Accounting for Sustainability in the Australian Rural Sector

Barbara Jean Geno

The aim of the research was to normatively and empirically investigate accounting for sustainability in the Australian rural sector. The normative investigation was comprised of two subject areas: accounting techniques and measures within the conventional financial accounting framework and proposed accounting frameworks found in the social and environmental accounting literature which are supportive of accounting for sustainability. The empirical investigation explored the implications of the normative findings in the Australian rural sector by surveying rural accounting practitioners and the owner/managers of rural business enterprises which are natural resource based (farms). The concept of sustainability was defined in the socio political, economic, and accounting contexts through an examination of the relevant literature. Key concepts defining sustainability relevant to accounting were the objectives of ecologically sustainable development and the requirement for the constancy of natural capital (strong sustainability). The first part of the normative investigation applied these concepts to conventional accounting frameworks. Capital maintenance was explored in the context of holding natural capital constant and physical capital maintenance was found relevant to maintaining productive capacity. Sustainability was demonstrated to be related to Hicksian income measurement, therefore a natural capital constant could be introduced into income equations used in conventional financial accounting. The use of replacement costs, restoration costs, and future values is consistent with environmental valuations which support sustainability. Opportunity costs and intrinsic values may be calculated for biodiversity and critical capital in agroecosystems. In exploring the implications of natural capital as an asset category, assets were reviewed historically and in the conceptual framework. Barriers to accounting for natural capital as assets were discussed and appropriate asset categories outlined. The second part of the normative investigation examined three approaches proposed in the social and environmental accounting literature to account for sustainability: sustainable costing, the inventory approach (natural capital maintenance statements) and resource flow/input-output statements (materials/energy balances). Sustainable costing derives from considerations of externalities and environmental economics. Natural capital maintenance statements are consistent with the aims of resource economics and environmental accounting for natural capital. In particular, the natural capital maintenance statement can account for critical capital and is therefore supportive of strong sustainability. Resource flow/input-output statements reported in the accounting literature are a type of materials/energy balance statement. Other types of materials/energy balances found in holistic ecology were discussed and found to be appropriate to accounting for sustainability in the rural sector. Materials/energy balance statements are consistent with the principles of maintaining ecological processes and protecting biodiversity if operationalised in the ecological, rather than industrial, model form. In the third part of the normative investigation, each of the three proposed accounting frameworks was developed as a statement suitable for accounting for sustainability in the Australian rural sector. Evidence was found in the normative investigations that techniques and measures from the conventional financial accounting framework are supportive of sustainability. An empirical investigation utilising a mail survey with two target populations: rural accounting practitioners and owner/managers of rural business enterprises in the Australia rural sector was undertaken to survey personal attitudes, values, beliefs, and actions which would support or hinder adoption of accounting measures supportive of sustainability. Two questionnaires were developed with the aid of models of human behaviour derived and justified from the literature of environmental sociology, rural sociology, and accounting. Constructs relevant to the attitudes and actions surveyed were derived from the literature. Survey results were received from 417 owner/managers of rural business enterprises and 397 rural accounting practitioners. The dissertation reports on the results of the surveys and the differences between and among the two target sample populations. Evidence was found that personal values and beliefs do not strongly affect the actions of either group with regard to their use of the selected accounting techniques and measures. Attitudes were more favourable in the owner/managers of rural business enterprises in Australia toward accounting measures which are consistent with accounting for sustainability. The reported use of selected techniques and measures within the conventional accounting framework was significantly higher amongst the owner/managers of rural business enterprises. The rural accounting practitioners seemed motivated to use selected accounting techniques and measures as a function of demand by their clients (primary producers). Their personal values and beliefs, including environmental concern, did not affect their attitudes toward accounting for sustainability. The implications of the findings for the accountancy profession were explored for academic research, accounting practitioners, and accounting education.

Accounting for Sustainability in the Australian Rural Sector

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Accounting for Sustainability in the Australian Rural Sector

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