This paper develops insights into externalities accounting and reporting that can help improve the use of externalities information in mediating between the traditionally discrete domains of financial reporting and sustainability reporting.

Authors

• Jeffrey Unerman, Royal Holloway, University of London
• Jan Bebbington, University of St. Andrews
• Brendan O’Dwyer, Alliance Manchester Business School and University of Amsterdam Business School 

Abstract

Information from externalities accounting and reporting has a significant role to play in both corporate reporting and effective mitigation of externalities impacts. However, a dispersed academic accounting literature on externalities has hitherto developed separately from concerns about what information is appropriate to report about corporate performance. This paper develops insights into externalities accounting and reporting that can help improve the use of externalities information in mediating between the traditionally discrete domains of financial reporting and sustainability reporting. Using externalities information to bridge these domains is not without problems, including those presented by the need for information to possess specific qualitative characteristics. This paper explores these problems in more depth, including commensuration challenges for quantification of externalities. The paper also highlights ways in which externalities can progressively become economically internalized, thereby bringing them more readily within the domain of economically-focused financial reporting practices. An agenda for further research into externalities accounting and reporting is also proposed.

The full paper has been published in the annual International Accounting Policy Forum special issue of Accounting and Business Research (volume 48, 2018 – issue 5). The paper can be downloaded from the Taylor and Francis website. The transcript of the practitioner’s response to the paper is also available.

• Academic paper
• Practitioners response