Because of the devastating effect of unbridled industrial growth and development throughout the world, environmental issues are becoming significant societal risk factors. In the wake of countless disasters and the progressive degradation of the earth’s ecosystems, society is beginning to demand a modicum of environmentally responsible behavior on the part of business management. Traditionally, the primary source for motivating environmentally responsible behavior has been through regulation based on government mandate. Recently, there at least appears to be a growing willingness of some, albeit small, groups of consumers to demand that companies refrain from egregious and wantonly irresponsible and exploitative behavior. As a result, the environmentally related issues with which a work organization is held accountable has expanded beyond those associated with the failure to comply with regulation to include missed market opportunities from not accurately anticipating consumer demand, failure to live up to societal expectations with respect to environmental stewardship, and in some cases, the destruction of sustaining resources.

While all members of society have a moral responsibility to act in the public interest, organizational management is specifically granted fiduciary responsibility over society’s economic resources, which consist of natural resources, financial assets, human assets, and technology. The accounting profession facilitates and monitors organizational management’s fiduciary responsibility and in this role is concerned with the integrity, responsibility, and accountability of the related financial and administrative systems and those who design, implement, and utilize them. The academic accounting community has a responsibility to facilitate, and actively engage in a dialogue among all affected stakeholders regarding how accounting (the profession, the professionals, the systems) and organizational management can fulfill their responsibilities. In the following discussion, we address specifically management’s, and therefore, accounting’s, responsibility with respect to environmental resources. Our long-term goal is to initiate inclusive and enlightened dialogue directed toward articulating and communicating what constitutes reasonable and responsible environmental stewardship as a basis for bringing about change. Here, we outline and apply a framework useful for articulating action space parameters that frame management decisions, and therefore, for developing environmentally enlightened management and accounting information systems.

We situate this project as part of the enabling accounting project, which is concerned with how accounting can be mobilized to advance the wellbeing of the earth and those critters that inhabit it. We wish to operationalize accounting as a force for social change through its potential for making actions and outcomes visible and comprehensible. As such, accounting can help stimulate dialogue and action directed toward change as well as provide the mechanisms that engender responsibility and accountability. We envision accounting as having the potential as a positive force facilitating the development of viable and emancipatory ways for bringing about democratic social progress. Specifically, following a somewhat pragmatic, yet critical path, here, we are about (re)making accounting information systems environmentally enabling by rendering visible and understandable the context of organizational decisions and implications of these resulting actions on natural systems. This discussion fits within a genre of work that is beginning to critically address environmental accounting.

As environmental awareness grew in the 1960s and 1970s, legislative initiatives began to gesture toward supplementing market solutions to ecological degradation. As a result, pollution emissions exceeding the regulatory limits represented the primary environmental considerations for business organizations. The regulatory reporting requirements associated with monitoring production processes specified information requirements. Selecting pollution control devices represented management’s primary environmental concern. At best, accounting’s function was generally associated with developing acquisition costs comparisons and projecting the effects on operating costs.

As the environmental implications of industrialization became more apparent, the scope and possibilities of environmentally related decisions expanded, as did the associated information requirements. As external stakeholders became more enlightened and involved, decision makers faced formidable environmental issues beyond those typically related to operations. For example, even though production processes were within the allowable regulatory limits, certain products and/or processes offended the sensibilities of environmental activists and their sponsors. As a result, companies were forced to consider these factors. An illustrative example occurred in the tuna industry in the late 1980s. While harvesting tuna using nets lethal to ensnared dolphins was not illegal, the impact of activists and consumers motivated three major name brand US tuna canning companies to switch to “dolphin-safe” harvesting methods even though this change increased the company’s operating costs. In other words, management has been forced to consider issues and constituencies outside the traditional value chain, and as a consequence the associated accounting information systems must capture and report an expanded information set in order to motivate and enable responsible action.

Management’s environmental strategy must be made visible and comprehensible, and the implications of management’s decisions must be specified. Further, formal corporate information systems must incorporate environmentally relevant information forcing management to consider the environmental impact of their operations and actions inclusive of, but also moving beyond, the economic implications. Such an environmentally enlightened perspective incorporates issues beyond, and sometimes in opposition with, maximizing shareholder value. Organizational management must recognize its societal responsibility as the operators of the primary natural resource transforming vehicle within the current social order and as such, fulfill its stewardship responsibility with respect to natural systems. As such, management must formulate and implement environmentally impregnated strategies and information systems that enable and sustain such strategies. The following discussion represents an initial phase of an ongoing, iterative process specifying the strategic processes, and fully articulating the information needs. Specifically, we consider three general levels of environmental sensitivity and discuss the information requirements along an environmental activity space ranging from a narrow focus on operations to an inclusive focus encompassing all relevant stakeholders.

There has been a limited, but expanding, concern with environmental reporting in the accounting literature. The more traditional work has focused primarily on the efficacy of socially responsible investing with environmental considerations only one of many factors. Stone (2001) has constructed a taxonomy of corporate social performance concepts useful in situating the various components and cites the work of Abbott and Monsen (1979), Anderson and Frankle (1980), Belkaoui (1976), Coffey and Fryxell (1991), Cowen, Ferreri, and Parker (1987), Diltz (1995), Griffin and Mahon (1997), Guerard (1997), Hamilton, Jo, and Statman (1993), Ingram and Frazier (1983), Kinder, Lydenberg, and Domini (1993), as relevant to the development of social and environmental accounting. Gray and Bebbington (2001) lay out in detail the issues relating to environmental accounting. As noted above, we take a somewhat pragmatic, critical path in an attempt to ultimately influence the revision, or reformulation, of management and accounting information systems in order to make the environmental implications of corporate actions transparent and comprehensible. The current discussion follows from and is informed by the alternative/critical accounting literature.