Accounting and sustainable development: An exploration

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Abstract

As the social and environmental impacts of human activity have become more evident, the role of sustainable development as an organising principle in a variety of policy contexts and over multiple scales has become central. There are, at least, two implications that emerge from this observation. First, morally infused problems that need to be addressed have become more intractable, requiring innovation in our modes of thinking. Second, new spaces have emerged where the academy might explore how knowledge is created, validated and translated (or not) alongside policy and practice settings. One outcome of these trends has been the emergence of a stream of work (sustainability science) which investigates how disciplines might develop knowledge that progresses sustainable development. The aim of this paper, in line with the focus of the special issue, is to explore what possibilities emerge for accounting in light of a sustainability science approach. To achieve this end the paper starts with an exploration of the frustrations expressed in the literature over the perceived lack of progress made by social and environmental accounting towards addressing sustainable development. The paper then introduces sustainability science with the aim of imagining how an accounting for sustainable development might emerge. The paper closes with two illustrations of how a sustainability science approach to accounting could develop.

Introduction

Since the 1970s, and most influentially within the pages of Accounting, Organizations and Society, our understanding of accounting has been enriched by drawing on new intellectual agendas and approaches. This paper seeks to contribute in a small way to this history by exploring possible links between the sustainable development literature and accounting. The accounting literature1 has not been silent on the issue of sustainable development and during the last decade (Gray, 2002) started to describe itself as ‘accounting for sustainable development’ to cope with an interest, both in theory and praxis, in organizational accounts that encompass global social and environmental issues, beyond the previous concern with local stakeholders and the immediate organisational context (Gray, 2010, Hopwood et al., 2010, Schaltegger et al., 2006, Unerman et al., 2007). Attempts to develop accounting practice in this area, however, has turned out not to be straightforward.

In particular, scholars note that it is difficult to define what sustainable development might mean in an organizational context (Gray & Milne, 2004) along with a lack of credible sustainable development accounts in practice. Two specific concerns focus our attention here. First, reviews of external reporting (sometimes described as sustainable development reporting) have found that this form of reporting has little to do with sustainable development (Gray, 2010). This has led some to suggest that these accounts should be conceived of as narratives decoupled from underlying organizational realities, intended (at best) to construct a plurality of discourses about sustainable development and among which it is impossible to adjudicate. This perspective is reflected in studies that examine the construction of corporate discourses about sustainable development (see, for example, Bebbington et al., 2008, Buhr and Reiter, 2006, Ferguson, 2007, Laine, 2009, Llewellyn and Milne, 2007, Spence, 2007). The merit of the narrative turn in this stream of research is that it has provided a healthy scepticism about claims found in these accounts that organizations operate in accordance with the demands of sustainable development.

Our second focus is on how accounting has sought to engage with sustainable development principles through full cost accounting (Antheaume, 2004, Atkinson, 2000, Bebbington, 2007, Bebbington et al., 2007, Bebbington and Gray, 2001, Bebbington et al., 2001, Bent, 2006, Frame and Cavanagh, 2009, Fraser, 2012, Herbohn, 2005, Xing et al., 2009). Of the various accounting techniques that have attempted to better expose social, environmental and economic externalities (at the root of unsustainable development), full cost accounting was seen as the most promising as it moves beyond the entity to identify externalities. However, despite some experimentation in this area, how one might create a defendable account of (un)sustainability2 remains elusive.

These two sets of observations have created something of a conundrum. We seem unable to observe in practice, or realise in academic experimentation, robust accounts of organisational (un)sustainability. At the same time, the challenges that face human society in social, environmental and economic terms (and issues emerging from the interplay of these factors) remain non-trivial. In addition, sustainable development remains the overarching concept under which an array of research and praxis takes place and as such remains central to an articulation of these various challenges. Drawing these points together, this paper is motivated by a desire to keep open the possibility that the discipline of accounting might, under certain conditions, allow organisations to address sustainable development challenges. In order to achieve this, however, we suggest that the intellectual roots of any accounting for sustainable development might have to be (re)envisaged.

In particular, it is our contention that attempts to account for sustainable development have drawn too closely on accounting and too little on sustainable development thinking. Indeed, Gray (2010, p. 47) suggests the same, stating that the “baggage associated with conventional accounting is no longer apposite when seeking to account for sustainability”. We agree with this and would suggest that accounting for sustainable development, as a distinctive research area, is yet to fully emerge and that its realisation requires a re-connection with wider discussions about sustainable development (in a variety of disciplines) to identify research questions that are of broader relevance and research approaches that might be valuable. To achieve this aim, this paper draws on the area of sustainability science to develop propositions for accounting.

The paper is structured as follows. Section two reflects on the disappointment expressed in social and environmental accounting concerning its attempt to address sustainable development. We argue that environmental accounting in the nineties connected with broader environmental debates and generated a new approach in the accounting literature which has subsequently been lost with the literature now focusing on accounting and management research questions. Recovering this connection to social and ecological concerns might, therefore, be valuable for accounting for sustainable development.

Section three refocuses attention on the links between sustainable development and accounting for two reasons. First, much of the accounting literature reproduces the Brundtland Report definition but does not explore more contemporary sustainable development work. There are some underlying elements of sustainable development that, if not recognized, might lead to accounting scholarship being decoupled from sustainable development concerns. Second, we argue that social and/or environmental accounting must be distinguished from accounting for sustainable development and this is attempted at the close of this section.

In section four the focus moves to an extended introduction to sustainability science (drawing on material that has been published over the last fifteen). We have framed our discussion in two ways: first, by describing the motifs of this area and, second, by addressing the issue of how to judge the merits of work in this area.

Section five brings the analysis undertaken to date together and seeks a consilience between accounting and sustainability science by way of two case studies. The first takes an existing area of accounting (that of full cost accounting) and explores how a sustainability science approach might influence the practice and evaluation of this work. The second case examines what we might learn if we start from a sustainable development perspective and identify a problem area where accounting might play an important role, but on which it has remained mostly silent, despite its importance. This example relates to sustainable consumption and production (an overarching theme of the United Nations’ sustainable development agenda) where institutions have developed around the creation of certification processes (often reflected in certification labels). Certification seeks to identify more socially, environmentally and economically sound production processes and through this to shape consumption choices. We will argue that there is a role for the accounting academy to contribute to an evaluation of the possibilities for and outcomes from certification. Both cases are used to demonstrate how a sustainable science inspired accounting investigation might develop.

To close, section six provides some concluding comments. Taken together, we hope that this paper might cause scholars to think differently about accounting investigations that are linked to sustainable development ideals as well as have more practical hope (Orr, 2002) of addressing sustainable development via the discipline of accounting (in concert with other disciplines). Before we reach that point, however, an examination of social and environmental accounting (as the place where sustainable development issues have most frequently been considered) is undertaken.

Section snippets

Social and environmental accounting3

Many putative accounts for sustainable development (however incompletely they have been realized) emerged from environmental accounting, which itself was an extension of work in social accounting (see Gray & Laughlin, 2012). Before the eighties environmental accounting was not articulated as a distinct research subject. During this decade, however, there was pressure for companies to disclose environmental liabilities (often emerging from litigation) and this led to studies that tried to

Accounting and sustainable development

This section seeks to point towards what accounting for sustainable development might entail by way of a two stage investigation. First, a description of the issues that fall under the ambit of sustainable development is attempted. Second, a translation of these concerns into an accounting context is undertaken drawing from and building on section two. The aim of this approach is to distinguish social and/or environmental accounting more clearly from any putative accounting for sustainable

Sustainability science18

The purpose of this section is to provide a bridge between earlier concerns about how one might research sustainable development issues and an appreciation of the complexity of the real world contexts in which these issues emerge and evolve. We have argued that additional modes of knowledge production (in conjunction to discipline based investigation) are required for this task and that this has been attempted by an emerging field of inquiry termed sustainability science. In particular,

Accounting and sustainability science investigations

The thesis explored in this paper is that if a sustainability science approach is taken accounting’s interaction with sustainable development would develop in new ways. This penultimate section seeks to further build this case by reference to two areas of study, both of which are non-exhaustive examples of how work might develop within accounting. First, we take an area of accounting investigation (that of full cost accounting) which is connected to sustainable development concerns (namely the

Concluding comments

O’Riordan (2004) notes that sustainable development work is “energized by the failure to overcome complex and policy-linked problem arenas such as climate change, biodiversity management, social justice and entitlement to all people to steward essential planetary resources for permanent and workable livelihoods.” These outcomes are not presently realised in practice and hence continue to motivate researchers and practitioners. Indeed, the failure to achieve sustainable development has prompted

Acknowledgements

Financial support provided by the Spanish Government (PR2011-0031 and ECO2009-09937) is gratefully acknowledged. The comments made by participants at the Critical Perspectives on Accounting conference in 2011, the Spanish and South American CSEAR conferences of 2011, the St Andrews CSEAR conferences of 2011 and 2012, faculty of Queens University Belfast, colleagues at the University of St Andrews and two anonymous reviewers for Accounting, Organizations and Society are gratefully recognized

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