Advances in Environmental Accounting and Management, Volume 2 (Advances in Environmental Accounting & Management) (Advances in Environmental Accounting & Management)

172 Pages·2003·0.89 MB·English

by  Martin Freedman

CONTENTS
LISTOFCONTRIBUTORS vii
EDITORS ix
ADHOCREVIEWERS xi
EDITORIAL xiii
MartinFreedmanandBikkiJaggi
THEIDENTIFICATION,MEASUREMENT,ANDREPORTING
OFCORPORATESOCIALIMPACTS:PAST,PRESENT,AND
FUTURE
MarcJ.Epstein 1
LEGITIMACYANDTHEINTERNET:ANEXAMINATIONOF
CORPORATEWEBPAGEENVIRONMENTALDISCLOSURES
DennisM.PattenandWilliamCrampton 31
POLLUTIONDISCLOSURESBYELECTRICUTILITIES:AN
EVALUATIONATTHESTARTOFTHEFIRSTPHASEOF
1990CLEANAIRACT
MartinFreedman,BikkiJaggiandA.J.Stagliano 59
FINANCIALANALYSTS’VIEWSOFTHEVALUEOF
ENVIRONMENTALINFORMATION
HerbertG.HuntIIIandJacqueGrinnell 101
v
vi
THEIMPACTOFCORPORATESOCIALRESPONSIBILITY
ONTHEINFORMATIVENESSOFEARNINGSAND
ACCOUNTINGCHOICES
AhmedRiahi-Belkaoui 121
ANASSESSMENTOFTHEQUALITYOFENVIRONMENTAL
DISCLOSURETHEMES
W.DarrellWaldenandA.J.Stagliano 137
LIST OF CONTRIBUTORS
WilliamCrampton DepartmentofAccounting,IllinoisState
University,Normal,Illinois,USA
MarcJ.Epstein JonesGraduateSchoolofManagement,Rice
University,Houston,Texas,USA
MartinFreedman DepartmentofAccounting,Collegeof
BusinessandEconomics,TowsonUniversity,
Towson,Maryland,USA
D.JacqueGrinnell SchoolofBusinessAdministration,University
ofVermont,Burlington,Vermont,USA
HerbertG.HuntIII AccountancyDepartment,Collegeof
BusinessAdministration,CaliforniaState
University,LongBeach,California,USA
BikkiJaggi SchoolofBusiness,RutgersUniversity,
NewBrunswick,NewJersey,USA
DennisM.Patten DepartmentofAccounting,IllinoisState
University,Normal,Illinois,USA
AhmedRiahi-Belkaoui DepartmentofAccounting,Collegeof
BusinessAdministration,Universityof
IllinoisatChicago,Chicago,Illinois,USA
A.J.Stagliano DepartmentofAccounting,ErvianK.Haub
SchoolofBusiness,SaintJoseph’sUniversity,
Philadelphia,Pennsylvania,USA
W.DarrellWalden E.ClaiborneRobinsSchoolofBusiness,
UniversityofRichmond,Richmond,
Virginia,USA
vii
EDITORS
MartinFreedman BikkiJaggi
TowsonUniversity RutgersUniversity
AssociateEditors
A.J.Stagliano SaraReiter
St.Joseph’sUniversity BinghamtonUniversity
EditorialBoard
BruceAvolio AriehUllmann
UniversityofNebraska BinghamtonUniversity
WalterBlacconiere OraFreedman
IndianaUniversity VillaJulieCollege
NolaBuhr RobGray
UniversityofSaskatchewan, UniversityofGlasgow,Scotland
Canada
CarlosLarrinaga
JeffreyCohen UniversityofSeville,Spain
BostonCollege
CherylLehman
DavidCooper HofstraUniversity
UniversityofAlberta,Canada
GlenLehman
CharlDeVilliers UniversityofSouthAustralia
UniversityofPretoria,
LeeParker
SouthAfrica
UniversityofAdelaide,Australia
JesseDillard
DennisPatten
UniversityofCentralFlorida
IllinoisStateUniversity
MarcEpstein
BillSchwartz
RiceUniversity
IndianaUniversityatSouthBend
PaulShrivasta
TonyTinker
BucknellUniversity
BaruchCollege
ix
AD HOC REVIEWERS
KathrynBewley YorkUniversity
YueLi UniversityofToronto
ArlineSavage OaklandUniversity
xi
EDITORIAL
Since the publication of the first volume in this series in 2000, there have been
advancesaswellasretreatsintheareasofbothenvironmentalperformanceand
environmentaldisclosures.TheKyotoProtocolwillbecomerealityif55nations
andtheindustrializednationsthatproduceatleast55%oftheworld’soutputof
carbon dioxide ratify the treaty. With the European Union’s ratification in 2002
and with Russia and Canada poised to ratify the treaty, the Kyoto Protocol is
expectedtobecomeeffectiveshortly.Evenwithoutthetreatybeingineffect,the
EUcountrieshaveinstitutedacarbondioxidetradingschemetolimittheemission
of greenhouse gases. These endeavors constitute progress toward making the
contents of the Kyoto Protocol effective. In the U.S., the Bush administration’s
choiceofignoringKyotoandrelaxingtherequirementsofcertainenvironmental
laws, however, constitute steps backwards in the battle to keep the planet clean
andsafeforfuturegenerations.
InthewakeofEnrondebaclewiththeresultingdissolutionofArthurAndersen
and other accounting scandals including those involving WorldCom and Xerox,
thequalityoffinancialreportingandauditinghasbeencalledintoquestion.Thus,
as a result of various accounting scandals, financial disclosures have suffered a
greatsetback.Thereis,however,asilverlininginthegloomyfinancialdisclosure
landscape. It has been observed that reporting of corporate environmental
and social accounting information has increased despite the setback in overall
financialdisclosures.Theremay,however,beacredibilityproblembecauseofthe
accountingscandalsandbecauseofthevoluntarynatureofthesedisclosuresthat
cast doubt on the reliability of information content of environmental and social
disclosures.
In the first article in this volume, Marc Epstein traces the history of social
accountingfromitshopefulbeginningsinthelate1960sandearly1970suntilthe
presentday.Beingoneofthepioneersofsocialaccounting,MarcEpsteinisina
uniquepositiontoprovideuswithapicturethatpresentsimportantmilestonesin
corporaterecognitionoftheimportanceofsocialandenvironmentalperformance
and disclosures. The author argues that although the number of companies
disclosingsocialandenvironmentalinformationhasincreasedandthequalityof
suchdisclosureshasnotimproved.Hemakesvaluablesuggestionsforincreasing
the integration of social and environmental impacts with managerial decisions
andforimprovingsocialandenvironmentaldisclosures.
xiii
xiv
In the article on Legitimacy and the Internet, Dennis Patten and William
Crampton present evidence that companies have used their websites as an
additional source of environmental information. However, their findings show
that corporate web page environmental disclosures by a sample of U.S. firms
do not appear to add any additional, non-redundant environmental information
beyond what is provided in the annual reports. The authors therefore conclude
thatthat“thefocusofinternetdisclosuresmaybemoreoncorporateattemptsat
legitimizationthanonmovingtowardgreatercorporateaccountability.”
IntheU.S.,theCleanAirAct(CAA)of1990wasconsideredamajoradvance
inthefighttoreduceairpollutionespeciallythoseemissionsthatcauseacidrain.
Akeypartofthelegislationwasanemission-tradingschemethatallowedelectric
utilities to find a least cost method to meet the emission standards. The article
byMartinFreedman,BikkiJaggiandA.J.Staglianoexaminestheextensiveness
oftheCAAdisclosuresbyfirmsdirectlyimpactedbythefirstphaseofthe1990
Act. Firms that needed to reduce their sulfur dioxide emissions the most tended
to provide the most extensive disclosures. However, the authors conclude that
relyingonvoluntarydisclosurestomeettheinformationneedsofstakeholdersis
notasuccessfulstrategy.Mandatingtheseenvironmentaldisclosureswouldbea
betterpublicpolicychoice.
In a survey of financial analysts, Herbert Hunt and Jacque Grinnell find that
financial analysts are not enthusiastic about the current state of environmental
reporting.Theanalyststendnottouseenvironmentalinformationintheirdecision
models.Thosethatdousetheinformation,doittoassessthedownsiderisk.One
of the key reasons given for not using environmental information is the lack of
reliabledata(especiallysincetheirmajorsourceofthedataistheannualreport).
The authors conclude that firms need to disclose more relevant and reliable
environmentperformanceinformationsothatthisinformationcanbebetterused
bytheinvestmentcommunity.
AhmedRiahi-Belkaoui’sfindingsshowthatinvestorsaremorelikelytorelyon
earnings reports from firms that have a reputation for corporate social responsi-
bility (based on Fortune’s rankings). The author, however, concludes that social
responsibilitywhichenhancestherelevanceofreportedearnings,mayalsohave
beenencouragingmanagementtobemoreaggressiveinmanipulatingthereported
earningsthroughtheuseofdiscretionaryaccruals.Thus,thefindingsofthisstudy
castdoubtonthereliabilityofreportedearningsbyfirmsthatareconsideredtobe
sociallyresponsible.
ThelastarticleinthisvolumeauthoredbyDarrellWaldenandA.J.Stagliano
dealswithqualityandplacementofenvironmentaldisclosuresinannualreports
toshareholders.Thestudyis,however,basedondatafrom1989,theyearofthe
Exxon Valdez oil spill and therefore it is related to a time period of heightened
xv
environmentalawareness.Ithasbeenreportedthatenvironmentalinformationis
disclosedthroughouttheannualreport,thoughitvariesfromfirmtofirm,butthe
information content of these disclosures in general is of limited usefulness. It is
possiblethatvariabilityinenvironmentaldisclosuresmaybeduetofirmsbelong-
ing to different industry groups. The bottom line seems to be that there is little
relationshipbetweenenvironmentaldisclosuresandenvironmentalperformance.
MartyFreedman
BikkiJaggi
Editors
THE IDENTIFICATION,
MEASUREMENT, AND REPORTING OF
CORPORATE SOCIAL IMPACTS: PAST,
PRESENT, AND FUTURE
Marc J. Epstein
ABSTRACT
Thispaperprovidesareviewoftheprogressmadeinbothacademicliterature
andcorporatepracticeoverthelastfortyyears.Althoughtherehasbeenan
increase in the number of companies producing social and environmental
reports,thequalityofthedisclosureshasnotincreased.Further,thereislittle
evidenceofprogressintheintegrationofsocialandenvironmentalimpacts
into management decisions. The paper provides suggestions on research
needs to increase the integration of social and environmental impacts into
managementdecisionsandimproveboththeinternalreportingandexternal
disclosuresandaccountabilityofcorporations.
INTRODUCTION
In recent years there has been a proliferation of academic and managerial
publicationsconcernedwiththesubjectofsocialreportingandtheintegrationof
social, environmental, and economic impacts into managerial decision-making.
This trend parallels a similar surge of interest in social accounting during the
AdvancesinEnvironmentalAccountingandManagement
AdvancesinEnvironmentalAccountingandManagement,Volume2,1–29
Copyright©2004byElsevierLtd.
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ISSN:1479-3598/doi:10.1016/S1479-3598(03)02001-6
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