How does environmental accounting information influence attention and investment?

• Date: 22 February 2013
• Pages: 22-52
• DOI: https://doi.org/10.1108/18347641311299731
• Published date: 22 February 2013
• Author: Hank C. Alewine,Dan N. Stone
• Subject Matter: Accounting & finance

How does environmental

accounting information inf‌luence

attention and investment?

Hank C. Alewine

College of Business Administration, University of Alabama in Huntsville,

Huntsville, Alabama, USA, and

Dan N. Stone

Gatton College of Business and Economics, University of Kentucky,

Lexington, Kentucky, USA

Abstract

Purpose – Environmental consequences increasingly inf‌luence management strategy and choice.

The purpose of this paper is to investigate the effects on attention and investment of: incorporating

environmental data into a balanced scorecard (BSC), called the sustainability balanced score card

(SBSC) and the organization of environmental accounting information.

Design/methodology/approach – In a between-participant design, participants (n<95) chose

from among two investments using BSCs. Participants were randomly assigned to one of three

conditions: no environmental data (control or BSC condition); environmental data embedded within the

traditional BSC (four-perspective SBSC); or environmental data added to a BSC as a standalone f‌ifth

perspective (f‌ive-perspective SBSC).

Findings – Investment to achieve environmental stewardship objectives was greater with the

four-perspective SBSC than the traditional BSC. In addition, participants were most eff‌icient, i.e. spent

the least total time, and least time per data element examined, with the four-perspective SBSC. Finally,

the time spent examining, and decision weight given to, environmental data were unrelated.

Research limitations/implications – Professional managers and accountants may have greater

knowledge of environmental metrics than do students, who are the participants in this study; hence,

the results may not generalize to higher knowledgeable professionals since their processing of

environmental data may differ from the lower knowledge participants of this study.

Practical implications – The form (i.e. organization) of environmental accounting data changed the

allocation of participants’ attention while the presence of environmental accounting data changed

participants’ investments; hence, both the presence and form of environmental accounting information

inf‌luenced decision making.

Originality/value – This study is among the f‌irst to show differing inf‌luences from both the

presence and organization of environmental accounting data on attention and investment.

Keywords United States of America,Investments, Decision making,Accounting information,

Environmentalaccounting, Sustainability balancedscorecard, Investment decisions, Decision strategies

Paper type Research paper

I. Introduction

Environmental costs and benef‌its increasingly inf‌luence management strategy and

investments[1]. For example, in the 1990s, management at the Amoco Yorktown, USA

ref‌inery estimated their environmental costs as a percentage of overall operating costs at

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1834-7649.htm

Accepting editor: Lee J. Yao

IJAIM

21,1

22

Received 15 February 2011

Accepted 24 September 2011

International Journal of Accounting

and Information Management

Vol. 21 No. 1, 2013

pp. 22-52

qEmerald Group Publishing Limited

1834-7649

DOI 10.1108/18347641311299731

3 percent. Field study results revealed environmental costs were 22 percent of the

operating costs (Shields and Boer, 1997). The increasing importance of environmental

data exacerbate concerns about its accounting presentation and disclosure, its proper

use in successfully executing a f‌irm’s environmental strategy (Perego and Hartmann,

2009), its proper application in the development of full cost environmental reporting

systems (Herbohn, 2005), and the extent of its inf‌luence on investment decisions (for

social and environmental accounting literature reviews, see Alewine (2010), Deegan

(2002), Gray (2002), Mathews (1997) and Parker (2005)). For example, an entity with

strategic environmental objectives should include environmental metrics in evaluating

its investment opportunities (Brown et al., 2005; Yuthas, 2005). However, inadequate

information about, and direction for, measuring environmental and sustainability

metrics impedes evaluating sustainability goals and their achievement (Dascalu et al.,

2010; Dias-Sardinha et al., 2002). Hence, there is a potential benef‌it in devising

a managerial accounting evaluation system that addresses these def‌iciencies. Including

environmental data in a management tool, such as the balanced scorecard (BSC) – in

some form – may facilitate incorporating environmental data into investment choices.

The BSC (Kaplan and Norton, 1993) assists in a number of managerial functions,

including unit and employee performance evaluations, as well as investment choice.

Traditionally, the BSC analyzes management decisions from four perspectives:

f‌inancial, customers, internal business processes, and learning and growth. The

ascendency of strategic environmental concerns has resulted in calls to include

environmental accounting data in the BSC (Dias-Sardinha et al., 2002; Epstein and

Wisner, 2001; Johnson, 1998; Van der Woerd and Van den Brink, 2004). Two methods

have been proposed for including environmental and sustainability data in the

scorecard (called the “sustainability” BSC, or sustainability balanced scorecard (SBSC)):

(1) adding a new f‌ifth “sustainability” perspective; vs

(2) embedding sustainability data within the existing four perspectives

(Dias-Sardinha et al., 2002)[2].

The environmental cost accounting data often include attributes that are unfamiliar to

managers who must use these data ( Johnson, 1998). These data often relate to a

production process, and are nonf‌inancial, e.g. tonnage of nitrogen dioxide emissions.

An important question with respect to such data is how accounting can best assist

decision makers in integrating unique nonf‌inancial data, such as environmental metrics,

with more traditional BSC metrics. Thus, the structure and display of environmental

cost data in accounting reports, including BSCs, is important to assisting management

with fulf‌illing an entity’s strategic environmental objectives.

This study investigates the effects on attention and investment of:

.incorporating environmental data into a BSC; and

.differing BSC presentations of environmental data.

Participants were randomly assigned to one of three conditions in a between-participant

design. They allocated funds between two investments that would expand a production

facility: one investment would better achieve the entity’s environmental obje ctives,

while the other investment would better achieve f‌inancial objectives. The control, or

BSC, condition contained traditional BSCs but with no environmental data. The SBSC

presentation was manipulated in two conditions: the environmental data were either

Environmental

accounting

information

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