Organisational Change in Response to the Environmental Agenda:
Some Developments
Carol Ann Tilt
School of Commerce
Flinders University
GPO Box 2100
Adelaide SA 5001
Email: Carol.Tilt@flinders.edu.au
Phone: (08) 8201 3892
Fax: (08) 8201 2644
SCHOOL OF COMMERCE
RESEARCH PAPER SERIES: 99-3
ISSN: 1441-3906
The author wishes to thank Professors Lee Parker, Rob Gray and Richard
Laughlin for their useful comments and suggestions when this paper was in
its (very) early stages of development.
Comments are welcome. All errors are the responsibility of the author.
1
Organisational Change in Response to the Environmental Agenda:
Some Developments
Abstract
Gray et al.’s (1995) paper in Critical Perspectives on Accounting uses and
develops Laughlin’s (1991) model of organisational change to link
empirical observations of UK (and NZ) companies to corresponding levels
of organisational change.
They assert that this model provides “...a
framework for analysis of the current levels of organizational change in
response to the developing environmental agenda”, or a research heuristic
(Gray et al., 1995, p. 215). The model is a self-purported “first step” in the
exploration of the environment and organisational change (Gray et al.,
1995, p. 218). This paper attempts to refine the model, to include other
elements that are discussed by Gray et al. (1995) but not explicitly contained
in the model. The result is a dynamic model of organisational change that
includes expected outputs from the organisation in response to
disturbances. These outputs are in the form of strategies and disclosure,
and are incorporated into the model using a socio-political framework.
INTRODUCTION
The contentious issue of the need for a cohesive theory for corporate social and environmental
accounting has been discussed, debated and developed in the literature for a number of years
(Matthews, 1997). The problem has been approached from a variety of perspectives. There
are ‘macro’ theories that attempt to explain the fundamental processes or reasoning behind
social reporting and accounting. The ‘micro’ theories attempt to highlight specific areas such
as strategy or disclosure and provide models or frameworks for examining firms’ activities.
Debates are influenced by varying philosophical views about the purpose of research, the
nature of society and the importance of the issues covered by social accounting. The result is
a series of issues that represent pieces in the vast puzzle being put together to achieve
2
enlightenment, and perhaps change, in the complex world of social and environmental
accounting.
This paper tries to put a few more pieces in place. It concentrates on environmental reporting
as a sub-set of social reporting. Most environmental reporting models appear to be focussed
on business ‘strategy’, or on environmental ‘disclosure’ in annual reports. Many models are
prescriptive, concentrating on outputs, in that they provide standards or benchmarks for good
environmental performance (eg. Steger, 1990; Simpson, 1991; Ford, 1992; James, 1992).
Others attempt to determine why organisations develop environmental strategies or disclose
environmental information, examining influences on behaviour (eg. Ledgerwood et al., 1992;
Stikker, 1992; Vandermerwe & Oliff, 1990; Welford & Gouldson, 1993).
One model,
developed by Gray et al., appeared in Critical Perspectives on Accounting in 1995 and
attempts to describe both the influences (inputs) on organisations and their response in the
form of organisational change.
While the paper provided a discerning analysis of the
dynamics of organisations’ interaction with the environment, it did not take the next step and
consider the responses (outputs) produced by the various levels of change that have taken
place. This is however, implied in the paper, as the authors use the results of other studies to
make an assessment of the level of change undergone by companies in the UK (and New
Zealand) have undergone.
This paper argues that the two issues, strategy and disclosure, which have previously been
considered in isolation, are in fact related and it is possible to develop a model that includes
both. This paper uses the model of organisational change (Laughlin, 1991; Gray et al., 1995)
described above, a strategic response model (Roome, 1992), and a disclosure model
3
(Elkington, 1993) to demonstrate this relationship. A summary of the relationship explored in
this paper is provided by Figure 1.
Figure 1.
Simple Model
Internal
Response
Inputs
Outputs
Environmental
Stratgies
Developed
Stimuli:
Influences on
Organisation
Organisational
Change
Occurs
Environmental
Disclosure
Produced
The paper is structured as follows: First, the three major ‘macro’ theoretical positions are
outlined, followed by an explanation of the stance taken in this paper. Next, a brief review of
the business response literature is provided. The organisational change framework is then
considered in detail, leading to the final section where the framework is developed to include
both strategy and disclosure elements.
THEORETICAL STANCES
In order to clarify the debates in the environmental (and social) accounting literature, each
piece of research must be considered in light of the philosophical stance of the writer. The
various positions taken by writers of social and environmental accounting literature, are
commonly seen as fitting into three categories (Mathews, 1984; 1987; Parker, 1995; Tinker et
al., 1991; Gray et al., 1996; Hackston & Milne, 1996). First, there is the functionalist or neoclassical economic paradigm, characterised by decision usefulness studies (eg. Spicer, 1978;
Belkaoui, 1980; 1984; Dierkes & Antal, 1985). These studies rely on market explanations for
all business activity, including social and environmental reporting. Second, there is the
4
interpretive or ‘middle of the road’ paradigm, where the status quo is accepted but reasons
other than market forces are explored as explanations for social reporting (eg. Gray et al.,
1988; Laughlin, 1990). Finally, the radical, critical or socio-political paradigm is where social
reporting cannot be considered without acknowledgment of the social and political nature of
the society within which firms exist (eg. Cooper, 1980; Tinker, 1980; Tinker et al. 1991;
Mathews, 1984; Gray, 1992; Lehman, 1995).
This paper is informed by the socio-political approach, as it considers social disclosures to be
one form of discourse between competing sectors of society. By responding to environmental
stimuli, organisations are extending their traditional boundaries to incorporate other elements
of society (Llewellyn, 1994; Gray et al., 1995).
Thus, they disclose, or account for,
information beyond the confines of the purely financial.
The paper also contends that
disclosure is in part an attempt to discharge the accountability of organisations. It considers
that firms that are responding to environmental stimuli do so in various forms, including
strategic changes, policy development, and reporting. Thus, disclosure, or ‘providing an
account’ of activities, should not be considered in isolation from models of organisational
behaviour. The next section outlines some of the research into the various business responses
before describing the model used in this paper.
BUSINESS RESPONSE
In the literature on business and the environment, many frameworks and models have been
developed that explain how organisations have reacted to various environmental pressures.
These frameworks can be classified into two major categories. First, those that attempt to
classify organisations along an ‘environmental continuum’. For example, Simpson (1991)
considers that organisations can be identified as “Why Me’s”, that observe only regulations;
5
“Smart Movers”, that adopt marketing ploys to their advantage; or “Enthusiasts”, that adopt
“…a company wide environmental policy” (Bansal, 1993b, p. 2). Steger (1990), Ford (1992)
and James (1992) provide other examples. These frameworks are generally developed from
an ‘external’ perspective and attempt to evaluate a company’s performance with respect to the
environment.
They have been criticised because, amongst other things, they classify
organisations into a hierarchy of commitment to environmental issues and they fail to
recognise that organisations have the choice of pursuing more than one strategy (Bansal,
1993).
The second category is those models developed from a ‘managerial’ perspective (eg. Bansal,
1993; Ledgerwood et al., 1992; Stikker, 1992; Vandermerwe & Oliff, 1990; Welford &
Gouldson, 1993). These are intended for management to use to examine past performance
and determine future directions for dealing with environmental concerns. Roome (1992, p.
11) developed a ‘Strategic Options Model’ which outlines the “…options available to
business in formulating and implementing environmental management policies and systems”.
He maintains that the options a company chooses will be determined in part by the public
perceptions about the company’s effect on the environment, and by scientific evidence of that
effect.
This, in conjunction with the companies’ perceptions about the state of the
environment (discussed below and in Table 1), will determine the environmental strategy
chosen. He “…suggests that most companies are reactive to various shades of environmental
threat” (Roome, 1992, p. 18). Roome’s (1992) five options are outlined in Table 1.
6
Table 1
Roome’s (1992) Strategic Options Model
Strategy Option
Description
Non-compliance
Strategy is to choose not to comply with environmental
legislation due to cost constraints etc.
Compliance
The organisation chooses a reactive strategy
Compliance Plus
Companies take a pro-active stance on environmental
management
Commercial and
Environmental
Excellence
Strategy based on the premise that “environmental
management is good management”
(Roome, 1992, p. 19)
Leading Edge
Company sets the standard for others and encourages the
workforce to “work towards an environmental ethic”
(Roome, 1992, p. 22)
Both types of framework have in common the characteristic of placing the organisation along
a spectrum from poor or no environmental performance to excellent performance. At the left
of the continuum, the least commitment is demonstrated by the organisation doing nothing, or
having no reaction to environmental influences. The right of the continuum depicts a level of
excellence and total commitment to environmental concerns.
This continuum could be
described as showing a ‘change’ from organisations being ‘non reactive’ to being ‘reactive’ in
their response to environmental influences and further, to being ‘proactive’ - rather than
simply responding to influences, they strive to be ahead of changing public perceptions or
upcoming legislation.
Laughlin (1991) uses the literature on the different levels of organisational change to examine
the response to environmental issues.
These levels vary from “no change”, where the
organisation seeks to remain as they are and not respond to the particular environmental issue;
to “second order change”, where organisations freely choose to change in response to the issue
(Gray, et al., 1995, pp. 216-217). This theory is considered more suitable for assessing
7
business response than any of those addressed above as it has appeared to be robust when
considering other stimuli for change (than environmental) and encompasses most of the
different frameworks described above. This theory therefore has a more ‘macro’ nature than
most of the others. If the relationship between society and organisations is examined within
the socio-political paradigm, and disclosure considered to be not only a form of discharging
accountability but also a medium for discourse between organisations and other societal
groups, then some form of measuring the reciprocal effects of such discourse is needed. The
theory of organisational change provides such a measure as it considers the various levels of
change in organisations’ corporate philosophy or beliefs and their expression in strategy and
operations.
In addition to these frameworks, of literature has also emerged that addresses the amount of
environmental disclosure produced by organisations in response to the environmental agenda.
Studies vary according to country and industry, and range from 97% of the sample producing
environmental disclosure (UN, 1994), to 24% (Rankin, 1996). Elkington (1993) developed
the most well known model for environmental disclosure. He attempts to identify the level of
business response to environmental issues from an external viewpoint and provides a typology
of environmental reports that reflect the level of commitment to the environment reached by
an organisation. The ‘Five stages of the Evolution of Corporate Environmental Reporting’ are
outlined in Table 2 below.
8
Table 2
Elkington’s Five Stages of Development in Environmental Reporting
Stage 1
Green glossies, newspapers, videos, short statements in annual
report.
Stage 2
One off environmental report often linked to first formal policy
statement.
Stage 3
Annual reporting linked to environmental management systems,
but more text than figures.
Stage 4
Provision of full TRI-style1 performance data on annual basis.
Available on diskette or online. Environmental report referred to
in annual report.
Stage 5
Sustainable development reporting linking environmental,
economic and social aspects of corporate performance supported
by indicators of sustainability.
Source: Elkington (1993)
An international study using this model found that 39% of companies were still at stages 1
and 2 (green glossies or one-off reports), 25% were at stage 3 (annual reporting), 5% at stage
4 (performance data and reporting in annual report) and none had reached stage 5 (sustainable
development reporting) (UNEP IE, 1994). Elkington’s (1993) five-stage model is discussed
further in the following sections.
While disclosure is mentioned occasionally, most of the two types of framework described
earlier (external and managerial) ignore the issue. Through the addition of some form of
disclosure to a model of business response to the environment, these two types of framework
can be brought together. In particular, it considers the reasons behind the various strategic
stances that may be taken in the managerial frameworks, ie. the change undergone in response
to external stimuli can be included. Thus, Gray et al.’s (1995) model of organisational change
1
Toxic Release Inventory - a method of disclosure of emission levels used by some UK companies, see Gray et
al. (1993).
9
is used as a basis for this paper. It is outlined in the next section, followed by this paper’s
developments.
ORGANISATIONAL CHANGE
Laughlin (1991) outlines a dynamic model of organisational change in which he first describes
a model of organisations where the organisation is conceptualised as “…an amalgam of
‘interpretive schemes’, ‘design archetypes’ and ‘sub-systems’…” (Laughlin, 1991, p. 211).
The ‘interpretive schemes’ are those values and beliefs that underlie the organisation - the
organisation’s ‘culture’ or ‘ideology’. The ‘design archetype’ element of the model includes
the organisation structure, decision processes and communications system, and relate to a set
of “…underlying … values and beliefs” (Laughlin, 1991, p. 212). Finally, the ‘sub-systems’
are described as the tangible aspects of the organisation, eg buildings, people, machines, etc.,
and the behaviours of these (Laughlin, 1991).
Within the literature on organisational change, there has been the assumption that
organisations are naturally change resistant. This assumption indicates that they will only
change when forced to by some kind of disturbance or ‘kick’, and in fact they would prefer
not to change at all, that is, to remain in their natural state, or display ‘inertia’ (Laughlin,
1991). Laughlin (1991) uses this model to track the pathways of organisational change. A
disturbance or ‘kick’ will lead to transitions and/or transformations by the organisation and
cause differing changes (Gray et al., 1995). Laughlin (1991, p. 214), using the work of Smith
(1982) and Robb (1988), describes the changes as being either first-order (morphostatic) or
second-order (morphogenetic):
…morphostatic changes involves ‘making things to look different while
remaining basically as they have always been’ (Smith, 1982, p. 318), …
10
morphogenesis … ‘penetrates so deeply into the “genetic code” that all future
generations acquire and reflect these changes’ (Smith, 1982, p. 318)
First and second order changes contain two sub-sections. First order changes consist of either
‘rebuttal’, where the organisation may change slightly but then revert after the disturbance, or
‘reorientation’, where the disturbance cannot be rebutted and must be “…internalised … [by
the] … organisation, but in a way that the real heart of the organization (the interpretive
schemes) is basically unaffected by the disturbance” - affecting perhaps only the ‘sub-systems’
of the organisation (Laughlin, 1991, pp. 217-218).
Second order changes can involve either ‘colonisation’ or ‘evolution’ and will cause changes
to all three elements of the model of the organisation described above (sub-systems, design
archetype and interpretive schemes). Colonisation occurs when a change is forced upon an
organisation, “formulating a totally new underlying ethos” (Laughlin, 1991, p. 219), while
evolution is a change that is chosen by the organisation, and is “accepted by all participants
freely and without coercion” (Laughlin, 1991, p. 220).
Laughlin (1991) recognises that this is a simple model which cannot fully detail the changes
within organisations, and requires much further research and in particular, case studies, to
improve upon it. Other characteristics must also be considered which provide potential for
change, for example, the strength of the firm’s ideologies, the magnitude of the disturbance,
the power relationships within the organisation, and the “competencies and capabilities”
within the organisation (Laughlin, 1991, pp. 222-223). Gray et al. (1995) summarise the
levels of change described by Laughlin into the typology shown in Table 3.
11
Table 3
Laughlin’s Typology Of Organisational Change
(i) “Inertia”
NO CHANGE
(ii) “Rebuttal”
FIRST ORDER CHANGE
(Morphostatic)
(iii) “Reorientation”
SECOND ORDER CHANGE
(iv) “Colonisation”
(v) “Evolution”
(Morphogenetic)
Source: Gray, Walters, Bebbington & Thomson (1995), p. 216.
Laughlin’s framework is employed by Gray et al. to examine the influence of the “greening of
organisations” (1995, p. 217). They also attempt to overcome some of the weaknesses they
identify in Laughlin’s framework. For example, how to identify disturbances a priori. Gray
et al. (1995, p. 217) redefine Laughlin’s model of the organisation in a less rigid way, drawing
on the work of Llewellyn (1994), seeing it as “…essentially fluid, increasingly transparent and
with shifting boundaries”. They investigate the environment as an agent for organisational
change, in that challenging the traditional boundaries of an organisation results in the
enactment of a process of change (Llewellyn, 1994). Organisational response to the natural
environment suggests that the notion that the environment is ‘outside’ the organisation is
being challenged.
Gray et al. (1995) identify a priori, four groups of environmental
disturbances producing that challenge:
Institutional Framework: changes in law, EC directives, price and taxation
changes.
Changes in Organisational Participants: changing trading arrangements;
green consumerism; attitudes of present and future management and
employees.
External Social Pressures: actions of environmental groups; changing public
opinion; changing moral/ethical positions.
12
Long-term Forecasting: if the more gloomy environmentalists are correct
then ‘business’ will find itself severely constrained/offered ‘new business
possibilities’ by direct environmental action in the relatively near future.
This will be factored into business planning.
(Gray et al., 1995, p. 219)
Gray et al. (1995) relate these disturbances to Laughlin’s typology by discussing the level of
organisational response likely for each potential disturbance (informed by their empirical
work). Thus, Gray et al. (1995) have extended Laughlin’s (1991) model to identify some of
the possible disturbances that may result in organisational change – the ‘inputs’ in Figure 1
above.
Gray et al. (1995, p. 219) also provide a useful framework for “…articulating the problems of
response to the environmental agenda faced by business…” onto which they have ‘mapped’
Laughlin’s three levels of change. This is reproduced in Table 4 below.
13
Table 4
Business Posture and The Environment
Perceived State of the Physical Environment
A
Business
Response
Greening as a
“passing fad”
1. Do nothing
OK
“Inertia”
B
Environmental
issues are significant
but not critical
(Perceived as
‘rebuttable’ or
‘reorientable’)
C
Natural environment
is in crisis.
(Perceived as
requiring ‘colonising
or evolution’)
Perhaps lose
business? Catch up
costs? Legal
problems
CRISIS
(No natural
environment)
2. Follow law and
public opinion
“Morphostatic”
3. Aim for
sustainable
business
OK
Costs and
advantages
CRISIS
(Perhaps delayed?
No natural
environment)
CRISIS
OK
(probably out of
business)
Costs and
advantages
“Morphogenetic”
Source: Gray, Walters, Bebbington & Thomson (1995), p. 219.
This typology highlights the problem that the determination of the most appropriate business
response to environmental concerns depends on what we consider the ‘nature’ of the problem
to be - that is, how critical is the environmental problem. Debate still surrounds this question,
and will probably do so for a long time to come. Meanwhile, the table above shows, in a
simplified form, the various options facing organisations today and the results of their actions
under varying assumptions.
Although it does not provide answers, it makes for more
informed decisions (Gray et al., 1995).
The next problem Gray et al. (1995) identify is how to identify ‘real’ morphogenetic change.
That is, there may be differing degrees of morphogenesis. Companies may “be ‘evolving’ to
14
morphogenetic change” if they have adopted a policy of, for example, Total Quality
Management (TQM), however, they are still only morphostatic at present (Gray et al., 1995, p.
219). This indicates that there is a time element involved in determining business response.
Their third criticism is that the mechanisms for evolution can only be perceived as capable of
morphostatic change. Gray et al. (1995) therefore adapt Laughlin’s (1991) model to include
‘morphostatic colonisation’ and ‘morphostatic evolution’.
Elkington & Burke’s (1989) ten steps to environmental excellence are considered by Gray et
al. (1995) as a way to determine the level of change an organisation has undergone. Thus they
are implying that undergoing some level of change will result in the organisation producing
some evidence of the change, or ‘outputs’ in Figure 1 above. This is discussed in more detail
later in the next section, however in summary Gray et al. (1995) consider those that have
implemented none of the steps to be in ‘inertia’. An average of just under 50% of UK
companies surveyed had not yet developed an environmental policy (step one), and thus are
currently resisting organisational change (Gray et al., 1995). They conclude, from reviewing a
number of surveys conducted on UK businesses, that “…motivations and attitudes are driven
by the ‘potentially’ morphogenetic disturbances…” and those most dominant are: social
responsibility, public opinion, family/conscience, and legislation (Gray et al., 1995, p. 220).
Although over 85% of the respondents considered the environment to be a significant issue,
little evidence was found of second order change (Gray et al., 1995).
Developments on the Model
As mentioned above, Gray et al. (1995) suggest that John Elkington’s (Elkington & Burke,
1989; Elkington, 1993) ten steps to environmental excellence listed below, are a way to
15
determine the level of change an organisation has undergone and may indicate that they are in
the process of change:
1.
Develop and publish an environmental policy
2.
Prepare an action program
3.
Organisation and planning - ensure top management commitment
4.
Allocate adequate resources
5.
Invest in environmental science and technology
6.
Educate and train
7.
Monitor, audit and report
8.
Monitor the evolution of the green agenda
9.
Contribute to environmental programs
10.
Help build bridges between the various interests.
The order in which these steps are undertaken, however, appears somewhat difficult to
determine. For example, one might consider that commitment of top management (step 3)
should come before the development of an environmental policy (step 1). A much broader
picture of the strategies a company has undertaken might in fact be more appropriate for
assessing the level of change. Elkington does admit that these 10 steps are really a “set of first
order changes” (Gray et al, 1995, p. 220), thus indicating that additional strategies are needed
for second order change. Thus, this paper uses Roome’s (1992) strategic options model,
which incorporates Elkington’s 10 steps in the ‘compliance-plus’ stage (see previous section
and Table 1).
Roome (1992) considers the first two strategic options (non-compliance and compliance) to
be unlikely to result in organisational change – in Laughlin’s (1991) terms, non-compliance
constitutes ‘inertia’ while compliance can be seen as ‘rebuttal’.
The third strategy,
‘compliance-plus’, however, “…involves a company in the possibility of significant
16
organisational change” (Roome, 1992, p. 20). Although Roome (1992) calls the change
‘significant’, using Laughlin’s (1991) model, it would only be evidence of ‘reorientation’ –
environmental management is undertaken but the organisation’s principles are not changed.
A company engaged in compliance-plus strategies will integrate environmental management
systems into their business strategy and will ensure that these systems can be verified.
Commitment of all staff from the Board down is also necessary. Roome (1992, p. 20)
considers that the first two options are ‘reactive’ in nature while compliance-plus involves a
‘pro-active’ stance. The next stage, ‘corporate and environmental excellence’ “…involves
even greater potential for organisational change”, and will involve TQM as well as company
wide acceptance and commitment – or ‘colonisation’. It will incorporate staff training in
environmental management as well as research and development, and community
consultation. The final stage, ‘leading edge’ will have all the above plus the company would
be a leader in standard setting for other businesses and would embrace an ‘environmental
ethic’, providing evidence of ‘evolution’. Table 5 shows the result of mapping these five
strategic options onto Laughlin’s (1991) levels of organisational change.
17
Table 5
Roome’s (1992) Strategic Options Model and Organisational Change
Strategic Option
1.
2.
Level of Change
Non Compliance
Inertia
Morphostatic
(Rebuttal)
Compliance
(Reorientation)
3.
Compliance Plus
4.
Commercial & Environmental
Excellence
5.
Leading Edge
Morphogenetic
(Colonisation)
(Evolution)
The boundaries of the mapping are not distinct, as can be seen in Table 5. Temporary
compliance (Roome’s option 2) would be seen as ‘rebuttal’, as the organisation changes but
reverts to its original state. Permanent compliance, however, would be seen as reorientation,
as it involves a permanent change.
Similarly, ‘colonisation’ may be represented by
‘compliance plus’, as management is beginning to be proactive rather than reactive, or by
‘commercial and environmental excellence’, a step further into environmental management.
For each of these divisions the boundaries are ‘fuzzy’, and are meant to represent a fluid
spectrum rather than finite categories. It is also important to note that a company’s position
along this spectrum may be continually moving depending on competing social and financial
pressures, and changes in corporate structure.
Laughlin (1991) uses the work of Habermas, whose theory of social evolution focuses on the
role of language, where “...development and change in the wider societal context is achieved
through developing and increasing our discursive skills” (Gray et al., 1995, p. 217). For the
18
remainder of this paper, there is a presupposition that there is a link between the level of
change an organisation may have undertaken and the amount of related disclosure they
produce, for a number of reasons. First, most studies in the past have, at least implicitly,
assumed that increased disclosure equals increased commitment to the environment. Second,
it accords with the socio-political view that disclosures provide a dialogue with society and
thus any change within either party should be reflected in the dialogue. Third, in order for the
organisational culture to ‘change’, information must be disseminated to members of the
organisation that may in turn lead to changes in the corporate ethic or philosophy. The best
way to disseminate information is via an ‘account’ of such changes, or accounting. It is
important to note that this paper is using a wider definition of accounting than ‘conventional
financial accounting’ (as does Gray et al. (1995) in their conclusion). The definition includes
the concepts known as environmental reporting – including the various types of disclosure
found in company annual reports and separate environmental booklets. As Llewellyn (1994,
p. 12) asserts, “...traditional accountings will no longer be sufficient to maintain thresholds in
post-modern organisations”.
Accounting (or reporting) as a vehicle for organisational change is not a new concept.
Hopwood (1990, p. 8) discusses three ways in which accounting plays a role.
First,
accounting creates a “visibility in the organisation” which has been recognised as early as the
early 19th century. Second, accounting is involved in the “objectification of phenomena …
making appear real and seemingly precise those things that would otherwise reside in the
abstract” (Hopwood, 1990, p. 9). Finally, accounting “…enables economic knowledges … to
be operationalised and thereby more readily to permeate and shape organisational agendas,
concerns and choices” (Hopwood, 1990, p. 10). Thus, to examine levels of disclosure and
reporting for evidence of organisational change is well justified.
19
Gray et al. (1991) believe that each society must, as a whole, find a way to identify the
responsibilities that organisations must meet. Then some way must be found to report, as
objectively, truthfully and fairly as possible, the extent to which those responsibilities have
been met, ie. to discharge their social accountability. This can be accomplished through social
reporting. The reporting becomes information in the public domain that could be used by
public interest groups to attempt to influence or manipulate organisations. Thus, companies
disclose as a result of pressure for accountability and the disclosures become a form of
pressure in themselves, which in turn produces more or different disclosure. This circularity
may in turn produce a change in the organisation’s policies, processes and ethic that should be
(if it occurs) reflected in its disclosures.
While the five stages outlined by Elkington (1993) (see previous section and Table 2) have
been used substantially in the literature, and studies have attempted to assess disclosure levels
according to these stages (UNEP IE, 1994), it can be criticised for its inability to capture
current practice. Studies have found that most reporting in the UK and Europe see companies
as somewhere between stages 3 and 4 (UNEP IE, 1994; Gray et al., 1996). They report
annually, as suggested in stage 3, and refer to environmental policies and objectives, but fall
short of full TRI-style reporting as outlined in stage 4 (Harte & Owen, 1992; Gray et al.,
1996). An additional stage would be useful in the typology for companies that report against
their CEP objectives annually, provide more than simple text, but do not provide the detail of
TRI-style emission inventories. Most reports of this type are not available on-line but are
found within the annual financial report or in a separate environmental booklet available to
shareholders and interested parties. Thus, an amendment to Elkington’s (1993) typology to
incorporate this additional stage is shown in Table 6.
20
Table 6:
Amendment to Elkington’s Five Stages of Development in
Environmental Reporting
Stage 1
Green glossies, newspapers, videos, short statements in annual
report.
Stage 2
One off environmental report often linked to first formal policy
statement.
Stage 3
Annual reporting linked to environmental management systems,
but more text than figures.
Stage 4
Annual reporting against the company’s policy objectives and
targets. In the annual report or separate booklet.
Stage 5
Provision of full TRI-style performance data on annual basis.
Available on diskette or online. Environmental report referred to
in annual report.
Stage 6
Sustainable development reporting linking environmental,
economic and social aspects of corporate performance supported
by indicators of sustainability.
Adapted from Elkington (1993), pp. 42-44 (italics represent adaptation).
Elkington’s (1993) five (amended to six) stages can be linked to Laughlin’s typology to help
to identify the level of business response to the environmental agenda and provide an account
to stakeholders of that response. Stages 1 to 4 could be considered ‘morphostatic’ changes
according to Laughlin’s typology, while stages 5 and 6 may be ‘morphogenetic’ in nature.
Stages 1 and 2 are most aptly considered evidence of ‘rebuttal’ because they are one-off
reactions that do not have any effect on the general running of the business (they are more
likely public relations driven). They are produced because organisations can no longer afford
to be seen to be ignoring the environment (Gray et al., 1995). Stages 3 and 4 may, however,
be considered ‘reorientation’ as there is evidence of an environmental management system
being developed (albeit on a limited scale). Some change, however, has occurred. Stages 5
and 6 outline responses that provide evidence of morphogenetic change. Whether they are
forced changes (colonisation) or voluntary changes (evolution) however, is arguable. A
21
variety of influences have been identified which attempt to force companies to report (ie.
pressure groups, public opinion, consumers and legislation) but some of these influences are
capable of producing evolutionary change as well (Gray et al., 1995). Thus, Elkington’s
(1993) stages could be used to extend Laughlin’s and Gray et al.’s frameworks to help to
identify the organisational changes that have occurred and thus the level of response to
environmental issues. Table 7 maps Laughlin’s three levels of change onto Elkington’s five
(amended to six) steps.
Table 7:
Business Response and Level of Change
Stage
Evidence of Business Response
Level of Change
Stage 1
Green glossies, newspapers, videos, short
statements in annual report.
MORPHOSTATIC
Stage 2
One-off environmental report, often
linked to first formal policy statement.
Stage 3
Annual reporting, linked to
environmental management systems, but
more text than figures.
Stage 4
Annual reporting against the company’s
policy objectives and targets. In the
annual report or separate booklet.
Stage 5
Provision of full TRI-style performance
data on annual basis. Available on
diskette or online. Environmental report
referred to in annual report.
Stage 6
Sustainable development reporting
linking environmental, economic and
social aspects of corporate performance
supported by indicators of sustainability.
Rebuttal
Reorientation
MORPHOGENETIC
Colonisation/Evolution
Evolution
This paper does not suggest that the strategic model of Roome (1992) or Elkington’s (1993)
reporting model, are the only models that could be used to extend Gray et al.’s (1995)
framework.
Roome’s (1992) model was chosen as it is one of the few that considers
22
organisational change as a reason for strategy development, and Elkington’s (1993) five stages
were chosen due to their prevalence in prior literature.
Table 8 below presents Laughlin’s three levels of change, Roome’s Strategic Options,
Elkington’s steps and Gray’s Business Response together. Again, note the ‘fuzziness’ of the
divisions between categories.
Disclosure
Stage
(Elkington)
Table 8:
Evidence of the Level of Change
Level of Change
Strategic
Business Response
(Laughlin)
Options
(Gray)
(Roome)
INERTIA
Stage 1
MORPHOSTATIC
Stage 2
Rebuttal
Non Compliance
Compliance
Compliance Plus
Stage 3
Stage 4
Reorientation
Stage 5
MORPHOGENETIC
Colonisation
1. Do nothing
2. Follow law and
public opinion
Commercial &
Environmental
Excellence
3. Aim for
sustainable business
Stage 6
Evolution
Leading Edge
After adding Elkington’s (1993) stages of environmental reporting and Roome’s strategic
options to the typology, the dynamics can now be modelled as in Figure 2 below. Laughlin’s
stages of organisational change are shown as a sliding continuum from ‘reactive to proactive’
and the arrow represents the fluid quality of these classifications. The strategic categories
provided by Roome (1992), and the disclosure categories provided by Elkington (1993), are
23
linked along the continuum with broken lines indicating that the connections are not clear-cut.
However, the lines do provide an indication of the type of disclosure that might be expected if
an organisation had chosen a particular strategic option regarding environmental issues.
24
Figure 2
Model of Organisational Change and Response
Stimuli
The Law
Public
Employees
Lobby Groups
Shareholders
Consumers
Banks
The
Organisation
Non
Compliance
Compliance
Plus
Compliance
Excellence
Leading Edge
Inertia
REACTIVE
No Reporting
Rebuttal
1. Green Glossies, etc
Reorientation
2. One-off Environmental Report
Accountability
3. Annual Reporting, Env. Management
Managing
Stakeholders
Colonisation
4. Annual Performance Reporting
Evolution
5. Annual Performance Data - On line
6. Sustainable Development Reporting
PROACTIVE
Organisational Change
25
Under a political economy theoretical paradigm, the disclosure that companies undertake is
partly to discharge accountability to stakeholders but also provides a form of discourse that
may act to manipulate stakeholders, as the company requires stakeholders’ support or
approval.
Thus, the organisation is protecting its legitimacy by using stakeholders to
influence public policy (Adler & Milne, 1997). Similarly, Gray et al (1995) discuss the use of
environmental reporting as a means of ‘negotiating’ and ‘defining’ and perhaps ‘controlling’
the environment. Such ‘capture’ of the environmental agenda is used as one argument against
the development of environmental accounting at all (Power, 1994). This relationship is
shown in the model above as the arrow from the disclosure back to the disturbances.
Shifting the ‘boundary’ to incorporate the environment into what constitutes part of the
organisation produces more accounting or information and accounting acts a legitimating
institution (Llewellyn, 1994). For organisations that have reached second order change, the
boundary defining what is ‘inside’ and what is ‘outside’ the organisation (Gray et al., 1995)
would fall somewhere between the strategies and the disclosure. That is, the organisation
must ‘account for’ the strategies undertaken to management (internal) and may choose to
disclose this account in annual report or elsewhere (external). This is demonstrated in Figure
3, which provides a simplified depiction of Figure 2 and includes the fluid and newly defined
boundary.
26
Figure 3
Summarised Model with Boundary
Internal
External
Strategies
Stimulus
Change
Account
Disclosure
Accountability
It is important to note however, that although textual disclosures allow satisfaction or
manipulation of the demands of “specific publics”, the association between the disclosures
and an organisation’s actions is often ambiguous (Neu et al., 1998, p. 268).
CONCLUSIONS
Gray et al. (1995) use Laughlin’s (1991) work on organisational change to find a way to
measure organisations’ commitment to the environment. This paper extends Gray et al.’s
work to include a disclosure element by adding Elkington’s (1993) reporting stages, and a
strategy element by adding Roome’s (1992) strategic options to the model.
The additions made in this paper provide a more comprehensive model that encompasses the
responses or outputs that might be expected from organisations that have undergone various
levels of change. The result includes the possibility that organisations attempt to react to
environmental stimuli by accounting for more than the traditional financial effects of doing
27
business. At some levels, they may also be attempting to control those stimuli and minimise
their effects on the organisation. The final model thus depicts the dynamic nature of the
relationship between organisations and elements of society, such as the natural environment,
and accords with the socio-political paradigm of the organisation-society relationship.
This model was refined based on the results of prior literature and is intended to assist in the
analysis of research conducted on both environmental disclosure and strategy. Its main
benefit is that it provides a broader context in which to consider empirical findings. Further
work will refine the model further, providing even more insight into the nature of businesses
activities affecting the natural environment.
28
References
Adler R.W. & M.J. Milne 1997 “Media Exposure, Company Size, Industry, and Social
Disclosure Practices”, paper presented at the 5th International Perspectives on
Accounting (IPA) Conference, Manchester.
Bansal P. 1993 “A Proposed Framework for the Corporate Response to Ecological Pressures”,
Templeton College Management Research Paper, Oxford.
Belkaoui A. 1980 “The Impact of Socio-economic Accounting Statements on the Investment
decision: An Empirical Study”, Accounting, Organizations & Society, 5(3), pp. 263283.
Belkaoui A. 1984 Socio-Economic Accounting, Quorum Books, Connecticut, USA.
Cooper D. 1980 “Discussion of Towards a Political Economy of Accounting”, Accounting,
Organizations and Society, 5(1) pp. 161-166.
Dierkes M. & A.B. Antal 1985 “The Usefulness and Use of Social Reporting Information”,
Accounting, Organizations & Society, 10(1) p.29-34.
Elkington J. & T. Burke 1989 The Green Capitalists, Gollancz Paperbacks, USA.
Elkington J. 1993 “Coming Clean: The Rise and Rise of the Corporate Environmental
Report”, Business Strategy and the Environment, 2(2), pp. 42-44.
Ford R. 1992 “The Green Organization”, in D. Koechlin & K. Müller (eds) 1992 Green
Business Opportunities: The Profit Potential, Pitman, UK, pp. 157-172.
Gray R.H. 1992 “Accounting and Environmentalism: An Exploration of the Challenge of
Gently Accounting for Accountability, Transparency and Sustainability”, Accounting,
Organizations & Society, 17(3), pp. 399-425.
Gray R., D. Owen & C. Adams 1996 Accounting and Accountability: Changes and
Challenges in Corporate Social and Environmental Reporting, Prentice Hall, UK.
Gray R., D. Owen & K. Maunders 1991 “Accountability, Corporate Social Reporting, and the
External Social Audits”, Advances in Public Interest Accounting, vol. 4, pp.
1-21.
Gray R., D. Owen, & K. Maunders 1987 Corporate Social Reporting - Accounting &
Accountability, Prentice-Hall, UK.
Gray R., D. Owen, & K. Maunders 1988 “Corporate Social Reporting: Emerging Trends in
Accountability and the Social Contract”, Accounting, Auditing and Accountability
Journal, 1(1), pp. 6-20.
Gray R., J. Bebbington & D. Walters 1993 Accounting for the Environment (The Greening of
Accountancy, Part II), Paul Chapman Publishing, UK.
29
Gray R., D. Walters, J. Bebbington & I. Thomson 1995 “The Greening of Enterprise: An
Exploration of the (non) Role of Environmental Accounting and Environmental
Accountants in Organisational Change”, Critical Perspectives on Accounting 6(3) pp.
211-239.
Hackston D. & M.J. Milne 1996 “Some Determinants of Social and Environmental
Disclosures in New Zealand Companies” Accounting, Auditing and Accountability
Journal, 9(1), pp. 77-108.
Harte G. & D. Owen 1992 “Current Trends in the Reporting of Green Issues in the Annual
Reports of United Kingdom Companies”, in Owen D. (ed) Green Reporting,
Accountancy and the Challenge of the Nineties, Chapter Eight, Chapman & Hall, UK.
Hopwood A.G. 1990 “Accounting and Organisation Change”, Accounting, Auditing and
Accountability Journal, 3(1), pp. 7-17.
James P. 1992 “Quality and the Environment: From Total Quality Management to Sustainable
Quality Management”, Greener Management International, 6, pp. 62-70.
Laughlin R.C. 1990 “Field Study in Accounting: A Case for Middle Range Thinking”,
unpublished working paper, Adelaide Accounting Research Meeting, The Flinders
University of South Australia.
Laughlin R.C. 1991 “Environmental Disturbances and Organisational Transitions and
Transformations: Some Alternative Models”, Organization Studies, 12(2), pp. 209232.
Ledgerwood G., Street E. & Therivel R. 1992 The Environmental Audit and Business
Strategy, Pitman, UK.
Lehman G. 1995 “A Legitimate Concern for Environmental Accounting”, Critical
Perspectives on Accounting, 6(5), pp. 393-412.
Llewellyn S. 1994 “Managing the Boundary: How Accounting is Implicated in Maintaining
the Organization”, Accounting, Auditing and Accountability Journal, 7(4), pp. 4-23.
Mathews M.R. 1984 “A Suggested Classification for Social Accounting Research”, Journal of
Accounting and Public Policy, 3, pp. 199-221.
Mathews M.R. 1987 “The Implementation of the Interpretive Paradigm: Philosophical Bases
Underlying Social Accounting”, Accounting Forum, 10(3), pp. 23-37.
Neu D., H. Warsame & K. Pedwell 1998 “Managing Public Impressions: Environmental
Disclosures in Annual Reports”, Accounting, Organizations and Society, 23(3), pp.
265-282.
Parker L.D. 1995 “Social and Environmental Accountability: International and Asian
Perspectives”, in Y.H. Pang (ed), Contemporary Issues in Accounting, Addison
Wesley, Singapore, pp. 233-290.
Power M. 1994 The Audit Explosion, Demos, London.
30
Robb F.F. 1988 “Morphostasis and Morphogenesis: Contexts of Participative Design Inquiry
in the Design of Systems of Learning and Human Development”, Discussion Paper,
University of Edinburgh, UK.
Roome N. 1992 “Developing Environmental Management Strategies” Business Strategy and
the Environment, 1(1), pp. 11-24.
Simpson A. 1991 The Greening of Global Investment: How the Environment, Ethics and
Politics are Reshaping Strategies, The Economist Publications, January, London.
Smith K.K. 1982 “Philosophical Problems in Thinking about Organizational Change” in
Goodman P.S. et al (eds) 1982 Change in Organizations, Jossey-Bass, San Francisco,
USA, pp. 316-374.
Spicer B.H. 1978 “Investors, Corporate Social Performance and Information Disclosure: An
Empirical Study”, The Accounting Review, LIII(1), pp. 94-111.
Steger U. 1990 “The Greening of the Board Room: How European Companies are Dealing
with Environmental Issues”, Business and Society Review, Maryland, USA.
Stikker A. 1992 “Sustainability and Business Management”, Business Strategy and the
Environment, 1(2).
Tinker A.M. 1980 “Towards a Political Economy of Accounting: An Empirical Illustration of
the Cambridge Controversies”, Accounting, Organizations and Society, 5(1), pp. 147160.
Tinker A.M., C. Lehman & M. Neimark 1991 “Falling Down the Hole in the Middle of the
Road: Political Quietism in Corporate Social Reporting”, Accounting, Auditing &
Accountability Journal, 4(2), pp. 28-54.
United Nations Environment Programme Industry and Environment (UNEP IE) 1994
Company Environmental Reporting: A Measure of the Progress of Business and
Industry Towards Sustainable Development, Technical Report No. 24, Paris.
Vandermerwe S. & Oliff M.D. 1990 “Customers Drive Corporations Green”, Long Range
Planning, 23(6), pp. 10-16.
Welford R. & Gouldson A. 1993 Environmental Management and Business Strategy, Pitman,
UK.
C:\CAT\Research\In Progress\research paper 98 theory.doc
last updated 8-Mar-16
31