Upload
arie-dwijayanti
View
4
Download
2
Embed Size (px)
Citation preview
al
He
sland
A lack of appropriate measurement techniques has constrained full cost environmental accounting (FCEA) exper-
This paper provides an account of a full cost
publicly owned State Forest and Timber reserves
under multiple use management within a
mous, and is referred to hereafter by the
ton & Gray, 2001; Owen, 1992). Full cost report-
ing systems are an attempt to reform current
accounting practice, since at their simplest, they
allow current accounting and economic numbersto incorporate all potential/actual costs and
eserved.
* Tel.: +61 7 3365 6581; fax: +61 7 3365 6788.
E-mail address: [email protected]
Accounting, Organizations and Soci0361-3682/$ - see front matter 2005 Elsevier Ltd. All rights renvironmental accounting experiment. The experi-
ment is based on a damage cost reporting system
in which net prot is adjusted for positive and neg-
ative estimates of environmental externalities using
valuation techniques from environmental econom-
ics. A case study was drawn from the Australian
public forest sector to test the feasibility of sucha reporting system. The case organisation controls
ctitious name of the Department of Forest Man-
agement (DOFM).
The perspective of the reporting experiment is
one of economic rationalist reformation. That is,
accountants have the capacity to make a positive
contribution to the ecological debate, by reforming
accounting and reporting systems to take accountof environmental and social externalities (Bebbing-imentation. Yet, there has been little research on the applicability of valuation techniques recently developed by envi-
ronmental economists within FCEA frameworks. This paper examines a reporting experiment using these valuation
techniques that was undertaken by an Australian Government Department managing publicly owned forests. The
FCEA experiment was ultimately not successful. However, the implementation experiences of the Department includ-
ing the reactions of its managers and stakeholders provide an opportunity to critically reect on the experimental out-
comes to extend the current empirical knowledge of corporate social responsibility reporting. Such critical reection has
not been common in past FCEA experimentation.
2005 Elsevier Ltd. All rights reserved.
Introduction politically sensitive environment. As a conse-
quence, the organisation asked to remain anony-A full cost environment
Kathleen
School of Business, The University of Queen
Abstractdoi:10.1016/j.aos.2005.01.001accounting experiment
rbohn *
, St Lucia, Brisbane, QLD 4072, Australia
www.elsevier.com/locate/aos
ety 30 (2005) 519536
benets including environmental (and perhaps so-
cial) externalities (Bebbington, Gray, Hibbitt, &Kirk, 2001, p. 8).
A largely unconsidered pool of measurement
techniques has been developed by environmentaleconomists to estimate non-market values of exter-
nalities. These include but are not limited to the
contingent valuation method, the travel cost meth-
od, benets transfer, doseresponse models, hedo-
nic pricing models and choice-modelling. These
valuation techniques have been used in several
high prole natural resource cases such as the Ex-1
There have been a limited number of past at-
tempts at full cost environmental reporting. The
approaches have been varied and include mainte-
nance cost, asset valuation and damage cost
reporting systems. Maintenance cost approachesfocus on the maintenance of natural capital3 and
have been used in the Net Value Added experi-ment (19901994) of BSO/Dutch Origin, and the
Sustainable Cost experiments of Landcare Re-search New Zealand (Bebbington & Tan, 1996,
1997) and Interface Europe (Howes, 2000). Asset
valuation approaches focus on valuation of envi-
ronmental assets and changes therein, as was thecase with the Supplementary Economic Accounts
520 K. Herbohn / Accounting, Organizations and Society 30 (2005) 519536xon Valdez oil spill in the USA, and CoronationHill (Kakadu) in Australia.2
Despite preliminary discussion of the applica-
bility of non-market valuation techniques by
accountants, (e.g. Burritt & Cummings, 1998; Dee-
gan, 1998; Herbohn, 2000; Herbohn, Harrison, &
Herbohn, 2000; Milne, 1991; Palmer, 1998; Peace,
1997), to date little practical accounting experi-
mentation has been attempted. Accordingly, thisstudy investigates the feasibility of incorporating
estimates of environmental externalities, derived
using techniques from environmental economics,
into a full cost environmental reporting system.
The public sector forest management organisation,
the DOFM, is the focus of investigation, and the
valuation methods considered include the choice
modelling and benets transfer methods. Threeunderlying research questions are addressed. They
are: (1) issues with the implementation itself; (2)
the reactions of managers to the eort; and (3)
the reactions of stakeholders to reporting non-
market values of environmental externalities.
1 Law suits were launched by the US Federal Government
and the Alaskan State Government against the Exxon Corpo-
ration for recovery of damages to the natural resources aected
by spilled oil, following the grounding of the Exxon Valdez oil
tanker in Prince William Sound, Alaska in 1989. Under US
Superfunds legislation, trustees were permitted to sue for loss of
use and non-use values, which the Department of the Interior
allowed to be estimated using an environmental economic
valuation technique.2 The Australian Federal Government commissioned a cost
benet analysis of the environmental costs expected from a
mining venture at Coronation Hill in Kakadu. The contingentvaluation method was used.experiment (19951998) of Earth Sanctuaries. Fi-
nally, damage cost systems are concerned with
estimates of external environmental costs from
an organisations operations. The Full Cost Envi-ronmental Accounting project of the Canadianpower utility, Ontario Hydro, adopted this ap-
proach (ICF, 1996)4 and it is also used in theDOFM case study reported in this paper.
Unfortunately, the limited case study evidence
from prior full cost environmental accounting
experiments suggests reporting objectives often
are not met due to both practical implementation
problems and resistance from managers. Docu-
mented practical implementation issues include
data availability, additivity of measurement units,incomplete account of impacts, reliability and suit-
ability of estimates, and unintended uses of the
environmental and social information by manage-
3 The concept of natural capital is drawn from the work of
environmental economists such as Pearce, Markandya, and
Barbier (1989). In brief, the capital available to humanity is
considered to fall into three categories critical natural capital,
other natural capital and man-made capital. The underlying
assumption is that critical natural capital must not be consumed
and reductions in other natural capital must be substituted for,
replaced or renewed in order for sustainability to be achieved.4 Over a 20-year period, Ontario Hydro developed a damage
function methodology for monetising external impacts and
costs for its fossil and nuclear electricity generation systems
such as human health and mortality. The organisation
attempted to use the estimates for internal decision-making
and investigated the possibility of external full cost environ-
mental reporting. However, the reporting experiment lost
signicant impetus with the departure of a key manager(Bebbington, 1998).
ment (Bebbington & Gray, 2001; Bebbington &
Tan, 1996, 1997; Dey, 2000; Dey, Evans, & Gray,
cost environmental reporting experiment, and
that the more environmentally sensitive an organi-
sations industry, the greater the incentive toundertake environmental reporting (e.g. Cowen,
Ferreri, & Parker, 1987; Deegan & Gordon,
1996; Dierkes & Preston, 1977; Patten, 1991,1992). The environmental sensitivity of the Austra-
lian public forest sector is the result of several dec-
ades of bitter public policy debates over forest use
between Federal and State Governments, conser-
vationists and the timber industry (Herbohn &
Herbohn, 1999).6 The end result is that environ-
mental lobby groups in Australia perceive that
K. Herbohn / Accounting, Organizations and Society 30 (2005) 519536 521how they were inuenced by the reactions of man-
agers to the eort. In addition, the DOFM case
provides the unique opportunity to balance this
evidence against the reporting outcomes evaluated
by external stakeholders.
The DOFM case study is reported in this paperas follows. Discussion of the case organisation and
full cost environmental reporting framework is
contained in the Section Full cost environmental
accounting and the department of forest manage-
ment. The study design and method is described
in the Section Study design and method, the
case evidence and discussion of results is contained
in Sections Case evidence and Discussion ofcase study evidence, and some concluding com-
ments follow.
Full cost environmental accounting and the
department of forest management
Case study setting
The Australian public forest sector was selected
as the source for this case study because it has a
high environmental prole combined with politi-
cally active stakeholder groups that have an inter-
est in the environmental consequences of forest
management. Previous research demonstrates
5 The one exception is the insightful, critical reection of
Bebbington and Gray (2001) on the Sustainable Cost exper-1995; Larringa & Bebbington, 2001). Tensions be-
tween the business as usual constraints of manag-ers and the environmental sustainability agendasof researchers has led to the documented resistance
by managers to full cost reporting systems (Bebb-
ington & Gray, 2001). Few researchers have how-
ever, systematically reected upon their reporting
experiences to identify the implementation issues
and manager reactions that inuenced the out-
comes of their reporting experimentation.5 This
study provides a critical reection on the imple-mentation issues experienced in the DOFM fulliment by Landcare Research New Zealand.the timber products industry is amongst the top10 environmentally sensitive industries (Deegan
& Gordon, 1996). At the same time, conservation-
ist groups within the public forest sector enjoy sig-
nicant political inuence. Their political activities
over the last decade have resulted in large tracts of
native forest being withdrawn from timber pro-
duction, with extensive dialogue now occurring
via the Regional Forest Agreement Process7 abouthow forests should be managed (Frawley, 1988).
Within this politically sensitive environment,
the Department of Forest Management (DOFM)
manages publicly owned State forests and Timber
Reserves for multiple forest uses including preser-
vation of sites of indigenous cultural signicance,
eco-tourism, forest products, military training,
nature conservation, outdoor recreation and re-search, outdoor recreation scenic qualities, and
maintenance of water quality and quantity. The
Department has legislated responsibilities for man-
aging forests to accommodate evolving Native Ti-
tle legislation, the RFA process, and ecologically
6 Two examples include struggles between Government,
conservation groups and the timber industry in relation to the
Franklin River Dam in Tasmania, and the World Heritage
Listing of large tracts of rainforest in north Queensland.7 The Regional Forest Agreement (RFA) process has been
instigated in each Australian state as part of the National
Forest Policy (1992). As part of this process, RFAs are
negotiated for regions within each state to provide an adequate
and representative forest reserve system for the ecologically
sustainable management of forested areas, and for the long-term stability of forests and forest industries.
sustainable forest management.8 Sustainable forest
management is to be monitored via the interna-
tional Montreal Agreement (1995),9 which estab-
lishes key criteria and indicators. The criteria
cover biological diversity, productive capacity, eco-system health and vitality, soil and water resources,
global carbon cycles, socio-economic benets, and
an eective legal, institutional and economic
framework.
The full cost environmental reporting experi-
ment at the DOFMwas initiated by this researcher,
vided the framework for the full cost reporting
experimentation. The FUP system was designed
to assist with the management of competing forest
uses within regions of the State while attaining the
goal of sustainable forest management. It com-prised eight phases, the fth of which was relevant
to the full cost environmental reporting experi-
ment.11 This phase involved preparing an inven-
tory of the current and potential benets from
regional forest resources that included economic
valuations of environmental externalities. An eco-nomic valuation project was established to gatherthese economic values, and two managers were as-signed to the project.12
At the commencement of the eld research,
managers from the economic valuation projectidentied three potential avenues for valuation of
environmental externalities. The rst was to volun-
teer the DOFM as a data source for choice model-
ing studies conducted by students from local
universities.13 A second was to seek external fund-
522 K. Herbohn / Accounting, Organizations and Society 30 (2005) 519536in conjunction with two middle managers from the
Department. Initial discussions revealed theDepartments interest in valuation of environmen-tal externalities, and potential uses of this informa-
tion. This interest had arisen because managers
perceived that the Department was subject to
increasing legislative, funding and political pres-
sures to demonstrate and communicate the out-
comes from its management of State forests for
multiple uses. Ultimately, the middle managersand the researcher developed a proposal to use
economic valuations of environmental externali-
ties within a full cost environmental reporting sys-
tem. Approval to proceed with the experiment was
subsequently received from the Departments se-nior management. The development of the report-
ing framework is outlined below in Sections Fit
within the organisational reporting frameworkand Damage cost reporting.
Fit within the organisational reporting framework
A decision analysis system, hereafter referred to
as the Forest Use Planning (FUP) system,10 pro-
8 In this context, sustainable forest management involves
integrating commercial and non-commercial values of forests so
that the welfare of society (both material and non-material) is
improved, while ensuring that the values of forests, both as a
resource for commercial use and for conservation, are not lost
or degraded for current and future generations (EGCRA,
1996).9 A group of 12 countries including Australia that together
contain more than 90% of the worlds temperate and borealforests participated in the Montreal Process and became
signatories to the Montreal Agreement (1995).10 The actual name of the decision support system has been
altered to preserve the anonymity of the case studyorganisation.ing for multiple choice-modeling studies of the
State forest resource. To this end, sta from the
DOFM, another government department and
two universities were participating in a competitive
11 Phases one to four centred on dening the boundaries of a
region and the forest resource, ascertaining community values
and developing a strategy for consultation with key stakehold-
ers on forest usage. The later phases, six to eight, involved
preparing, ratifying and communicating a draft plan for use
and management of the forest resource in question.12 One manager was an economist with post-graduate quali-
cations in environmental economic valuation techniques and
the other had an economics background and was pursuing post-
graduate studies in the valuation of environmental externalities
from natural resource management.13 In a choice modeling study, respondents are asked to choose
between dierent bundles of environmental goods, which are
described in terms of their attributes and the levels that these
take. Varying the levels of attributes gives rise to a range of
options that comprise the choice set. Respondents choices arestatistically analysed to determine the impact of each attribute
and a willingness-to-pay measure of value is estimated (Bennett,
1996). At the commencement of data collection, one study had
already been completed which focused on the value of
landscape, conservation, wood and honey uses of the Stateforest resource.
Study design and method
ations and Society 30 (2005) 519536 523national joint industry and university research
grant application. A third source was the benets
transfer method. Existing estimates of externalities
at one site that had been estimated from choice
modeling studies would be used as a surrogatefor a similar change elsewhere (Kirchio, Colby,
& LaFrance, 1997; Pearce & Moran, 1994).
Damage cost reporting
After some discussion between the two middle
managers from the DOFM and the researcher, a
damage cost approach was selected for the DOFMreporting experiment as being most compatible
with non-market valuation techniques from envi-
ronmental economics. The damage cost approach
centres on deriving estimates of external environ-
mental costs owing from an organisations oper-ations. The externalities have been likened to
non-monetary infusions of natural capital into an
organisation that are provided by the environment(Boone & Rubenstein, 1997), and the damage cost
estimates are deducted from net prot. The choice
modelling and benets transfer valuation methods
would be used to provide estimates of the DOFMspositive and negative environmental impacts to be
incorporated into the conventional net prot g-
ure. For example, the Departments forest man-agement results in positive environmentalexternalities such as improvements in scenic quali-
ties, improvements in water quality, increases in
bio-diversity, and the provision of opportunities
for outdoor education and research. Negative
externalities include the value of alternate forest
uses that are lost such as the opportunity for out-
door recreation in areas of cultural heritage
signicance.The rationale of the damage cost approach is
essentially pragmatic. The reection of environ-
mental damage costs in conventional accounting
performance measures motivates managers and
stakeholders to factor these impacts into their
decisions. This was consistent with the pragmatic
aim of the DOFMs managers to use full cost envi-ronmental accounting to communicate the valueof their organisations forest management in re-sponse to increasing legislative, funding and polit-
K. Herbohn / Accounting, Organizical pressures.Feedback data collection
Data sources included documentation, directobservation and semi-structured interviews with
DOFM managers and stakeholders. The non-
interview data was used as part of the triangu-
lation process to provide a background on the
Department and to assist in the development of
coding schema (McKinnon, 1988; Yin, 1994).
The most persuasive source of data was semi-
structured interviews with 13 DOFM managersand 14 DOFM stakeholders. The interviews fol-
lowed a cascading process, where an interviewee
provided the name and contact details of other
people who would be useful to interview, who
might in turn provide leads on other potential con-
tacts. All interviews were tape-recorded and tran-
scribed verbatim.
The semi-structured interviews were designed toprovide background information about the inter-
viewees. Information was also collected on the cur-
rent environmental reporting framework of the
DOFM including factors inuencing its current
form, and its perceived usefulness to managers
and stakeholders. Additionally, the interviews ex-
plored the feasibility of a damage cost environ-
mental reporting system incorporating estimatesfrom choice modelling and benets transfer, and
in particular the need for this system, and potential
barriers to its implementation.14
Managers from the Department were identied
as potential interviewees if they were involved in
(a) estimation of environmental externalities from
the organisations management of forests, and (b)communication of management outcomes withexternal stakeholders. Key contacts within the
Department initiated contact with the managers
to assist the interview process. No refusals to be
interviewed were received. The interviews were
conducted during three visits to the head oce of
the DOFM over an eight-month period. The rst
and last visits were of one-working days duration,while the second visit was for one working week.
14 The interview protocol containing specic interview ques-tions is available from the author upon request.
The DOFM managers were drawn from senior
and middle management levels, and were involved
in planning, consultation, operations, cultural her-
itage and environmental audit. The length of the
interviews ranged from 35 min to 70 min, with an
summaries on observations, documentation) was
done manually using an Excel spreadsheet. To
minimise bias in the coding process, the descriptive
coding schemes were developed prior to the com-
mencement of analysis as part of the case study
protocol, while the pattern coding scheme was
developed after the rst major data collectionphase (Miles & Huberman, 1994). Check-coding
was used to test the consistency between the co-
ders data reduction and another researchers cod-ing of randomly selected sections of text, and also
the main coders work against itself at regularintervals during the process.
Data display was the second sub-process used
to analyse the case study data (Miles & Huberman,1994). Structured data displays were developed via
a three-stage iteration. First, interim data displays
were prepared for each of the 13 manager and 14
stakeholder interviewees. Four interim data dis-
524 K. Herbohn / Accounting, Organizationaverage length of 56 min. The managers requested
that no further demographic information be pro-
vided to maintain their anonymity.
The Departments regional planners throughoutthe State identied pools of stakeholders from
their region who satised the following selection
criteria. The stakeholder must (a) currently use
information produced by the DOFM to assess itsmanagement of forests, and (b) be in a position
to comment on the proposed environmental report-
ing system (e.g. hold a management position, par-
ticipate in regular consultation with the DOFM as
part of its FUP system). The lists of potential
stakeholder interviewees were provided to the re-
searcher who then contacted each stakeholder di-
rectly. Only two refusals were received.15 Theresulting 14 stakeholder interviews were conducted
over a ve-month period. The researcher traveled
to the work place of each stakeholder to conduct
the interviews. Table 1 contains general demo-
graphic information on the stakeholder inter-
viewees.
Data analysis
The analytical protocol recommended by Miles
and Huberman (1994) was used for this study. It
comprises three linked sub-processes of data
reduction, data display and conclusion drawing/
verication. The steps involved in data reduction
and data display that allowed conclusions to be
drawn are outlined below.Data reduction was undertaken in two steps.
Firstly, data summaries were used to reduce obser-
vations, eld notes, and documents collected in the
eld. The summaries identied the signicance of
15 The rst refusal came from the Mayor of a local council
whose involvement in a political campaign meant that she did
not have the time available to be interviewed. The second
refusal was from a forester who had been retired for three years
and felt that he had lost touch with developments in the forestsector.the item, provided a summary of its content and
reective comments by the researcher. Once com-
pleted each data summary was added to the case
study database. Secondly, data reduction was
undertaken through manual coding, using descrip-
tive and pattern coding schema. The unit of coding
was a minimum of one and a maximum of three
sentences. The coding of interview data (e.g. inter-view transcripts) and non-interview data (e.g. data
Table 1
Demographic details of stakeholder interviewees
Stakeholder groupsa Number
Conservation 4
Timber industry 3
Private sector (non-forestry commercial)b 2
Government departments/agencies 4
Other communityc 1
Average Range
Average duration of interview (min) 40 2060
a The stakeholder categories used were the most frequently
identied groups by DOFM managers, and in many cases were
how the stakeholder interviewees identied their own
organisations.b Business people dependent on the ow-on eects (e.g.
employment, tourism) of forestry into regional economies.c Community member with specic environmental, ecological
expertise who was highly involved in consultation with the
DOFM.
s and Society 30 (2005) 519536plays were prepared per interviewee, based on
descriptive codes, pattern codes, predicted stake-
holder reactions (prepared only for DOFM man-
agers), and any emerging constructs. The data
included in these displays took the form of short
blocks of text, quotations and phrases, and sum-maries in the researchers own words. Also, anyrelevant material from the document summaries
that related to an interviewee was incorporated.
Next, separate meta-matrices were constructed
These nal display matrices were prepared for po-
K. Herbohn / Accounting, Organizationtential costs and benets from the reporting exper-
iment, implementation experiences, impediments,
and predicted stakeholder reactions. They took
the form of role-ordered matrices, in which man-
agers organisational levels, and stakeholdersbackground were used to sort the data. Also, the-matic conceptual displays were prepared to com-
pare and contrast the issues emerging from the
analysis of data relating to the DOFMs managersand its stakeholders.
A nal research report was drawn from the
role-ordered matrices and thematic conceptual
matrices. Feedback on the research report was ob-
tained from the DOFM manager interviewees toreduce bias and improve reliability (Guba, 1981;
Miles & Huberman, 1994; Stake, 1994).17
Case evidence
The case evidence is presented on the three re-
search questions regarding implementation experi-
16 For example, the meta-matrix cell entry will have additivityproblems, icon species cause problems with valuations and
should not report on endangered species was distilled into thegeneric descriptor concerns about the appropriateness of non-market values.17 While exposure of the ndings added to the reliability of the
results, it also revealed managers concerns about possibleidentication. Accordingly, additional eort was expended tofor managers and stakeholders respectively, that
combined the data from the individual interim
data displays. From these two meta-matrices, nal
display matrices were derived in which key phraseswere distilled into more generic descriptors.16protect condentiality of data sources.ences, the DOFM managers reactions andstakeholders reactions to the full cost environmen-tal reporting system.
Implementation experiences
Initial indications were positive that the imple-
mentation of a full cost environmental reporting
system for the DOFM would be feasible. The
reporting experiment had been approved by senior
management and was supported by middle manag-
ers from the DOFM. An organisational frame-
work in the form of the FUP system was inplace to support the full cost reporting system. In
addition, the DOFM had begun to use choice
modelling exercises and, to a lesser extent, benets
transfer to value environmental externalities from
its forest management activities.
Despite the early encouraging signs, little
progress was made on the DOFM full cost envi-
ronmental reporting experiment over the eight-month period between the commencement of the
reporting experiment and the end of data collec-
tion by the researcher. Over-optimism by the
DOFM managers, coupled with sta turnover on
the economic valuation project contributed tothe slower than expected progress. However, the
major stumbling block was that no new estimates
of the Departments environmental externalitieswere obtained during this period. The FUP system
was only applied in three areas in the State and
the inventories of benets from regional forest
resources produced in phase ve for each applica-
tion had not included economic estimates of
externalities.
The failure of potential sources of nancial esti-
mates of environmental externalities meant that itwas not possible to proceed with an application of
the full cost environmental reporting system as
envisaged by the researcher and the DOFM man-
agers. The limited implementation experiences do
however, provide an opportunity for reection
on impediments to the DOFM implementing a
damage cost environmental reporting system.
These impediments are discussed below. The preli-minary implementation experiences can also be
used to critically reect on the outcomes of the
s and Society 30 (2005) 519536 525experiment using the Department managers and
cies such as the highly venomous Western Taipan
snake.18
An unexpected development during the course
of the eld research was the resistance of managers
on the economic valuation project to the use ofestimates of environmental externalities, which
they described as part of simple socio-economicvalue, cost-benet analysis. They suggested thatnon-market values should only be used as a sup-
ations and Society 30 (2005) 519536stakeholders evaluations of the system. Thesereactions of managers and stakeholders are exam-
ined in Sections Reactions of the departmentsmanagers and Reactions of stakeholders
respectively.The most compelling impediment facing the
DOFM managers in the reporting experiment
was the business as usual constraint rst identi-ed by Bebbington and Gray (2001). During
the course of the experiment, the DOFM was
under considerable pressure from two sources.
Conservationist stakeholders and other State
Government agencies and departments launchedsustained political attacks on the Departmentsforest management, and at the same time the
State Government introduced budgetary funding
cuts to the public forest sector. As the reporting
experiment progressed, it became clear that rstly,
funding economic valuation studies of environ-
mental externalities from forest management,
and secondly, developing a damage cost reportingsystem were decreasing in priority in direct pro-
portion to the increasing funding and political
pressures to which the DOFM was subject. As
one senior manager explained: We dont want areporting system that is going to take 90 per cent
of our resources and leave 10 per cent for forest
management.Interestingly, a second impediment was resis-
tance from four DOFM managers. This resistance
emerged despite the managers initial support andenthusiasm for the full cost reporting experiment.
One of the main sticking points was managers be-lief that resource management decisions and out-
comes could not be reduced to nancial
components. Instead, they saw forest management
outcomes as the result of political compromiseamongst all aected stakeholders, with nancial
estimates of externalities as only a subset of infor-
mation. Following from this, the Departmentsmanagers were concerned that willingness-to-pay
measures, which are estimated in choice modelling,
may be ill-informed in an ecological and sustain-
able forest management context. To illustrate,
one manager discussed the likelihood of overvalu-ation of the forest habitats of icon species such as
Koala Bears at the expense of the habitats of more
526 K. Herbohn / Accounting, Organizecologically important but universally disliked spe-plementary information set, to complement a more
complex multi-disciplinary planning approach
such as Multi-Criteria Analysis (MCA).19 How-
ever, they acknowledged that using more complexvaluation methods creates what they termed a val-uation dilemma. That is, the more technical andcomplex the valuation method used, the less likely
DOFM stakeholders would be to accept the valu-
ation outcomes because of their unwillingness to
treat the valuation process as a black box process.
In summary, the success of the DOFM full cost
reporting experiment was eroded by a lack of addi-tional funding to undertake economic valuation
studies in the face of State Government budget
cuts, and changing priorities as the organisation
responded to sustained political scrutiny from its
stakeholders. There was also resistance by manag-
ers to non-market valuation techniques, which had
been unexpected for both DOFM managers and
the researcher.
Reactions of the departments managers
Six of the 13 DOFM manager interviewees gen-
erally supported the proposed environmental
reporting system, while seven gave qualied sup-
port. Table 2 summarises the specic benets and
costs of the reporting system perceived by the
18 Although there were few estimates of environmental exter-
nalities available for the DOFM, 10 of the 13 Departmental
managers had previous experience with or knowledge of non-
market valuation techniques, and raised this concern based on
their prior experiences.19 Multi-criteria analysis is an evaluation approach that aims
to rationalise planning and resource-use decisions through a
systematic representation of various objectivesthat is eco-
nomic, environmental and socio-culturaland their attributes(Tumaneng-Diete & Waring, 2000).
Table 2
Reactions of managers from the Department of Forest Man-
agement to full cost environmental reporting using choice
K. Herbohn / Accounting, OrganizationDepartments managers in their overall assessmentof the system.20
The benet most commonly identied was the
use of estimates of environmental externalities in
monitoring and reporting on sustainable forest
management. Managers were concerned about
the diculty in interpreting the sustainability of
the DOFMs forest management against the Mon-treal criteria that were outlined in Section Case
study setting. As one manager explained, whatdoes it mean if two of the indicators for conserva-
tion go up, 29 indicators stay the same, and the
modeling and benets transfer valuation methods (n = 13)
General reactions No. of managers
Positive 6
Negative
Mixed 7
Total 13
Benets
Monitoring and reporting on
sustainable forest management
7
Rigorous resource management decisions 5
Stronger funding negotiation position 5
Costs
Philosophical concerns 7
Stakeholder acceptance problems 6remaining two on biodiversity go down? Sevenof the Departments managers could foresee bene-ts in exploring the possibility that a prot gure
adjusted for positive and negative environmentalexternalities from the Departments forest manage-ment might assist in meeting their responsibility to
the community to deliver sustainable forest
management.
The possibility of using full cost environmental
accounting data to improve the rigour of forest re-
source decisions was also an important benet to
managers. The ve DOFM managers noting thisadvantage perceived that emotion, rhetoric and
political lobbying by powerful stakeholder groups
20 Discussion of the costs and benets is drawn from
preliminary results reported by Herbohn and Henderson
(2002, pp. 141144).rather than the best quantitative data available,
are currently used to inuence forest resource allo-
cation decisions. The introduction of full cost nan-
cial data to assist in making policies and decisions
on competing forest uses could contribute to morerational, transparent and justiable outcomes.
Managers also perceived the potential for full
cost environmental reporting to be used in funding
negotiations. Approximately six months prior to
the experiment, the State Treasury Department
had signalled that future funding was no longer
to be allocated on the basis of the cost to provide
a service. The focus was to be on the demonstratedoutputs delivered, which had implications for the
DOFM. The other government departments
against which it competes for scare public re-
sources tend to produce services that have a com-
mercial value, while the DOFM delivers public
goods that have no commercial value. Hence, the
Departments managers argued that valuing publicgood components of its management of forests,such as the conservation of cultural heritage sites,
and adjusting conventional prot measures using
the public good values, would strengthen the case
for continued and increased funding.
Balanced against the perceived benets from
full cost reporting, are the potential costs. As sum-
marised in Table 2, seven departmental managers
had philosophical concerns about the feasibilityof measuring environmental externalities. These
concerns related, in particular, to the ability of
nancial values to capture landscape aesthetics,
conservation and sites of cultural heritage signi-
cance. One manager explained:
You cant value social value. You cant do itwith aesthetics. You cannot quantify becauseaesthetics is about smell. You know you gointo a beautiful waterfall settingyou cansmell it, you can hear it, you can see it, youcan feel it. You know so all of those emotionfeelings, but how can you put a number on itbecause one person will have a dierent feelto another.
The Departments managers argued that any at-tempt to measure environmental externalities must
be incomplete, and the information should only be
s and Society 30 (2005) 519536 527a sub-set of reported information.
ationtural heritage site with the timber production in
the area.Departmental managers also attempted to
communicate with non-indigenous cultural heri-
tage groups using rankings of forest values
including cultural heritage uses. The extent ofA low level of stakeholder acceptance was a sec-
ond potential cost. The DOFM managers were
concerned that stakeholders, particularly powerful
groups, would see the potential erosion of their
power base and oppose reporting:
The problem is of course that somebodyultimately makes a decision, now they eithermake a decision based on a set of compara-ble facts, or they make some sort of a subjec-tive decision. Now I suspect that if you arepowerful people, or a powerful lobby group,you are probably better having subjectivedecisions made. Particularly if you think thatyou can overly inuence those decisions.
The DOFM managers suggested that a compli-
cating factor is that stakeholders in the public for-
est sector currently have high levels of cynicism
about the motivations of government and publicservants. Consequently, nancial estimates of costs
and benets of forest management would be
viewed with distrust by stakeholders because the
nancial numbers would be perceived as exagger-
ated and subject to manipulation through the
underlying mathematics.
A further issue in stakeholder acceptance was
the hostility managers expected from specicstakeholder groupscultural heritage and conser-
vation groups. The Departments managers foundthat indigenous cultural heritage groups did not
want to discuss resource management at the level
of forest uses. Instead, their representatives
wanted to negotiate a role within the resource
management framework along the lines of co-
management with the DOFM. Also, the indige-nous cultural heritage stakeholders did not want
their forest uses valued in the same way as other
uses, considering their uses to be on a higher plane.
As one DOFM manager explained: They say thattheir uses are special. Indigenous people are saying
to us, You cant compare our religious, our cul-
528 K. Herbohn / Accounting, Organizthe adverse reaction to quantifying aspects ofcultural heritage was such that there was no at-
tempt to introduce non-market values into the
communication process. As one manager ex-
plains, They just hated it. Just thought howcould you possibly put numbers on anything. . .you cant quantify a cultural heritage value, soconverting that to dollars I would say is even
worse.The DOFM managers attempts to use nancial
estimates of environmental externalities in com-
munication with conservation stakeholders re-
vealed a similar attitude. A common managerial
description of communication with conservationgroups is: They are the sorts of ones who say,You cant put dollar values on some things.How much is my life worth because I am chained
around a tree? Twenty-ve dollars? There are
huge amounts of outrage and you are not going
to reason with them.
Reactions across managers organisational level andbackground
The perceived benets and costs were ordered
around the DOFM managers organisational lev-els and backgrounds, and Table 3 summarises
the results. To preserve their anonymity within a
highly political environment, a negotiated compro-
mise was reached with the DOFM managers
whereby only modal responses are reported sepa-rately by level and background.
Senior/upper middle management appeared
more concerned with strategic rather than practical
day-to-day consequences of full cost environmen-
tal reporting. Their most commonly identied ben-
et was being able to monitor and report on
sustainable forest management, and to develop a
stronger negotiation position with powerful stake-holders. In contrast, middle management was
focused on using full cost environmental data to
improve the rigour of forest management deci-
sions. A strategic focus was also evident for poten-
tial costs since senior/upper middle management
most commonly focused on the philosophical issue
of whether it is appropriate to reduce resource
management to wholly quantitative components.While middle management were most often con-
cerned with the issue of stakeholder resistance to
s and Society 30 (2005) 519536full cost reporting.
onme
cision
s, and
nagem
ct int
ationThe two most commonly identied potential
benets across manager background were the use
of full cost environmental reports to assist in mon-
Table 3
Most commonly identied benets and costs of full cost envir
managers level and background
Managers levela Modal response
Benet
Senior and upper middle
management (n = 3)
Monitoring and reporting on
sustainable forest management
Stronger negotiation position
Middle management (n = 10) Rigorous forest management de
Managers backgroundb
Forestry (n = 7) Monitoring and reporting on
sustainable forest management
Stronger negotiation position
Other (n = 4) Stronger negotiation position
Economics (n = 2) Monitoring and reporting on
sustainable forest management
a Based on levels of responsibility, location and size of oce
divisions in management levels between senior/upper middle mab The DOFM managers backgrounds were indicated by a dire
conservation, engineering, biological sciences).
K. Herbohn / Accounting, Organizitoring and reporting on SFM, and attaining a
stronger negotiation position with stakeholders.
In terms of potential costs, managers from all
backgrounds were most commonly concerned
about stakeholder resistance. The economists werealso focussed on the appropriateness of choice
modelling and benets transfer in estimating the
value of environmental externalities from the
DOFMs forest management.
Reactions of stakeholders
The majority of stakeholders (i.e. eight out of14) favoured a full cost environmental reporting
system to account for the DOFMs forest manage-ment, while six stakeholders had mixed reactions.
Table 4 contains a summary of the specic benets
and costs that were perceived by stakeholders. In
contrast with the Departments managers, stake-holders backgrounds are reported, because thestakeholder interviewees did not perceive a threatto their anonymity from the disclosure of this
information.Ten stakeholders across all stakeholder groups
identied the benecial use of damage cost report-
ing in the negotiation of forest management
2 Stakeholder acceptance problems 2
2 Appropriateness of valuation methods 2
Stakeholder acceptance problems 2
comments made by the interviewees, there are two apparent
ent, and middle management.
erview question and include forestry, economics and other (e.g.ntal reporting for the Department of Forest Management by
No. Cost No.
3 Reduction of environmental management
to quantitative components
2
3
s 4 Stakeholder acceptance problems 5
3 Stakeholder acceptance problems 4
3
s and Society 30 (2005) 519536 529outcomes. Economic rationalism was perceived
to dominate the Australian resource management
decision and policy arena. Consequently, nancial
quantication of environmental externalities
from forest management was perceived as theonly way to ensure consideration of environmental
issues. As one of the three conservationists
adopting this pragmatic perspective explained:
I loathe economic rationalism with a pas-sion. However, I think my view is that we livein a world that is so totally dominated byeconomics that unless environmental issuescan be couched with some kind of economicvalue on them, the policy makers arentgoing to be interested. So basically, we, con-servationists have to start speaking thelanguage of business and government other-wise we are going to be shut out.
In particular, large positive values of environ-mental externalities from forest management were
expected. Stakeholders acknowledged that such
geme
s G
d
a
(
3
1
3
2
2
3
3
cadem
ations and Society 30 (2005) 519536Specic costs
Appropriateness of nancially quantifying
environmental externalities
3
Loss of political eectiveness by the DOFM 1
High levels of distrust of the DOFM 4
Complexity of valuation methods 2
a The community stakeholder group category comprised an a
regularly consulted with the DOFM.bTable 4
Reactions of stakeholdersb of the Department of Forest Mana
modeling and benets transfer valuation methods
General reactions Conservationist
(n = 4)
Positive 1
Negative
Mixed 3
Specic benets
Negotiation tool 3
Improvements in decision-making 3
Means of rewarding or penalising
entities for environmental performance
3
530 K. Herbohn / Accounting, Organizvalues would be extremely useful in negotiations to
promote conservation-related forest uses by either
conservationists, or by the DOFM as it manages
public good components of State forests. A man-
ager from a government agency/department de-
scribed the negotiation advantage of full cost
information for the DOFM.
As a manager involved in negotiating fundsfrom both State and Commonwealth govern-ments, there is great benet in having intrin-sic values attached to the protected areas. IfIve got my hand out I want a really bol-stered value of the assets that I manage. Ihave to have some tools in my bag to justifywhy I have spent $5m preserving that area.
The ability to use estimates of environmental
externalities to assist with resource use decisions
was a benet identied by seven of the Depart-
ments stakeholders from all categories except re-gional business and the community. Full cost
data on environmental impacts could be used to
The stakeholder groups are based on self-description by the stakeho
managers.nt to a full cost environmental reporting system using choice
overnment
epartments
nd agencies
n = 4)
Timber
industry
(n = 3)
Local
business
(n = 2)
Communitya
(n = 1)
Total
1 2 1 8
2 6
14
1 2 1 10
2 7
1 1 7
1 7
3 7
4
2
ic with a specialization in natural resource management whocompare alternate forest uses to produce more jus-
tiable resource management decisions. It was also
suggested that if non-market values were estimated
when resource use plans are developed, it would
ensure that any environmental impacts were con-
sidered from the start of a project, rather than as
an after-thought.
Seven of the DOFMs stakeholders also identi-ed the possible use of full cost data as a basis
for rewarding or penalising entities for their envi-
ronmental performance. For example, non-market
values could be used to determine nancial incen-
tives for groups such as private landholders and
government departments that use the forest re-
source to produce positive environmental impacts
including increased biodiversity and preservationof wildlife habitat. Non-market values could also
used in a punitive sensethat is, the user pays.
Groups such as developers, government depart-
ments, and local government authorities could be
held responsible for nancially quantied negative
environmental impacts from their activities such as
the loss of habitat for rare ora and fauna.
lders and supported by the classication of the DOFM regional
whatever the assumptions are that the modelis built on are correct, and Im not prepared
ationBalanced against these benets are the costs of
full cost reporting that were perceived by the
Departments stakeholders. From Table 4, theinappropriateness of non-market values for forest
resources was one of the most common concerns.Seven stakeholders from conservation, govern-
ment and community backgrounds suggested that
full cost reporting results in the treatment of the
environment as a commoditytermed the com-modication of the environment by one conserva-tionist. Since intrinsic values such as spiritual
enrichment from forest recreational opportunities
and aesthetic appreciation, and the complex inter-relations between ecological components of forests
cannot be nancially quantied, they tend to be
devalued. Consequently, inappropriate trades
could be made between alternate forest uses. As
one conservationist explained:
So that would mean that you could start awhole system of trading, basically this placeis worth $150,000, and that place is onlyworth $30,000, so we will trash the $30,000one because this place is worth less in oursystem of accounting for resources. That$30,000 one might be a critical habitat withsome endangered ora species, or faunaspecies.
A reduction in the political eectiveness of the
DOFM and the timber industry was another issue
that stakeholders identied with full cost report-
ing. They argued that full cost data were poten-
tially sensitive information for the Department
because it could be used in an opportunistic way
by conservationists, particularly if the values of
conservation-related forest uses were high. A po-tential consequence would be the degeneration of
forest resource management decisions into pro-
longed debates between conservationists, the tim-
ber industry and the DOFM at the expense of
sound forest resource management.
Four stakeholders from conservation groups
were suspicious that the DOFM would exploit
the potential for manipulation of full cost report-ing to further its own interests. This perception re-
ects the history of prolonged debates between
K. Herbohn / Accounting, Organizconservationists, the timber industry and govern-to make that leap of faith.
Discussion of case study evidence
The DOFM case study is an account of anunsuccessful full cost environmental reporting
experiment within the Australian state forest sec-
tor. The implementation experience serves to illus-
trate the dependence of accounting systems on their
context. That is, the form and ultimately the suc-
cess of an accounting system reects both the orga-
nisations political and historical context, and themotivations and philosophical positions of organi-sational managers and stakeholders. For example,
changes in the Departments political environmentincluding State Government funding cuts and sus-
tained political scrutiny by the historically adver-
sarial conservationist stakeholders distracted
managers from developing the reporting system
as they struggled to conduct business as usual.Another major sticking point was resistance
from the Departments managers. This resistancewas surprising to them as well as to the researcher,ment, with perceived manipulation of statistics
by all parties involved. One conservationist com-
mented: I guess that I get a bit cynical aboutnancial data because you can make them show
anything you want . . . and we are pretty selectiveabout the things we include too.
The use of complex economic valuation models
is a related cost since the DOFM stakeholders
would be asked to accept the full cost information
provided without understanding the underlying
processes. Two conservationist stakeholders ar-
gued the potential credibility of full cost informa-
tion is questionable unless a transparentvaluation system was used:
A whole bunch of numbers get thrown intothis big black box and I cant see what isgoing on in the box, and Im being asked totrust that it is going to spit out a goodanswer. Im also being asked to trust that
s and Society 30 (2005) 519536 531and is similar to the experiences documented in
prior experimental reporting case studies by Dey
(2000) and Bebbington and Gray (2001). Unlike
these prior experiences, the issue for the DOFM
was not a struggle for control of the organisation
(Dey, 2000), or a failure to reconcile the organisa-
economic based theories and socially grounded
theories.22
It is contention of this paper that socially
grounded theories oer more insights and useful
interpretations of the DOFM manager-stake-holder interactions compared to economic based
theories such as Agency Theory and Positive
Accounting Theory.23 There are well-rehearsed
criticisms of economic theories and their role in
corporate social responsibility (CSR) research.24
Apart from these broad concerns, economic theory
oers, at best, a narrow interpretation of the
empirical evidence of the DOFM case study. Thereporting experiment could be interpreted as an
exercise in minimising political costs, such as in-
creased legislation of forest uses, by managers in
light of the Departments high political visibilityand its perceived poor past environmental perfor-
mance by conservationists. Additionally on the ba-
532 K. Herbohn / Accounting, Organizations and Society 30 (2005) 519536tions unsustainable use of resources with theobjectives of the reporting system (Bebbington &
Gray, 2001). Rather, the concern for the DOFM
managers was that economic valuation methods
are ill-informed in an ecological sense and a focus
on full cost information results in unsustainable
forest resource decisions. The Departments man-agers strongly advocated forest resource manage-ment as a process of compromise with full cost
reports as one subset of available data. This view-
point is not new. Researchers have long questioned
the validity of attempting to value environmental
dimensions of organisational life (e.g. Gibson,
1996; Hines, 1991, 1992; Lehman, 1995, 1996,
1998; Maunders & Burritt, 1991). In a similar vein
to the DOFM managers, they have argued thatsuch economic rationalist attempts are counter-
productive and actually contribute to environmen-
tal exploitation and degradation.21
Additional reections on the reactions of managers
and stakeholders
It was not the original intention of the DOFMcase study to oer comment on the reporting
experiment in light of descriptive theories of cor-
porate social responsibility (CSR) activities. How-
ever, the empirical evidence creates a compelling
case to do so. The interactions between managers
and stakeholders in negotiating the role of full cost
environmental reporting in managing the State
forest resource and in their relationships with eachother are of particular interest. In exploring these
interactions, the current paper draws a general dis-
tinction between two broad groups of theories
used to inform empirical investigations of CSR
21 For example, Gibson (1996) illustrates this point with
reference to reporting tradeable pollution allowances withinnancial statements.sis of market event studies, the exercise would be
likely to be supported by the Departments stake-holders because of the information content of
CSR disclosures. The restricted focus of this type
of interpretation provides few insights into the
complexity of the reactions of managers and stake-
holders. It ignores the tensions between managers
and stakeholders over the use of quantitative full
22 The classication of descriptive theories of CSR is drawn
from Gray, Kouhy, and Lavers (1995a) which developed three
broad theory groups: (1) decision usefulness studies, (2)
economic theory studies, and (3) social and political theory
studies. Gray et al. (1995a, 1995b) noted that decision useful-
ness studies overlap with economic studies. Consequently, the
current paper only draws a general distinction between two
broad categorieseconomic theory and socially grounded
theory.23 Studies of CSR activities drawing from economic theory
such as Agency Theory and Positive Accounting Theory have
investigated the determinants of CSR disclosures such as social
performance, political visibility, various nancial variables and
economic performance (e.g. Belkaoui & Karpik, 1989; Mak,
1991; Ness & Mirza, 1991). The information content of CSR
disclosures evidenced by stock-market reactions has also been
investigated (e.g. Belkaoui, 1976; Blacconiere & Patten, 1994;
Ingram, 1978; Jaggi & Freedman, 1982; Shane & Spicer, 1983).24 A persuasive case has been made for the greater potential
contribution of social theories over economic theories to the
development of a conceptual underpinning for CSR (e.g.
Arrington & Francis, 1991; Christenson, 1983; Gray et al.,1995b, 1995a; Puxty, 1986; Tinker & Okcabel, 1991).
cost data and emotive rhetoric that was underlaid
by strategic opportunism. Thus, few opportunities
are oered to develop and extend the existing
descriptive theoretical underpinning of CSR
practice.Socially grounded theory, in contrast to eco-
nomic theory, oers more insights into the DOFM
use negotiations with other State Government
Departments.26 They were however, particularly
focussed on using the information to manage their
interactions with conservationists who had access
to inuential media and cultural heritage groupswith legislative power via for example the Native
Titles Act. Both stakeholder relationships were
adversarial, and managers described full cost envi-
ronmental reporting as an aggressive strategy to
re-negotiate, re-dene and re-gain control of the
environmental asset, the State Forest Resource.27
K. Herbohn / Accounting, Organizations and Society 30 (2005) 519536 533case evidence. Of the socially grounded theories,
the organisation-orientation of Stakeholder The-
ory is most closely aligned with the focus of the
case study on the Department and its stakeholder
relationships. This makes Stakeholder Theory par-
ticularly useful for informing the interpretation ofthe case evidence.25 Stakeholder theory posits that
a major role of management is to assess the impor-
tance of meeting stakeholder demands in order to
achieve the strategic objectives of the organisation
(Roberts, 1992). Organisations have a certain
degree of discretion on how to full these external
demands, and accordingly prioritise managing the
demands of powerful stakeholder groups. Stake-holder importance derives from their power to con-
trol critical resources required by the organisation
to remain viable (Ullman, 1985). Consequently,
the organisation will strategically manage relation-
ships with important stakeholders to ensure contin-
ued survival. Publicly disclosed information,
including CSR disclosure, is viewed as part of a
strategic arsenal available to negotiate stakeholderrelationships (Ullman, 1985).
These themes from Stakeholder Theory perme-
ate the DOFM case study evidence. The motives of
Departmental managers for damage cost reporting
centred on the capacity to measure and report the
value of the outcomes from the DOFMs forestmanagement as a basis for dialogue with its pow-
erful stakeholders. Managers described quantiedpublic good outcomes as necessary tools in their
bag to bolster the Departments position in forest
25 There are two broad variants of Stakeholder Theory (Gray,
Owen, & Adams, 1996). The rst variant is normative in nature
and is concerned with the accountability owed by an organi-
sation to its stakeholders (Freeman, 1984; Roberts, 1992). It has
little descriptive power in a CSR context and thus is notconsidered further in this paper.Reporting the nancial values of forest uses was
seen as a means of replacing the dialogue of emo-tion and rhetoric used by these stakeholder to
great eect to promote their favoured forest uses.
The dynamic, two-way interaction between
management and stakeholder groups documented
in the DOFM case study has not been adequately
captured in the CSR literature drawing on Stake-
holder Theory. The general view is that social
and environmental disclosures assist in securingstakeholders support and approval through, forexample, developing a corporate reputation as
being socially responsible (Roberts, 1992), or dis-
tracting their opposition and disapproval (Gray
et al., 1996). To some extent, full cost environmen-
tal reporting by the Department did gain support
from stakeholders because it met their expecta-
tions that environmental consequences were fac-tored into mainstream performance measures of
the DOFM. This was not however, the main
source of stakeholder support for the experiment.
Rather, the majority of stakeholders were inter-
ested in the potential for opportunistic, strate-
gic use of any new information such as full cost
26 For example, a manager related the following experience:
We were negotiating a power line through State forest withanother Government Department and we put a metric on the
trades to reect them occurring. The guy from the power
authority was happy to acknowledge conservation values, so it
made the process of management and negotiation so much
easier.27 The phenomenon of organisations redening the environ-
ment in quantitative terms to suit their own ends, has
previously been identied by Gray et al. (1995b). They speculate
that it is most likely attractive to organisations because it
apparently reduced ambiguity, bears a hallmark of science andtranslates the environment into that which is known and overwhich power can be exercised.
and government funding, and more generally to
ationensure that environmental externalities are explic-
itly considered in decisions and policies. However,
philosophical concerns about the reduction of
intrinsic environmental values to nancial terms,
was an unresolved source of tension for some man-
agers and stakeholders.
The potential role of environmental economic
valuation techniques within accounting andreporting frameworks is not as clear. The invest-
ment of resources required to undertake valuation
studies was problematic for the DOFM. There was
also a valuation dilemma facing the Department in
that the complexity of the natural eco-systems
managed required more complex valuation meth-
ods, which were in turn viewed with distrust by
stakeholders because of their complexity. At theconclusion of the case study, a stalemate had been
reached with managers on the economic valua-information, to further the interests of their
respective organisations.
In short, while full cost environmental dis-
closures were intended by managers as part of a
strategy to renegotiate the power balance in rela-tionships with stakeholders, these very same groups
viewed the information as a potential tool to be
used to negotiate their relationships with the
Department. Further exploration of the dynamic
nature of organisation-stakeholder relationships
would assist in developing a better understanding
of CSR practice from a Stakeholder Theory per-
spective. Evidence from this study suggests thatwhen CSR disclosures are used as stakeholder man-
agement strategies, managers and powerful stake-
holders are likely to contest control of these
disclosures because of their strategic importance.
Conclusion
The evidence from the DOFM case study
indicates that there may be a role for full cost envi-
ronmental reporting systems within the non-
corporate, natural resource management sector in
Australia. The Departments managers and stake-holders alike perceived that full cost reporting is a
necessary undertaking to secure political support
534 K. Herbohn / Accounting, Organiztion project unclear on how to proceed with thevaluation of environmental externalities. A worth-
while area for future research would be whether
economic valuation methods such as choice mod-
elling and benets transfer are more appropriate
for use by organisations operating under dierentconditions to the DOFM. Possible factors to con-
sider in future research include the availability of
resources, the political sensitivity of operations,
and the history of interactions with organisational
stakeholders.
More generally, empirical evidence from the
DOFM case study implies that the t between anaccounting system and its organisational context,and its broader historical and political context is
an important factor in its successful implementa-
tion. In the case of the DOFM, the history of bitter
power struggles between Government, conserva-
tionists, and the timber industry acted to sensitise
organisational managers and stakeholders to the
political implications of any new information pro-
vided by the full cost environmental accounting sys-tem. These operating conditions also resulted in the
imposition of resource constraints that ultimately
hindered the reporting experiment. A fruitful area
for future research includes additional eld based
research into how the t of proposed environmental
accounting systems within their broader organisa-
tional, historical and political contexts inuences
the outcomes achieved.The case evidence also highlighted the value of
socially grounded theories, such as Stakeholder
Theory, compared to economic based theory in
interpreting CSR reporting. From an economic
theory based perspective, the DOFM reporting
experiment was merely an exercise in minimising
political costs. In contrast, the Stakeholder Theory
perspective suggests that full cost environmentalreporting was part of an aggressive strategy used
by the Departments management to negotiate itsrelationships with powerful stakeholders. Interest-
ingly, this study found that powerful stakeholders
responded by supporting such disclosure because
of its potential application in furthering the inter-
ests of their own organisations. A worthwhile area
for future research is to explore the interactionsbetween organisations and stakeholders in re-
sponse to CSR disclosures intended as part of a
s and Society 30 (2005) 519536stakeholder management strategy.
Belkaoui, A., & Karpik, P. G. (1989). Determinants of the
K. Herbohn / Accounting, Organizations and Society 30 (2005) 519536 535corporate decision to disclose social information. Account-
ing, Auditing and Accountability, 2(1), 3651.
Bennett, J. (1996). The contingent valuation method: A post-
Kakadu assessment. Agenda, 3(2), 185194.
Blacconiere, W. G., & Patten, D. M. (1994). Environmental
disclosures, regulatory costs and changes in rm value.
Journal of Accounting and Economics, 18, 357377.
Boone, C., & Rubenstein, D. B. (1997). Natural solution. CA
Magazine, 130(4), 1822.
Burritt, R. L., & Cummings, L. S. (1998). Environmental
accounting, economic values and nancial reportingThe
case of Earth Sanctuaries Ltd, Paper presented at Account-
ing Association of Australia and New Zealand, Cairns,
Australia, July.
Christenson, C. (1983). The methodology of positive account-Acknowledgments
The cooperation of managers from the anony-
mous case organisation is most gratefully
acknowledged. Also, this research has signicantlybeneted from the helpful comments of the
two anonymous reviewers, Scott Henderson, Lee
Parker, and participants at the Emerging Schol-
ars Colloquium at the 2001 Asia Pacic Inter-Disciplinary Researchers Association conference
in Adelaide, Australia. Any remaining errors are
my own.
References
Arrington, E., & Francis, J. (1991). Letting the chat out of the
bag: Deconstruction, privilege and accounting research.
Accounting, Organizations and Society, 14(1/2), 128.
Bebbington, J. (1998). Full cost accounting from an environ-
mental perspective: Review. Social and Environmental
Accounting, 18(1), 121.
Bebbington, J., & Gray, R. (2001). An account of sustainabil-
ity: Failure, success and a reconceptualisation. Critical
Perspectives on Accounting, 12(5), 557605.
Bebbington, J., Gray, R., Hibbitt, C., & Kirk, E. (2001). Full
cost accounting: An agenda for action. London: Association
of Chartered Certied Accountants.
Bebbington, J., & Tan, J. (1996). Accounting for sustainabil-
ity. Chartered Accountants Journal of New Zealand, 75(6),
7576.
Bebbington, J., & Tan, J. (1997). Accounting for sustainabil-
ity. Chartered Accountants Journal of New Zealand, 76(1),
3740.
Belkaoui, A. (1976). The impact of the disclosure of the
environmental eects of organisational behaviour on the
market. Financial Management(Winter), 2631.ing. The Accounting Review(January), 122.Cowen, S. S., Ferreri, L. B., & Parker, L. D. (1987).
The impacts of corporate characteristics on social
responsibility disclosure: A typology and frequency-based
analysis. Accounting, Organisations and Society, 12(2),
111122.
Deegan, C. (1998). Environmental reporting in Australia: Weremoving along the road, but theres still a long way to go.Environmental and Planning Law Journal, 15(4), 246258.
Deegan, C., & Gordon, B. (1996). A study of environmental
disclosure practices of Australian corporations. Accounting
and Business Research, 26(3), 187199.
Dey, C. (2000). Bookkeeping and ethnography at Traidcraft
plc: A review of an experiment in social accounting. Social
and Environmental Accounting, 20(2), 1619.
Dey, C., Evans, R., & Gray, R. H. (1995). Toward social
information systems and bookkeeping: A note on develop-
ing mechanisms for social accounting and audit. Journal of
Applied Accounting Research, 2(3), 3669.
Dierkes, M., & Preston, L. E. (1977). Corporate social
accounting for the physical environmentA critical review
and implementation proposal. Accounting, Organisations
and Society, 2(1), 322.
EGCRA (1996). Comprehensive regional assessment East
Gippsland: Resource and economics report. Report of the
C EGCRA (1996), Comprehensive regional assessment East
Gippsland: Resource and economics report. Commonwealth
and Victorian Regional Forestry Agreement Steering Com-
mittee, 1, 6, 8, AGPS: Canberra. Commonwealth and
Victorian Regional Forestry Agreement Steering Committee,
1, 6, 8. Canberra: AGPS.
Frawley, K. (1988). The history of conservation and the
national park concept in Australia: A state of knowledge
review. In Proceedings of the rst national conference on
Australian forest history, pp. 395417.
Freeman, R. E. (1984). Strategic management: A stakeholder
approach. Marshall, MA: Pitman.
Gibson, K. (1996). The problem with reporting pollution
allowances: Reporting is not the problem. Critical Perspec-
tives on Accounting, 7, 655665.
Gray, R. H., Kouhy, R., & Lavers, S. (1995a). Corporate social
and environmental reporting: A review of the literature and
a longitudinal study of UK disclosure. Accounting, Auditing
and Accountability, 8(2), 4777.
Gray, R. H., Owen, D., & Adams, C. (1996). Accounting and
accountability: Changes and challenges in corporate social
and environmental reporting. Sydney: Prentice Hall.
Gray, R. H., Walters, D., Bebbington, J., & Thompson, I.
(1995b). The greening of enterprise: An exploration of the
(non) role of environmental accounting and environmental
accountants in organizational change. Critical Perspectives
on Accounting, 6, 211239.
Guba, E. G. (1981). Criteria for assessing the trustworthiness of
naturalistic inquiries. Educational Communication and Tech-
nology, 28, 7592.
Herbohn, K. F. (2000). Accounting and reporting of forest
enterprises. In S. R. Harrison, J. L. Herbohn, & K. F.Herbohn (Eds.), New horizons in environmental economics:
536 K. Herbohn / Accounting, OrganizationSustainable small-scale forestry (pp. 104119). Cheltenham:
Edward Elgar.
Herbohn, K. F., Harrison, S. R., & Herbohn, J. L. (2000). An
alternative approach to accounting for natural resources:
The case of multi-purpose forestry in Australia. Society and
Natural Resources, 13(7), 121.
Herbohn, K. F., & Henderson, W. S. (2002). Forestry manag-
ers perceptions of the feasibility of incorporating non-market value estimates in nancial environmental reporting.
Economic Analysis and Policy, 32(2), 131154.
Herbohn, K. F., & Herbohn, J. L. (1999). Accounting for
forests in social, economic and political contexts. Account-
ing Forum, 23(4), 408440.
Hines, R. (1991). On valuing nature. Accounting, Auditing and
Accountability, 4(3), 2729.
Hines, R. (1992). Accounting: Filling the negative space.
Accounting, Organisations and Society, 17(3/4), 313341.
Howes, R. (2000). Corporate environmental accounting:
Accounting for environmentally sustainable prots. In J.
Proops & S. Simon (Eds.), Greening the accounts, a volume
in the international library of ecological economics
(pp. 223245). London: Edward Elgar.
ICF (1996). Full cost accounting for decision-making at
Ontario Hydro: A case study. Research Report prepared
for the United States Environmental Protection Agency
(EPA). EPA: Washington.
Ingram, R. W. (1978). An investigation of the information
content of (certain) social responsibility disclosures. Journal
of Accounting Research, 16(2), 270285.
Jaggi, B., & Freedman, M. (1982). An analysis of the
information content of pollution disclosures. Financial
Review, 19(5), 142152.
Kirchio, S., Colby, B. G., & LaFrance, J. T. (1997).
Evaluating the performance of benet transfer: An empir-
ical inquiry. Journal of Environmental Economics and
Management, 33, 7593.
Larringa, C., & Bebbington, J. (2001). Environmental account-
ing perspectivesOrganisational change or institutional
appropriation. Critical Perspectives on Accounting, 12(3),
269292.
Lehman, G. (1995). A legitimate concern for environmental
accounting. Critical Perspectives on Accounting, 6, 393412.
Lehman, G. (1996). Environmental accounting: Pollution
permits or selling the environment. Critical Perspectives on
Accounting, 7, 667676.
Lehman, G. (1998). Corporate environmental reporting: Some
critical thoughts. Social and Environmental Accounting,
18(2), 911.
Mak, Y. T. (1991). Corporate characteristics and the voluntary
disclosures of forecast information: A study of New Zealand
prospectuses. British Accounting Review, 23(4), 305328.
Maunders, K. T., & Burritt, R. (1991). Accounting and
ecological crisis. Accounting, Auditing and Accountability,
4(3), 926.
McKinnon, J. (1988). Reliability and validity in eld research:
Some strategies and tactics. Accounting, Auditing andAccountability, 1(1), 3454.Miles, M. B., & Huberman, A. M. (1994). Qualitative data
analysis: An expanded sourcebook. Thousand Oaks: Sage
Publications.
Milne, M. (1991). Accounting, environmental resource values,
and non-market valuation techniques for environmental
resources: A review. Accounting, Auditing and Accountabil-
ity, 4(3), 81109.
Ness, K., & Mirza, A. (1991). Corporate social disclosure: A
note on a test of agency theory. British Accounting Review,
23, 211217.
Owen, D. L. (Ed.). (1992). Green reporting: Accountancy and the
challenge of the nineties. Melbourne: Chapman and Hall.
Palmer, J. (1998). The economics of environmental improve-
ment: Will SMEs grasp the nettle of environmental
accounting? Social and Environmental Accounting, 18(2),
510.
Patten, D. M. (1991). Exposure, legitimacy, and social
disclosure. Journal of Accounting and Public Policy, 10,
297308.
Patten, D. M. (1992). Intra-industry environmental disclosures
in response to the Alaskan oil spill: A note on legitimacy
theory. Accounting Organisations and Society, 17(5),
471475.
Peace, R. (1997). Natural resource value. In Conference
proceedings of the 5th interdisciplinary perspectives on
accounting conference, North Carolina State University.
Pearce, D. W., Markandya, A., & Barbier, E. B. (1989).
Blueprint for a green economy. London: Earthscan.
Pearce, D. W., & Moran, D. (1994). The economic value of
biodiversity. London: Earthscan.
Puxty, A. G. (1986). Social accounting as immanent legitima-
tion: A critique of a technist ideology. Advances in Public
Interest Accounting, 1, 95112.
Roberts, R. W. (1992). Determinants of corporate social
responsibility disclosure. Accounting, Organisations and
Society, 17(6), 595612.
Shane, R. B., & Spicer, B. H. (1983). Market response to
environmental information produced outside the rm. The
Accounting Review, 58(3), 521538.
Stake, R. E. (1994). Case studies. In N. K. Denzin & Y. S.
Lincoln (Eds.), Handbook of qualitative research
(pp. 236247). London: Sage Publications.
Tinker, A. M., & Okcabel, F. (1991). Fatal attractions in the
agency relationship. British Accounting Review, 23(4),
329354.
Tumaneng-Diete, T., & Waring, B. (2000). Sustainable forest
management context: The case of the Gold Coast hinterland
state forests. Paper presented at the International Ecological
Economics Society, 58 May, Australian National Univer-
sity, Canberra.
Ullman, A. E. (1985). Data in search of a theory: A critical
examination of the relationships between social disclosures
and economic performance of US rms. Academy of
Management Review, 10(3), 540557.
Yin, R. K. (1994). Case study research: Design and methods (2nd
ed.). Applied Social Research Methods Series (vol. 5).
s and Society 30 (2005) 519536London: Sage Publications.
A full cost environmental accounting experimentIntroductionFull cost environmental accounting and the department of forest managementCase study settingFit within the organisational reporting frameworkDamage cost reporting
Study design and methodFeedback data collectionData analysis
Case evidenceImplementation experiencesReactions of the departments managersReactions across managers rsquo organisational level and background
Reactions of stakeholders
Discussion of case study evidenceAdditional reflections on the reactions of managers and stakeholders
ConclusionAcknowledgmentsReferences