A newly emerging field of accounting for sustainable development can help us meet the needs of the present without compromising those of the future.
Many corporate shareholders, managers, employees and an array of stakeholders recognize the need for companies to act as responsible environmental stewards. To an ever-increasing degree - particularly in the mining, forestry, petroleum and utilities sectors - the idea of corporate stewardship is expanding to include not only environmental considerations, but also economic and social concerns.
The development and implementation of integrated management systems which collectively address environmental, economic and societal concerns represent a significant step in making the concept of sustainable development a corporate reality. This discussion is designed to provide an introduction to sustainable development, and the newly emerging field of accounting for sustainable development (ASD).
Defining sustainable development
The term sustainable development was first proposed in 1987 in the Brundtland Commission's report, Our Common Future.(1) It is defined as:
"to meet the needs of the present, without compromising the ability of future generations to meet their own needs."
Upon release of the Brundtland Report, Canadian business and business communities around the world were initially, and understandably, cautious about how they should react to the idea of sustainable development. Nonetheless, following the United Nations' Conference on Environment and Development in 1992 (popularly known as the Rio Summit or Earth Summit), over 170 countries agreed on the need for businesses to incorporate sustainable development into their operations.
In response, many businesses picked up the environmental banner, and for many forward-thinking companies it became much more than banner waving. To assess why companies would practise sustainable development, The Society of Management Accountants of Canada surveyed (the "Corporate Survey," October, 1996) major corporations/executives (i.e., presidents, CEOs, VPs environment, VPs sustainable development, directors environment, senior managers) from across Canada and the United States, and asked them, "Why does, or will, your company practise sustainable development?" Of 90 companies surveyed, 72 responded, as indicated in Figure 1.
Although the Brundtland definition of sustainable development provides a solid foundation, it has limited applicability from the perspective of why companies practise sustainable development, because it does not expressly take into account the interests of primary stakeholders [ILLUSTRATION FOR FIGURE 1 OMITTED]. In response, many corporations are addressing this limitation by customizing sustainable development definitions specifically suited to their operation and stakeholders. For example, Rio Algom, a multinational mining and metals distribution company, has adopted the following definition of sustainable development:
"the realization of competitive advantage by serving the needs of our shareholders, employees, customers, and the residents of local communities, while simultaneously maintaining the integrity of the environment for future generations."
Figure 3: Examples of environmental, economic and societal
sustainable development principles, based on Weyerhaueser's
1995 Annual Environmental
Environment "We will conserve energy and resources by ensuring
Economy "We will manage our environmental challenges to create
Society "We will work in good faith with nongovernmental
organizations and individuals to resolve
The reference to primary stakeholders in this definition sends a clear message that their interests will not be compromised. …