SUSTAINABILITY ACCOUNTING

A brief literature review

BACKGROUND
Sustainability being a multi dimensional concept is
not directly measurable and requires a set of
indicators to enable performance toward its multiple
objectives to be assessed
Sustainability Accounting Guidelines were first
released at the World Summit on Sustainable
Development in Johannesburg in August, 2002
Environmental accounting and its most evolved
form sustainability accounting, have received
continuing attention in the academic accounting
literature beginning with the work of Gray in the
early 1990s
Gray is attributed with much of the conceptual
development of sustainability accounting
 Gray (1993) identifies three different methods of
sustainability accounting
1.Sustainable cost.
2.Natural capital inventory accounting.
3.Inputoutput analysis

1. Sustainable cost and full-cost accounting

Gray draws on the accounting concept of capital
maintenance, and defines Sustainable cost as:
Sustainable cost is the (hypothetical) cost of restoring the
earth to the state it was in prior to an organization's
impact; that is the amount of money an organization
would have to spend at an end of an accounting period
in order to place the biosphere back into the position it
was at the start of the accounting period
o 2. Natural capital inventory accounting

Natural capital inventory accounting involves the

recording of stocks of natural capital over time, with
changes in stock levels used as an indicator of the
(declining) quality of the natural environment

o(Gray, 1994) suggests four categories of natural

capital.
1.Critical, for example, the ozone layer, tropical
hardwood, biodiversity.
2.Non-renewable/non-substitutable, for example, oil,
petroleum and mineral products.
3.Non-renewable/substitutable, for example, waste
disposal, energy usage.
4.Renewable, for example, plantation timber, fisheries.
o 3. Inputoutput analysis
Inputoutput analysis accounts for the physical flow of
materials and energy inputs and product and waste
outputs in physical units

o It measures all materials inputs into the process, and

outputs of finished goods, emissions, recycled materials
and waste for disposal

o It is often the first step in an environmental audit

process, and it can facilitate product innovation and
pollution prevention strategies

o Advantages of inputoutput analysis include

identification of potential resource and energy savings
TRIPLE BOTTOM LINE ACCOUNTING AND THE
GLOBAL REPORTING INITIATIVE (GRI)

Aims to report on an organization's economic,

social and environmental impacts
Some versions of TBL attempt to use monetary
units to measure economic, social and
environmental performance
GRI Sustainability Accounting Guidelines utilise
a wide array of indicators to measure
performance toward the goal of sustainability
TRADITIONAL AND SUSTAINABILITY
ACCOUNTING

Most of the various approaches to sustainability

accounting draw on traditional accounting principles
The capital maintenance concept used in sustainable
cost and natural resource inventory accounting, full
cost accounting, inventory accounting, and the
valuation of environmental assets and liabilities are
examples of this reliance
GRI Guidelines provide a comprehensive set of
qualitative attributes of sustainability accounting
information, which are included later in this paper as
part of the sustainability accounting framework
o THE INFLUENCE OF CONVENTIONAL ACCOUNTING OVER
NATURAL CAPITAL INVENTORY ACCOUNTING IS EVIDENT IN THE
APPLICATION OF THE CAPITAL MAINTENANCE CONCEPT, AS
WELL AS UTILIZATION OF THE MANAGEMENT ACCOUNTING
TOOL OF INVENTORY CONTROL

SIMILARLY THE ACCOUNTING PRINCIPLE OF MATERIALITY IS

CRITICAL IN IDENTIFYING THE LEVEL OF DETAIL AND THE
DEGREE OF PRECISION REQUIRED AT THE DATA CAPTURE
STAGE AND REPORTING STAGES
FIVE COMPONENTS ARE IDENTIFIED AS INTEGRAL TO THE
FINANCIAL ACCOUNTING MODEL AND SUSTAINABILITY
ACCOUNTING MODEL

Sustainability
Financial Accounting
Accounting

1.The accounting
reports
2.Accounting principles
3.Accounting records
4.The objective of the
accounting model
5.Qualitative attributes
OUTCOME
Dissemination of information to users and involves two key
questions:
1.What is the appropriate format of sustainability accounting reports?
2.How frequently should sustainability accounting information be
disseminated to users?
Examples of reporting formats used to present sustainability
accounting information include
Tables of performance indicators which measure actual values of
each indicator for a specified accounting period. Usefulness of
information is increased where actual values are compared to
relevant sustainability targets
Inventories of stocks of natural capital segregated into various
categories
Cost estimates of sustainable alternatives to current business
practice
Inputoutput analysis
Life cycle analyses.
Lists of non compliance with relevant legislation incidents (for
example
Narratives of environmental and social impacts.
FINALLY