the Carbon Disclosure Project database over a 5-year period from 2008 to 2012, to capture the introduction of National Greenhouse and Energy Reporting (NGER) Act in 2007 which legislated a single national framework for reporting of greenhouse gas emissions by organisations.
The third paper moves the focus from environmental policies and carbon management to corporate social responsibility and individual ethical decision making. In this paper by Wynder, attention is given to the design of performance management systems in evaluating and rewarding corporate social performance within corporations. Wydner used experimental methods to determine the effect that individual’s personal values have on performance evaluation. The experimental setting was a for-profit hospital (HealthCo) with operations around the world. Accounting students (the experiment participants) were provided with details to evaluate the performance of two hospital managers, Manager A and Manager B. In the experimental scenario, Manager A has poor social performance but good financial performance and Manager B, the opposite. The two experimental conditions were as follows: the individual’s proximity (physical/social closeness) to the ethical decision presented (relating to local versus overseas staff recruitment and respective loss/gain in productivity) and the presentation of the social performance data (as a separate balanced scorecard perspective, or as part of the overall suite of balanced scorecard measures). While Wydner did not find a difference in the way the data were presented, he did find that physical proximity is implicated in ethical values and the evaluation of corporate social performance. This paper provides insight into the impact of the domestic world and associated familial order of worth in corporate decision-making. It also highlights the important symbolic role of accounting in demonstrating management’s attention and concern for their employees.
The fourth paper moves closer to the green world and order of worth based on valuing and accounting for biodiversity. Taking a deeper ecological perspective, this paper by Barut, Raar and Azim assumes the important position local councils and communities have in protecting nature’s resources. Content analysis of Web sites and reports posted by 151 local government authorities in New South Wales, Australia, was conducted to examine the quantity and quality of biodiversity disclosures. They also examined the nature of the disclosures and whether they were quantified (monetary and non-monetary) or remained as qualitative disclosures. In general, they found the need for more coherent and uniform reporting frameworks for local governments and that there were good opportunities for promoting accountability by local governments for biodiversity resources. They found 72.2 per cent of local government authorities provided information about endangered species. While adequate disclosures on biodiversity policies were evident, Barut et al. suggest that there is still room for demonstration of accountability and for local government authorities to convince stakeholders that biodiversity management is an important part of future development, by improved demonstration of performance. This paper is perfectly positioned to comment on the value of accounting as a useful tool for the green world’s tests of worthiness where the proof is not at all financial, but ecological and ecosystemic as determined by environmentalists.
This ecosystemic view leads to the final paper of the special edition which considers the decision making approaches taken by senior managers. Oliver, Vesty and Brooks consider the notion of integrated thinking in terms of hard and soft systems thinking, suggesting the views of those such as Barut et al. are naturally aligned with a soft systems thinking perspective, whereas Ramiah et al.’s approach would be aligned with the hard systems thinking which optimises sustainability choices. Soft systems thinking focuses on relationships and broad social indicators of wellbeing and tries to leverage opposing viewpoints. Oliver et al.’s paper is a result of the recent attention to integrated reporting and the consideration of multiple capitals, their interrelationships and trade-offs in the corporate business model. Integrated thinking is an assumed management trait required for this form of reporting. Oliver et al. develop a theoretical model of integrated thinking to help explore this concept in practice.
In conclusion, all five papers contribute in different ways to the sustainability debate. Examining the collection with a sociological lens offered by Boltanski and Thévenot (1991, 2006) helps to demonstrate the broad range of justificatory regimes used by people to defend their position. Each are justified when examined in their respective world view; however, none are without dispute when other world values are caught up in the debate. Accounting can play an important role in navigating the different world views and contributing to generate the associated tests of worth. The framework provided by Boltanski and Thévenot (1991, 2006) provides a number of conceptual advantages:
enhanced insight on understanding and explaining sustainability issues;
understanding differences in research paradigms by showing (dis)similarities; and
provides an opportunity to chart the progress of sustainability research by highlighting elements that may have once existed and what might exist in the future.
By categorizing research themes and articulating the network of relationships between the “worlds”, researchers will be better able to investigate and interpret sustainability issues more fully.
Gillian Vesty and Steven Dellaportas - School of Accounting, RMIT University, Melbourne, Australia
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