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Sustainability
Sustainability accounting and accounting and
reporting: fad or trend? reporting
Roger L. Burritt
Centre for Accounting, Governance and Sustainability (CAGS), 829
School of Commerce, University of South Australia, Adelaide, Australia, and
Stefan Schaltegger
Center for Sustainability Management (CSM), Leuphana University Lüneburg,
Lüneburg, Germany

Abstract
Purpose – The paper aims to discuss the current development of sustainability accounting research,
the identification of critical and managerial paths, and to assess of the future of sustainability
accounting and reporting.
Design/methodology/approach – The paper is a review of recent literature in sustainability
accounting.
Findings – Assessment of recent literature leads to the conclusion that both management decision
making, through problem solving and scorekeeping, and a critical approach, through awareness
raising, contribute to the development of sustainability accounting and reporting; however, the
development of sustainability accounting and reporting should be orientated more towards improving
management decision making.
Originality/value – The paper is a systematic review of recent research developments in
sustainability accounting.
Keywords Economic sustainability, Accounting, Management accounting, Decision making,
Accounting research
Paper type General review

1. Introduction
Two main paths for development of sustainability accounting can be distinguished.
The first path adopts a critical theory perspective. Critical theorists argue that
corporate sustainability accounting is the cause and source of corporate sustainability
problems (Maunders and Burritt, 1991; Aras and Crowther, 2009; Gray and Milne,
2002; Gray, 2010), because conventions are not fit for the purpose of recording and
disclosing information about corporate social and environmental impacts (Gray, 2002;
Gray and Bebbington, 2000; Welford, 1997). For instance, Gray (2010) argues that as
the very definition of what is required for “sustainability” remains highly contested
there is little hope for corporate sustainability accounting amounting to much use (see
also Gray and Milne, 2002). From the critical perspective, sustainability accounting is a
fad and will disappear in time.
The second, management orientated path to sustainability accounting, gives Accounting, Auditing &
recognition to the importance of management decision making and views corporate Accountability Journal
Vol. 23 No. 7, 2010
sustainability accounting as a set of tools that provide help for managers dealing with pp. 829-846
different decisions. Management and accounting theorists argue that there are a q Emerald Group Publishing Limited
0951-3574
number of corporate sustainability decision settings for which accounting information DOI 10.1108/09513571011080144
AAAJ provides necessary support as the basis for assessing deliberative actions to be taken
23,7 (Gabel and Sinclair-Desgagné, 1993; Burritt et al., 2002).
As several attempts have been made to map literature in the field of sustainability
accounting and reporting (see summaries of pertinent works in Lamberton, 2005,
Thomson, 2007; Aras and Crowther, 2009; Schaltegger and Burritt, 2009), only a
selection of prominent recent works, are reviewed here. This paper reviews the most
830 recent developments, and approaches which constitute these two paths of
sustainability accounting development. It furthermore deals with the question of
what the future focus of sustainability accounting research and practice could be.
The article proceeds as follows: in section 2, the critical path of sustainability
accounting development is examined. Section 3 considers the managerial path of
sustainability accounting development, and includes four sub-sections, which examine
the three approaches, followed by inside out, outside in, and the twin-track approaches.
Finally, in section 4, suggestions are made about the outlook for these two paths and
how there is a need for them to co-exist, to best develop corporate sustainability
accounting in the future.

2. Critical path of sustainability accounting development

Obfuscation is a strong word for an academic to use in relation to a concept, but
obfuscation is what Aras and Crowther (2009, p. 279) argue is conveniently associated
by the top 100 corporations in the UK with “the real situation regarding the effect of
corporate activity on the external environment and the consequent implications for the
future”, known generically as sustainability, or sustainable development. The problem,
Aras and Crowther (2009) suggest, is that sustainability is insufficiently understood;
hence any evaluation (putting a value on the notion) is flawed and simplistic. Likewise,
corporate sustainability accounting and reporting is claimed by Maunders and Burritt
(1991) and Gray and Milne (2002) to present a challenge because of the need to address
the entity concept and focus on eco-systems and their carrying capacities, thresholds
and cumulative effects rather than on the organisation. While Maunders and Burritt
(1991) are optimistic that tools can be devised for helping companies to incorporate
environmental considerations into their activities and actions, Gray and Milne (2002)
do not envisage such a possibility. The authors propose that the legal corporation is the
wrong boundary for application of the notion of sustainability. However, it could also
be argued that no boundary is appropriate, whether local eco-system, social system, the
earth or the universe, as nothing known is sustainable in the very long term. Hence,
pragmatism indicates the need for accepting some bounds on the targets for
sustainability. Corporate activity, being so dominant an institution in society, is as
justifiable a target for assessing sustainability as any other.
Also Gray and Milne (2002) suggest that because it is not possible to define what a
sustainable organization would look like, the necessary accounting as the basis for
sustainability reporting must also be unknown and, implicitly, is fraught with the
possibilities of conspiratorial actions by managers using the uncertainty generated by
self-seeking actions. Such is the view of critical researchers, forever suspicious of
power and wealth relationships, unfair distribution and abuse, and their concern that
use of sustainability accounting is as a mere “buzzword”, a fad which condemns the
management approach to sustainability accounting as worthless (Gray, 2002, p. 698;
Gray and Bebbington, 2000; Welford, 1997, also see Schaltegger and Burritt, 2009).
 Gray and Milne (2002) suggest the sustainability report product is not serviceable, Sustainability
and it cannot be serviceable by definition. One implication of this reasoning and the accounting and
reasoning of authors such as Aras and Crowther (2009), Gray and Milne (2002) and
Gray (2010) is that the main thrust of academic research in relation to sustainability reporting
accounting must be to continue to question the rhetoric about corporate sustainability
manifested by corporations in their sustainability reports in the context of a flawed and
simplistic understanding of the concept of sustainability. Herein lies the core issue for 831
any discussion of sustainability accounting by academic accountants. Indeed, it is a
sad reflection on the academic accounting community that in the almost a quarter of a
century since the Bruntland Report (WCED (World Commission on Environment and
Development), 1987) was published, drawing attention to the global need for
sustainable development, it is still possible to say that sustainability is insufficiently
understood, and that by inference the potential contribution of corporate sustainability
accounting is truncated or should be abandoned because it cannot be defined. These
authors’ major focus is generating awareness or attention directing (Simon et al., 1954),
to make people aware of the insuperable problems of corporate sustainability
accounting and then watch the funeral pyre smouldering.
Yet, some companies remain keen to adopt sustainability accounting processes, see
the product of sustainability accounting, smell the product, touch the product and wear
the product for all to see (see also Bebbington et al., 2009). In these circumstances,
managers and companies feel the need to deal with sustainability accounting processes
and the resulting sustainability reporting because of diverse pressures from internal
parties (different types of managers requiring the satisfaction of managers in
marketing, environmental, accounting, production, logistics, research and
development, etc.), external parties (public pressure, media pressure, stakeholder
pressure, political pressure and sometimes also market pressure) and the resulting
perceived opportunities (reputational opportunities, competitive opportunities, political
opportunities and also market opportunities). Corporate sustainability accounting
exists and managers look to engage with it. The next section considers how managers
might achieve a satisfactory approach to sustainability accounting.

3. Managerial path of sustainability accounting development

3.1 Three approaches
Sustainability accounting as a notion is, then, thrust into the ongoing debate about
what the fundamentals of sustainability and corporate sustainability (e.g. Schaltegger
and Burritt, 2005) are and what the term means to different parties, especially
management and external stakeholders. Financial and cost accounting were initially
designed to meet the needs of external reporting (Wells, 1978; Fleischman and Tyson,
1998), while management accounting developed to meet the needs of managers for
relevant data for decision making, planning, control, etc. (Burritt, 2002). The first
publications linking accounting with sustainability tended to focus on the deficiencies
of conventional accounting (Gray, 1992; Schaltegger and Sturm, 1992; Mathews, 1997;
Schaltegger and Burritt, 2000), as well as the limits of the underlying philosophy of
accounting, which conventionally focuses on monetary, quantitative measures of
corporate economic activities (Maunders and Burritt, 1991; Gray, 1992; Lehman, 1999;
Mathews, 1997, 2001).
AAAJ Taking up the challenge laid down by Spence et al. (2010) it is time for sustainability
23,7 accounting and reporting to consider breaking away and embracing a goal beyond
external accountability. The move is away from management capture and conspiracy
in debates over accountability, which can never be resolved as socio-political
relationships are at the core (Baker, 2010), towards the gathering of data to help
understand purposive decision making. Perhaps management decision making can
832 provide a more effective and pragmatic foundation for sustainability accounting
because of the under-pinning need for relevance if data are to be gathered, classified,
accumulated and used in different decision settings, the calculus of which may be
influenced by integrated social, environmental and economic aspects. The focus is on
developing accounting approaches to provide sustainability information, to design
information processes and to understand empirically where in corporate practice the
data comes from and the uses to which it can be put (Spence et al., 2010, p. 86).
Three approaches can be located within the managerial path towards corporate
sustainability accounting. First, and significantly contrasting with the critical path, is
the inside-out approach; this is followed by the outside-in approach, then the twin-track
approach which combines both the inside-out and the outside-in. Sustainability
accounting is at one and the same time a process through which information flows are
organised and provided for management decision making and, second, a product (or
service) to be obtained by internal and external parties with an interest in corporate
sustainability information. Sustainability accounting consists of elements of an
“outside-in” and an “inside-out” approach (Schaltegger and Wagner, 2006). These two
approaches differ in their driving forces behind sustainability accounting. The
outside-in approach includes stakeholder dialogues, screens publicly-discussed issues,
reports and communicates the corporate contribution to these issues and thus defines
measurement and management activities on the basis of these issues for consumption
by external parties such as rating agencies, media groups and other stakeholders
(Schaltegger and Wagner, 2006). The focus is on fulfilling stakeholder expectations and
serving information requirements by external parties. The Global Reporting Initiative
typifies the outside-in approach and offers guidelines for supply of externally
published corporate sustainability reports (Lamberton, 2005). In contrast, the
inside-out approach is primarily based on the company’s defined business strategy
and analysis of issues that are relevant for effective implementation of the strategy
through sustainability performance measurement, management and reporting. Hence,
sustainability accounting is seen as representing the process for information collection
and communication to support internal decision making to implement corporate
sustainability. It is driven by competitive market forces, and the wish to implement
associated corporate strategies successfully. Sustainability reporting, furthermore,
represents the result of the demand from managers to position the company in society
and the market and to communicate achievements. The focus is on obtaining
information and providing information for problem solving by different managers.

3.2 Inside-out approach

Many managers are trying to contribute to sustainable development and they need
relevant and reliable information to support their decisions. The decisions relate to
solving social and environmental problems, while strengthening the competitive
position of the company in the marketplace. Sustainability accounting for these people
is a set of pragmatic tools, which contribute to the solution of environmental and social Sustainability
business problems. The information provided by these tools is a necessary part of accounting and
systematic, effective and efficient problem solving and is becoming the trend
associated with the managerial path towards corporate sustainability. The pragmatic reporting
approach demands development of the existing skill set of accountants to enable them
to account for sustainability by building on the conventional accounting platform
(Schaltegger and Burritt, 2000). Sustainability accounting will not move beyond a 833
buzzword or fad if too rapid a change is instigated, but corporate sustainability
accounting may become a trend if it is accepted that the current tools and methods are
the first step in a methodological development process towards sustainability
accounting providing useful and high quality information. The logic is that only if
management information considers sustainability issues – and thus if accounting can
provide this information – will managers have the basis to improve their decisions
towards a better consideration of sustainability.
Research into the inside-out approach to sustainability accounting processes and
products suggests first that corporate and business strategies are transformed into key
performance indicators and information systems and, second, that sustainability
accounting is designed in terms of managerial decision support.
The step from corporate strategy to the design of sustainability information
management is supported with approaches like the sustainability balanced scorecard,
eco-control (Henri and Journeault, 2010; Schaltegger and Sturm, 1995) or sustainability
management control (Schaltegger, 2010). These approaches try to condense
strategically relevant sustainability issues into key performance indicators and
information requirements.
Second sustainability accounting, from the view of the inside-out approach,
proposes that tools depend on the number and type of managers needing information,
product, production, mobility, purchasing, research and development, etc. (Burritt et al.,
2002). Data can be obtained to assist different types of managers with their decision
making in a rich set of situations. Burritt et al. (2002) develop a framework of
decision-making, which recognises that decisions vary in terms of type of data
(monetary or physical), scope (past or future), range (short or long run) and periodicity
(regular or ad hoc) of the information gathered. Monetary data are required for decision
making by managers needing to aggregate data across a wide range of settings and
measures. Money is a common metric and can be used to reduce diversity and
complexity to a single measure. For example, information flows associated with
operating and capital investment decisions can be unified through a common monetary
measure, such as accounting for carbon, which will require sustainability accounting
tools that will need to include accounting for short term financial implications resulting
from purchased carbon allowances, yearend matching of actual emissions with
allowances, recognition of subsequent assets and liabilities, resulting effects of tax and
reporting significant amounts of this information externally (Bebbington and
Larringa-Gonzàles, 2008). In contrast, physical metrics reflect matters of singular
concern, such as the environmental manager’s tracking of whether carbon dioxide
emissions of a business are higher or lower than expectation (Schaltegger, 1997).
Hence, type of data, monetary or physical, is related to decision settings on hand.
Furthermore, scope of data relates to the past or future. Past data are confirmable, or
inter-subjectively testable, whereas future data are unknowable and speculative.
AAAJ Sustainability accounting tools needs to address the possible problems arising
23,7 requiring access to such ex post and ex ante data. Third, the range of data is of vital
importance in sustainability accounting as sustainability is a long run concept, but one
which relies on a sequence of short run decisions that are commensurate with long
term sustainable outcomes. Fourth, the periodicity of data gathering and reporting is
an issue of concern as some data are gathered on a regular basis for operational control
834 and periodically reported to different managers, while other data are gathered on an
ad hoc basis for specific decisions, such as large investment of resources in
environmentally friendly technologies. Based on these four general characteristics of
decision making information relevant to problem solving by different managers,
Burritt et al. (2002), develop a matrix of 16 possible decision settings each of which
identifies different types of data which sustainability management accounting needs to
supply.
Data provided by sustainability accounting for strategic decision making provide a
starting point for good decisions, but only if the data are related to desired goals will
the quality of decisions be improved (Chambers, 1966; Schaltegger and Burritt, 2000).
The approach is appropriate for drawing attention to strategic goals and competitive
market strategies. They take a view of the inside-out approach, as it requires
integratable and aggregatable sets of sustainability measurements related to the total
set of business activities and their connection with social and environmental aspects.
But indicators can be made practical by considering the costs and benefits of obtaining
information and the sensitivity of the organisation and its units to changes in
measurements and their components, as in practice a truncated and simplified set of
indicators of social, environmental and economic corporate performance would be the
norm.
What appears to be gathering traction are attempts to bring process, product and
behavioural change to organisations (Schaltegger and Wagner, 2006) through the
provision of a sustainability accounting system, or “calculative mechanism”
(Hopwood, 2009, p. 433) providing recognisably limited but serviceable information
for management decisions which are based on development of well-intentioned and
designed sustainability accounting processes and internal and external sustainability
reporting and communication product which goes beyond fad and fashion and
becomes the trend, potentially through a mix of mimetic, regulatory and normative
isomorphisms.
In Hopwood’s (2009, p. 433) words for people inclined to voluntarily seek out
sustainable solutions to environmental issues:
. . . a strong will to act might result in less call on calculative devices, including accounting, to
construct new patterns of incentives and visibility, I sense that the role of calculation would
still not be minimal. Trade-offs would still have to be evaluated, interests would still diverge,
thereby suggesting a role for incentives to engender change, intentions would still need to be
checked against achievements, and there still would be areas where careful analyses of
alternative approaches would need to guide action... So a dream of a post-calculative society is
certainly a very long way away and possibly should not even be entertained at all.
Accounting has long been presented in a conventional way as being used by
management and external parties (Schaltegger and Burritt, 2000; Lesourd and
Schilizzi, 2001, p. 97). For sustainability accounting there is a need for costs and
benefits of environmental and social matters to be identified, for measurement and
quantification of these where appropriate, for provision of qualitative data when Sustainability
intangible costs and benefits arise, for the use of commonly accepted physical and accounting and
monetary performance indicators, and for recognition that many impacts of companies
take a long time to eventuate (Aras and Crowther, 2009, p. 286). Eco-efficiency is a reporting
notion closely associated with the inside-out approach to sustainability accounting
(Burritt and Schaltegger, 2001) designed to integrate monetary and physical
information to provide a set of relative indicators monetary and environmental 835
gains (Schaltegger, 1998). Apart from efficiency improvements in production, logistics,
etc. internal goals such as innovations and externally orientated goals like increasing
or maintaining a good reputation may be drivers for management to develop a
sustainability accounting system.
Ferreira et al. (2010) drill into the notion of innovation as one problem-solving
situation for which sustainability accounting can provide support. Ferreira et al. (2010)
set out to examine whether in situ sustainability-related management accounting is
associated with general increases in economic benefits to the organisation. To illustrate
their approach, Ferreira et al. (2010) explore the associations between
sustainability-related management accounting use and process and product
innovation, with the intention of trying to establish whether there is an economic
advantage as well as an environmental benefit from the use of environmental
management accounting. It is then, of course, up to the business to decide how any
such gains are distributed. By definition environmental management accounting use is
designed to highlight environmental aspects of a business in tandem with identifying
situations where economic benefits emerge, potentially leading to a competitive
advantage (Burritt et al., 2002). Ferreira et al. (2010) seek to establish whether the
gathering of environmental management accounting is related to green innovation in
production processes and products, e.g. through cleaner technologies and greener
products designed to lower environmental impacts, while improving the economic
bottom line. Based on structural equation modelling and controlling for size and
industry, a significant association is found between environmental management
accounting use and process innovation. No association is found between
environmental management accounting use and product innovation or long term
strategy. Hence, Ferreira et al.’s (2010) paper contributes to the understanding of
decision settings in which environmental management accounting tools can be seen to
provide an advantage to the organisation and the environment.
Based on Ferreira et al.’s (2010) results managers can expect to be able to boost
economic performance and environmental performance at the same time through
process innovation, but not through product innovation. But note their rider that the
evidence is based on a small sample size and so further extension of the research is
important. The need for further systematic evidence gathering about the usefulness of
sustainability management accounting still exists. Stakeholders rely on managers as
being the party understanding and reacting to competitive reactions through
innovation and, because of an agency problem (Schaltegger, 1997), have no full
understanding themselves of such matters, hence the need for managers to have
reliable and credible information for such decisions and the gathering trend for such
information to be gathered through sustainability accounting.
In contrast, Abrahamson (1991), sounds a warning of concern that research should not
adopt a bias towards innovation per se. Imitation, in the sense adopted by new
AAAJ institutional sociology, is a troubling notion for Abrahamson (1991) because of the
23,7 tendency for organisations to mimic others with innovations even though the benefits
from doing so are not clear, or are unlikely to materialise. When an organisation is
influenced by regulators, or other stakeholders on the diffusion, or rejection of an
innovation a mimetic fad arises, rather than a trend towards supports for problem-solving
so evident from the inside-out managerial approach (Rikhardsson et al., 2005).
836 The business case relates to the generation of value added for the business, which
could be used to the advantage of any and all parties involved. Indeed, this view opens
up the prospect that the business case for sustainability be reviewed in light of Aras
and Crowther’s (2009) general concern about the vague concept of sustainability. For
example, one important contribution of sustainability accounting could be to facilitate
the introduction of standards for calculative expression, whether in monetary or
physical terms, supported by management discussion and opinion. The purpose of
standards along with assurance, an opinion provided by an independent professional
expert, is to impede a crowding-out of good quality, credible information by bad
quality information (Schaltegger, 1997; Simnett et al., 2009, p. 939) but it is subject to
possible capture (Baker, 2010) and distortion, as lessons learnt from recent financial
crises reveal.

3.3 Outside-in approach

The outside-in approach provides a second way of considering how management can
contribute to sustainable development through sustainability accounting. A reporting
driven sustainability accounting development process can be started on the basis of a
stakeholder or shareholder-orientated view, or a multiple stakeholder engagement
process, or by referring to cultural expectations.
From an external stakeholder perspective sustainability reporting and the
underlying accounting systems face different challenges from those of internal
sustainability accounting. For internal planning purposes managers need to know how
things are so that they have a good basis for decision making, to improve the
organisation’s performance, its (eco-)efficiency or reputation, or to decide that an
improvement is not worthwhile pursuing. Managers are, of course, subject to positive
and negative rewards and may try to adopt favourable views of their own, their
business unit’s and their company’s performance. For personal reasons managers
always have an incentive to inflate their achievements and those of their business unit,
or organisation.
In spite of the problems with the lack of understanding of sustainability, Aras and
Crowther (2009) do recognise that the more enlightened corporations are realising that
socially responsible activity makes business sense and that engagement with
stakeholders can actually be used to help improve corporate economic performance
(Schaltegger and Burritt, 2005). This is where the outside-in approach links in. Its logic
is that companies are social organisations embedded in society, and that corporate
responsibility will be judged, by stakeholders, on which the company depends. To act
responsibly can thus only be ensured if managers know what expectations, goals and
views stakeholders have. The starting point of any performance measurement and
management, in the outside-in view, is thus to communicate with stakeholders, to scan
the expectations and to derive performance measures and accounting approaches from
there (Schaltegger and Wagner, 2006).
 Following a shareholder focused outside-in approach, Schaltegger and Figge (2000) Sustainability
highlight approaches that exist to direct environmental management activities accounting and
towards increasing shareholder value. Simnett et al. (2009) take a similar stance
towards the costs of voluntary assurance of sustainability reports. Chen and Macve reporting
(2010) add their support to such a view through their use of enlightened shareholder
theory to explore use of the equator principles, a voluntary code for social and
environmental reporting by banks related to project financing. Such recognition that a 837
business case for socially responsible activity exists in banking is sufficient for further
thought to be given to the question of what sustainability accounting could encompass
to support management in being better informed and to make better informed
decisions. Chen and Macve (2010) stand in contrast to the conventional critique of lack
of accountability associated with reporting and the development of counter accounting
typical of the critical path (see for example, O’Sullivan and O’Dwyer’s, 2009 qualitative
study of legitimacy, non-government organisations and the equator principles).
Integral to Aras and Crowther’s (2009) argument is that current sustainability
reporting still does not highlight the environmental risks and opportunities of business
and, hence, it means that investors provide capital at an unrealistically low cost,
cloaked by a veil of ignorance about environmental risks. It could also be argued that,
if risks and opportunities are shrouded from view, management is going to be misled if
sustainability accounting provides such incomplete information. Unfortunately
complete reporting on the social and environmental risks and opportunities
associated with project financing by banks does little to encourage an integrated
approach to the development of sustainability accounting, an approach that includes
all aspects of bank activities. Such integration is necessary for a comprehensive
understanding of the practical relevance of sustainability accounting and reporting to
emerge. In contrast to the limits to systematic development of relevant sustainability
accounting pushed by a project by project focus in banking, Aras and Crowther (2009)
hold up a light to beckon promoters of outside-in sustainability accounting towards
serviceability, with a product that fully identifies risks and opportunities to external
capital providers. Implicit is the notion that capital and an accrual based system of
accounting are essential components to the decisions of capital providers, something
not needed in project financing, because it is cash based. The pragmatic problem then
becomes how to identify risks and opportunities in order to develop “workable”
sustainability policies, entity accounting, assurance and accountability at the level of
the corporate institution from an outside-in perspective. Because of this situation a
standardisation of the information creation processes (i.e. standardisation of
sustainability reporting) and the information provided is needed (Schaltegger, 1997;
Schaltegger and Burritt, 2000).
However, if management uses sustainability accounting for internal purposes, then
at least less misleading incentives do not exist to the same extent than with external
sustainability accounting and reporting. As in other markets, the quality of products
can be good or bad. The question whether the market process and competition between
providers/suppliers will increase quality of sustainability accounting information in
terms of decision maker relevance, or whether it will decrease quality, depends also on
the characteristics of the information situation. If an asymmetric information situation
exists (as first described by Akerloff, 1970) and the receivers of the information cannot
assess the quality, then suppliers will reduce the quality. This is discussed under the
AAAJ term “adverse selection” which is basically what Gray (2010) and Schaltegger (1997)
23,7 are also assuming. Providers of information reduce information quality, as the
receivers are unable to judge the quality of the information.
However, Gray and Milne (2002) are not so forgiving when they argue that
accounting, as the basis for sustainability reporting must be unknown. In their
argument they overemphasise the significance of sustainability reporting and the
838 outward appearance of the sustainable corporation at the expense of use of
sustainability accounting in management decision-making. But external appearances
are not everything required from sustainability accounting. Foundation garments lurk
below the external looks and elements of the sustainability accounting product need to
be managed if the external appearance is to become serviceable for its purpose. In this
sense, sustainability reporting is rather like clothing, a large number of items may not
be visible, but sustainability accounting undergirds those clothes which are visible to
the public as messages are portrayed about the wearer in space and over time. From
the outside-in approach, sustainability accounting provides the mass of data, which
helps sustainability reporting to external parties keep companies desirable, or not.
Adams and Whelan (2009) recognise that sustainability reporting has imperfections,
which the viewed might not like to be seen, and which some viewers might not like to
see. In a similar way to Aras and Crowther (2009), Adams and Whelan (2009) wish to see
the trend in sustainability reporting survive and grow. They look for a more complete
and credible sustainability reporting product and idealistically assume that for the
viewed, and an expanded set of viewers, working towards transparency is the best
outcome for all parties engaged in reducing the motivations for corporate (and
stakeholder) dissonance to occur. Adams (2002) and Adams and Larrinaga-Gonzalez
(2007) previously argue the case for taking the views of different actors into account, the
outward-in approach, in a pluralist inspired attempt to resolve the completeness and
credibility issues related to sustainability disclosure by corporations.
Whereas Adams and Whelan (2009) appeal to the notions of von Mises, Festinger and
Lewin, Baker (2010) dresses up the argument through a lens coloured by Habermas and
Foucault’s ideas. Adams and Whelan (2009) look for mechanisms to create cognitive
dissonance and associated change following “unfreezing” (see also Maunders and Burritt
(1991) and the recent experience of BP provide an obvious example of the need for
“unfreezing” in a contemporary setting related to the oil spill in the Gulf of Mexico).
In contrast, Baker (2010) reaches a similar conclusion through arguments about
power and subjectivity that managers and other stakeholders are open to. Baker’s
(2010) theorising is couched in the context of the redundancy of prior debates about
managerial capture by powerful forces, as capture is pervasively entrenched through a
sub-conscious reaction to the situations in which managers find themselves associated
with their own personal rewards. Multiple representations of environmental and social
issues also implicate stakeholders as self-interested strategic interest groups each
representing their own brand of political environmental truth for their own purposes.
Stakeholders too are fashion conscious and captured by their own expectations,
intentions and agendas. This is why a sole outside-in orientation on stakeholder
expectations and engagement may not be useful. Stakeholder decisions are framed
with subjectivities. In consequence, as stakeholders they are individually no more
legitimate than managers in representing the broader issues of responsibility to the
natural environment’ (Baker, 2010). Everyone is embedded in power relationships.
 The stakeholder driven outside-in approach based on multiple stakeholder Sustainability
dialogues is linked with sustainability reporting, social acceptance and reputation accounting and
requirements and suffers from potential greenwash, and the suspicion of conspiracy to
mislead. Baker’s (2010) solution is for researchers to accept ethical responsibility to reporting
probe and interrogate the moral arguments of other parties to the point where the
arguments are revealed to be ungrounded and self-referential. Researcher transparency
becomes all-important, thereby tracking away from the main issue of the potential 839
fashion for examining uni-capture (managerial) and multi-capture (managers and
stakeholders) sustainability accounting situations when neither resolves the dilemma
of capture itself (Ilnitch et al., 1998).
Therefore both Adams and Whelan (2009, p. 137) and Baker (2010) ignore the
possibility that revealed blemishes can be unpleasant to see and unwanted when the
need for increases in shareholder wealth is institutionalised and when management
rewards are linked to such wealth increases. Unpleasantness arises because not all of
the viewers are, or can be, represented at the table where discussion about potentially
complete and credible disclosures takes place. Representatives of hither to be
discovered environmental, social and economic concerns about corporate activities
cannot be at the table, and complete and for them credible disclosures will remain
incomplete and incredible. Further concerns are raised by Banerjee (2008) who adds to
the discontent when he raises objections to the instrumental treatment of stakeholders
in sustainability reporting.
Adams and Whelan (2009, p. 137) very constructively seek to move debate about
sustainability reporting forward by encouraging a new mindset, which goes beyond a
simple set of explanatory considerations relating to a focus on shareholder wealth
maximisation, reputation risk management, and maintenance of organisational
legitimacy which they see as being simplistic motivations and can be taken as givens.
The new mindset would require examination of “the ways in which different
managerial attitudes and cultures will result in different interrelationships of factors
being more likely to give rise to cognitive dissonance, and thus, a felt need for change”
(Adams and Whelan, 2009, p. 135). In addition, Adams and Whelan (2009) suggest
there is a need for further research into the steps management take once they are
convinced of the need for change, as well as a need for researchers to be more nuanced
with regard to the political realities that have an impact on the potential for change in
relation to the outside-in approach.
It will take time for these suggestions to filter into academic research circles, but by
way of illustration Bebbington et al. (2009, p. 592) use new institutional sociology to
lock into establishing the need to reveal the reasons why “social context influences
organizational participants to behave relatively unconsciously in ways that are
“normal” to “fit in” and appear “appropriate” within the contexts in which they
operate”. In short, social influences on the choice of managers is acknowledged by
Bebbington et al. (2009) to downplay deliberative management decision making and
actions as a reason for sustainability reporting.
Introduction of sustainability reporting is examined by Bebbington et al. (2009),
based on the simplistic notion of interviewing six reporting champions in six New
Zealand companies rather than interviewing the full set of people in organisations who
might have a management interest in reporting and might influence the processes
whereby sustainability accounting and reporting emerge.
AAAJ In contrast, Archel et al. (2009) address the issue raised by Adams and Whelan
23,7 (2009) of going beyond studies of legitimacy theory towards a richer understanding of
influences on sustainability reporting. Archel et al. (2009) choose to match political
realities and links with legitimacy theory through a longitudinal discourse analysis of
annual report and media disclosures between a multinational automotive company in
Spain, employees and the state. In their example, the lie of pluralistic engagement is
840 confirmed as the state aligns with corporate management rather than with employees,
and leaves problems with sustainability reporting unresolved as the state chooses to
favour disclosures about the introduction of a new lean production facility for the
company rather than how employee conditions have not been improved. The state as
the pluralist policy maker is, thus, complicit in the ongoing legitimisation of business.
One multinational in one sector provides a beginning for researchers, with the need for
colour to be added to find evidence confirming or disconfirming their findings and
perhaps in a similar setting finding instances of state antagonism towards the
corporation. Camara et al. (2009) raise a complicating issue with extending
stakeholders such that all voices are heard in the debate about best practice
engagement in sustainability reporting for a Spanish tobacco company – the state as
both controller and regulator.
Political realities are also one essence of sustainability reporting as represented by
the global reporting initiative (GRI) and its derived standard placed in the market for
others to follow when, at the time, practice was developing inconsistent and impossible
to compare reporting contents in terms of scope and depth (Brown et al., 2009). GRI
views itself as the best-known set of guidelines for producing sustainability reports
worldwide (Brown et al., 2009). The lessons for sustainability accounting can be taken
directly from GRI experience based on empirical data and analysis of available
documents and agreed to by a wide, but not complete (see previous), group of
international stakeholders negotiated through a multi-stakeholder process, all of which
had their own interests to the fore in a process of what Baker (2010) might view as
multi-stakeholder capture. This exemplifies an outside-in approach to sustainability
reporting whereby the GRI provides one foundation for key performance indicators
presenting the challenge for management to get the data to measure the indicators.
Thus, derived demand for a sustainability accounting system, its processes and
product, is formed. In this case the sustainability accounting and reporting product is
provided by an external institution (the GRI) and is only marginally influenced by the
needs of managers concerned to maintain their discretion over the shaping of the
product, its length and width so to speak, as selection from different sets of indicators
takes place.
The GRI process is a trend with the product sold not as a one-faced, or two-faced,
but a three-faced vision of power: discursive, material and charismatic being “captured
through the created mystique of a vital mission which gave outsiders the feeling they
could be part of an historical event” (Brown et al., 2009, p. 193). A critical part of the
GRIs success was “maintaining balance between the individual and collective interests
of their diverse constituencies, between inclusiveness and efficient pursuit of technical
objectives, and between building a new institution and not challenging existing
institutions and power relations” (Brown et al., 2009, abstract). A sole focus on social
forces being championed is insufficient when evidence suggests both internal and
external influences on sustainability accounting and reporting are important (Adams,
2002). According to Brown et al. (2009, p. 196) the dual process which Adams and Sustainability
Whelan (2009) and Baker (2010) espouse does not work, it being seen instead as “a accounting and
change agent in the relationship among powerful societal actors with regard to
accountability and sustainability; but also as a project in better information reporting
management with win-win outcomes and efficiency gains for every kind of actor”, and
here is a stakeholder, the GRI, that embodies thoughts of all stakeholders on
sustainability reporting (although see Camara et al., 2009 for a view of the GRI as the 841
“institutional entrepreneur” behind sustainability reporting of business organisations
with which it interacts in a two party representative dialogue).
The problem is that, “this duality created unrealistic and mutually inconsistent
expectations among both the developers and future users of the Guidelines” (Brown
et al., 2009, p. 196). It would appear that expectations about the sustainability
accounting product when viewed through external sustainability reporting eyes have
too much gloss raising unrealistic expectations, too much complexity and no
possibility of addressing all considerations without some form of political compromise.
Arrow (1977) goes to the heart of the matter - stakeholder engagement when no unique
social preference function can be derived leads to the need for political solutions.
Complexities in the space of stakeholder engagement are extended further when
supply chain is included as an issue in a multiple case study exploring first and second
tier suppliers (Ciliberti et al., 2009). The question is what information can corporate
sustainability accounting provide that will support the decisions that engaged
stakeholders, such as suppliers, need to make. This outside-in approach also provides,
of necessity, an induced demand for and trend towards sustainability accounting
information.
Finally, cultural issues provide one further potential influence on the outside-in
approach to sustainability accounting and reporting. Orij (2010) raises the issue of the
potential links between national cultures and sustainability (corporate social
responsibility) reporting. His empirical study of 600 companies from 22 countries in
ten industries reveals that masculinity is negatively related to levels of sustainability
disclosures, positively related to power distance and negatively to individualism.
Somewhat of a surprise is that long-term orientation is not related to sustainability
disclosures, although it is strongly correlated with power distance and collectivism.
Neither is sustainability disclosure related to legal systems. The results indicate that
stakeholder theory needs to be treated with caution in relation to the saliency, but
manager morality in relation to stakeholders is not examined.

3.4 Twin-track approach

The twin-track approach brings both inside out and outside in together (Schaltegger
and Wagner, 2006). Systems based on sustainability management control could help to
develop the twin-track approach. A pragmatic view of the first step to take is to
address eco-control in the environmental area. Henri and Journeault’s (2010) research in
eco-control is positioned at the edge of the twin-track approach and draws on the
history of eco-control over the last 15 years (Schaltegger and Sturm, 1995; Schaltegger
and Burritt, 2000). The approach of a combined inside-out management perspective
and outside-in stakeholder view is partially considered by Henri and Journeault (2010)
who seek empirical evidence about the influence of management control systems on
AAAJ environmental management (termed eco-control) and economic and environmental
23,7 performance of organisations. They examine four main uses of data:
(1) To monitor compliance with environmental policies and regulation.
(2) To motivate continuous improvement.
(3) To provide data for internal decision making.
842 (4) To provide data for external reporting.

Whereas use (4) has an external dimension (1), (2) and (3) have an internal focus. The
recognised relationship between internal and external values (Ilnitch et al., 1998) brings
together the managerial, business orientated view, and stakeholder perspectives on
social, environmental and economic performance.
Therefore Henri and Journeault (2010) provide a holistic view of four aspects of
environmental performance: regulatory compliance, process and product
improvements/ innovations, financial impacts and stakeholder relations. Their
results indicate that environmental performance plays a mediating role between the
management control system and economic performance, there being no direct
association between eco-control and economic performance. Environmental
performance is affected by several situational variables: level of environmental
exposure; level of public visibility; level of environmental concern, and size of
organisation. The implications for management are that there are several ways to
integrate environmental issues into the control systems:
.
developing specific performance indicators (e.g. inputs of energy, outputs of solid
waste, financial impact);
.
frequently using those indicators to monitor compliance, to support decision
making, to motivate continuous improvement and for external reporting;
.
fixing specific goals in the budget for the environmental expenses, incomes and
investment; and
.
linking environmental goals and indicators to rewards (Henri and Journeault,
2010, p. 75).

The direction of Henri and Journeault’s (2010) paper captures the essence of the
managerial path towards the trend developing in sustainability accounting. They
provide empirical results which could be extended to other elements of
sustainability.

4. Outlook
The question asked is, “What is the future focus of sustainability accounting research
and practice?”. The paper has illustrated the main arguments and issues discussed in
two main paths relating to the development of sustainability accounting. Path 1, the
critical path, sees sustainability accounting as a source of the problems that lead to
unsustainable development and for which an awakening or awareness of this issue is
the main focus of attention. Part 2, the managerial path, views sustainability
accounting as the provider of solutions to problems and directs attention to tools which
can support decisions to be made in a set of diverse circumstances by diverse actors,
different types of managers as well as different stakeholders.
 The logical conclusion is that both paths need to be followed if sustainability is to Sustainability
become more than an awareness building exercise and to move into problem solving. accounting and
Conventional accounting continues to neglect corporate sustainability issues and leads
to distorted information being provided to managers as a basis for their reporting
decision-making. The critical perspective on accounting highlights these deficiencies.
In contrast, development towards sustainability accounting can lead to corrections to
the conventional accounting systems. Diversity in the types of accounting system in 843
existence means that it is not possible quickly for all accounting to be improved, but is
a gradual process of trying to improve on conventional accounting in all its facets
through sustainability accounting as a foundation for problem solving. The
managerial perspective engages in developing such tools of sustainability accounting.
The critical path is not wrong. It is good to raise questions and issues and to make
sure that managers are not too self-confident and are aware of the issues raised. But the
path does not lead to problem solving in the pragmatic way espoused by a managerial
path. Both paths require a scorecard of corporate performance to be established, either
for awareness generation or for problem solving. The managerial path is partially
beginning to engage with the scorecard foundations for sustainability accounting.
However, the critical path chooses not to engage, but is here exhorted to engage with
examination of the fundamental scorecard from which a combined thrust towards
awareness raising and problem solving can help move companies and the societies
within which they operate move towards sustainability through sustainability
accounting and reporting.

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About the authors

Roger L. Burritt is professor in accounting at the School of Commerce and director of the Centre
for Accounting, Governance and Sustainability (CAGS), University of South Australia. He
publishes widely in the areas of environmental and sustainability accounting. Roger L. Burritt is
the corresponding author and can be contacted at: roger.burritt@unisa.edu.au
Stefan Schaltegger is professor of management and head of the Centre for Sustainability
Management (CSM) and the MBA Sustainability Management, Leuphana University Lüneburg,
Germany. He publishes widely in corporate environmental and sustainability management.

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