Society & Natural Resources

ISSN: 0894-1920 (Print) 1521-0723 (Online) Journal homepage: https://www.tandfonline.com/loi/usnr20

Policy Review - An Alternative Approach to

Accounting for Natural Resources: The Case of
Multipurpose Forestry in Australia

K. F. Herbohn, S. R. Harrison, J. L. Herbohn

To cite this article: K. F. Herbohn, S. R. Harrison, J. L. Herbohn (2000) Policy Review - An

Alternative Approach to Accounting for Natural Resources: The Case of Multipurpose Forestry in
Australia, Society & Natural Resources, 13:7, 663-683, DOI: 10.1080/08941920050121936

To link to this article: https://doi.org/10.1080/08941920050121936

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Society & Natural Resources, 13 : 663È683, 2000
Copyright Ó 2000 Taylor & Francis
0894-1920/00 $12.00 1 .00

P o licy R eview

A n A lternative A pp roa ch to A ccoun ting for N atural

R esou rces : T he C ase of M ultipurpose F orestry in
A ustralia

K. F. HERBOHN
School of Business
James Cook University of North Queensland
Townsville, Queensland, Australia

S. R. HARRISON
Department of Economics
University of Queensland
Brisbane, Queensland, Australia

J. L. HERBOHN
School of Business
James Cook University of North Queensland
Townsville, Queensland, Australia

Accounting reports represent one of the most widely used forms of communication
on an organizationÏs performance to its stakeholders, including existing and poten-
tial investors, regulatory agencies, and lobby groups. However, these reports often
present only a partial picture of an organizationÏs performance because nonmarket ,
unpriced events relating to the management of natural resources are not taken into
consideration. Consequently , reliance on these reports can lead to poorly informed
decisions regarding use of resources controlled by organizations . In this article, an
alternative reporting framework for organizations managing natural resources is
proposed , which incorporates the data management and communication skills of the
accountant , and the resource valuation techniques of the economist . T he proposed
reporting framework is illustrated with reference to a multipurpose reforestation
program in Australia, and practical issues associated with its application are dis-
cussed.

K ey w or dsenvironmental accounting, environmental valuation, externalities,

multiple-use forests, nonmarket beneÐts

Received 15 June 1998 ; accepted 15 September 1999.

This research has been supported by the Co-operative Research CentreÈRainforest.
Address correspondence to K. Herbohn, School of Business, James Cook University, Townsville,
Qld. 4811, Australia. E-mail : Kathleen.Herbohn @ jcu.edu.au

663
664 K . F. Herbohn et al.

E†ective communication of the results of an entityÏs activities within society plays a

critical role in allowing informed decision making by external resource providers
(e.g. shareholders, taxpayers) and management of the entity. However, it has been
argued by environmental accounting researchers, such as Gray (1990), that tradi-
tional accounting reports are developed from only a partial information set, which
excludes any nonpriced transactions and events that a†ect society. Traditional
accounting deals with things over which there are transferable property rights, the
price of which is revealed in market transactions. Values to society of resources such
as clean air and water, and the landÏs ability to support crop and animal life, are
excluded from the accounting picture.
An implication of this partial reporting framework is that entities are not com-
pletely discharging their accountability for their full range of activities. Decision
makers including funding bodies are not able to make well-informed decisions based
on these accounting reports. Information provided by traditional accounting
systems does not meet the needs of the growing number of socially aware citizens
who wish to evaluate the political propriety of their investments. Accounting
methods can themselves have an adverse impact on the environment, such as
encouraging land degradation (Maunders and Burritt 1991). Some progress is being
made in environmental accounting at a national accounts level, where ““satelliteÏÏ
national accounts have been developed that incorporate broad measures of resource
depletion and defensive expenditure (El Serafy 1997). Progress is slower at the micro
level, where more speciÐc measures are required.
Recently, accounting researchers have advocated a more complete reporting
framework at the Ðrm and agency level (Dierkes and Preston 1977 ; Schreuder and
Ramanathan 1984 ; Milne 1991 ; Milne 1996 ; Herbohn et al., 2000). Such a reporting
framework would be particularly useful to entities that operate within environ-
mentally sensitive areas, are accountable to external stakeholders, and must balance
multiple objectives that are both commercial and noncommercial in nature. The
Community Rainforest Reforestation Program (CRRP) in North Queensland, Aus-
tralia, is a good example of such an entity and is taken as a test case to consider the
policy issues that arise from this proposed reporting framework. The aims of this
article are to (1) provide a brief overview of the current state of knowledge of
environmental accounting ; (2) provide a brief outline of an accounting framework
that incorporates the accountantÏs communication skills and the economistÏs valu-
ation techniques ; and (3) illustrate the application of such a reporting framework
with reference to the CRRP.

A n A ccou n ting P ersp ective o n E n viro n m en ta l Im p a cts

In an attempt to overcome the reporting constraints of traditional accounting
systems, accounting academics and practitioners have been actively involved with
the development of environmental accounting, which ““can be seen as an exploration
of what accounting might look like if it were not so artiÐcially constrained by its
attachment to accounting entities, economic events, Ðnancial description and nar-
rowly deÐned groups of “usersÏ ÏÏ (Gray 1994, 5 È 6). During the 1970s, there was an
upsurge of interest in social accounting that laid the foundations for environmental
accounting. Since the early 1990s, accountants have become interested in environ-
mental accounting, perhaps due to disenchantment with the ““greed is goodÏÏ culture
of the 1980s and 1990s (Gray 1994), increasing awareness within society of environ-
 Accounting for Natural Resources 665

mental issues, and political e†ectiveness of environmental lobby groups. An addi-

tional concern has been the need for organizations to consider the full impacts of
these activities to ensure that their activities have long-term sustainability (Pearce et
al., 1989 ; Gray et al., 1993).
Environmental accounting is characterized by a broad spectrum of theoretical
perspectives, which cover extreme right-wing applications of agency theory, capital
market efficiency theory (e.g., Belkoui and Karpik 1989 ; Mak 1991 ; Ness and Mirza
1991), stakeholder theory and legitimacy theory (e.g., Guthrie and Parker 1989 ;
Guthrie and Parker 1990 ; Arnold 1990), and ““deep greenÏÏ outlooks concerned with
sustainability and radical ecology (e.g., Maunders and Burritt 1991 ; Gray 1992).
The step from environmental accounting theory to practice has not been as
successful as proponents envisaged, with only spasmodic and disjointed attempts to
account for environmental impacts. The slow progress has been in part due to
opposition within the accounting profession. In particular, it has been argued (e.g.,
Porter 1996, iii) that statement preparers have viewed attention to the environment
as inimical to company competitiveness. Further, accountants have argued that they
do not possess the ecological and scientiÐc knowledge, nor the measurement meth-
odologies, to identify and value unpriced environmental beneÐts and costs. The exis-
tence of a wide variety of competing theoretical perspectives has meant there is lack
of consensus among proponents of environmental accounting about what form
environmental disclosures should take.

Current Environmental Accounting Practice

In most countries, environmental reporting is not widely regulated. The United

States is an exception to the extent that environmental reporting in the late 1980s
through to the mid-1990s has been dominated by mandatory Ðnancial disclosures
on environmental activities (Gray et al. 1996). For example, the Securities and
Exchange Commission (SEC) S-K Regulation Items 101 to 103 and the Superfund
amendments in the United States require enterprises to disclose information relating
to how compliance with environmental laws a†ects Ðnancial performance, the levels
of environment-related expenditure, signiÐcant pending environment-related judicial
proceedings, and environmental risks related to any entityÏs activities (Gray et al.
1995).
In the absence of regulation, companies operating in Europe and Australasia
have undertaken voluntary experiments with environmental disclosures (Guthrie
and Matthews 1985 ; Guthrie and Parker 1989 ; Harte and Owen 1992 ; Owen 1992 ;
Gray et al. 1995). In many cases, these experiments have been ad hoc, with entities
not consistently reporting the same types of information on an annual basis, and
disclosures have often been devoid of content information (i.e., aimed at image and
advertising rather than accountability) (Harte and Owen 1992 ; Gray et al. 1993 ;
Gray et al. 1996).
Generally, organizations have been found to comply with regulated reporting
requirements only, and compliance is usually at a minimum level. Bebbington and
Gray (1993, 5) aptly describe this situation :

When talking to companies, to civil servants, to NGOs etc., one is con-

scious that many are taking no initiatives for quite plausible reasons. There
are fears about putting ““heads above parapets,ÏÏ there is a concern about
666 K . F. Herbohn et al.

““fair playÏÏ and the need for ““level playing ÐeldsÏÏ and especially in a reces-
sion, one has to recognise that being up to oneÏs armpits in alligators is
likely to distract one from the job of draining the swamp.

Surveys of environmental reporting practices within North America, Europe,

and Australasia have focused on Ðnancial statements that are publicly available for
distribution to stakeholders external to the company. Organizations also prepare
information for their own use (internal reports) or for use by statutory authorities
(special-purpose reports). These reports rarely reach the public domain and so have
not been investigated in any detail by researchers. Surveys of environmental
accounting within external reports have generally been categorized into descriptive
and performance reporting, quantitative environmental accounts, inventory-style
reports, and Ðnancial environmental reporting (Gray et al., 1996).
Descriptive and performance environmental reports have included short qualit-
ative statements of good citizenship, assignment of responsibility for environmental
issues, statements of environmental policies and the activities undertaken to achieve
these policies, and extracts from environmental audit reports. Disclosures on com-
pliance with external standards (e.g., pollution emissions), receipt of environment-
related awards, and even case materials on individualsÏ experiences in relation to the
entityÏs products have also been documented.
Quantitative environmental accounts go beyond disclosure of corporate
environmental policies and the scope of an entityÏs ““environmentally friendly pro-
ductsÏÏ and typically include some form of quantitative inputÈ output analysis
applied to a single product. These accounts attempt to illustrate the resources used
by the company (e.g., all inputs and energy) and how efficiently they are used to
produce an output (e.g., Ðnished products vs. emissions). Experimentation with
quantitative environmental accounts has been undertaken by western European
companies, the most notable example being the Okobilanzen (eco-balance) developed
by German, Austrian, and Swiss companies (Gray et al. 1993 ; Deegan 1996 ; Gray et
al. 1996).
The inventory approach to environmental reporting, which also divorces an
organizationÏs Ðnancial performance from its environmental performance, has been
adopted by some UK and Australian corporations (e.g., Thorn EMI). The environ-
mental report is usually separate from the Ðnancial statements and includes an
inventory of the entityÏs environmental inputs (diesel, electricity, wood recycled
paper) and outputs (air emissions, water emissions, oil emissions, scrap paper). This
is usually supported by comparisons with current environmental targets and com-
mitments, progress toward targets and future targets, and commitments.
Integrated Ðnancial environmental accounts are a comprehensive picture of an
entityÏs full interactions with its external environment, in which environmental and
Ðnancial performance are considered conjointly (Matthews 1993). Early attempts
were made by Abt and Associates (1972) and Linowes (1972) to capture all social
and environmental impacts of organisations in Ðnancial terms. More recently, BSO/
Origin (a Dutch consulting and electrical engineering company) attempted to Ðnan-
cially quantify its environmental impacts by estimating the monetary costs of its
atmospheric emissions, wastewater emissions, and other wastes (relating to ash,
sludge, and other residue). This allowed the negative environmental impacts of
BSO /Origin to be deducted from its Ðnancial gain from economic activities (i.e.,
proÐt) to produce ““net value addedÏÏ by the organization (Gray et al. 1993 ; Deegan
1996 ; Gray et al. 1996).
 Accounting for Natural Resources 667

Another example of integrated statements is the sustainable cost account devel-

oped by several UK researchers (e.g., Gray 1992 ; Gray 1994 ; Bebbington and Gray
1997). Here, the amount of money that an organization would have to spend at the
end of the accounting period to place the biosphere back into the position it was in
at the start of the accounting period is estimated. This estimate is included in the
income statement as a notional reduction of proÐt, or notional addition to oper-
ating expenditure, to yield a sustainable income Ðgure. Preliminary experiments
have been conducted in New Zealand and Canada ; however, practical problems
with measurement and constructing an account of sustainability were encountered
(Bebbington and Gray 1997).
Attempts to prepare Ðnancial environmental accounts have been criticized
because they are ““partial, subjective and, in e†ect, add possible apples to approx-
imate pears and subtract the results from hypothetical orangesÏÏ (Gray et al. 1993,
225). There have also been concerns that techniques of assigning a value to beneÐts
such as the aesthetic pleasure provided by an architecturally designed office block,
or to costs such as air pollution, have not been fully developed (Parker, 1986 ; Gray
et al. 1987).
Discussion among environmental accountants has turned to rationalization of
the aim of measuring all environmental impacts. For example, Gray et al. (1987),
Dierkes and Preston (1977), and Schreuder and Ramanathan (1983 ; 1984) have
argued that while comprehensive quantiÐcation of environmental performance (e.g.,
preparation of Ðnancial environmental accounts) has little prospect of success at
least in the medium term, partial Ðnancial quantiÐcation has a role to play in the
development of environmental accounting. Organizations could combine Ðnancial
data with qualitative data (e.g., descriptions of environmental objectives of the
organization) and quantitative data (emission levels of pollutants for a plant) to
communicate a reasonable perspective on their environmental impacts. Environ-
mental accounts represent not the end of the journey of experimentation with
environmental reporting, but one step along the way (Deegan 1996 ; Gray et al.
1996). Schreuder and Ramanathan (1984, 414) e†ectively argue that it

is logically invalid that the inherent problems of measuring externalities

places the resolution of this problem outside the scope of accounting. This
is tantamount to a person dismissing the existence of forms and shapes
because cataracts cloud their vision. . . . Perfect measurement of external-
ities is not necessary for a better internalisation than currently exists. Even
if indicators are presently subjective and imprecise, the appropriate test of
their desirability is whether the current situation is improved by their
acceptance.

Reservations exist about the objectivity and reliability of estimates of environ-

mental and social impacts because these cannot be attested to by an independent
third party. Di†erences of opinion on these estimates between valuation experts are
likely. Environmental disclosures usually have not been audited, and much of the
information (e.g., general statements of good intentions) would be difficult to verify
within the traditional audit process. There is a danger that environmental reporting
may become blatantly self-serving, and incomplete, defensive, and sprinkled with
propaganda (Estes 1976). On the other hand, the concept of an environmental audit
has attracted interest during the 1990s. It has its origins in the social audit move-
ment of the 1970s and has been deÐned as ““the systematic examination of the inter-
668 K . F. Herbohn et al.

actions between any business operation and its surroundings. This includes all
emissions to air, land and water, legal constraints ; the e†ects on the neighbouring
community, landscape and ecology ; and the publicÏs perception of the operating
company in the local areaÏÏ (Confederation of British Industry 1990, cited in Gray et
al. 1993, 79).
Gray et al. (1993) identiÐed six types of environmental audit : (1) environmental
impact assessment ; (2) environmental survey ; (3) environmental review, monitoring,
and surveillance ; (4) environmental investigation ; (5) the ““eco-auditÏÏ (including the
British Standard 7750) ; and (6) independent attestation of environmental informa-
tion (for internal and external participants). Various surveys (e.g. Harte et al. 1991 ;
Harte and Owen 1992 ; Deegan and Gordon 1996) reveal that a growing number of
entities (particularly in industries with visible environmental implications) have
commissioned at least one environmental audit. Many entities retain audit informa-
tion for internal purposes only, and others extract only positive aspects for pub-
lication. An exception is the Caird Group, operating in the waste disposal industry
in Europe, which published a full independent environmental audit, as did the Aus-
tralian cotton industry (Gibb Environmental Sciences and Arbour International
1991) and the Australian canegrowing industry (Gutteridge Haskins and Davey
1996).

A P ro p osed A ltern a tive A pp ro ach to E n viro n m en ta l A cco un tin g

An environmental accounting system is proposed here to take account of unpriced
aspects of the environment. AccountantsÏ skills lie in the systematic collation,
sorting, and recording of data within an organization, their experience in communi-
cation of information (within and external to the organization), independence of
mind, and evaluative ability (particularly in respect of evidence). However, accoun-
tants lack skills to value environmental resources. When preparing Ðnancial state-
ments, traditionally accountants rely on actuaries for the estimation of values for
employee superannuation beneÐts, engineers for the estimation of the value of
specialized plant and equipment, and lawyers for determining the value of contin-
gent liabilities. It has been argued (e.g. Milne 1991 ; Milne 1996 ; Peace 1997) that a
team could also be formed between accountants and economists. Economists could
be involved in identifying and valuing nonmarket environmental aspects of an
entityÏs operations, while accountants would have responsibility for the management
and communication of this information to the entityÏs stakeholders.

An Economic Perspective on Valuation of Environmental Resource s

SigniÐcant developments in environmental law, particularly in the United States

with the introduction of the Comprehensive Environmental Response, Com-
pensation and Liability Act (CERCLA)Èalso referred to as the Superfund
legislationÈhave increased interest in nonmarket valuation beyond the circle of
academics and researchers, to include professional accountants and the general
business community. CERCLA permits U.S. government entities to recover mone-
tary damages when a release of hazardous substances causes an ““injury to, destruc-
tion of, or loss of natural resources.ÏÏ Natural resources in this context include land,
Ðsh, wildlife, biota, surface water, groundwater, and other resources, belonging to,
 Accounting for Natural Resources 669

managed by, held in trust by, appertaining to, or otherwise controlled by the U.S.
government.
In the U.S. Court of Appeals case State of Ohio v. Department of the Interior,
880 F.2d 432 (C.C. Cir. 1989), the court identiÐed the need to supplement the incom-
pleteness of market processes in establishing the value of natural resources, and
accepted the contingent valuation technique for estimation of values where market
prices are unavailable. It was also found that evaluation is the responsibility of the
potentially responsible party. In addition, the National Oceanic and Atmospheric
Administration (NOAA) committee concluded that contingent valuation method
(CVM) studies can provide estimated values that are sufficiently reliable as a start-
ing point in the judicial process of damage assessment (Arrow et al. 1993 ; Bennett
1996).
These events have meant that professional accountants in industry and public
practice are now expected to be familiar with nonmarket valuation techniques
(Lehman 1995). U.S. accounting regulators (Financial Accounting Standards Advi-
sory Council 1992) and researchers (Milne 1991 ; Milne 1996) have investigated how
well such valuations can be incorporated into the existing accounting framework.
Nonmarket values have mainly been incorporated into decision-making pro-
cesses via extended cost-beneÐt analysis (CBA) and, to a lesser extent, natural
resource accounting (NRA) 1 and environmental impact assessment (EIA).2 Much of
the research in environmental and resource economics has largely been driven by
policy questions (Deacon et al. 1998). Bringing environmental values into business
and political calculations as an everyday input to decision making is a major goal of
extended CBA (Hanley and Splash 1993). As Randall (1986, 193) commented, ““no
longer can it be claimed that there are overwhelming economic arguments for the
development option, while the beneÐts of the preservation option are conÐned to
sentiments and emotions existing only in the woolly heads of environmentalists.ÏÏ
Extended CBA is gaining increasing acceptance within the policy arena. The con-
ceptual framework usually adopted is that of total economic value (TEV), compris-
ing use value and nonuse value (option and existence value) (Pearce and Moran
1994).
Economists have developed a variety of methods for estimating TEV and its
individual components. A good deal of research is being devoted to the stated pref-
erence techniques of contingent valuation, contingent rating, contingent ranking
and choice modeling (e.g., Morrison et al. 1996 ; Sterner and van den Bergh 1998 ;
Hanley et al. 1998) and surrogate market techniques such as the travel cost and
hedonic price methods. Also, there is considerable interest in the expedient of beneÐt
transfers, or ““transfer of existing estimates of non-market values to a new study
which is di†erent from the study for which the values were originally estimatedÏÏ
(Boyle and Bergstrom, as reported by Kirchlo† et al. 1997, 21). Space precludes
further discussion here, but a contemporary survey of progress and challenges in
nonmarket valuation is provided by Harrison (1999). As these methods are further
reÐned, and their strengths and limitations better understood, they could become
routine sources for accounting information.

A pp lica tio n to th e C o m m u n ity R a info rest R efo resta tion P rog ra m (C R R P )

The extended reporting framework proposed here is examined with reference to the
Community Rainforest Reforestation Program in North Queensland. The CRRP
670
T A B L E 1 Overview of the Current Reporting Framework of the CRRP

Provision of Provision of
Ðnancial physical
Title of information information
section in Number
report Yes No Yes No Contents of section in report pages

Executive u u Background on the establishment of the CRRP 1

Summarya
Introduction u u Background on the management of the CRRP (e.g., number of stakeholders 1
(some) involved) ; and future directions (e.g., conversion to a program run by the
community)
u u Provision of information on 4 goals of the CRRP 2
u u Provision of information on attainment of these 4 goals (e.g., number of 1
(some) hectares planted each year)
u u Details of support of the Joint Board for the Management Committee of 1
(some) the CRRP (e.g., $47,743 direct expenses paid)
u u Details of membership of the CRRP Management Committee 1
u ?b Summary of planting by year in each shire/ city 1
DNR u u Details of DNR expenditure reporting system, which divides CRRP 1
component expenditure into operational and extension activities
Expenditure u u Details of expenditure by CRRP in terms of 12 cost categories (e.g. 1
report establishment, information systems) and the amounts contributed by
State and Federal Governments
Seedling u u Source of seed supply, average cost per seedling, list of species planted 3
supply in 1995/ 1996
Landowner u u Selection criteria for land holder participation in program 1
recruitment
 T A B L E 1 Continued

Landowner u u Summary of predominant primary industry type of participating landowners 1

activity
types
Geographic u u Summary of activities undertaken to establish a GIS that provides 1
information records of planted areas that have been mapped into species and
system (GIS) locations
Site u u Details of activities undertaken to improve the physical structure of the 1
preparation soil and remove competing vegetation ; ensure competing vegetation ;
ensure adequate soil moisture ; and establish adequate fencing
Planting and u u Details of planting, weed control, fertilizing, mulching, watering, and 4
maintenance (some) pruning of trees planted
Joint board u u Details of membership of the Joint Board 1
component
u u Administration Operating Statement for the year (comparing actual 1
1996 expenditure with budgeted 1996 expenditure)
Publicity and u u Summary of promotional activities undertaken (e.g., public meetings 3
promotion (some) held)
Research u u Summary of research projects funded by the CRRP 1
Conclusion u u General summary of the CRRPÏs annual report 1
Note. From 1996 Annual Report of the CRRP.
a Sections listed in the order in which they appeared in the annual report.
b No units were indicated in the annual report.

671
672 K . F. Herbohn et al.

has its origins in a consultancy report (Shea 1992) commissioned by North Queens-
land Local Government Authorities (LGAs), in response to the World Heritage
listing of previously logged forests. Applications were Ðrst called for landholders
wishing to establish plantations of rainforest timbers on their land in 1992. Eligi-
bility requirements included freehold tenure, suitable land with high rainfall and
limited slope, and a minimum area of 5 ha. Approximately 1500 ha was planted
over 5 years, with the emphasis then switching to supporting private initiatives.
The CRRP represents a cooperative e†ort between the Federal Department of
Primary Industries and Energy, Queensland Department of Natural Resources
(DNR), and LGAs (acting together as the North Queensland A†orestation Program
Joint Board), and private landholders. The program has four objectives stated to be
of equal importance : (1) to develop a private plantation resource base for a sustain-
able timber industry in the north of Australia, with major emphasis on native rain-
forest species ; (2) to address the problem of land degradation in the wet tropics area,
following extensive inappropriate clearing ; (3) to provide for improved water quality
by establishing vegetative bu†ers along rivers and streams ; and (4) to train a work-
force to support the long-term practice of rainforest plantation establishment
(CRRP Management Committee 1996). A management committee, with an indepen-
dent chair and two representatives of each tier of government, had the task of
guiding and coordinating the program. The committee is accountable to the various
stakeholder groups, and must communicate and demonstrate progress toward
achieving Ðnancial and nonÐnancial goals and provide information to assist deci-
sion making by stakeholders.

Current CRRP Reporting Framework

It is doubtful whether the reporting framework adopted by the CRRP (Table 1) has
provided to the various stakeholders information that is useful in assessing the
progress of the CRRP in achieving its speciÐed goals. While the annual accounting
report has provided detail on the structure of the CRRP (e.g., interrelationships
between various stakeholders), planting activities (e.g., seedling supply, planting and
maintenance), and expenditure, only market-based Ðnancial outlays are detailed in
the Expenditure Report and the Administration Operating Statement. In fact, the
majority of disclosures in the annual report take the form of apparently ad hoc
qualitative descriptions, supported by minimal Ðnancial and physical information
concerning the program. Clearly, there is scope to extend the reporting framework
to include nonmarket environmental beneÐts and costs.
During the course of the study, the CRRPÏs function changed in 1997 to pro-
moting landholder plantings by acting as an extension service, with a signiÐcant
reduction in government funding. At that time, a competing rea†orestation
schemeÈthe Queensland Joint Venture Plantation Scheme (QJVPS)Èwas initiated,
in which private landholders enter into a cost- and revenue-sharing arrangement
(Harrison et al. 1999). We argue that given the initial nature of the CRRP (i.e.,
multiple objectives, multiple stakeholders), it is still useful to develop a relevant
environmental reporting framework that might have been used by the CRRP in its
original form. 3 This investigation highlights some of the major issues and problems
that may be encountered by other organizations pursuing similar reporting goals. In
fact, we suggest that if the CRRP had been reporting on the full impact of its activ-
ities (i.e., priced and unpriced), its management committee would have been able to
argue more e†ectively for maintaining the level of funding.
 Accounting for Natural Resources 673

Suggested Environmental Reporting by the CRRP

The accounting perspective adopted here is that accounting reports that include
information on several attributes are most relevant to stakeholders (Dierkes and
Preston 1977). For example, stakeholders in the CRRP may be interested in infor-
mation on the Ðnancial value of carbon sequestration from planting trees, as well as
scientiÐc information on stream water quality (e.g., sediment load, nutrient levels,
conductivity). If an alternative reporting framework is to be developed, at least four
preliminary issues need to be considered :
d What process should be used to identify what information is important and so
should be reported in an organisationÏs annual report.
d What economic valuation techniques are appropriate in the case of the reporting
entity in question.
d What is the most appropriate means of communicating this information to stake-
holders.
d Other reporting considerations (e.g., cost-e†ectiveness).

Identiücation of Relevant Information

Accountants have identiÐed at least two methods of developing an inventory of

environmental impacts of an organization. The Ðrst method is to produce an eco-
balance as discussed earlier. All inputs to and outputs from an organizationÏs activ-
ities are identiÐed and quantiÐed (not necessarily in Ðnancial terms), which assists in
highlighting potential areas of environmental impact. The eco-balance highlights
inputs such as degraded farm land, labor, tree stock inventory, and fertilizer and
pesticides which ultimately produce outputs such as employment, vehicle pollution,
timber (sawn logs), and stabilization of areas vulnerable to erosion.
A second method of determining an inventory of environmental impacts is to
identify areas of interest to stakeholders and internal management (Dierkes and
Preston 1977). First, the CRRP was developed through a process of consultation
between federal and state governments, LGAs, and private landholders, and its
operation depends on cooperation and involvement of these three groups of stake-
holders. The stated goals of the CRRP summarize what these groups perceive to be
important. Also, results of surveys of CRRP members (Broome 1993 ; Creighton and
Sexton 1996 ; Harrison et al., 1998) suggest that private landholders would be most
interested in information that relates to the protection of soil and water quality, the
provision of wildlife habitats, shade, and windbreaks, and timber production. While
stakeholders could be expected to maintain private records on their investment in
plantations, the CRRP Management Committee could still provide useful informa-
tion on regional issues such as beneÐts of increased tourism (due to improving
aesthetics), creation of jobs, and timber production. Information such as this would
likely also be useful for LGAs, who identiÐed development of a sustainable timber
industry as being one of the most important beneÐts of the CRRP (Harrison et al.
1996).
An inventory of environmental impacts of the CRRP has been identiÐed using
the CRRPÏs objectives and the results of stakeholder surveys, and is presented in
Table 2.

Identiücation of Relevant Economic Valuation Techniques

Valuation techniques must be matched to the particular resource or environ-
mental changes. Selection of appropriate economic valuation techniques is guided
674
T A B L E 2 Environmental Impacts of the CRRP and Suggested Variables to Be Reported

Impact

CRRP objectives Activity Environmental Financial

Development of Preparation of land for planting Establishment of private

private plantation Provision of advice to landholder on timber plantation resourcea
resource base for a tree species Growing trees for timber
sustainable timber Planting trees productiona
industry, with Maintenance of trees (e.g., fertilizing, Provision of advice, labor,
emphasis on native weed control, pruning) and seedlings to landholder
rainforest species at minimal cost
Address problems of Planting trees on land not suitable for Protection of soil Prevention of Ðnancial
land degradation commercial crops qualitya outlays to address land
following Provision of advice to landholders to Provision of shade and degradation
inappropriate clearing encourage a more balance approach windbreaks for stocka Increased tourism due to
to land utilization Improved aesthetic value improved aesthetics
of rural land holding
Provide for improved Planting trees along rivers and streams Protection of water Reduced water treatment
water quality in rivers Planting trees upstream to allow any qualitya costs for LGAs
and streams agricultural runo† to be Ðltered Reduced sedimentation of Increased tourism due to
before entering waterways water coursesa improved recreation
Establishing sensitive logging Protection against stream opportunities and aesthetics
guidelines to ensure trees are harvested bank erosiona (e.g., unpolluted waterways)
and replanted in a responsible manner Recreation (e.g., Ðshing)
(e.g., single tree selection, directional possible on waterways
felling) Improved aesthetics of
waterways (e.g., bank
stumping)
 T A B L E 2 Continued

Train a workforce to Participation of long-term unemployed Training of long-term Creation of jobsa

support the long-term in training courses and planting trees in unemployed to assist with Creation of a skilled forestry
practice of rainforest the Ðeld [Landcare and Environment their integration into workforce, which
plantation Action Plan (LEAP), Regional societyb previously did not exista
establishment Environmental Employment Projects
(REEP)]
Provision of training for managing
plantations to landholders
Otherc BeneÐts perceived by stakeholders Increased biodiversity
(e.g., landholders, LGAs) from Carbon sequestration by
participation in the CRRP actively growing forests
and subsequent reduction
in rates of greenhouse gas
levels
Provision of habitat for
wildlifea
a Impacts identiÐed in surveys of CRRP stakeholders.
b If a broader perspective on the environment is adopted, then employment of the long-term unemployed may also be considered under the environment.
c A Ðfth objective created to summarize the beneÐts of participation within the CRRP that were not adequately described by the existing four objectives

of the CRRP.

675
676 K . F. Herbohn et al.

by at least four factors, including the inventory of environmental impacts to be

reported ; the availability of economic values for other sites that could be transferred
to the CRRP ; the limited resources of the CRRP that could be devoted to reporting
activities ; and the suitability of economic valuation techniques in terms of their cost
and ease of application. Table 3 contains a preliminary overview of suitable
methods of measurement for the environmental impacts of the CRRP.

Means of Communicating Environmental Information

There are no generally accepted environmental reporting guidelines that are
available for entities such as the CRRP to follow when preparing reports. Conse-
quently, this situation calls for experimentation with the process of communicating
environmental information. The experimental disclosure format based on the work
of Dierkes and Preston (1977) and Gray et al. (1993) may be appropriate. This
format does not lock the CRRP into the disclosure of environmental impacts (all
measured in dollar amounts) as notional adjustments to Ðnancial statement ele-
ments. Instead, it is possible to produce a special purpose report on environmental
performance that contains information on several attributes of the CRRPÏs environ-
mental impacts.
The special-purpose environmental report could be divided into Ðve sections
based on the four objectives of the CRRP and the perceptions of stakeholders

T A B L E 3 Estimation Method by BeneÐt Category

Environmental
and social
variable Estimation technique

Timber value Included in current reporting (i.e., estimated volume of timber 3

current stumpage prices) ; Ñow-on beneÐts could be estimated by
input Èoutput analysis
Land protection Estimated reduction in soil loss from monitoring sites, and
predicted Ðeld reduction (from modeling studies)
Reduced siltation of watercourses, storages and roadsÈengineersÏ
subjective estimates
Increased landscape amenity, estimated by contingent valuation
method (CVM) or recreation value (travel cost method, TCM), or
beneÐts transfer
Water protection Increased recreation value of rivers and creeks (hiking, swimming,
Ðshing)ÈTCM or beneÐts transfer
Reduced water treatment costsÈengineersÏ subjective estimates
Increased riverine biotaÈCVM
Employment creation Net saving in unemployment beneÐts
Wildlife habitat CVM for existence and viewing of native animals such as
cassowary
Shade and shelter Budgeted estimates of increased net crop and livestock income
Carbon sequestration Estimated aggregate tree biomass and carbon content by carbon
sequestration imputed price
DisbeneÐts Budgeted crop damage from native and feral animals using new
habitat

Note. Both beneÐts to landholders (private beneÐts) and beneÐts to the wider community (social beneÐts) are
relevant.
677
T A B L E 4 Extract From Proposed Special-Purpose Environmental Report for the CRRP for Water Quality
CRRP data Comparison norms
Environmental impact
dimension Program / policy Experience Industry Community Other

Water quality CRRP objective 3

1. Protection of water quality
2. Reduced sedimentation of
water courses
3. Protection against
stream-bank erosion
4. Increased opportunities for
recreation (e.g., Ðshing) on
waterways
5. Improved aesthetics of
waterways
È È
È ScientiÐc measurement of
agricultural runo†
concentrations in water
downstream from CRRP-sponsored
plantations
È ScientiÐc measurement of
particle concentration in a
random sample of water
downstream from
CRRP-sponsored plantations
È È
Sensitive logging È È
guidelines
È Environmental economics
valuation of increased
opportunities for recreation
on waterways ($)
È Environmental economic
valuation of improved
aesthetics ($)
È È
È È
È È
È È
È È
È È
È È
Results of scientiÐc research into
numbers (and changes therein) of
animals and plants supported by
waterways in regions with
CRRP-sponsored tree plantations
Levels of agricultural runo† identiÐed
as a problem by Australian scientists
Generally acceptable levels among
Australian scientists of particle
concentration within water
Average number of times per annum
(and changes therein since establishment
of the CRRP) that local port authorities
dredge harbors in CRRP plantation
regions
È
È

Summary evaluation Water quality appears to have improved in regions with CRRP-sponsored plantations, with supporting evidence
from scientists and local port authorities ; also, improvements in water quality appear to have had a
positive impact on the value of waterway aesthetics and perceived recreation
opportunities along waterways
678 K . F. Herbohn et al.

(summarized by a Ðfth objective labeled ““otherÏÏ). Each section could contain infor-
mation on relevant environmental impacts to enable statement users to assess the
performance of the CRRP in each area. Comparison norms from industry, com-
munity, and others (e.g., state government guidelines), where applicable, are incor-
porated to facilitate assessment of organizational performance (Dierkes and Preston
1977 ; Gray et al. 1993 ; Gray et al. 1996).
Table 4 illustrates how the proposed CRRP special-purpose environmental
report might be structured to account for performance, in this example for water
quality. This section of the report is divided into the speciÐc environmental impacts
identiÐed by stakeholders and consistent with the CRRPÏs objectives. The section
ends with a summary evaluation of the overall environmental impact that the
CRRP has had in the area of water quality.
Another issue is whether the special-purpose environmental report for the
CRRP is to be subject to veriÐcation by an independent external third party. Given
the limited resource base of the CRRP and the preliminary nature of the proposed
environmental reporting format, a cost-e†ective approach to obtaining external
veriÐcation might be adopted, whereby a well-respected critical journalist or a well-
respected person with signiÐcant experience of reforestation programs and the fore-
stry industry is invited to write a critique on its overall performance. This is similar
to the approach that was adopted in the annual reports of a U.S. corporation, the
Atlantic RichÐeld Company. 4

Other Reporting Considerations

Accounting for both priced and unpriced activities on a systematic basis at
regular intervals (e.g., annually) ensures maximum beneÐts from comparability, and
fully informed decision making by a†ected stakeholders. We have endeavored to
recommend a communication format that allows for information to be added in
later reporting periods as funds become available for reporting, or as the cost of
obtaining the information decreases (e.g., due to advances in technology). In terms
of estimates of unpriced environmental impacts, it may be possible to undertake
surveys in the initial stage, and then use simpler updating methods in subsequent
years. BeneÐts transfer is probably the most cost-e†ective method, but the travel
cost method (TCM) can also be carried out at low cost.
Whenever an organization operates with multiple objectives, the assessment of
overall environmental performance becomes difficult. For example, if an organiz-
ationÏs management is interested in setting priorities for future action, trade-o†s
between objectives are always necessary. Consequently, it would be useful for stake-
holders of organizations such as the CRRP to be able to compare performance in
the di†erent areas of environmental impact. Dierkes and Preston (1977) have devel-
oped a preliminary reporting format that attempts to communicate information to
statement users on relative performance in key areas of interest for an organization.
A rating of ““high,ÏÏ ““medium,ÏÏ ““low,ÏÏ or ““mixedÏÏ is assigned to the organizationÏs
performance relative to industry, community, and other norms. Where possible,
information could also be included on the priority attached to each performance
dimension by internal stakeholders (e.g., internal survey of representative manage-
ment groups) and external stakeholders (e.g., survey of public opinion). This allows
statement users to identify areas of high performance relative to areas of low per-
formance, which may assist them in making decisions about future activities and
goals of organizations such as the CRRP. An alternative approach is to use econo-
 T A B L E 5 Suggested Reporting Format for Disclosure of Information on the CRRPÏs Performance in Terms of Its Multiple Objectives

Overall evaluation of CRRP performance relative to Priority attached to each

comparison norms performance dimension

Environmental performance dimension Industry Community Other Internal External

Development of private plantation Rating of low, Rating of low, Rating of low, Managerial Public opinion
resource base for a sustainable timber medium, or high to medium, or high to medium, or high to judgment (low, (low, medium,
industry be inserted here for be inserted here for be inserted here for medium, high) to high) to be
each environmental each environmental each environmental be inserted inserted (most
Address problems of land degradation performance performance performance (most likely from likely drawn from
Provide for improved water quality in dimension. Based on dimension. Based on dimension. Based on an internal survey a survey of
waterways summary evaluation summary evaluation summary evaluation of representative representative
for each dimension for each dimension for each dimension management groups selected
Train a workforce to support long-term drawn from the drawn from the drawn from the groups). from the general
practice of rainforest plantation special-purpose special-purpose special-purpose public).
establishment environmental environmental environmental
report. report. report.

Note. From Dierkes and Preston (1977, 19).

679
680 K . F. Herbohn et al.

metric methods, such as the multiattribute value and utility model by Keeney and
Rai†a (1993), that are available to determine these trade-o†s. However, such a
model was not used in the case study because it is complicated and beyond the
expertise of the CRRP sta† and the reporting budget.

C on clud ing C o m m en ts
It is evident that traditional reporting of entities using natural resources pays inade-
quate attention to environmental and social impacts. Traditional accounting
systems exclude any nonpriced values relating to the natural resources controlled by
organizations (either directly through legal rights, or indirectly as public-sector cus-
todians for society). Traditionally, the management of these resources has been
based on only a partial information set. Societal pressures are slowly focusing atten-
tion on the shortcomings of traditional accounting information systems. Calls have
been made for accountants to review accounting policy, and to experiment with the
production of useful information on how an organization has managed the natural
resources under its management. We suggest an alternative approach to this
problem, which provides great scope for fruitful collaboration between accountants
and resource economists. In particular, the accountant would contribute informa-
tion management and communication skills to this collaborative reporting e†ort,
while the economist would contribute economic valuation techniques aimed at mea-
suring the costs and beneÐts associated with the management of natural resources.
The product of this reporting framework would be special-purpose environmental
reports that convey a more complete picture of an organizationÏs operations for a
particular reporting period. It is envisaged that this information would be useful to
a broad range of stakeholders such as existing and potential investors, lobby groups,
and regulatory agencies. In light of the evolutionary nature of environmental
accounting, more experimentation with accounting and reporting policies within a
range of di†erent organizations is required.

N o tes
1. The objective of NRA is to adjust the information stored in the national resource
accounts to produce supplementary accounts that provide an indicator of sustainable income
(i.e., the maximum consumption possible during a period, such that society has the same
wealth at the end of the period as at the start of it) (Common 1995). The supplementary
accounts include details of opening stocks of environmental assets, the annual use of these in
the economy (i.e., additions, depletions), and subsequent closing stocks. Once physical stocks
have been recorded, their market and nonmarket values may be incorporated into the
account. However, it has not been common for NRA to incorporate nonmarket values
(Oakley 1997).
2. There has been an unresolved debate on whether the use of nonmarket valuations in
EIA is appropriate. While extended CBA is not used frequently in EIA (Thomas 1998),
researchers such as Hundloe et al. (1990) present persuasive arguments for its inclusion.
3. The framework could also be used for the CRRP in its present form. However, it
would be difficult to justify the resources required to implement the reporting framework
since the CRRP is only an extension service.
4. In the case of Atlantic RichÐeld, a well-known critical journalist of the period, Milton
Markowitz, was asked to prepare a critique of the companyÏs social and environmental
 Accounting for Natural Resources 681

report. The critique was published in conjunction with the annual report and acted as a form
of audit.

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