Hello Christina
Treating environmental issues as externalities is the problem with
financial reporting of environmental issues. If they are treated as
externalities, they are presumed to be someone elses problem. See
chapter 2, page 23-4 of my thesis:
http://intergon.net/phd/ (click on chapter 2) or go directly there
http://intergon.net/phd/phdch2.doc
That text reads:
"At best, economists consider that environmental and social issues are
captured effectively in externalities. From this neoclassical economic
perspective, pollution is viewed as an external cost of production
(Verhoef 1997, p. 2). This implies pollution results in
'uncompensated costs to others' (Mansfield 1994, p. 327-9) and
requires 'government' to 'intervene' to correct 'external
diseconomies' (p. 547-9). The ultimate question posed is whether or
not there has been an economic cost imposed on an uninvolved third party
by a negligent business. However, in this mind-set, if business
pollutes and then nullifies the pollution through some clean-up process
there is no harm done from an economic perspective. So, is this
sustainability? Verhoef rejects such use of externalities, suggesting
that an externality might instead be an 'unpriced effect'. He views
this as 'tension between efficiency and equity'. Verhoef (1997, p.
15) suggests the practice of requiring polluters to pay for pollution
would enable those with enough money to continue polluting. This could
be viewed as highlighting a need for achieving a TBL measurement, where
more than financial quantitative measures are relied on.
Yet, Denton (1998) concludes that, rather than containing cost,
avoiding fines and fixing mistakes, the real benefit of cleaner
production is the savings in operations. Similarly, in the quality
movement there is reference to the quality versus cost trade-off (Juran
and Gryna 1988, pp. 4.1-4.30). Boxer (1991 and 1993) and Denton (1999)
demonstrate the benefits of harnessing employees in the pursuit of the
resolution of the causes of pollution, but there is a need to allocate
sufficient resources to such initiatives. They do this for neither
ethical reasons nor marketing reasons. Rather, they recognize anything
that maximizes the output from all their raw material resources, saves
money and boosts competitiveness and profits.
In exploring the value created from corporate image and reputation,
Fombrun (1996) concludes that economic performance tends to be better
for organizations that care about their reputation, and specifically in
terms of communities, employees and the environment (Fombrun and Foss
2001). While Fombrun (1996) speaks in terms of respect, trust and
building a consistent image, he does allude to behaving in accordance
with society's expectations. Environmental and social stewardship
could be perceived to be of interest to society. Konar and Cohen (1997)
identified a direct correlation between reduction of emissions and
increase in market value."
I must say that this is out of context and the chapter should be read
in whole, as should the thesis. ;-)
Lionel
Lionel Boxer CD PhD MBA BTech(IndEng) - 0411267256
Research Fellow -
lionel.boxer@rmit.edu.au
Centre for Management Quality Research
Read The Sustainable Way - see
http://intergon.net/tsw
Improvement Implementation:
http://intergon.net
>>>
christina.chiang@AUT.AC.NZ 29/11/2005 9:08 am >>>
Hi Lionel,
I would like to see environmental matters in financial reports for
the teaching case treated as externalities.
REgards,
Christina
Christina Chiang
Senior Lecturer
Faculty of Business
Auckland University of Technology
Private Bag 92006, Auckland 1020, New Zealand
Tel: 64-9-921 9999, extn 5720
Fax:: 64-9-921 9990
Email:
christina.chiang@aut.ac.nz
>>>
lionel.boxer@RMIT.EDU.AU 28/11/05 20:06:32 >>>
Hello Christina
Do the financial reports you are dealing with treat environmental
matters as externalities? If not, how are environmental matters
treated?
Lionel Boxer CD PhD MBA BTech(IndEng) - 0411267256
Research Fellow -
lionel.boxer@rmit.edu.au
Centre for Management Quality Research
Read The Sustainable Way - see
http://intergon.net/tsw
Improvement Implementation:
http://intergon.net
>>>
christina.chiang@AUT.AC.NZ 11/28/05 10:09 AM >>>
Dear everyone,
I intend teaching my senior auditing students the application of
IAPS
1010: the consideration of environmental matters in the audit of
financial reports in 2006. Hence, I am hoping to write a case study
on
an audit client whose business activity impacts the environment and
the company has environmental liabilities and obligations. The
objective of the case study is to get students to plan and audit the
company's environmental liabilities and obligations.
I would really appreciate if anyone could share with me or is able
to
direct me to resources on writing such case studies.
Thank you very much.
Christina Chiang
Senior Lecturer
Faculty of Business
Auckland University of Technology
Private Bag 92006, Auckland 1020, New Zealand
Tel: 64-9-921 9999, extn 5720
Fax:: 64-9-921 9990
Email:
christina.chiang@aut.ac.nz