Directory UMM :Data Elmu:jurnal:E:Environmental Management and Health:Vol08.Issue2.1997:
Accounting for the sustainable corporation
Frank Birkin
Busine ss Sc ho o l, Staffo rdshire Unive rsity, Sto ke -o n-Tre nt, UK
David Woodward
Busine ss Sc ho o l, Staffo rdshire Unive rsity, Sto ke -o n-Tre nt, UK
Presents a framework and
methodology of accounting
for the sustainable corporation which has the familiar
accounting objectives of
assessing and reporting
corporate performance but
that is where the similarities
end. Instead of conceiving of
the corporation in economic
terms, this account is based
on the principles of sustainable development and the
information needs of both
economic and non-economic
stakeholders. A new concept
of the corporation is achieved
by the integration of existing
environmental engineering
and ecological techniques
with economic considerations. In this way, managerial
horizons and responsibilities
are widened and important
communication channels are
opened between key disciplines, public and private
authorities and a range of
communities. The account
does not measure in absolute
terms the sustainable development that a corporation
has attained but provides a
comparative mechanism so
that corporations may assess
their sustainable development
in relation to other corporations.
Enviro nme ntal Manage me nt
and He alth
8 / 2 [ 1997] 6 7 –7 2
© MCB Unive rsity Pre ss
[ ISSN 0956-6163]
Basic relationships
In or der to be su sta in a ble, a cor por a tion m u st
obey th e pr in ciples of su sta in a ble developm en t. In th e lon g ter m , th er e is n o option to
avoid th is r espon sibility. Th ese pr in ciples a r e
ecologica l in or igin a n d a ccor din g to Br ow n
(1994, p. 15) in clu de th a t in th e lon g ter m :
• r esou r ce u se ca n n ot exceed r esou r ce
r en ew a l r a tes;
• species extin ction ca n n ot exceed species
evolu tion ;
• soil er osion ca n n ot exceed soil for m a tion ;
• ca r bon em ission s ca n n ot exceed ca r bon
fixa tion ; a n d
• h u m a n bir th s ca n n ot exceed h u m a n
dea th s.
E a ch of th ese pr in ciples r equ ir es th a t su sta in a ble developm en t a ssessm en ts a r e to
som e exten t exter n a l to tr a dition a l cor por a te
bou n da r ies. E ven w ith r e ga r d to th e em ission
of pollu ta n ts by in du str y, it is n ot th e em ission per se th a t is pr oblem a tic bu t r a th er th e
effect of th e pollu ta n t in ch a n gin g ecologica l,
en vir on m en ta l a n d biologica l system s.
F r om th is u n der sta n din g, th e a bility of
cor por a tion s to per for m well in a n ecologica l
sen se is of m or e fu n da m en ta l im por ta n ce
th a n th eir econ om ic per for m a n ce: th er e ca n
be n o fu tu r e for econ om ic a ctivity w ith ou t
com plia n ce w ith th e pr in ciples of su sta in a ble
developm en t. Wh ile con tem por a r y effor ts to
ca ptu r e som eth in g of su sta in a ble developm en t in econ om ic ter m s h ave th eir u ses (su ch
a s m a in ten a n ce of n a tu r a l ca pita l a n d in ter a n d in tr a -gen er a tion ca pita l), th e fu n da m en ta l im por ta n ce of a n ecologica l u n der sta n din g is m issed by th is a ppr oa ch a n d h en ce
th er e is a n eed to r e-con ceive of in du str ia l
a ctivity in ecologica l ter m s.
F r om a n ecologica l per spective, th e h u m a n
com m u n ity is on e com m u n ity a m on g m a n y.
However, th e volu m e of in for m a tion , diver sity of r ela tion sh ips a n d com plex n eeds of th e
h u m a n com m u n ity ju stify tr ea tin g th is com m u n ity a pa r t – th e h u m a n com m u n ity
r em a in in g a pa r t of a n d bein g depen den t on
th e ecosystem bu t sepa r a ted for th e pu r poses
of th is a ccou n t. In th is a ccou n t, th e h u m a n
com m u n ity is a n a lysed in to va r iou s “sta k eh older s”.
To be con sisten t w ith th e ecologica l
a ppr oa ch , cor por a tion s a r e r epr esen ted a s
“in du str ia l m eta bolic pr ocesses”. In th e lon g
ter m , th ey a r e depen den t on th e h ea lth y fu n ction in g of both th e h u m a n com m u n ity a n d
th e la r ger ecosystem . Th ese ba sic r ela tion sh ips a r e su m m a r ized in F igu r e 1.
Nature of the relationships
Th e sign ifi ca n ce of th e ba sic r ela tion sh ips
ou tlin ed a bove is th a t both sta k eh older s a n d
in du str ia l en tities a r e em bedded w ith in th e
ecosystem a n d, con sequ en tly, gover n ed in
som e r e ga r ds by ecosystem pr oper ties. An y
a ccou n t of th e su sta in a ble cor por a tion n eeds
to be aw a r e of th ese pr oper ties wh ich differ
fu n da m en ta lly fr om th ose pr oposed for tr a dition a l econ om ics.
Th ese pr oper ties in clu de:
• In terd epen d en ce – wh er e a n en tity ca n be
fu lly defin ed on ly in ter m s of r ela tion sh ips
w ith in itself a n d w ith oth er en tities. Th e
wolf, for exa m ple, is a fu n ction of in ter n a l
cell-biology a n d exter n a l h a bita t a s well a s
bein g of a cer ta in m a ss, sh a pe, colou r a n d
so on – a n d h en ce in th is a ccou n t th e cor por a tion is both wh a t h a s been r e ga r ded
tr a dition a lly a s th e “cor por a tion ” plu s
sta k eh older a n d ecosystem r ela tion sh ips.
• In d eter m in a cy – ch a os th eor y a n d qu a n tu m ph ysics r evea l th e in h er en t u n cer ta in ty of r ea lity a n d th is r equ ir es a differ en t u n der sta n din g of pla n n in g a n d con tr ol
– Wh ea tly (1994, p. 151) w r ites of th is n ew
scien ce in bu sin ess lea der sh ip: “In th is
n ew wor ld, you a n d I m a k e it u p a s we go
a lon g, n ot beca u se we la ck exper tise or
pla n n in g sk ills, bu t beca u se th a t is th e
n a tu r e of r ea lity”.
It is beyon d th e scope of th is pa per eith er to
ju stify th is n ew u n der sta n din g or to explor e,
even m odestly, its fu ll im plica tion s. However,
a s a r esu lt of th is u n der sta n din g pr ofou n d
ch a n ges in cu ltu r a l a s well a s bu sin ess ph en om en a ca n be r ecogn ized a n d in ter pr eted.
Per h a ps two m or e qu ota tion s w ill r evea l a
little m or e of th e im pa ct of th e n ew u n der sta n din g:
With r e ga r d to ecologica l u n der sta n din g:
Ou r sta tem en ts con cer n in g th in gs a n d
qu a lities, fr a ction s a n d wh oles ca n n ot be
[ 67 ]
Frank Birkin and David
Wo o dward
Ac c o unting fo r the
sustainable c o rpo ratio n
Enviro nme ntal Manage me nt
and He alth
8 / 2 [1 9 9 7 ] 6 7 –7 2
Figure 1
Basic re latio nships o f ac c o unting fo r the
sustainable c o rpo ratio n
Ecosystem
Stakeholders
Industrial
metabolic
processes
m a de m or e pr ecise w ith ou t a tr a n sition to
field a n d r ela tion a l th in k in g. (N a ess, 1990,
p.79).
With r e ga r d to ch a os th eor y a n d deter m in istic con tr ols in bu sin ess:
F ir st, m a n y of th e in a ppr opr ia te a spects of
th e con tr ol for m s th ey a dopt in ter fer e w ith
th e spon ta n eou s politica l lea r n in g pr ocess...
Th e secon d h a r m fu l con sequ en ce of espou sin g u n r ea listic expla n a tion s of h ow a bu sin ess ca n fu n ction is th a t ver y little a tten tion
is pa id to th e pr ocesses th a t in r ea lity h ave
to be a pplied to dea lin g w ith th e
u n pr edicta ble (Sta cey, 1993, p. 342).
A fu n da m en ta l r eor ien ta tion is r equ ir ed of
m ost bu sin ess m in d-sets. For exa m ple, on e
u ltim a te ju stifi ca tion for bu sin ess a ctivity
h a s been th a t of “wea lth cr ea tion ” bu t th is n o
lon ger h olds sin ce th e r ela tion sh ips w ith th e
ecosystem sh ow th a t su ch a on e-sided, a lm ost
god-lik e fu n ction is sim ply n ot tr u e. It is m or e
a ccu r a te to ta lk of a “wea lth a ppr opr ia tion ”
pr ocess: “Wea lth a ppr opr ia tion descr ibes th e
n ew in du str ia l cor por a tion ’s a ctivity of ta k in g to itself or devotin g to specia l pu r poses
th e wea lth a lr ea dy pr esen t in th e society or
en vir on m en t” (Bir k in a n d J ør gen sen , 1994,
p. 25).
Hen ce it is ou r objective to esta blish a
fr a m ewor k a n d m eth odology for a ccou n tin g
for th e su sta in a ble cor por a tion – th e n a tu r e
of th e a ccou n t pr eclu des th e esta blish m en t of
fixed r efer en ce poin ts a n d con ten ts.
Constructing the account
An in te gr a ted a n d com pr eh en sive fr a m ewor k
a n d m eth odology of a ccou n tin g for su sta in a ble developm en t h a s n ot been su ccessfu lly
[ 68 ]
a pplied to a n in dividu a l cor por a tion . For th e
pu r poses of a pr a ctica l exa m ple, it is n ecessa r y to con str u ct su ch a n a ccou n t fr om th e
best exa m ples of sever a l cor por a tion s a n d
in stitu tion s.
Industrial metabolic processes
Th is is th e pa r t of th e a ccou n t th a t cor r espon ds m ost closely to existin g in ter n a l pla n n in g a n d con tr ol system s. It is per h a ps best
u n der stood in ter m s of two in for m a tion
flow s: eco-ba la n ce a ccou n ts a n d life-cycle
a ssessm en ts. Th ese two in for m a tion flow s a r e
fr equ en tly both in clu ded w ith in th e defin ition of “life-cycle a ssessm en ts”. However,
wh en th ese two in for m a tion str ea m s a r e
r e ga r ded fr om th e poin t of view of oper a tion s
m a n a gem en t a n d r epor tin g, th ey a r e su fficien tly differ en t a n d im por ta n t to ju stify
sepa r a tion .
For exa m ple, th e eco-ba la n ce (som etim es
r efer r ed to a s th e “m a ss-ba la n ce” bu t th is
n a m e exclu des en er gy flow s a n d fu n da m en ta l
ecosystem depen den ce) ca n be con str u cted
fr om existin g sou r ce docu m en ts w ith in th e
cor por a tion su ch a s m a ter ia l r eceipts,
invoices, w aybills, stock r ecor ds a n d sa les
despa tch es. An d th e eco-ba la n ce ca n be com piled a n d oper a ted by existin g com pa n y in ter n a l-in for m a tion pr ovider s su ch a s cost cler k s,
tech n icia n s a n d a ccou n ta n ts. On th e oth er
h a n d, th e pr epa r a tion of a life-cycle a ssessm en t of th e cor por a tion in cor por a tin g a com plete “cr a dle to gr ave” view r equ ir es m u ch
in for m a tion exter n a l to tr a dition a l cor por a tion da ta ba ses a n d a n exper tise n ot fou n d
a m on g tr a dition a l pr ovider s of cor por a te
in for m a tion . F igu r e 2 lists th e pa r a m eter s of
th e eco-ba la n ce in pu t/ ou tpu t a n a lysis a t th e
tota l cor por a te level a s developed a n d a pplied
by Dr Ch r istin e J a sch , dir ector of th e In stitu te of E cologica l E con om ics (IÖW) Vien n a .
Th e Da n ish Steel Com pa n y h a s su ccessfu lly
pr epa r ed a n d oper a ted a n eco-ba la n ce
a ccou n t for pu r poses of in ter n a l m a n a gem en t
a n d con tr ol a n d a lso exter n a l r epor tin g (J ør gen sen , 1993, pp. 2-5). An eco-ba la n ce
a ppr oa ch h a s been u sed for sever a l yea r s by a
n u m ber of Ger m a n com pa n ies in clu din g
Ku n er t AG a n d Moh n dr u ck Gr a ph isch e
Betr iebe Gm bH.
However, in or der to optim ize a n in du str ia l
m eta bolic per for m a n ce it is n ecessa r y to
con sider m or e th a n in ter n a l fu n ction s a lon e.
Th e in for m a tion flow pr ovided by life cycle
a ssessm en t en a bles th e cor por a tion to
em ba r k on th e system a tic im pr ovem en t of
pr odu cts a n d pr ocesses a ccor din g to th e
objectives of clea n er tech n ology a n d, u ltim a tely, in a ccor da n ce w ith th e pr in ciples of
su sta in a ble developm en t. Wh ile th e en gin eer s of m a n y cor por a tion s a r e m a k in g u se of
Frank Birkin and David
Wo o dward
Ac c o unting fo r the
sustainable c o rpo ratio n
Figure 2
Parame te rs o f the input/ o utput analysis (IÖW, Vie nna)
Enviro nme ntal Manage me nt
and He alth
8 / 2 [1 9 9 7 ] 6 7 –7 2
life-cycle a ssessm en ts for developm en t pu r poses, few a r e u sin g th e tech n iqu e to con str u ct a n a ccou n t. Th e Da n ish E n gin eer in g
Com pa n y Da n foss r efer s r epea tedly in qu a lita tive ter m s to th e u se of life-cycle a ssessm en ts w ith in th ose pa ges of its a n n u a l r epor t
dedica ted to pr odu ct a n d pr ocess developm en t a n d wh ile qu a n tita tive per for m a n ce
im pr ovem en t in for m a tion is a lso given , th e
two a r e n ot lin k ed. Th e la r ge Swedish
for estr y com pa n y MoDo is wor k in g to in tegr a te its in du str ia l a ctivities w ith th e su sta in a ble u se of Swedish for estr y r esou r ces
a n d th e com pa n y displays a n effective life
cycle for for ests a n d for estr y pr odu cts in th eir
1993 en vir on m en ta l r epor t. As th e MoDo
pr esiden t h a s w r itten in th e for ewor d to th a t
r epor t: “Su sta in a bility in ever y a spect a n d a
[ 69 ]
Frank Birkin and David
Wo o dward
Ac c o unting fo r the
sustainable c o rpo ratio n
Enviro nme ntal Manage me nt
and He alth
8 / 2 [1 9 9 7 ] 6 7 –7 2
cyclic a ppr oa ch for m th e ver y fou n da tion for
th e fu tu r e developm en t of ou r com pa n y”.
Stakeholders
Sta k eh older r epor tin g is a ch ieved th r ou gh
m a n y differ en t com m u n ica tion ch a n n els a n d
th ese ch a n n els ca n va r y a ccor din g to sta k eh older n eeds a n d th e n a tu r e of a n y pa r ticu la r
piece of in for m a tion . Wh ile th e a ctu a l con ten t of th e sta k eh older r epor ts m ay va r y
con sider a bly, it is of som e u se to cla ssify cor por a te sta k eh older s a n d th eir in for m a tion
n eeds w ith in a fr a m ewor k for r epor tin g pu r poses.
Ta ble I pr ovides on e su ch cla ssifica tion ,
ba sed on idea s in itia lly pr om u lga ted in T h e
Corpora te R epor t (ACCA, 1975), a n d u pda ted
by Woodw a r d (1993), a n d wh ich h a s been u sed
su ccessfu lly to a n a lyse em pir ica lly th e exten t
of sta k eh older in for m a tion pr ovision by bu sin ess en ter pr ises. It sh ou ld be n oted th a t th e
sta k eh older iden tified a s “th e n a tu r a l en vir on m en t” sta n ds a pa r t fr om th e oth er in ter est gr ou ps sh ow n , in th a t per se it h a s lim ited
a bility to dem on str a te th e th r ee elem en ts
in h er en t in bein g a sta k eh older of in ter est,
cla im (Ca r r oll, 1993) a n d a bility to in flu en ce
th e m a tter u n der con sider a tion (F r eem a n ,
1984). E lem en ts of th e en vir on m en t ca n n ot
th em selves give expr ession to th eir feelin gs
a bou t a spects of envir on m en ta l con cer n , a n d
r ely on pr essu r e gr ou ps to do th is on th eir
beh a lf for better or for wor se. It m ay th u s be
better to en visa ge th e n a tu r a l en vir on m en t a s
Table I
A mo de l o f c o rpo rate stake ho lde r info rmatio n ne e ds
Stakeholder
[ 70 ]
Information needed to assist in
determining/ assessing/ evaluating
Information source
Owners: existing and potential
shareholders (including holders of
options and warrants) and their
advisers
Share trading dec isions
Comparisons with earlier
years/ other c ompanies
Managerial performanc e
future performanc e
Corporate report
Value added statements
Forec asts
Lenders: existing and potential
suppliers of short- and long-term
funds
Sec urity of investment
Value of c ollateral
Cash generating ability
Corporate report
Cash-flow statements
Independent valuations
Human resources: existing potential
and past employees and their
representatives
Sec urity and prospec ts
Information for c ollec tive bargaining
Position, progress and prospec ts
Employee/ employment
reports at loc al (site) level
Corporate report
Business contacts
customers, suppliers,
competitors and those
interested in business
amalgamations
Long-term viability
Ability to meet obligations
Produc t information
Ec onomic c omparisons
Produc t literature
Trade press releases
Corporate report
Governmental/ regulatory
All aspects of national and
local government and
quasi-government
Ec onomic indic ators (balanc e of
payments; output; employment; etc .)
Tax data
Central Statistic al
Offic e returns
Spec ial reports
Corporate report
General public: taxpayers (central
and local), community interest
and pressure groups, interest
groups and representative
bodies
Role of the enterprise in the
c ommunity and how all its ac tions
affec t soc iety at large
Media
Surveys/ reports/
investigations
Corporate report
Natural environment: in reality,
groups of concerned individuals
claiming to represent environmental
interests
The total effec t of the enterprise
on the natural environment
Environmental reports
Life-c yc le analyses
Sustainability surveys
Environmental impac t
assessments
Frank Birkin and David
Wo o dward
Ac c o unting fo r the
sustainable c o rpo ratio n
Enviro nme ntal Manage me nt
and He alth
8 / 2 [1 9 9 7 ] 6 7 –7 2
a n “a r ea of in ter est” th a n a n “in ter est
gr ou p” beca u se of th is u n iqu e fea tu r e. N ever th eless, a sta k eh older m odel wou ld n ot be
com plete w ith ou t a r ecogn ition of con cer n for
th e n a tu r a l en vir on m en t, a n d Sm ith (1993)
h a s iden tified th e em er gen ce of a “n ew er a ” of
en vir on m en ta lism wh ich h a s be gu n to
develop its ow n m om en tu m .
Th e poten tia l for sta k eh older a n a lysis a n d
r epor tin g to a ccom m oda te a n a ccou n t of
su sta in a ble developm en t h a s yet to be fu lly
r ea lized, for a s th e CE O of th e Ger m a n
h osier y com pa n y Ku n er t AG obser ves in its
1994 E n vir on m en ta l Repor t: “If ou r su ccessfu l socia l m a r k et econ om y is a lso to in te gr a te
th e pr eser va tion of th e en vir on m en t in its
con tr ol cir cu it system , th en ecology m u st
becom e r eleva n t for th e m a r k et”.
Ecosystem
Sin ce t h e n ew u n d er st a n d in g of in t er d e p en d en ce a n d in d et er m in a cy p la ces t h e
cor p or a t ion w it h in t h e ecosy st em in com p lex a n d u n p r ed ict a ble w ay s, r ela t ion sh ip s
b et w een t h e cor p or a t ion a n d t h e ecosy st em
w ill b e ver y d ifficu lt t o su m m a r ize in
a ccou n t s. Som et h in g of t h ese r ela t ion sh ip s
w ill of cou r se h ave b een in cor p or a t ed in t h e
ot h er p a r t s of t h e a ccou n t for su st a in a ble
d evelop m en t . Life-cycle a ssessm en t s a n d
d em a n d in g st a k eh old er s cou ld on t h eir ow n
in t e gr a t e in d u st r ia l a ct iv it y sign ifica n t ly
w it h in t h e ecosy st em . Wh a t t h en is t h e r ole
for t h is p a r t of t h e su st a in a ble d evelop m en t
a ccou n t ?
Th e a ccou n t so fa r h a s been dir ected by th e
exper ien ces, a bilities a n d n eeds of th e cor por a tion a n d h u m a n sta k eh older s. An y a ccou n t
of su sta in a ble developm en t for th e cor por a tion m u st a lso in clu de th e a bility of th e
ecosystem (both loca l a n d n on -loca l) to m a in ta in itself a t th e given level of r esou r ces
a ppr opr ia ted by th e cor por a tion . E ven for th e
zer o-pollu tin g in du str ia l a ctivity, ecosystem
colla pse r em a in s a possibility wh en too m a n y
r esou r ces, in clu din g la n d a n d w a ter, a r e
a ppr opr ia ted by th e cor por a tion . Th e a ssessm en t of th e ca pa city for th e ecosystem to
m a in ta in a n d r en ew itself is n ecessa r ily don e
on a r e gion a l level: few cor por a tion s exist
a lon e in th eir loca l ecosystem . Also, th e iden tifica tion of a ppr opr ia te bou n da r ies for
a ssessin g th e loca l ecosystem is n ot obviou s
in m a n y ca ses wh er e u r ba n developm en ts,
la r ge-sca le en gin eer in g a n d n on -ecologica l
politica l bor der s exist. Th is pa r t of th e
a ccou n t is per h a ps best h a n dled by per son n el
ca pa ble of in tr odu cin g a bior e gion a l per spective a n d a u th or ity – loca l a u th or ities bein g
th e obviou s a gen ts.
Th e ca r r yin g ca pa city of th e ecosystem in
wh ich th e cor por a tion is situ a ted cou ld th en
be a ssessed by m ea n s of m ea su r es of h ea lth of
th e ecosystem su ch a s w a ter a cidity or a lk a lin ity, w a ter ava ila ble oxygen dem a n d, in dica tor species su ch a s lich en s a n d bir ds, h a bita t
a n d species diver sity, a ir qu a lity, la n d u tiliza tion , pollu tion loa d a n d so on . Given th e h igh
level of u r ba n a n d econ om ic developm en t in
pa r ts of th e UK, su ch a s Lon don a n d Bir m in gh a m , it is pr oblem a tic h ow th eir loca l ecosystem ca n be ca pa ble of ca r r yin g in depen den t
loca l su sta in a ble developm en t. Th er e is som e
poten tia l for “bu yin g” th eir ca r r yin g ca pa city elsewh er e su ch a s by pr otectin g a r ea s of
tr opica l for est bu t th ese m ea su r es ca n on ly
“bu y” tim e. Th e in ter depen den ce a n d in deter m in a cy of th e ecosystem a n d econ om ic
a ctivity r equ ir es th a t a ll pa r ticipa n ts beh ave
a ccor din g to th e pr in ciples of su sta in a ble
developm en t – th er e is n o “optin g-ou t”. For
exa m ple, wh y sh ou ld th ose cou n tr ies w ith
exten sive tr opica l for ests n ot a ppr opr ia te a ll
th eir ecosystem wea lth for im m edia te u se
wh en sign ifica n t r e gion s of th e so-ca lled
developed wor ld h ave don e exa ctly th a t? –
for est cover in th e UK is n ow a sm a ll fr a ction
of th a t existin g a t th e be gin n in g of th is cen tu r y, wh ich w a s in itself a sm a ll r em n a n t of
th e post-gla cia l for est cover. A few m om en ts
r efl ection on issu es su ch a s th ese sh ow th a t
con sider a ble ch a n ges in cu ltu r a l va lu es a r e
r equ ir ed befor e su sta in a ble developm en t
ga in s a n essen tia l, ever yday pr a ctica l expr ession .
Th e im plem en ta tion of Agen da 21 a s a gr eed
a t th e Rio E a r th Su m m it is th e m a in focu s for
th e in te gr a tion of econ om ic a n d ecologica l
cr iter ia w ith in th e UK. Peter bor ou gh E n vir on m en t City Tr u st, for exa m ple, h a s com pleted th e fir st sta ges of a com pr eh en sive
en vir on m en ta l a u dit of th e city a n d h a s a
sch em e n ow oper a tin g wh er eby a ll sm a ll a n d
m ediu m -sized en ter pr ises w ith in th e city
lim its ca n r eceive con su lta n cy a ssista n ce in
pr epa r in g a n en er gy a u dit for th eir com pa n y.
Th e tr u st h a s a lso been exper im en tin g w ith
th e a pplica tion of biologica l m ea su r es in th e
u r ba n , h u m a n com m u n ity.
The sustainable development
account for a corporation
Th er e is a n eed to pr ovide a com m on con ten t,
fr a m ewor k a n d m eth odology for th e pr epa r a tion a n d r epor tin g of su ch a n a ccou n t: m a n a gem en t, in vestor s, politica l a u th or ities,
en vir on m en ta l w a tch dogs a n d loca l com m u n ities wou ld a ll lik e to com pa r e a n d con tr a st
th e su sta in a ble developm en t per for m a n ce of
cor por a tion s in a con ven ien t a n d sta n da r dized w ay. Un for tu n a tely, th e ecosystem does
n ot beh ave in a sta n da r dized w ay!
[ 71 ]
Frank Birkin and David
Wo o dward
Ac c o unting fo r the
sustainable c o rpo ratio n
Table II
Be nc hmarks fo r a sustainable de ve lo pme nt c o rpo rate ac c o unt
Life cycle
assessment
Enviro nme ntal Manage me nt
and He alth
8 / 2 [1 9 9 7 ] 6 7 –7 2
Ecobalance
accounts
Stakeholder
analysis
Carrying capacity
assessment
No waste
Third party
verific ation
90% stakeholder
support
High transparenc y
Demand management
100% renewable
resourc es
Diverse biotic
environment
Produc t redesign
Proc ess redesign
Stakeholder dialogues
Analysis of stakeholder needs
Material sourc ing
and disposal
Regular stakeholder
reports
EMAS c redentials
Customer use
analysis
Material effic ienc y
Environmental
performanc e
indic ators
Reuse
Rec yc le
Linear proc esses
No waste rec ords
Industrial ec ology
Habitat restoration
High use of
renewables
Toleranc e of
c ompetitor spec ies
Dematerialized
growth
CO2 / O2 stabilized
No ozone damage
Harvest rates
monitored
No rec ognition of
ec osystem limits
Habitats fragmented
+ Verific ation by
c ompetent body
Sustainable
development
–
A com pr om ise is to a gr ee on th e br oa d fr a m ewor k a n d m eth odology for th e a ccou n t. Th is
a gr eem en t sh ou ld be n a r r ow en ou gh to
en a ble m ea n in gfu l com m u n ica tion a bou t th e
a ccou n ts to be m a de between oper a tor s a n d
u ser s in , say, Lon don a n d Rio de J a n eir o bu t
br oa d en ou gh to per m it th e evolvin g loca l
a n d r e gion a l va r ia tion s of differ en t sites to be
con sider ed. A ben ch m a r k a ppr oa ch seem s
m ost su ita ble for th is pu r pose. Ta ble II gives
a n exa m ple of a ben ch m a r k a ccou n t for cor por a te su sta in a ble developm en t. Deta iled
pr ocedu r es a n d ca te gor iza tion s cou ld be
in cor por a ted w ith in th e a ccou n t by u se of
en vir on m en ta l m a n a gem en t system sta n da r ds su ch a s ISO 14001; fu r th er wor k cou ld
esta blish a sta n da r dized fr a m ewor k for sta k eh older r epor tin g; th e a ssessm en t of ecosystem ca r r yin g ca pa city is tech n ica lly fea sible.
However, th e pr epa r a tion of su ch a n a ccou n t
is n owh er e n ea r a s difficu lt a s cr ea tin g th e
cu ltu r a l va lu es in wh ich su ch a n a ccou n t h a s
m ea n in g.
References
ACCA 1975), T h e Corpora te R epor t, Accou n tin g
Sta n da r ds Steer in g Com m ittee, Lon don .
[ 72 ]
Environmental reports
Press releases
Minimum stakeholder
c ommunic ations
Bir k in , F.K. a n d J ør gen sen , H.B. (1994), “Cor por a te en vir on m en ta l r epor ts a s wea lth a ppr opr ia tion sta tem en ts”, En viron m en ta l M a n a gem en t a n d Hea lth , Vol. 5 N o. 3, pp. 23-7.
Br ow n , L. et a l. (1994), V ita l S ign s 1994, N or ton ,
N ew Yor k , N Y.
Ca r r oll, A.B. (1993), B u sin ess a n d S ociety: Eth ics
a n d S ta k eh old er M a n a gem en t, Sou th -Wester n
P u blish in g Co. Cin cin n a ti, OH.
F r eem a n , R. (1984), S tra tegic M a n a gem en t: A
S ta k eh old er A pproa ch , Ma r sh a ll, Boston , MA.
J ør gen sen , H.B. (1993), “Th e ‘gr een a ccou n t’ of
th e Da n ish Steel Wor k s Ltd”, S ocia l a n d En viron m en ta l A ccou n tin g, Vol. 13, pp. 2-6.
N a ess, A. (1990), Ecolog y, Com m u n ity a n d L ifestyle,
Ca m br idge Un iver sity P r ess, Ca m br idge.
Sm ith , D. (E d.) (1993), B u sin ess a n d th e En viron m en t, P a u l Ch a pm a n , Lon don .
Sta cey, R.D. (1993), T h e Ch a os Fron tier: Crea tiv e
S tra tegies for Con trol in B u sin ess, Bu tter wor th -Hein em a n n , Oxfor d.
Wh ea tly, M.J . (1994), L ea d ersh ip a n d th e N ew
S cien ce, Ber r et-Koeh ler, Sa n F r a n cisco, CA.
Woodw a r d, D.G. (1993), “A sta k eh older a ppr oa ch
to cor por a te socia l r epor tin g a n a lysis”,
S h effield Un iv ersity M a n a gem en t S ch ool Discu ssion Pa pers, N o. 93, p. 39.
Frank Birkin
Busine ss Sc ho o l, Staffo rdshire Unive rsity, Sto ke -o n-Tre nt, UK
David Woodward
Busine ss Sc ho o l, Staffo rdshire Unive rsity, Sto ke -o n-Tre nt, UK
Presents a framework and
methodology of accounting
for the sustainable corporation which has the familiar
accounting objectives of
assessing and reporting
corporate performance but
that is where the similarities
end. Instead of conceiving of
the corporation in economic
terms, this account is based
on the principles of sustainable development and the
information needs of both
economic and non-economic
stakeholders. A new concept
of the corporation is achieved
by the integration of existing
environmental engineering
and ecological techniques
with economic considerations. In this way, managerial
horizons and responsibilities
are widened and important
communication channels are
opened between key disciplines, public and private
authorities and a range of
communities. The account
does not measure in absolute
terms the sustainable development that a corporation
has attained but provides a
comparative mechanism so
that corporations may assess
their sustainable development
in relation to other corporations.
Enviro nme ntal Manage me nt
and He alth
8 / 2 [ 1997] 6 7 –7 2
© MCB Unive rsity Pre ss
[ ISSN 0956-6163]
Basic relationships
In or der to be su sta in a ble, a cor por a tion m u st
obey th e pr in ciples of su sta in a ble developm en t. In th e lon g ter m , th er e is n o option to
avoid th is r espon sibility. Th ese pr in ciples a r e
ecologica l in or igin a n d a ccor din g to Br ow n
(1994, p. 15) in clu de th a t in th e lon g ter m :
• r esou r ce u se ca n n ot exceed r esou r ce
r en ew a l r a tes;
• species extin ction ca n n ot exceed species
evolu tion ;
• soil er osion ca n n ot exceed soil for m a tion ;
• ca r bon em ission s ca n n ot exceed ca r bon
fixa tion ; a n d
• h u m a n bir th s ca n n ot exceed h u m a n
dea th s.
E a ch of th ese pr in ciples r equ ir es th a t su sta in a ble developm en t a ssessm en ts a r e to
som e exten t exter n a l to tr a dition a l cor por a te
bou n da r ies. E ven w ith r e ga r d to th e em ission
of pollu ta n ts by in du str y, it is n ot th e em ission per se th a t is pr oblem a tic bu t r a th er th e
effect of th e pollu ta n t in ch a n gin g ecologica l,
en vir on m en ta l a n d biologica l system s.
F r om th is u n der sta n din g, th e a bility of
cor por a tion s to per for m well in a n ecologica l
sen se is of m or e fu n da m en ta l im por ta n ce
th a n th eir econ om ic per for m a n ce: th er e ca n
be n o fu tu r e for econ om ic a ctivity w ith ou t
com plia n ce w ith th e pr in ciples of su sta in a ble
developm en t. Wh ile con tem por a r y effor ts to
ca ptu r e som eth in g of su sta in a ble developm en t in econ om ic ter m s h ave th eir u ses (su ch
a s m a in ten a n ce of n a tu r a l ca pita l a n d in ter a n d in tr a -gen er a tion ca pita l), th e fu n da m en ta l im por ta n ce of a n ecologica l u n der sta n din g is m issed by th is a ppr oa ch a n d h en ce
th er e is a n eed to r e-con ceive of in du str ia l
a ctivity in ecologica l ter m s.
F r om a n ecologica l per spective, th e h u m a n
com m u n ity is on e com m u n ity a m on g m a n y.
However, th e volu m e of in for m a tion , diver sity of r ela tion sh ips a n d com plex n eeds of th e
h u m a n com m u n ity ju stify tr ea tin g th is com m u n ity a pa r t – th e h u m a n com m u n ity
r em a in in g a pa r t of a n d bein g depen den t on
th e ecosystem bu t sepa r a ted for th e pu r poses
of th is a ccou n t. In th is a ccou n t, th e h u m a n
com m u n ity is a n a lysed in to va r iou s “sta k eh older s”.
To be con sisten t w ith th e ecologica l
a ppr oa ch , cor por a tion s a r e r epr esen ted a s
“in du str ia l m eta bolic pr ocesses”. In th e lon g
ter m , th ey a r e depen den t on th e h ea lth y fu n ction in g of both th e h u m a n com m u n ity a n d
th e la r ger ecosystem . Th ese ba sic r ela tion sh ips a r e su m m a r ized in F igu r e 1.
Nature of the relationships
Th e sign ifi ca n ce of th e ba sic r ela tion sh ips
ou tlin ed a bove is th a t both sta k eh older s a n d
in du str ia l en tities a r e em bedded w ith in th e
ecosystem a n d, con sequ en tly, gover n ed in
som e r e ga r ds by ecosystem pr oper ties. An y
a ccou n t of th e su sta in a ble cor por a tion n eeds
to be aw a r e of th ese pr oper ties wh ich differ
fu n da m en ta lly fr om th ose pr oposed for tr a dition a l econ om ics.
Th ese pr oper ties in clu de:
• In terd epen d en ce – wh er e a n en tity ca n be
fu lly defin ed on ly in ter m s of r ela tion sh ips
w ith in itself a n d w ith oth er en tities. Th e
wolf, for exa m ple, is a fu n ction of in ter n a l
cell-biology a n d exter n a l h a bita t a s well a s
bein g of a cer ta in m a ss, sh a pe, colou r a n d
so on – a n d h en ce in th is a ccou n t th e cor por a tion is both wh a t h a s been r e ga r ded
tr a dition a lly a s th e “cor por a tion ” plu s
sta k eh older a n d ecosystem r ela tion sh ips.
• In d eter m in a cy – ch a os th eor y a n d qu a n tu m ph ysics r evea l th e in h er en t u n cer ta in ty of r ea lity a n d th is r equ ir es a differ en t u n der sta n din g of pla n n in g a n d con tr ol
– Wh ea tly (1994, p. 151) w r ites of th is n ew
scien ce in bu sin ess lea der sh ip: “In th is
n ew wor ld, you a n d I m a k e it u p a s we go
a lon g, n ot beca u se we la ck exper tise or
pla n n in g sk ills, bu t beca u se th a t is th e
n a tu r e of r ea lity”.
It is beyon d th e scope of th is pa per eith er to
ju stify th is n ew u n der sta n din g or to explor e,
even m odestly, its fu ll im plica tion s. However,
a s a r esu lt of th is u n der sta n din g pr ofou n d
ch a n ges in cu ltu r a l a s well a s bu sin ess ph en om en a ca n be r ecogn ized a n d in ter pr eted.
Per h a ps two m or e qu ota tion s w ill r evea l a
little m or e of th e im pa ct of th e n ew u n der sta n din g:
With r e ga r d to ecologica l u n der sta n din g:
Ou r sta tem en ts con cer n in g th in gs a n d
qu a lities, fr a ction s a n d wh oles ca n n ot be
[ 67 ]
Frank Birkin and David
Wo o dward
Ac c o unting fo r the
sustainable c o rpo ratio n
Enviro nme ntal Manage me nt
and He alth
8 / 2 [1 9 9 7 ] 6 7 –7 2
Figure 1
Basic re latio nships o f ac c o unting fo r the
sustainable c o rpo ratio n
Ecosystem
Stakeholders
Industrial
metabolic
processes
m a de m or e pr ecise w ith ou t a tr a n sition to
field a n d r ela tion a l th in k in g. (N a ess, 1990,
p.79).
With r e ga r d to ch a os th eor y a n d deter m in istic con tr ols in bu sin ess:
F ir st, m a n y of th e in a ppr opr ia te a spects of
th e con tr ol for m s th ey a dopt in ter fer e w ith
th e spon ta n eou s politica l lea r n in g pr ocess...
Th e secon d h a r m fu l con sequ en ce of espou sin g u n r ea listic expla n a tion s of h ow a bu sin ess ca n fu n ction is th a t ver y little a tten tion
is pa id to th e pr ocesses th a t in r ea lity h ave
to be a pplied to dea lin g w ith th e
u n pr edicta ble (Sta cey, 1993, p. 342).
A fu n da m en ta l r eor ien ta tion is r equ ir ed of
m ost bu sin ess m in d-sets. For exa m ple, on e
u ltim a te ju stifi ca tion for bu sin ess a ctivity
h a s been th a t of “wea lth cr ea tion ” bu t th is n o
lon ger h olds sin ce th e r ela tion sh ips w ith th e
ecosystem sh ow th a t su ch a on e-sided, a lm ost
god-lik e fu n ction is sim ply n ot tr u e. It is m or e
a ccu r a te to ta lk of a “wea lth a ppr opr ia tion ”
pr ocess: “Wea lth a ppr opr ia tion descr ibes th e
n ew in du str ia l cor por a tion ’s a ctivity of ta k in g to itself or devotin g to specia l pu r poses
th e wea lth a lr ea dy pr esen t in th e society or
en vir on m en t” (Bir k in a n d J ør gen sen , 1994,
p. 25).
Hen ce it is ou r objective to esta blish a
fr a m ewor k a n d m eth odology for a ccou n tin g
for th e su sta in a ble cor por a tion – th e n a tu r e
of th e a ccou n t pr eclu des th e esta blish m en t of
fixed r efer en ce poin ts a n d con ten ts.
Constructing the account
An in te gr a ted a n d com pr eh en sive fr a m ewor k
a n d m eth odology of a ccou n tin g for su sta in a ble developm en t h a s n ot been su ccessfu lly
[ 68 ]
a pplied to a n in dividu a l cor por a tion . For th e
pu r poses of a pr a ctica l exa m ple, it is n ecessa r y to con str u ct su ch a n a ccou n t fr om th e
best exa m ples of sever a l cor por a tion s a n d
in stitu tion s.
Industrial metabolic processes
Th is is th e pa r t of th e a ccou n t th a t cor r espon ds m ost closely to existin g in ter n a l pla n n in g a n d con tr ol system s. It is per h a ps best
u n der stood in ter m s of two in for m a tion
flow s: eco-ba la n ce a ccou n ts a n d life-cycle
a ssessm en ts. Th ese two in for m a tion flow s a r e
fr equ en tly both in clu ded w ith in th e defin ition of “life-cycle a ssessm en ts”. However,
wh en th ese two in for m a tion str ea m s a r e
r e ga r ded fr om th e poin t of view of oper a tion s
m a n a gem en t a n d r epor tin g, th ey a r e su fficien tly differ en t a n d im por ta n t to ju stify
sepa r a tion .
For exa m ple, th e eco-ba la n ce (som etim es
r efer r ed to a s th e “m a ss-ba la n ce” bu t th is
n a m e exclu des en er gy flow s a n d fu n da m en ta l
ecosystem depen den ce) ca n be con str u cted
fr om existin g sou r ce docu m en ts w ith in th e
cor por a tion su ch a s m a ter ia l r eceipts,
invoices, w aybills, stock r ecor ds a n d sa les
despa tch es. An d th e eco-ba la n ce ca n be com piled a n d oper a ted by existin g com pa n y in ter n a l-in for m a tion pr ovider s su ch a s cost cler k s,
tech n icia n s a n d a ccou n ta n ts. On th e oth er
h a n d, th e pr epa r a tion of a life-cycle a ssessm en t of th e cor por a tion in cor por a tin g a com plete “cr a dle to gr ave” view r equ ir es m u ch
in for m a tion exter n a l to tr a dition a l cor por a tion da ta ba ses a n d a n exper tise n ot fou n d
a m on g tr a dition a l pr ovider s of cor por a te
in for m a tion . F igu r e 2 lists th e pa r a m eter s of
th e eco-ba la n ce in pu t/ ou tpu t a n a lysis a t th e
tota l cor por a te level a s developed a n d a pplied
by Dr Ch r istin e J a sch , dir ector of th e In stitu te of E cologica l E con om ics (IÖW) Vien n a .
Th e Da n ish Steel Com pa n y h a s su ccessfu lly
pr epa r ed a n d oper a ted a n eco-ba la n ce
a ccou n t for pu r poses of in ter n a l m a n a gem en t
a n d con tr ol a n d a lso exter n a l r epor tin g (J ør gen sen , 1993, pp. 2-5). An eco-ba la n ce
a ppr oa ch h a s been u sed for sever a l yea r s by a
n u m ber of Ger m a n com pa n ies in clu din g
Ku n er t AG a n d Moh n dr u ck Gr a ph isch e
Betr iebe Gm bH.
However, in or der to optim ize a n in du str ia l
m eta bolic per for m a n ce it is n ecessa r y to
con sider m or e th a n in ter n a l fu n ction s a lon e.
Th e in for m a tion flow pr ovided by life cycle
a ssessm en t en a bles th e cor por a tion to
em ba r k on th e system a tic im pr ovem en t of
pr odu cts a n d pr ocesses a ccor din g to th e
objectives of clea n er tech n ology a n d, u ltim a tely, in a ccor da n ce w ith th e pr in ciples of
su sta in a ble developm en t. Wh ile th e en gin eer s of m a n y cor por a tion s a r e m a k in g u se of
Frank Birkin and David
Wo o dward
Ac c o unting fo r the
sustainable c o rpo ratio n
Figure 2
Parame te rs o f the input/ o utput analysis (IÖW, Vie nna)
Enviro nme ntal Manage me nt
and He alth
8 / 2 [1 9 9 7 ] 6 7 –7 2
life-cycle a ssessm en ts for developm en t pu r poses, few a r e u sin g th e tech n iqu e to con str u ct a n a ccou n t. Th e Da n ish E n gin eer in g
Com pa n y Da n foss r efer s r epea tedly in qu a lita tive ter m s to th e u se of life-cycle a ssessm en ts w ith in th ose pa ges of its a n n u a l r epor t
dedica ted to pr odu ct a n d pr ocess developm en t a n d wh ile qu a n tita tive per for m a n ce
im pr ovem en t in for m a tion is a lso given , th e
two a r e n ot lin k ed. Th e la r ge Swedish
for estr y com pa n y MoDo is wor k in g to in tegr a te its in du str ia l a ctivities w ith th e su sta in a ble u se of Swedish for estr y r esou r ces
a n d th e com pa n y displays a n effective life
cycle for for ests a n d for estr y pr odu cts in th eir
1993 en vir on m en ta l r epor t. As th e MoDo
pr esiden t h a s w r itten in th e for ewor d to th a t
r epor t: “Su sta in a bility in ever y a spect a n d a
[ 69 ]
Frank Birkin and David
Wo o dward
Ac c o unting fo r the
sustainable c o rpo ratio n
Enviro nme ntal Manage me nt
and He alth
8 / 2 [1 9 9 7 ] 6 7 –7 2
cyclic a ppr oa ch for m th e ver y fou n da tion for
th e fu tu r e developm en t of ou r com pa n y”.
Stakeholders
Sta k eh older r epor tin g is a ch ieved th r ou gh
m a n y differ en t com m u n ica tion ch a n n els a n d
th ese ch a n n els ca n va r y a ccor din g to sta k eh older n eeds a n d th e n a tu r e of a n y pa r ticu la r
piece of in for m a tion . Wh ile th e a ctu a l con ten t of th e sta k eh older r epor ts m ay va r y
con sider a bly, it is of som e u se to cla ssify cor por a te sta k eh older s a n d th eir in for m a tion
n eeds w ith in a fr a m ewor k for r epor tin g pu r poses.
Ta ble I pr ovides on e su ch cla ssifica tion ,
ba sed on idea s in itia lly pr om u lga ted in T h e
Corpora te R epor t (ACCA, 1975), a n d u pda ted
by Woodw a r d (1993), a n d wh ich h a s been u sed
su ccessfu lly to a n a lyse em pir ica lly th e exten t
of sta k eh older in for m a tion pr ovision by bu sin ess en ter pr ises. It sh ou ld be n oted th a t th e
sta k eh older iden tified a s “th e n a tu r a l en vir on m en t” sta n ds a pa r t fr om th e oth er in ter est gr ou ps sh ow n , in th a t per se it h a s lim ited
a bility to dem on str a te th e th r ee elem en ts
in h er en t in bein g a sta k eh older of in ter est,
cla im (Ca r r oll, 1993) a n d a bility to in flu en ce
th e m a tter u n der con sider a tion (F r eem a n ,
1984). E lem en ts of th e en vir on m en t ca n n ot
th em selves give expr ession to th eir feelin gs
a bou t a spects of envir on m en ta l con cer n , a n d
r ely on pr essu r e gr ou ps to do th is on th eir
beh a lf for better or for wor se. It m ay th u s be
better to en visa ge th e n a tu r a l en vir on m en t a s
Table I
A mo de l o f c o rpo rate stake ho lde r info rmatio n ne e ds
Stakeholder
[ 70 ]
Information needed to assist in
determining/ assessing/ evaluating
Information source
Owners: existing and potential
shareholders (including holders of
options and warrants) and their
advisers
Share trading dec isions
Comparisons with earlier
years/ other c ompanies
Managerial performanc e
future performanc e
Corporate report
Value added statements
Forec asts
Lenders: existing and potential
suppliers of short- and long-term
funds
Sec urity of investment
Value of c ollateral
Cash generating ability
Corporate report
Cash-flow statements
Independent valuations
Human resources: existing potential
and past employees and their
representatives
Sec urity and prospec ts
Information for c ollec tive bargaining
Position, progress and prospec ts
Employee/ employment
reports at loc al (site) level
Corporate report
Business contacts
customers, suppliers,
competitors and those
interested in business
amalgamations
Long-term viability
Ability to meet obligations
Produc t information
Ec onomic c omparisons
Produc t literature
Trade press releases
Corporate report
Governmental/ regulatory
All aspects of national and
local government and
quasi-government
Ec onomic indic ators (balanc e of
payments; output; employment; etc .)
Tax data
Central Statistic al
Offic e returns
Spec ial reports
Corporate report
General public: taxpayers (central
and local), community interest
and pressure groups, interest
groups and representative
bodies
Role of the enterprise in the
c ommunity and how all its ac tions
affec t soc iety at large
Media
Surveys/ reports/
investigations
Corporate report
Natural environment: in reality,
groups of concerned individuals
claiming to represent environmental
interests
The total effec t of the enterprise
on the natural environment
Environmental reports
Life-c yc le analyses
Sustainability surveys
Environmental impac t
assessments
Frank Birkin and David
Wo o dward
Ac c o unting fo r the
sustainable c o rpo ratio n
Enviro nme ntal Manage me nt
and He alth
8 / 2 [1 9 9 7 ] 6 7 –7 2
a n “a r ea of in ter est” th a n a n “in ter est
gr ou p” beca u se of th is u n iqu e fea tu r e. N ever th eless, a sta k eh older m odel wou ld n ot be
com plete w ith ou t a r ecogn ition of con cer n for
th e n a tu r a l en vir on m en t, a n d Sm ith (1993)
h a s iden tified th e em er gen ce of a “n ew er a ” of
en vir on m en ta lism wh ich h a s be gu n to
develop its ow n m om en tu m .
Th e poten tia l for sta k eh older a n a lysis a n d
r epor tin g to a ccom m oda te a n a ccou n t of
su sta in a ble developm en t h a s yet to be fu lly
r ea lized, for a s th e CE O of th e Ger m a n
h osier y com pa n y Ku n er t AG obser ves in its
1994 E n vir on m en ta l Repor t: “If ou r su ccessfu l socia l m a r k et econ om y is a lso to in te gr a te
th e pr eser va tion of th e en vir on m en t in its
con tr ol cir cu it system , th en ecology m u st
becom e r eleva n t for th e m a r k et”.
Ecosystem
Sin ce t h e n ew u n d er st a n d in g of in t er d e p en d en ce a n d in d et er m in a cy p la ces t h e
cor p or a t ion w it h in t h e ecosy st em in com p lex a n d u n p r ed ict a ble w ay s, r ela t ion sh ip s
b et w een t h e cor p or a t ion a n d t h e ecosy st em
w ill b e ver y d ifficu lt t o su m m a r ize in
a ccou n t s. Som et h in g of t h ese r ela t ion sh ip s
w ill of cou r se h ave b een in cor p or a t ed in t h e
ot h er p a r t s of t h e a ccou n t for su st a in a ble
d evelop m en t . Life-cycle a ssessm en t s a n d
d em a n d in g st a k eh old er s cou ld on t h eir ow n
in t e gr a t e in d u st r ia l a ct iv it y sign ifica n t ly
w it h in t h e ecosy st em . Wh a t t h en is t h e r ole
for t h is p a r t of t h e su st a in a ble d evelop m en t
a ccou n t ?
Th e a ccou n t so fa r h a s been dir ected by th e
exper ien ces, a bilities a n d n eeds of th e cor por a tion a n d h u m a n sta k eh older s. An y a ccou n t
of su sta in a ble developm en t for th e cor por a tion m u st a lso in clu de th e a bility of th e
ecosystem (both loca l a n d n on -loca l) to m a in ta in itself a t th e given level of r esou r ces
a ppr opr ia ted by th e cor por a tion . E ven for th e
zer o-pollu tin g in du str ia l a ctivity, ecosystem
colla pse r em a in s a possibility wh en too m a n y
r esou r ces, in clu din g la n d a n d w a ter, a r e
a ppr opr ia ted by th e cor por a tion . Th e a ssessm en t of th e ca pa city for th e ecosystem to
m a in ta in a n d r en ew itself is n ecessa r ily don e
on a r e gion a l level: few cor por a tion s exist
a lon e in th eir loca l ecosystem . Also, th e iden tifica tion of a ppr opr ia te bou n da r ies for
a ssessin g th e loca l ecosystem is n ot obviou s
in m a n y ca ses wh er e u r ba n developm en ts,
la r ge-sca le en gin eer in g a n d n on -ecologica l
politica l bor der s exist. Th is pa r t of th e
a ccou n t is per h a ps best h a n dled by per son n el
ca pa ble of in tr odu cin g a bior e gion a l per spective a n d a u th or ity – loca l a u th or ities bein g
th e obviou s a gen ts.
Th e ca r r yin g ca pa city of th e ecosystem in
wh ich th e cor por a tion is situ a ted cou ld th en
be a ssessed by m ea n s of m ea su r es of h ea lth of
th e ecosystem su ch a s w a ter a cidity or a lk a lin ity, w a ter ava ila ble oxygen dem a n d, in dica tor species su ch a s lich en s a n d bir ds, h a bita t
a n d species diver sity, a ir qu a lity, la n d u tiliza tion , pollu tion loa d a n d so on . Given th e h igh
level of u r ba n a n d econ om ic developm en t in
pa r ts of th e UK, su ch a s Lon don a n d Bir m in gh a m , it is pr oblem a tic h ow th eir loca l ecosystem ca n be ca pa ble of ca r r yin g in depen den t
loca l su sta in a ble developm en t. Th er e is som e
poten tia l for “bu yin g” th eir ca r r yin g ca pa city elsewh er e su ch a s by pr otectin g a r ea s of
tr opica l for est bu t th ese m ea su r es ca n on ly
“bu y” tim e. Th e in ter depen den ce a n d in deter m in a cy of th e ecosystem a n d econ om ic
a ctivity r equ ir es th a t a ll pa r ticipa n ts beh ave
a ccor din g to th e pr in ciples of su sta in a ble
developm en t – th er e is n o “optin g-ou t”. For
exa m ple, wh y sh ou ld th ose cou n tr ies w ith
exten sive tr opica l for ests n ot a ppr opr ia te a ll
th eir ecosystem wea lth for im m edia te u se
wh en sign ifica n t r e gion s of th e so-ca lled
developed wor ld h ave don e exa ctly th a t? –
for est cover in th e UK is n ow a sm a ll fr a ction
of th a t existin g a t th e be gin n in g of th is cen tu r y, wh ich w a s in itself a sm a ll r em n a n t of
th e post-gla cia l for est cover. A few m om en ts
r efl ection on issu es su ch a s th ese sh ow th a t
con sider a ble ch a n ges in cu ltu r a l va lu es a r e
r equ ir ed befor e su sta in a ble developm en t
ga in s a n essen tia l, ever yday pr a ctica l expr ession .
Th e im plem en ta tion of Agen da 21 a s a gr eed
a t th e Rio E a r th Su m m it is th e m a in focu s for
th e in te gr a tion of econ om ic a n d ecologica l
cr iter ia w ith in th e UK. Peter bor ou gh E n vir on m en t City Tr u st, for exa m ple, h a s com pleted th e fir st sta ges of a com pr eh en sive
en vir on m en ta l a u dit of th e city a n d h a s a
sch em e n ow oper a tin g wh er eby a ll sm a ll a n d
m ediu m -sized en ter pr ises w ith in th e city
lim its ca n r eceive con su lta n cy a ssista n ce in
pr epa r in g a n en er gy a u dit for th eir com pa n y.
Th e tr u st h a s a lso been exper im en tin g w ith
th e a pplica tion of biologica l m ea su r es in th e
u r ba n , h u m a n com m u n ity.
The sustainable development
account for a corporation
Th er e is a n eed to pr ovide a com m on con ten t,
fr a m ewor k a n d m eth odology for th e pr epa r a tion a n d r epor tin g of su ch a n a ccou n t: m a n a gem en t, in vestor s, politica l a u th or ities,
en vir on m en ta l w a tch dogs a n d loca l com m u n ities wou ld a ll lik e to com pa r e a n d con tr a st
th e su sta in a ble developm en t per for m a n ce of
cor por a tion s in a con ven ien t a n d sta n da r dized w ay. Un for tu n a tely, th e ecosystem does
n ot beh ave in a sta n da r dized w ay!
[ 71 ]
Frank Birkin and David
Wo o dward
Ac c o unting fo r the
sustainable c o rpo ratio n
Table II
Be nc hmarks fo r a sustainable de ve lo pme nt c o rpo rate ac c o unt
Life cycle
assessment
Enviro nme ntal Manage me nt
and He alth
8 / 2 [1 9 9 7 ] 6 7 –7 2
Ecobalance
accounts
Stakeholder
analysis
Carrying capacity
assessment
No waste
Third party
verific ation
90% stakeholder
support
High transparenc y
Demand management
100% renewable
resourc es
Diverse biotic
environment
Produc t redesign
Proc ess redesign
Stakeholder dialogues
Analysis of stakeholder needs
Material sourc ing
and disposal
Regular stakeholder
reports
EMAS c redentials
Customer use
analysis
Material effic ienc y
Environmental
performanc e
indic ators
Reuse
Rec yc le
Linear proc esses
No waste rec ords
Industrial ec ology
Habitat restoration
High use of
renewables
Toleranc e of
c ompetitor spec ies
Dematerialized
growth
CO2 / O2 stabilized
No ozone damage
Harvest rates
monitored
No rec ognition of
ec osystem limits
Habitats fragmented
+ Verific ation by
c ompetent body
Sustainable
development
–
A com pr om ise is to a gr ee on th e br oa d fr a m ewor k a n d m eth odology for th e a ccou n t. Th is
a gr eem en t sh ou ld be n a r r ow en ou gh to
en a ble m ea n in gfu l com m u n ica tion a bou t th e
a ccou n ts to be m a de between oper a tor s a n d
u ser s in , say, Lon don a n d Rio de J a n eir o bu t
br oa d en ou gh to per m it th e evolvin g loca l
a n d r e gion a l va r ia tion s of differ en t sites to be
con sider ed. A ben ch m a r k a ppr oa ch seem s
m ost su ita ble for th is pu r pose. Ta ble II gives
a n exa m ple of a ben ch m a r k a ccou n t for cor por a te su sta in a ble developm en t. Deta iled
pr ocedu r es a n d ca te gor iza tion s cou ld be
in cor por a ted w ith in th e a ccou n t by u se of
en vir on m en ta l m a n a gem en t system sta n da r ds su ch a s ISO 14001; fu r th er wor k cou ld
esta blish a sta n da r dized fr a m ewor k for sta k eh older r epor tin g; th e a ssessm en t of ecosystem ca r r yin g ca pa city is tech n ica lly fea sible.
However, th e pr epa r a tion of su ch a n a ccou n t
is n owh er e n ea r a s difficu lt a s cr ea tin g th e
cu ltu r a l va lu es in wh ich su ch a n a ccou n t h a s
m ea n in g.
References
ACCA 1975), T h e Corpora te R epor t, Accou n tin g
Sta n da r ds Steer in g Com m ittee, Lon don .
[ 72 ]
Environmental reports
Press releases
Minimum stakeholder
c ommunic ations
Bir k in , F.K. a n d J ør gen sen , H.B. (1994), “Cor por a te en vir on m en ta l r epor ts a s wea lth a ppr opr ia tion sta tem en ts”, En viron m en ta l M a n a gem en t a n d Hea lth , Vol. 5 N o. 3, pp. 23-7.
Br ow n , L. et a l. (1994), V ita l S ign s 1994, N or ton ,
N ew Yor k , N Y.
Ca r r oll, A.B. (1993), B u sin ess a n d S ociety: Eth ics
a n d S ta k eh old er M a n a gem en t, Sou th -Wester n
P u blish in g Co. Cin cin n a ti, OH.
F r eem a n , R. (1984), S tra tegic M a n a gem en t: A
S ta k eh old er A pproa ch , Ma r sh a ll, Boston , MA.
J ør gen sen , H.B. (1993), “Th e ‘gr een a ccou n t’ of
th e Da n ish Steel Wor k s Ltd”, S ocia l a n d En viron m en ta l A ccou n tin g, Vol. 13, pp. 2-6.
N a ess, A. (1990), Ecolog y, Com m u n ity a n d L ifestyle,
Ca m br idge Un iver sity P r ess, Ca m br idge.
Sm ith , D. (E d.) (1993), B u sin ess a n d th e En viron m en t, P a u l Ch a pm a n , Lon don .
Sta cey, R.D. (1993), T h e Ch a os Fron tier: Crea tiv e
S tra tegies for Con trol in B u sin ess, Bu tter wor th -Hein em a n n , Oxfor d.
Wh ea tly, M.J . (1994), L ea d ersh ip a n d th e N ew
S cien ce, Ber r et-Koeh ler, Sa n F r a n cisco, CA.
Woodw a r d, D.G. (1993), “A sta k eh older a ppr oa ch
to cor por a te socia l r epor tin g a n a lysis”,
S h effield Un iv ersity M a n a gem en t S ch ool Discu ssion Pa pers, N o. 93, p. 39.