Voluntary Environmental Disclosure by Australian Listed Mineral Mining Companies: An Application of Stakeholder Theory

Gary Monroe

P ro fe s so r o f A c c o u n tin g

E d ith C o w an U n iv e rs ity

A u stra lia

T h e authors a c k n o w le d g e the h elp fu l co m m en ts from C o lin D o lle y , M ich a el G ib b in s, A tiq u e Islam and

G eo ffrey Soutar, w o rk sh o p participants at Edith C ow a n U n iv ersity , Curtin U n iv ersity o f T e c h n o lo g y

and p articipan ts at the 1 9 9 6 B ritish A c c o u n tin g A sso c ia tio n annual c o n feren ce at C ardiff. V o l. 5, N o . 1, A u g 1997

© C entre for In d on esian A c c o u n tin g and M a n a g em en t R esearch

T h e I n t e r n a t io n a l J o u r n a l o f A c c o u n t i n g a n d B u s i n e s s S o c i e t y 43

r e q u ir e d e c i s i o n u s e f u l in f o r m a t io n a n d u n if o r m it y in t h e a n n u a l r e p o r t o f m in e r a l m i n in g c o m p a n ie s .

I. Introduction

C o n c e rn fo r th e e n v iro n m e n t h as re c e iv e d c o n s id e ra b le p u b lic atte n tio n , p a rtic u la rly d u rin g th e p as t d e ca d e. A n in c re a sin g s o c ie ta l c o n c e rn fo r e n v iro n m e n ta l m a tte rs h as h e ig h te n e d th e d e m a n d fo r co m p a n ie s to b e e n v iro n m e n ta lly re sp o n sib le . S ta k e h o ld e rs are in te re ste d in e n v iro n m e n ta l in fo rm a tio n b e c a u se e n v iro n m e n ta l

a c tiv itie s m a y h a v e s ig n ific a n t fin an c ia l im p lic a tio n s fo r c o m p a n ie s (G o w la n d , 1995) an d fo r th e e n v iro n m e n t.

A u s tra lia n m in in g c o m p a n ie s te n d to b e p re s s u re d fro m e n v iro n m e n ta l

g ro u p s sin c e th e ir a c tiv itie s ca n h a v e a s ig n if ic a n t im p a ct o n th e e n v iro n m e n t (D e e g a n a n d G o rd o n , 1994). th e ir a c tiv itie s re q u ir e e n v iro n m e n ta lly re s p o n s ib le

a c tio n s an d , as a c o n s e q u e n c e , th e re is a n eed fo r m in in g c o m p a n ie s to p ro v id e

e n v iro n m e n ta l in fo rm a tio n to th e ir sta k eh o ld ers. M in in g c o m p a n ie s re sp o n d by im p le m e n tin g e n v iro n m e n ta l p ro te c tio n is t a c tiv itie s an d d is c lo s in g th e m in th e ir

a n n u al rep o rts . A n n u a l re p o rts are a so u rce o f in fo rm a tio n a c tiv e ly so u g h t b y fin a n c ia l re p o rt u s e rs (A n d e rso n an d E p s te in , 1995; T ilt, 1994; R o b e rts, 1991; Z e g h a l a n d A h m e d , 19 90) b ec a u se th e y c o n ta in in fo rm a tio n w h ic h e n a b le u sers to

a s s e s s th e p o te n tia l fin a n c ia l e ffe c ts o f e n v iro n m e n ta l c o n c e rn s (G ib s o n an d O ’D o n o v a n , 1994).

W h ile th e re are v a rio u s e n v iro n m e n ta l acts in A u stra lia 1, d is c lo s u re o f

e n v iro n m e n ta l in fo rm a tio n in th e an n u al re p o rt is n o t m a n d a to ry . V o lu n ta ry

e n v iro n m e n ta l d is c lo s u re (E D ), h o w ev er, h as lo n g b ee n p ra c tic e d b y A u stra lia n

e n titie s (T ro tm a n , 1979; G u th rie an d P a rk er, 1989). R e s e a rc h e rs a rg u e th a t th e re are

fa c to rs w h ic h m o tiv a te firm s to v o lu n ta rily d is c lo se e n v iro n m e n ta l in fo rm a tio n an d th is h as re s u lte d in a n u m b e r o f th e o rie s e x p la in in g th e in c id en ce o f E D . 2 .W e use s ta k e h o ld e r th e o ry to e x a m in e th e fac to rs th a t in flu e n c e v o lu n ta ry d is c lo s u re o f

e n v iro n m e n ta l in fo rm a tio n b y A u stra lia n liste d m in eral m in in g c o m p a n ie s in th e ir 1993 a n n u a l rep o rts . A ll th re e d im e n sio n s o f s ta k e h o ld e r th e o ry as d e fin e d by U llm a n n (1 9 8 5 ) are ex am in ed : S ta k e h o ld e r p o w er, stra te g ic p o stu re, an d e c o n o m ic p e rfo rm a n c e .

T h is stu d y e x te n d s p rio r res ea rch by e x a m in in g th e re la tio n b e tw ee n a n u m b e r o f c o rp o ra te c h a ra c te ristic s w ith in th e d im e n s io n s o f s ta k e h o ld e r th e o ry an d

c a te g o rie s o f v o lu n ta ry E D b ased on th re e d is c lo su re in d ex es. W e b e lie v e th e p rin c ip a l c o n trib u tio n o f th is stu d y is th e ex a m in a tio n o f th e e x te n t o f E D u sin g th re e in d ex es, w o rd s, u n w eig h te d in d ex (d ic h o to m o u s ) an d a w e ig h te d ind ex , w h e re th e

V o l. 5 , N o . 1, A u g 1 9 9 7 © C e n t r e f o r I n d o n e s ia n A c c o u n t i n g a n d M a n a g e m e n t R e s e a r c h

44 V o l u n t a r y E n v i r o n m e n t a l D i s c l o s u r e b y A u s t r a lia n .

re la tiv e im p o rta n c e o f ite m s is b a se d o n th e p e rc e p tio n s o f fin a n c ia l a n a ly sts , in a sin g le stu d y .

T h e fin d in g s o f th is s tu d y are e x p e c te d to b e re le v a n t to an y d e c is io n b y th e re g u la to rs o f a c c o u n tin g in fo rm a tio n to in tro d u ce an a c c o u n tin g sta n d a rd in th e a re a o f E D . In p a rtic u la r th e re g u la to rs w ill fin d it u s efu l in u n d e rs ta n d in g m a n a g e m e n t

m o tiv a tio n o f v o lu n ta ry E D an d th e re fo re b e in a b e tte r p o s itio n to g a u g e m a n a g e m e n t m o tiv a tio n o f v o lu n ta ry E D an d th e re fo re b e in a b e tte r p o s itio n to

g a u g e m a n a g e m e n t re a c tio n to a n y p ro p o s e d a c c o u n tin g sta n d a rd in th is a re a o f

d is c lo su re . T h e fin d in g s w ill a ls o b e o f in te res t to sta k e h o ld e rs.

II. Prior Research

A n u m b e r o f p rio r stu d ie s e x a m in e th e a s s o c ia tio n b e tw e e n c o rp o ra te

c h a ra c te ris tic s an d th e v o lu n ta ry d is c lo su re in A u s tra lia b y T ro tm a n a n d B ra d le y (1 9 8 1 ), K elly (1 9 8 1 ) an d D eeg an an d G o rd o n (1 9 9 4 ); o v e rs e a s re s e a rc h o n th e

d e te rm in a n ts o f v o lu n ta ry d is c lo su re b y C o w en et al (1 9 8 7 ), B elk ao u i & K a rp ik (1 9 8 9 ), N e s s an d M ir z a (1 9 9 1 ), R o b erts (1 9 9 2 ) an d M a h e s h w a ri (1 9 9 2 ); a n d re s e a rc h on th e re la tio n b e tw ee n fin an c ia l p e rfo rm a n c e an d so cial a n d e n v iro n m e n ta l p e rfo rm a n c e b y M c G u ire e t al (1 9 8 8 ) an d Jag g i an d F re e d m a n (1 9 9 2 ). T h e s e p rio r s tu d ie s are re le v a n t to th is stu d y b e c a u se th e y in d ic ate w h ic h v a ria b le s in th e p a s t

h a v e b e e n s ig n ific a n tly a s s o c ia te d w ith so cial a n d E D .

T h e s ig n ific a n t v a ria b le s re p o rte d in th e se s tu d ie s are firm size , so c ia l p re s s u re s,

e n v iro n m e n ta l s e n s itiv e ly , n a tu re o f in d u s try , so cial re s p o n s ib ility c o m m itte e , s y ste m a tic ris k , s o cial p e rfo rm a n c e , lev erag e, p o litic a l a ctio n c o m m itte e , p u b lic a ffa irs, p h ila n th ro p ic fo u n d a tio n , re tu rn on eq u ity , ag e an d re tu rn on as se ts. R o b e rts (1 9 9 2 ) h a s sp ec ia l s ig n ific a n c e fo r th is stu d y as it w as th e o n ly stu d y w h ich u tilis e d th e s ta k e h o ld e r

m a n a g e m e n t’s

d e c isio n

h o rizo n

S o m e p rio r s tu d ie s u se an in d ex o f e n v iro n m e n ta l a n d /o r so cial d is c lo s u re as th e d e p e n d e n t v a ria b le s . T h e se in c lu d e n u m b e r o f p ag es (T ro tm a n , 1979; G u th rie & P ark er, 1989; C o w en e t al., 1987; M a h e s h w a ri, 1992; G ib so n a n d O ’D o n o v a n , 199 4),

lin e b y lin e (T ro tm a n an d B rad le y , 1 981), d ic h o to m o u s (K e lly , 1981; N e s s a n d M irz a, 1991), n u m b e r o f w o rd s (D ee g an an d G o rd o n , 19 94 ), s p e c ific ity o f item (W is e m a n , 1 98 2) a n d re la tiv e im p o rta n c e (J a g g i an d F re e d m a n , 1992).

T h e c u rre n t stu d y ad d re s s e s s h o rtc o m in g s in th e s e s tu d ie s. P rio r s tu d ie s h a v e n o t c o n s id e re d c a te g o rie s o f E D . W h ere an in d e x w as u se d as th e d e p e n d e n t v a ria b le , th e im p a c t o f a lte rn a tiv e in d e x e s w a s n o t in v e stig a te d . C o n s e q u e n tly , a lte rn a tiv e

in d e x e s, w o rd s, an u n w e ig h te d in d e x an d a w e ig h te d in d ex , are a p p lie d to c a te g o rie s

V o l . 5 , N o . 1, A u g 1 9 9 7 © C e n t r e f o r I n d o n e s ia n A c c o u n t i n g a n d M a n a g e m e n t R e s e a r c h

T h e I n t e r n a t io n a l J o u r n a l o f A c c o u n t i n g a n d B u s i n e s s S o c i e t y 45

o f v o lu n ta ry E D . A ls o , o th e r v a ria b le s, w h ic h h a v e n o t b ee n p re v io u s ly te ste d (m e m b e rs h ip o f th e A u s tra lia n M in in g In d u s try C o u n c il (A M IC ) an d c o m m e rc ia l p ro d u c tio n ), are in c lu d e d .

III. Theoretical Framework and Hypotheses

T h re e d im e n s io n s o f s ta k e h o ld e r th e o ry are e x a m in e d in th is stu d y : sta k e h o ld e r p o w e r, s tr a te g ic p o stu re , an d e c o n o m ic p e rfo rm a n c e . O w n e rs h ip

d iffu s io n , fin a n c ia l le v e ra g e a n d p o litic a l p re s s u re are u se d as p ro x ie s fo r s ta k e h o ld e r p o w e r; th e p re s e n c e o f a c o rp o ra te e n v iro n m e n ta l c o m m itte e is u se d as a p ro x y fo r stra te g ic p o s tu re ; an d re tu rn o n e q u ity a n d s y ste m a tic ris k are u s e d as p ro x ie s fo r

e c o n o m ic p e rfo rm a n c e . F irm size a n d c o m m e rc ia l p ro d u c tio n are in c lu d e d as c o n tro l v a ria b le s .

Stakeholder Power

A s ta k e h o ld e r h a s d iffe re n tia l p o w e r d e p e n d e n t o n th e d e g re e o f c o n tro l o v e r re s o u rc e s re q u ir e d b y th e c o m p a n y (U llm an n , 1985). T h e m o re critic a l th e s ta k e h o ld e r re s o u rc e s , th e g re a te r th e w illin g n e s s o f th e c o m p a n y to s a tisfy th e s ta k e h o ld e r d e m a n d s. E n v iro n m e n ta l a c tiv itie s m a y a b so rb a c o n s id e ra b le a m o u n t o f an

e n tity ’s re s o u rc e s .

e n v iro n m e n ta l re s p o n s ib ility a c tiv itie s in m a k in g th e ir in v e stm e n t d e c is io n s b e c a u se

in fo rm a tio n about

e n v iro n m e n ta l re s p o n s ib ility ac tiv itie s. 3 In re s p o n s e , c o m p a n ie s m a y d is c lo s e th e s e

a c tiv itie s in th e ir a n n u a l re p o rts to re v e a l th e fin a n c ia l im p lic a tio n s o f its

e n v iro n m e n ta l a c tiv itie s . H o w e v e r, c o m p a n ie s m a y b e re lu c ta n t to d is c lo s e

e n v iro n m e n ta l a c tiv itie s . H o w e v e r, c o m p a n ie s m a y b e re lu c ta n t to d is c lo s e en v iro n m e n ta l lia b ilitie s b e c a u se su ch d is c lo su re m a y b e p e rc e iv e d a s an a d m is s io n o f g u ilt (C e rf, 1993). C o n s e q u e n tly th e re m a y b e a s e le c tiv e d is c lo s u re p ro b le m w ith v o lu n ta ry E D .

Ownership Diffusion

o w n e rs h ip , p a rtic u la rly

e n v iro n m e n ta lly c o n c e rn e d in v e sto rs, m a y in te n s ify th e p re s s u re fo r m a n a g e m e n t to re p o rt e n v iro n m e n ta l re s p o n s ib ility a ctiv itie s.

H o w e v e r, re s e a rc h o n th e re la tio n b e tw ee n o w n e rs h ip an d c o rp o ra te so cial

a n d E D h a s p ro d u c e d m ix e d res u lts. C ra sw ell an d T a y lo r (1 9 9 2 ) fin d th e

c o n c e n tra tio n o f o w n e rs h ip in a firm ex p la in e d th e v o lu n ta ry d is c lo s u re o f o il re s e rv e s in th e a n n u a l re p o rts o f A u stra lia n o il a n d g as c o m p a n ie s . P a tte n (1 9 9 2 ) r e p o rts th a t as a c o n s e q u e n c e o f th e E x x o n V a ld e z a c c id en t, fir m s th a t a ffilia te d w ith

V o l . 5 , N o . 1, A u g 1 9 9 7 © C e n t r e f o r I n d o n e s ia n A c c o u n t i n g a n d M a n a g e m e n t R e s e a r c h

46 V o l u n t a r y E n v ir o n m e n t a l D i s c l o s u r e b y A u s tr a lia n .

A la s k a P ip e lin e S e rv ic e c o m p a n y (as a p ro x y o f o w n e rs h ip ) in c re a s in g ly d is c lo se d

e n v iro n m e n ta l in fo rm a tio n . In co n tra st, R o b erts (1 9 9 2 ) fin d s th a t o w n e rs h ip

d if fu s io n , i.e., 5 % o r m o re o f o u ts ta n d in g o rd in a ry sh a re s h e ld b y m a n a g e m e n t o r o th e r in d iv id u a ls, is n o t s ig n if ic a n tly re la te d

to th e d e g re e o f c o rp o ra te so c ial re s p o n s ib ility d is c lo su re s .

W e p ro p o s e to fu rth e r te s t th e a rg u m e n t b y U llm a n n (1 9 8 5 ) th a t firm s w id e ly

h e ld b y s h a re h o ld e rs are m o re lik ely to v o lu n ta rily d is c lo se e n v iro n m e n ta l in fo rm a tio n in th e ir a n n u al re p o rt th a n firm s c lo se ly h eld b y sh a re h o ld e rs. T h e

e x p e c te d re la tio n b e tw e e n o w n e rs h ip a n d v o lu n ta ry E D is sta te d in h y p o th e s is H I :

HI: T h e e x te rn o f v o lu n ta ry E D in th e a n n u al re p o rts o f A u stra lia n listed m in eral m in in g c o m p a n ie s is p o s itiv e ly re la te d to o w n e rs h ip d iffu sio n .

O w n e rs h ip d if fu s io n is d e fin e d as a p e rc e n ta g e o f o u ts ta n d in g o rd in a ry s h a re s o w n ed

b y o th e r th a n th e to p tw e n ty s h a re h o ld e rs. 4

Financial Leverage

L e v e ra g e can c a p tu re th e im p o rta n c e o f c re d ito rs as s ta k e h o ld e rs in a f ir m ’s w e alth , c re d ito rs a n d fin a n c ia l le n d in g in stitu tio n s m a y sh are in p o te n tia l lia b ilitie s if th e ir lo an s are s e c u re d b y c o n ta m in a te d p ro p e rtie s (D av ey , 1 994; W illia m s an d

P h ilip s , 1994). A s a re su lt, th e y m ay d e m a n d a d d itio n a l in fo rm a tio n in th e an n u al re p o rt in o rd e r to a sse ss th e p ro b a b ility o f a firm m e e tin g th e ir d e b t o b lig a tio n s. T h is im p lie s th a t d is c lo s u re o f e n v iro n m e n ta l re s p o n s ib ility m a y b e lin k ed to d e b t lev els.

I f c re d ito rs are c o n c e rn e d w ith e n v iro n m e n ta l re s p o n s ib ility a c tiv itie s , th e c o m p a n y is m o re lik ely to d is c lo se its e n v iro n m e n ta l ac tiv itie s .

R e s e a rc h on th e re la tio n b etw ee n le v e ra g e an d c o rp o ra te s o c ia l re s p o n s ib ility

h as p ro d u c e d m ix e d re su lts. B e lk a o u i an d K arp ik (1 9 8 9 ) an d M c G u ire e t al. (1 9 8 8 ) re p o rt a s ig n ific a n t n e g a tiv e a s s o c ia tio n b e tw ee n le v erag e (to ta l d e b t to to ta l a s s e ts )

a n d th e lev el o f s o cial d is c lo su re an d so cial p e rfo rm a n c e . O n th e o th e r h an d , R o b erts (1 9 9 2 ) e m p lo y s a d iffe re n t le v e ra g e m e a su re an d fin d s th a t le v e rag e (to ta l d e b t to to ta l e q u ity ) h as a p o s itiv e re la tio n w ith so cial re s p o n s ib ility d is c lo su re .

M c G u ir e et al. (1 9 8 8 ) s u g g e s t th a t, o n th e b a sis o f th e re s u lts o f th e ir stu d y , it is w o rth y to c o n s id e r p rio r fin a n c ia l p e rfo rm a n c e as an e x p la n a to ry v a ria b le in flu e n c in g c o rp o ra te so cial re s p o n s ib ility d is c lo su re ra th e r th a n c o n c u rre n t o r

s u b se q u e n t p e rfo rm a n c e , T h e ir su g g es tio n im p lie s th a t th e re m a y b e d iffe re n t e ffe c ts o f p rio r an d c u rre n t le v e ra g e o n th e e x te n t o f e n v iro n m e n ta l d is clo su re.

W e p ro p o s e to fu rth e r te s t th e le v erag e a rg u m e n t an d to in c o rp o ra te th e M cG u ire at al (1 9 8 8 ) su g g es tio n to c o n s id e r th e e ffe c t o f p rio r le v e rag e. T h e

V o l. 5 , N o . 1, A u g 1 9 9 7 © C e n t r e fo r I n d o n e s ia n A c c o u n t i n g a n d M a n a g e m e n t R e s e a r c h

T h e I n t e r n a t io n a l J o u r n a l o f A c c o u n t i n g a n d B u s i n e s s S o c i e t y 47

e x p e c te d re la tio n b e tw e e n le v e ra g e an d v o lu n ta ry E D is sta te d in h y p o th e s e s H 2 a and H2b:

H 2 a: T h e e x te n t o f v o lu n ta ry E D in th e a n n u a l re p o rts o f A u stra lia n liste d m in e ra l m in in g c o m p a n ie s is p o s itiv e ly re la te d to le v e ra g e in th e p re v io u s y e ar.

H2b: T h e e x te n t o f v o lu n ta ry E D in th e a n n u a l re p o rts o f A u s tra lia n liste d m in e ra l m in in g c o m p a n ie s is p o s itiv e ly re la te d to le v e ra g e in th e c u rre n t y ear.

L e v e ra g e is m e a su re d as th e ra tio o f to ta l d e b t to to ta l a s s e ts as u se d b y

B e lk a o u i a n d K a rp ik (1 9 8 9 ) a n d M c G u ir e e t al. (1 9 8 8 ).

Political Pressure

M in e ra l m in in g c o m p a n ie s m a y b e a r p o litic a l c o n s tr a in ts . T h e s e p re s s u re s ste m fro m in te rn a tio n a l as w e ll as n a tio n a l le g is la tio n . A t an in te rn a tio n a l lev el, firm s th a t are o p e ra tin g in o v e rs e a s c o u n trie s , p a rtic u la rly in d e v e lo p in g c o u n trie s ,

h av e to c o m p ly w ith th e re q u ire m e n ts o f th e U n ite d N a tio n s , th e W o rld B a n k an d th e In te rn a tio n a l F in a n c e C o rp o ra tio n ( O ’N e ill, 1 993) in a d d itio n to r e la te d -c o u n try re g u la tio n s . A t a n a tio n a l le v e l, th e A u stra lia n g o v e rn m e n t h a s p la c e d s tr ic t re g u la tio n s o n th e e n v iro n m e n t a t F e d e ra l, S ta te a n d lo cal g o v e rn m e n t le v els (A u s tra lia n M in in g In d u s tr y C o u n c il (A M IC ), 1 993b; G ib s o n a n d O ’D o n o v a n ,

1994). F o r e x a m p le , N e w S o u th W a le s re q u ir e s 50 p e rm its , w h e re a s N o rth e rn T e rrito ry re q u ir e s 6 0 0 p e rm its fo r n e w m in in g c o m p a n ie s (G o m e z , 1992).

B e ll a n d W a rh u rs t (1 9 9 3 ) c o n c lu d e th a t la rg e fir m s a s s o c ia te d w ith th e

B u s in e s s C o u n c il o f A u s tra lia (B C A ) te n d to b e m o re p o litic a lly a c tiv e , in te rm s o f

d e a lin g w ith th e p o litic a l e n v iro n m e n t an d th e lev el o f re la tio n s h ip to g o v e rn m e n t, th a n n o n -m e m b e r firm s. S im ila rly in th e U n ite d S ta tes firm s h a v e b e c o m e in c re a s in g ly in v o lv e d in p o litic a l ac tio n c o m m itte e s to a ffe c t p o litic a l d e c isio n m a k in g (K e im a n d B a y s in g e r, 1988). F u rth e rm o , R o b e rts (1 9 9 2 ) p o in ts o u t th a t “ h ig h e r le v els o f p e rc e iv e d g o v e rn m e n ta l in flu e n c e o n c o rp o ra te a c tiv ity w o u ld be

e x p e c te d to lead to a g re a te r e ffo rt b y m a n a g e m e n t to m e e t e x p e c ta tio n s o f

g o v e rn m e n t” (p .6 0 2 ).

T h e d e v e lo p m e n t o f s tra te g ic c o rp o ra te re p o rtin g ca n b e u s ed to re d u c e th e p e rc e iv e d p o litic a l p re s s u re o r g o v e rn m e n ta l in flu e n c e (H u iz in g an d D e k k e r, 1 992).

A s g o v e rn m e n t m a y in tro d u c e p o litic a l c o n s tr a in ts b y re q u ir in g firm s to a d d re s s th e p e rc e iv e d

firm s

d is c lo se

in fo rm a tio n about

e n v iro n m e n ta l p ro g ra m an d p o lic y in th e ir an n u al re p o rt e x p la in in g th a t th e y co m p ly w ith e n v iro n m e n ta l s ta n d a rd a n d re g u la tio n s.

V o l . 5 , N o . 1, A u g 1 9 9 7 © C e n t r e f o r I n d o n e s ia n A c c o u n t i n g a n d M a n a g e m e n t R e s e a r c h

48 V o lu n t a r y E n v ir o n m e n t a l D i s c l o s u r e b y A u s t r a lia n .

M e m b e rs h ip o f th e A M IC is se le c te d a s p ro x y o f p o litic a l c o n s tra in ts . T h e re

a re tw o re a s o n s w h y A M IC m e m b e rs h ip is c h o s e n ; firs t, d e s p ite th e e x is te n c e o f m a n y s u b -m in in g o rg a n is a tio n s , th e C o u n c il re p re s e n ts th e m a jo rity o f m in in g fir m s w h ic h o p e ra te th r o u g h o u t A u stra lia . S ec o n d , th e C o u n c il s e e m s to b e m o re p o litic a lly p o w e rfu l th a n o th e r m in in g o rg a n is a tio n s to n e g o tia te o r lo b b y w ith

g o v e rn m e n t a n d e n v iro n m e n ta l g ro u p s b e c a u se th e m in in g in d u s tr y is fu n d a m e n ta l to

A u s tr a lia ’s e c o n o m ic d e v e lo p m e n t (A M IC , 1994; B a rn e tt, 19 94 ). T h ird , th e A M IC

d e v e lo p s a n d p ro p o s e s e n v iro n m e n ta l o b je c tiv e s a n d s ta n d a rd s to g o v e rn m e n t in w h ic h th e s e s ta n d a rd s m u s t b e ad o p te d b y th e m e m b e rs.

D iffe re n t p re s s u re s o f g o v e rn m e n t o n c o rp o ra te e n v iro n m e n ta l r e s p o n s ib ility m a y le a d to d iffe re n tia l d is c lo s u re p a tte rn s a c ro s s c o m p a n ie s . T h e p ro v is io n o f E D is v ie w e d as re a c tiv e re s p o n s e to s o c ia l p re s s u re s (G u th rie a n d P a rk e r, 1 99 0). A s th e

a c tiv itie s o f m in in g c o m p a n ie s are s u sc e p tib le to d e trim e n t o f th e e n v iro n m e n t, th e

A M IC m e m b e rs m a y jo i n tly d e v e lo p s tr a te g ie s a n d p o lic ie s to re s to re th e

e n v iro n m e n t in c lu d in g th e p ro v is io n o f an e n v iro n m e n ta l re p o rt. W e p re d ic t th a t firm s w h ic h a re m e m b e rs o f th e A M IC are m o re lik e ly to d is c lo s e e n v iro n m e n t a n d p re s s u re g ro u p s b e c a u s e th e y are m o re in fo rm e d th a n n o n -A M IC c o m p a n ie s . T h e re fo re , it is p re d ic te d th a t th e re w ill b e a p o s itiv e a s s o c ia tio n b e tw e e n m e m b e rs h ip o f th e A M IC a n d c o rp o ra te E D .

H 3: T h e e x te n t o f v o lu n ta ry E D in th e a n n u a l re p o rts o f A u s tra lia n liste d m in e ra l m in in g c o m p a n ie s is p o s itiv e ly re la te d to m e m b e rs h ip o f th e A M IC .

S tr a te g ic P o s tu re

U llm a n n (1 9 8 5 ) d is tin g u is h e s a f ir m ’s str a te g ic p o s tu re as e ith e r a c tiv e o r p a s s iv e . A c tiv e s tra te g ic p o s tu re m e a n s th a t a firm is p e rfo rm in g e n v iro n m e n ta l

a c tiv itie s p ro a c tiv e ly to a d d re s s s ta k e h o ld e r in flu e n c e s. F o r e x a m p le , a firm m a y

e s ta b lis h a sp e c ia l d e p a rtm e n t o r c o m m itte e , w h ic h is re s p o n s ib le fo r p re p a rin g a n d

d e v e lo p in g p ro g ra m s , p o lic ie s an d s tr a te g ie s re la tin g to e n v iro n m e n ta l m a tte rs . P a s s iv e s tr a te g ic p o s tu re m e a n s th a t a firm d o e s n o t d e v e lo p a s p e c ific p o lic y o r p ro g ra m to a d d re s s th e e x is tin g e n v iro n m e n ta l issu es . S tra te g ic p o s tu re o f a c o m p a n y is p o s itiv e ly a s s o c ia te d w ith th e e x te n t o f d is c lo su re . S ta k e h o ld e r th e o ry p o s its th a t th e m o re a c tiv e th e s tra te g ic p o stu re , th e m o re lik e ly a c o m p a n y is to c a rry o u t

e n v iro n m e n ta l a c tiv itie s a n d d is c lo se su ch a c tiv itie s to sta k e h o ld e rs .

The presence of an Environment Responsibility committee

E m p iric a l e v id e n c e su g g e s ts th a t th e p re s e n c e o f th e so c ia l re s p o n s ib ility

c o m m itte e c o u ld e x p la in th e e x te n t o f so cial d is c lo s u re (C o w e n e t al., 1987; M a h e s h w a ri,

1992). S im ilarly , th e e x iste n c e o f a c o rp o ra te e n v iro n m e n ta l r e s p o n s ib ility c o m m itte e ca n d e s c rib e th e s tr a te g y o f a c o m p a n y in a d d re s s in g

V o l . 5 , N o . 1, A u g 1 9 9 7 © C e n t r e f o r I n d o n e s ia n A c c o u n t i n g a n d M a n a g e m e n t R e s e a r c h

T h e I n t e r n a t io n a l J o u r n a l o f A c c o u n t i n g a n d B u s i n e s s S o c i e t y 49

e n v iro n m e n ta l issu es . T h e re fo re , an e n v iro n m e n ta l r e s p o n s ib ility c o m m itte e is s e le c te d a s a p ro x y o f a f ir m ’s str a te g ic p o s tu re .

C o m p a n ie s th a t h a v e an e n v iro n m e n ta l r e s p o n s ib ility c o m m itte e a n d m e n tio n it in th e a n n u a l re p o rt are p e rc e iv e d to h a v e an a c tiv e s tr a te g ic p o s tu re . I f

c o m p a n ie s d o n o t m e n tio n it in th e ir a n n u a l re p o rt, th e y are a s s u m e d to h a v e a p a s s iv e s tra te g ic p o stu re . W e p o s it th a t c o m p a n ie s th a t h a v e an e n v iro n m e n ta l re s p o n s ib ility c o m m itte e are m o re lik e ly to d is c lo se e n v iro n m e n ta l a c tiv itie s . T h u s , w e e x p e c t a p o s itiv e re la tio n b e tw e e n th e p re s e n c e o f an e n v iro n m e n ta l c o m m itte e

a n d v o lu n ta ry E D in an e n tity ’s a n n u a l re p o rt. H y p o th e s is H 4 is sta te d as fo llo w s:

H 4: T h e e x te n t o f v o lu n ta ry E D in th e a n n u a l re p o rts o f A u s tra lia n liste d m in e ra l m in in g c o m p a n ie s is p o s itiv e ly re la te d to th e p re s e n c e o f an e n v iro n m e n ta l re s p o n s ib ility

c o m m itte e .

E c o n o m ic P e rfo rm a n c e

T h e th ird d im e n s io n c o n c e rn s th e e c o n o m ic p e rfo rm a n c e o f th e firm .

D e a lin g w ith e n v iro n m e n ta l m a tte rs ca n b e co stly . F o r e x a m p le , in th e U S ,

e n v iro n m e n ta l, h e a lth a n d s a fe ty e x p e n d itu re s b y th e F o rtu n e 5 0 0 m a y b e as h ig h as $ 4 6 b illio n p e r y e a r o r 2 % o f s a le s (G re e n o an d R o b in so n , 1 9 9 2 ) o r 2 5 % to 6 0 % o f

e a rn in g s (M a s tra n d o n a s an d S trife , 1 99 2 ) an d th e se c o s ts are lik ely to in c re a s e in th e fu tu re . T h e re fo re , e c o n o m ic p e rfo rm a n c e w ill d ire c tly a ffe c t a f ir m ’s a b ility to

e s ta b lis h a n d m a in ta in e n v iro n m e n ta l p ro g ram s.

E c o n o m ic p e rfo rm a n c e an d e n v iro n m e n ta l r e s p o n s ib ility a c tiv itie s are re la te d (B o w m a n a n d H a ire , 1975; S p ic e r, 1 97 8) a n d th e y a re in s e p a ra b le

c o m p o n e n ts o f s u s ta in a b le d e v e lo p m e n t (A M IC , 1 993 a; B e b b in g to n , 199 3; B a tle y

a n d T o z e r, 19 93 ). T h is im p ie s th a t m o re fa v o u ra b le th e e c o n o m ic p e rfo rm a n c e o f a firm , th e m o re lik e ly it is to e n g a g e in e n v iro n m e n ta l a c tiv itie s a n d d is c lo s u re s . In

c o n tra st, fin a n c ia lly d is tre s s e d firm s are less lik e ly to e n g a g e in e n v iro n m e n ta l

a c tiv itie s an d , th e re fo re , th e y m a y h a v e less d is c lo su re s . P ro fita b ility an d s y s te m a tic risk , as m e a s u re s o f e c o n o m ic p e rfo rm a n c e , are p e rc e iv e d as c a u s a l fa c to rs th a t a llo w m a n a g e m e n t to u n d e rta k e m o re e x te n siv e e n v iro n m e n ta l re s p o n s ib ility p ro g ra m s . 5

E c o n o m ic p e rfo rm a n c e is m e a su re d on tw o d im e n s io n s , p ro fita b ility a n d s y s te m a tic risk .

Return on equity

W e e x p e c t th a t th e m o re p ro fita b le a firm is, th e m o re lik e ly it is to m a k e

e n v iro n m e n ta l d is c lo s u re s sin c e su ch firm s are b e tte r ab le to fin a n c e e n v iro n m e n ta l p ro g ra m s . T h e re a s o n is th a t, b e tte r p e rfo rm in g fir m s w a n t to sig n a l th e s u p e rio r sk ill

V o l . 5 , N o . 1, A u g 1 9 9 7 © C e n t r e f o r I n d o n e s ia n A c c o u n t i n g a n d M a n a g e m e n t R e s e a r c h

50 V o lu n t a r y E n v ir o n m e n t a l D i s c l o s u r e b y A u s tr a lia n .

o f th e m a n a g e m e n t k e e p in g th e firm p ro fita b le w h ile a c h ie v in g e n v iro n m e n ta l re s p o n s iv e n e s s (B o w m a n a n d H aire , 1976; A le x a n d e r a n d B u c h o lz , 1978; 1992).

R etu rn o n E q u ity h as b e en u sed as a m e a su re o f e c o n o m ic p e rfo rm a n c e in p rio r s tu d ie s an d h a s re s u lte d in c o n flic tin g fin d in g s. T h e fin d in g s o f c e rta in s tu d ie s in d ic a te a p o s itiv e a s s o c ia tio n b e tw e e n R etu rn o n E q u ity a n d s o c ia l a n d

e n v iro n m e n ta l r e s p o n s ib ility d is c lo su re (S p ic e r, 1978; M ills an d G a rd n e r, 1984; R o b e rts, 1 9 92 ) w h e re a s th e fin d in g s o f o th e r stu d ie s s u g g e s t a n e g a tiv e a s s o c ia tio n w ith so c ia l a n d e n v iro n m e n ta l p e rfo rm a n c e (B o w m a n an d H aire , 1 975; J a g g i an d

F re e d m a n , 1 992). T h is im p lie s th a t c o m p a n ie s te n d to h a v e e n v iro n m e n ta lly re s p o n s ib le a c tiv itie s b u t th e y are c o n tin g e n t u p o n th e ir fin a n c ia l p ro file s (M ills an d

G a rd n e r, 1 984). T h e re fo re , th is stu d y p re d ic ts th a t firm s w ith la rg e r R e tu rn o n E q u ity are lik e ly to v o lu n ta rily d is c lo se m o re e n v iro n m e n ta l in fo rm a tio n . H y p o th e s is H 5 a is

e x p re s s e d as fo llo w s: .

H 5a: T h e e x te n t o f v o lu n ta ry E D in th e a n n u a l re p o rt o f A u s tra lia n listed m in e ra l m in in g c o m p a n ie s is p o s itiv e ly re la te d to th e R etu rn o n E q u ity in th e c u rre n t y ear.

R e tu rn o n E q u ity is d e fin e d as n et in c o m e a fte r ta x a n d e x tra o rd in a ry item s to to ta l o rd in a ry sh ares.

R o b e rts (1 9 9 2 ) in d ic a te s th a t a tim e d im e n s io n o f R etu rn o n E q u ity a p p e a re d to h a v e e ffe c ts o n th e lev el o f e n v iro n m e n ta l

d is c lo su re . M o re im p o rta n tly , he

c o n c lu d e s th a t stro n g R etu rn o n E q u ity in th e p rio r p e rio d is p o s itiv e ly a s s o c ia te d w ith c u rre n t R e tu rn o n E q u ity an d c u rre n t so cial d is c lo su re to c h e c k th e a s s o c ia tio n . T h is stu d y ta k e s a c c o u n t o f th a t a s s o c ia tio n an d th e re fo re th e h y p o th e s is is fo rm u la te d as:

H 5 b: T h e e x te n t o f v o lu n ta ry e n v iro n m e n ta l d is c lo su re in th e a n n u a l re p o rt o f

A u s tra lia n listed m in e ra l m in in g co m p a n ie s is p o s itiv e ly re la te d to th e R etu rn o n

E q u ity in th e p rio r y ear.

Systematic Risk

P re v io u s stu d ie s on th e re la tio n s h ip b e tw e e n s y ste m a tic ris k an d c o rp o ra te so cial an d E D h as p ro d u c e d m ix e d re su lts. T h o tm an an d B ra d le y (1 9 8 1 ) an d

B elk ao u i an d K arp ik (1 9 8 9 ) fo u n d th a t s y ste m a tic ris k an d th e e x te n t o f so cial

d is c lo s u re w e re p o s itiv e ly rela te d . T h o tm a n an d B rad le y c o n c lu d e th a t c o rp o ra te m a n a g e m e n t re d u c e d risk b y u n d e rta k in g so cial d is c lo su re . H o w e v er, R o b e rts (1 9 9 2 ) v ie w e d c o rp o ra tio n s w ith lo w s y ste m a tic risk as m o re lik ely to h a v e h ig h e r le v els o f so c ia l d is c lo su re . H e a rg u e d th e se c o m p a n ie s te n d e d to h a v e m o re sta b le p a tte rn s o f s to c k m a rk e t re tu rn s an d sta b le e c o n o m ic p e rfo rm a n c e w o u ld e n h a n c e th e a b ility o f a

c o m p a n y to c o m m it to s o c ia lly re s p o n s ib le a c tiv itie s an d d is c lo su re s . R o b e rts (1 9 9 2 )

V o l. 5 , N o . 1, A u g 1 9 9 7 © C e n t r e f o r I n d o n e s ia n A c c o u n t i n g a n d M a n a g e m e n t R e s e a r c h

T h e I n t e r n a t io n a l J o u r n a l o f A c c o u n t i n g a n d B u s i n e s s S o c i e t y 51

fo u n d a n e g a tiv e re la tio n s h ip b e tw e e n th e e x te n t o f s o c ia l d is c lo s u re a n d s y s te m a tic risk .

W e p ro p o s e to fu rth e r te s t th e s y ste m a tic ris k re la tio n s h ip a rg u m e n t b y R o b e rts (1 9 9 2 ). T h e e x p e c te d re la tio n b e tw e e n s y ste m a tic ris k a n d v o lu n ta ry E D is s ta te d in h y p o th e s is H 6:

H 6: T h e e x te n t o f v o lu n ta ry E D in th e a n n u a l re p o rts o f A u s tra lia n liste d m in e ra l m in in g c o m p a n ie s is n e g a tiv e ly re la te d to th e s y ste m a tic risk .

S y s te m a tic ris k is d e fin e d as th e c o n trib u tio n o f th e in d iv id u a l s e c u rity to p o rtfo lio risk .

C o n tr o l V a ria b le s

S iz e a n d c o m m e rc ia l p ro d u c tio n are c o n s id e re d c o n tro l v a ria b le s b e c a u se th e y m a y in te rv e n e w ith o th e r v a ria b le s a n d th e re fo re th e y sh o u ld b e c o n tro lle d (U llm a n n , 1985; C o w e n et al., 1987; B e lk a o u i a n d K alp ik , 1989; R o b e rts, 1992). R o b e rts f u rth e r n o te s th a t th e y m a y a lso re p re s e n t s o m e a s p e c ts o f s ta k e h o ld e r p o w e r, s tra te g ic p o s tu re a n d e c o n o m ic p e rfo rm a n c e .

Company Size - Total Assets; Total Sales; Market Capitalisation

P re v io u s re s e a rc h in d ic a te s th a t c o m p a n y size h a s e x p la n a to ry p o w e r to th e

e x te n t o f so c ia l a n d e n v iro n m e n ta l d is c lo s u re (e.g ., T ro tm a n a n d B ra d le y , 1981;

C o w a n e t al., 1987). C h e n an d M e tc a lf (1 9 8 0 ) c o n c lu d e th a t size, as a b a c k g ro u n d

fa c to r, in flu e n c e s th e a s s o c ia tio n o f c o rp o ra te e n v iro n m e n ta l a c tiv itie s a n d fin a n c ia l in d ic a to rs . H o w e v e r, size is a s s o c ia te d w ith e n v iro n m e n ta lly s e n s itiv e in d u s tr ie s an d

c a n n o t b e g e n e ra lis e d to in d u s trie s w h ic h are n o t e n v iro n m e n ta lly s e n s itiv e (D e e g a n

a n d G o rd o n , 1994).

T h e re are th re e ra tio n a le s fo r s e le c tin g firm size as an in d e p e n d e n t v a ria b le s .

F irst, la rg e r c o m p a n ie s are m o re lik ely to h a v e g re a te r p o litic a l v is ib ility o r p o litic a l

c o s ts (W a tts a n d Z im m e rm a n , 1986; D e e g a n a n d C a rro ll, 19 93 ) a n d th e y p ro d u c e

e n v iro n m e n ta l d is c lo s u re to m itig a te p o litic a l c o s ts (D e e g a n a n d G o rd o n , 1 99 4) o r p o litic a l v is ib ility (B e lk a o u i an d K arp ik , 1989). A s m in in g c o m p a n ie s ca n h a v e a

d e trim e n ta l e ffe c t o n th e e n v iro n m e n ta l (D ie rk e s an d P re sto n , 1 977). L a rg e m in in g fir m s are lik e ly to b e s c ru tin is e d b y th e g e n e ra l p u b lic , g o v e rn m e n t, a n d

e n v iro n m e n ta l in te re s t g ro u p s. In o th e r w o rd s, th e y h a v e p o litic a l p re s s u re s fro m p u b lic . T o a v o id c la im th e y are d e s tro y in g th e e n v iro n m e n t, c o rp o ra te m a n a g e m e n t te n d to d e v e lo p e n v iro n m e n ta l p o lic ie s a n d s tr a te g ie s a n d d is c lo se th e m in th e a n n u a l re p o rt. T h e in te n tio n is to s h o w th a t th e ir a c tio n s are in h a rm o n y w ith th e

e n v iro n m e n t in o rd e r to a c h ie v e a s u s ta in a b le c o rp o ra tio n (E lk in g to n , 1994; G re e n o

V o l . 5 , N o . 1, A u g 1 9 9 7 © C e n t r e f o r I n d o n e s ia n A c c o u n t i n g a n d M a n a g e m e n t R e s e a r c h

52 V o lu n t a r y E n v ir o n m e n t a l D i s c l o s u r e b y A u s tr a lia n .

a n d R o b in s o n , 1 992 ). T h e s e c o n d re a s o n is th a t la rg e r fir m s are m o re lik e ly to h a v e

b e tte r e n v iro n m e n ta l a c tiv itie s (S p ic e r, 1978; C h e n a n d M e tc a lf , 1980). T h ird , la rg e r firm s are b e tte r a b le to af fo rd th e c o s t o f p ro d u c in g th e v o lu n ta ry in fo rm a tio n to b e

d is c lo se d . 6

H a c k s to n a n d M iln e (1 9 9 6 ) stu d ie d so cia l an d e n v iro n m e n ta l d is c lo s u re s an d s e le c te d to ta l a s s e ts , to ta l s ales a n d m a rk e t c a p ita lis a tio n as th e m e a s u re o f c o m p a n y size . T h e y c o n c lu d e d th a t c o m p a n y size w as s ig n ific a n tly a n d p o s itiv e ly a s s o c ia te d

w ith th e e x te n t o f c o m p a n y size. T h is stu d y c o n s id e rs all th re e m e a s u re s o f size.

C o n s e q u e n tly , la rg e r firm s are e x p e c te d to p ro d u c e m o re v o lu n ta ry

d is c lo s u re s o f e n v iro n m e n ta l in fo rm a tio n . T h is le ad s to h y p o th e s is H 7:

H 7: T h e e x te n t o f v o lu n ta ry E D in th e a n n u a l re p o rts o f A u s tra lia n listed m in e ra l m in in g c o m p a n ie s is p o s itiv e ly re la te d to size.

Commercial Production

I t is p o s s ib le th a t s o m e m in e ra l m in in g c o m p a n ie s are m e re ly c a rry in g o u t

e x p lo ra tio n a n d o th e r c o m p a n ie s are a c tiv e ly d rillin g an d e x tra c tin g m in e ra ls fro m th e ea rth . C le a rly , th e le tte r are m o re lik e ly to h a v e an a d v e rs e e ffe c t o n th e

e n v iro n m e n t. C o m m e rc ia l p ro d u c tio n m e a n s th a t a c o m p a n y h a s e x tra c te d c ru d e m in e ra ls a n d m ig h t n e e d to p ro c e s s th e m fu rth e r in o rd e r to m a rk e t th e p ro d u c t to cu s to m e rs. T h u s, firm s th a t are in c o m m e rc ia l p ro d u c tio n are lik e ly to d e p le te n a tu ra l re s o u rc e s a n d b e m o re d e trim e n ta l to th e e n v iro n m e n ta l th a n n o n -c o m m e rc ia l firm s.

T h is v a ria b le s h a s n o t b e e n te ste d in p rio r s tu d ie s. It is e x p e c te d in th is stu d y th a t c o m m e rc ia l o p e ra tio n s are a s s o c ia te d w ith v o lu n ta ry E D . H y p o th e s is H 8 is sta te d a s fo llo w s:

H8: T h e v o lu n ta ry E D in th e a n n u a l re p o rts o f A u s tra lia n liste d m in e ra l m in in g

c o m p a n ie s is re la te d to c o m m e rc ia l o p e ra tio n .

IV. Method

Data Sources and Sample Selection

T h e s a m p le c o m p ris e s A u stra lia n m in e ra l m in in g c o m p a n ie s liste d o n th e

A u s tra lia n S to c k E x c h a n g e (A S X ) in 1993. T h e s a m p le w as s e le c te d fro m th e m ic ro fic h e A n n u a l R e p o rt F ile o f th e A u stra lia n G ra d u a te S ch o o l o f M a n a g e m e n t (A G S M ). T h e A G S M F ile c o n s is ts o f th e to p 5 0 0 liste d c o m p a n ie s in A u s tra lia b y m a rk e t c a p ita lis a tio n . T o m a in ta in h o m o g e n e ity in th e sa m p le , o il a n d g a s firm s w e re

e x c lu d e d a s th e y a re u s in g d iffe re n t e q u ip m e n t an d te c h n o lo g y . A ls o , o n e m in e ra l

V o l . 5 , N o . 1, A u g 1 9 9 7 © C e n t r e f o r I n d o n e s ia n A c c o u n t i n g a n d M a n a g e m e n t R e s e a r c h

T h e I n t e r n a t io n a l J o u r n a l o f A c c o u n t i n g a n d B u s i n e s s S o c i e t y 53

m in in g fir m th a t h a s o il a c tiv itie s w a s e x c lu d e d fro m s a m p le J T a b le 1 d e s c rib e s th e n u m b e r o f firm s in c lu d e d in th e sa m p le.

T a b le 1

S a m p le o f t h e S t u d y

N u m b e r o f m in in g fir m s liste d o n A u s tra lia n S to ck E x c h a n g e 386 N u m b e r o f firm s n o t liste d o n th e A G S M A n n u a l R e p o rt F ile

251 N u m b e r o f m in in g firm s liste d o n th e A G S M A n n u a l R e p o rt F ile

Measuring, the Extent of Disclosure

T h is s tu d y u s e s th re e d iffe re n t in d e x in g sy ste m s. T h e s e a re w o rd in d e x , u n w e ig h te d in d e x a n d w e ig h te d in d ex . 8 A s u m m a ry o f th e in d e x in g p ro c e d u re u se d to s c o re e a c h in d e x is c o n ta in e d in T a b le 2.

c a te g o rie s ) is c a lc u la te d b y s u m m in g th e w o rd s fo r item s d is c lo s e d b y e a c h c o m p a n y .

2. U n w e ig h te d In d e x

a. S co re ‘ 1 ’ fo r th e p re s e n c e o f a n e n v iro n m e n ta l item a n d s c o re ‘0 ’ fo r th e ab se n c e ,

a. E a c h item is w e ig h te d o n th e b a s is o f th e r e la tiv e d e g re e o f im p o rta n ce .

b. T h e w e ig h ts o f th e ite m s is th e a v e ra g e s c o re s o f all s c o re s g iv e n b y fin a n c ia l a n a ly sts.

c. T h e a m o u n t o f e n v iro n m e n ta l d is c lo s u re s (to ta l a n d

c a te g o rie s ) is c a lc u la te d b y s u m m in g th e w e ig h ts o f ite m s d is c lo s e d b y e a c h c o m p a n y .

V o l . 5 , N o . 1, A u g 1 9 9 7 © C e n t r e f o r I n d o n e s ia n A c c o u n t i n g a n d M a n a g e m e n t R e s e a r c h

54 V o lu n t a r y E n v i r o n m e n t a l D i s c l o s u r e b y A u s t r a lia n

Identifviw the Individual ED Items Used in the Disclosure Indices

T h e firs t ste p in d e v e lo p in g o u r d is c lo s u re in d e x es w as to id e n tify in d iv id u a l

e n v iro n m e n ta l d is c lo s u re item s. B y re fe rrin g to p rio r stu d ie s (e .g ., T ro tm a n an d

B ra d le y , 1981; W ise m a n , 1982; C o w e n e t al., 1987; d e e g a n an d G o rd o n , 1 9 94 ) an d re v ie w in g a ra n d o m s a m p le o f 10 a n n u a l re p o rts, a list o f e n v iro n m e n ta l ite m s w as

g e n e ra te d . T h e c h e c k lis t w as c o n s tr u c te d to m e a su re th e q u a n tity o f n o n -m a n d a to ry

e n v iro n m e n ta l in fo rm a tio n . T o e n s u re th e h o m o g e n e ity o f th e ite m s (M a rs to n a n d S h riv e s , 1 99 1), th e ite m s w e re c la s s ifie d in to fo u r c a te g o rie s . T h e s e are c o rp o ra te

e n v iro n m e n ta l p o lic y , re c o g n itio n o f e n v iro n m e n ta l a c tiv itie s , p re v e n tio n o r re p a ir o f

e n v iro n m e n ta l d a m a g e , a n d e n v iro n m e n ta l lia b ilitie s . A s e n io r a c a d e m ic a n d an

h o n o u rs s tu d e n t w e re a s k e d to re v ie w th e e n v iro n m e n ta l ite m s a n d th e ir

c la s s ific a tio n in to th e fo u r c a te g o rie s . T h e s e n io r a c a d e m ic c h e c k e d th e c la s s ific a tio n fo r d u p lic a tio n a n d th a t n o n e o f th e item s w e re re q u ire d u n d e r e x is tin g a c c o u n tin g s ta n d a rd s w h ile th e h o n o u rs s tu d e n t c o m p ile d an in d e p e n d e n t list o f item s. A m e e tin g w a s h e ld a n d a fte r a d ju s tm e n t th is re s u lte d in a fin al list o f 2 2 ite m s an d th e ir c la s s ific a tio n s . T h e s e are sh o w n in T a b le 3.

T a b le 3

C a t e g o r ie s o f V o lu n t a r y e n v i r o n m e n t a l I t e m s

Mean Score

E n v i r o n m e n t a l P o l ic i e s of Analysts

A d o p t i o n o f e n v ir o n m e n t a ll y s e n s i t i v e m a n a g e m e n t t e c h n iq u e 4.00 2. D e p a r t m e n t s o f o f f i c e s f o r e n v ir o n m e n t a l a f f a ir s

2.18 3. S e t t i n g u p o b j e c t i v e s a n d s t r a t e g i e s f o r t h e e n v ir o n m e n t

4.18 4. E n v ir o n m e n t a l a w a r e n e s s c a m p a ig n

5.00 7. E s t a b lis h m e n t o f e n v i r o n m e n t a l p r o g r a m s 6.00

R e c o g n itio n o f E n v iro n m en ta l A ctiv ities 8 e v i d e n c e o f p u b li c s u p p o r t o r a p p r o v a l

3.40 9. A w a r d s f o r e n v i r o n m e n t a l p r o t e c t io n 3.00

4.60 13. U n d e r t a k in g w i l d l i f e p r e s e r v a t io n

3.30 14. E s t i m a t e d f u t u r e c o s t s f o r e n v ir o n m e n t a l r e h a b ilit a t io n ( r e s t o r a t io n ) 6.80

a c t i v it i e s ( n o t a s p a r ts o f f in a n c ia l s t a t e m e n t ) 15. E n v ir o n m e n t a l