Accounting Forum 34 (2010) 32–45

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Accounting Forum

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An examination of environmental reporting by Australian stategovernment departments

Barbara Lynch ∗

School of Accounting, Economics and Finance, Faculty of Business and Law, Deakin University, Warrnambool, Victoria, Australia

a r t i c l e i n f o

Keywords:Government environmental reportingGlobal Reporting InitiativeAnnual reports

a b s t r a c t

This study provides an examination of environmental disclosure practices within the annualreports produced by a sample of Australian state government departments. This entailedthe examination of environmental disclosures using an environmental disclosure indexdeveloped for the purposes of the study.

The study’s sample was 18 Australian state government departments, 12 of which wereresponsible for environmentally sensitive areas. The period of analysis was from 2000-1to 2007-8. The results of the analysis presented in the study found that, over the researchperiod, environmental disclosures, using the developed disclosure index, increased from336 in 2000-1 to 449 in 2007-8. Disclosure practices varied between the departments interms of the coverage of disclosures. Reporting is not consistent over time making compar-ison between departments difficult.

© 2009 Elsevier Ltd. All rights reserved.

1. Introduction

Whilst there has been prior research on environmental reporting in corporate annual reports,1 a review of the literaturehas found little research on environmental reporting by government departments. Exceptions are Gibson and Guthrie (1995),Burritt and Welsh (1997a) and Frost and Seamer (2002). Despite the limited research in this area, there is recognition thatgovernment action and leadership is the most important driver of the adoption of sustainability reporting.2 Therefore thisstudy will add to the literature on environmental reporting, in particular, into the issue of environmental reporting in thepublic sector.

Australia is a federation comprised of six states and two territories with local governments in each state. For this study,state government departments responsible for environmentally sensitive areas were selected from each state as well as asample of other state government departments. The public sector is important, not least because of its size. According toBall and Grubnic (2007) internationally, the public sector accounts for some 40% of all economic activity. Society has anexpectation that governments will manage public resources in a sustainable manner. Ball and Grubnic also assert that publicsector organisations have far greater responsibilities for sustainable development than the corporate sector (Figs. 1 and 2).

Legislation in Australia requires Commonwealth and state government departments to include in their annual reports asection detailing the environmental performance of the organisation as well as the organisation’s contribution to ecologically

∗ Tel.: +61 3 55633287; fax: +61 3 55633320.E-mail address: blynch@deakin.edu.au.

1 See for example Harte and Owen (1991), Patten (1992), Deegan and Gordon (1996), Deegan and Rankin (1996), Cormier and Gordon (2001), Deegan,Rankin, and Tobin (2002).

2 See February 2009, CPA Australia publication ‘In the Black’ article “Government support crucial to sustainability success’.

0155-9982/$ – see front matter © 2009 Elsevier Ltd. All rights reserved.doi:10.1016/j.accfor.2009.11.001

B. Lynch / Accounting Forum 34 (2010) 32–45 33

Fig. 1. Average level of environmental disclosures from 2000 to 2007.

Fig. 2. Average level of GRI reporting.

sustainable development (ESD). In addition, some state governments have additional reporting requirements, for exam-ple in Victoria, all government departments, are required to report on waste, energy, water use as well as and othermeasures.

The nature and extent of environmental reporting within the annual reports of 18 Australian state government depart-ments over an eight-year period from 2000-1 to 2007-8 will be examined in this study. Twelve of these departments areresponsible for environmentally sensitive areas such as conservation, water management and public land management.3

The nature of these areas is a factor which might potentially affect disclosure practices. Accordingly, it might be expected thatthese departments would disclose more environmental information than departments in less environmentally and politi-cally sensitive areas. These departments also have a number of politically active stakeholder groups, including Aboriginalcommunities and organisations, environmental groups and forest and timber industries. One other department from eachstate was also selected for comparison purposes.

The departments’ annual reports were examined for disclosures that can broadly be termed environmental disclosures.According to (Deegan & Rankin, 1996, p. 51) environmental disclosures are part of what are often termed social responsibilitydisclosures. They state that:

‘social responsibility disclosures can include . . . disclosures relating to the interaction between an organization and itsphysical and social environment inclusive of disclosures relating to human resources, community involvement, the naturalenvironment, energy and public safety.’

The aim of this paper is to provide a review of environmental reporting within the annual reports of 18 Australian stategovernment departments over an eight-year period between 2000-1 and 2007-8. A review of the relevant literature ongovernment environmental reporting, and the Global Reporting Initiative (GRI) is provided in the next section. The study’sfindings are followed by an analysis of trends in disclosure practices and a comparison between the departments’ reportingpractices. Finally, the limitations of the study and recommendations for future research are outlined.

3 The Victorian Government Department of Sustainability and Environment (DSE), Western Australian Department of Fisheries (DF), Western AustralianDepartment of Agriculture and Food (DAg), Western Australian Department of Water (DoW), Western Australian Department of Environment and Con-servation (DEC), Tasmanian Department of Primary Industries and Water (DPIW), Tasmanian Department of Infrastructure, Energy and Resources (DIER),South Australian Department for Environment and Heritage (DEH), South Australian Department of Primary Industries and Resources (PIRSA), New SouthWales Department of Water and Energy (DWE), Queensland Department of Mines and Energy (DME) and Queensland Environmental Protection Agency(EPA).

34 B. Lynch / Accounting Forum 34 (2010) 32–45

2. Literature review

2.1. Government environmental reporting

Legitimacy theory is often referred to for an explanation for the provision of environmental disclosures by the private sec-tor. According to Adams and Roberts (1995), legitimacy theory argues that companies see disclosure as a way of legitimisingtheir activities and will seek to portray themselves as acting in a socially responsible manner consistent with prevailing socialnorms and expectations. Burritt and Welsh (1997b) state that legitimacy theory could be extended to the public sector andsuggest an examination of power relationships through case studies to further develop the links between legitimacy theoryand disclosures. Frost and Seamer (2002) also suggest further analysis of content to provide evidence of the underlyingarguments of legitimacy theory.

This study does not use a case study approach, rather, an examination of a sample of reporting practices of governmentdepartments over a period of time. Disclosures are not analysed for the motivation behind them or whether they are used toinfluence the annual report users’ perceptions as demonstrated by legitimacy theory. However, if this study was extendedby using more interview data, legitimacy theory might provide useful insights into public sector disclosure practices.

In a similar approach to legitimacy theory, institutional theory contends that organisations operate in a manner consistentwith societal norms, values and assumptions about what constitutes acceptable behaviour (Oliver, 1991). Institutional theoryhas been used to explain the adoption of generally accepted accounting principles for external financial reporting by publicsector entities (Carpenter & Feroz, 2001).

Bebbington, Higgins, and Frame (2009) use an institutional theory framework to analyse why organisations initiatedsustainable development reporting. They found that a wide range of regulative, normative and cognitive influences com-bined with organisational dynamics contribute to sustainable reporting. Regulative influences such as laws and regulationsinfluence disclosures practices because of the threat of penalty for non-compliance. Normative influences influence valuesand norms and managers pursue various courses of actions because of societal obligations and expectations (Bebbington etal., 2009). Cognitive influences are subtle and complex, whereby activities are enacted in a manner that is generally accepted(Bebbington et al., 2009). Bebbington et al. (2009) state that when these influences combine, isomorphism and homoge-nization occurs. (Carpenter & Feroz, 2001) state that because of isomorphic pressures organisations become increasinglyhomogenous and conform to the expectations of the wider institutional environment.

The Bebbington et al. (2009) study undertook in-depth interviews which were able to provide rich material for analysis.As previously mentioned, an extension of this paper would be to undertake interviews to determine how institutionalinfluences combine with organisational dynamics and affect disclosure practices.

Accountability is a commonly accepted objective of public sector annual reporting. According to Gray, Owen, and Adams(1996, p. 38) accountability is ‘the duty to provide an account (by no means necessarily a financial account) or reckoning ofthose actions for which one is held responsible’. Sinclair (1995, p. 221) also refers to a responsibility for actions stating thataccountability ‘entails a relationship in which people are required to explain and take some responsibility for their actions’.

Sinclair (1995, p. 225) identifies five forms of accountability; one of these is public accountability, which she defines as‘direct accountability to the public, interested community groups and individuals’. There is acknowledgement that there isa difference between public sector accountability and that which exists in the private sector.

Accountability responsibilities of governments far exceed those of business corporations according to Barton (2005, p.143) who states: ‘governments, as agents of citizens are required to account for their decisions and activities as well as theirperformance in substantial detail’. Governments are agents of the public and are accountable for the authority which theyhold, because of this, public accountability is more visible. There is an expectation that governments are more transparent andopen in their actions than companies in the private sector. Whilst there is the expectation that governments are transparentand open, the absence of competitive market forces and shareholder demands for information (as in the private sector) mayresult in a lack of accountability.

According to the Global Reporting Initiative (GRI) Sector Supplement for Public Agencies4 (2005, p. 7) ‘public agenciesalso have a major impact on national and global progress towards sustainable development. Given their size and influence,public agencies are expected to lead by example in reporting publicly and transparently on their activities to promotesustainability’. Recent research by CPA Australia also found that there is a need for a universal approach to sustainabilityreporting, adding weight to the need for government leadership and also international collaboration (CPA Australia, 2009).

The preparation and presentation of the annual financial report is part of the discharge of accountability. Coy, Fischer,and Gordon (2001, p. 14) argue that ‘the value of the annual report . . . enables all stakeholders to obtain a comprehensiveunderstanding of . . . objectives and performance in financial and non-financial terms. No other single source of informationis available to all stakeholders on a routine basis’.

A review of Australian government environmental reporting in annual reports found only three studies, by Gibson andGuthrie (1995), Burritt and Welsh (1997a) and Frost and Seamer (2002) have been published.

Gibson and Guthrie (1995) examined annual reports from a selection of Australian public and private sector organisationsand compared them with environmental disclosures made by overseas organisations. The authors found that environmental

4 This supplement was developed in response to increased demand for specific guidance for public sector organisations.

B. Lynch / Accounting Forum 34 (2010) 32–45 35

disclosure practices varied between the two sectors studied and also between nations. In terms of the frequency of disclo-sure, the sectors were similar. However, quantified information was far more frequently disclosed by the private sector. Incomparison to international surveys, Australian organisations appeared to have more disclosures (measured by more thanone page of disclosure). US companies appeared to disclose more financial and quantitative data. However, this could havebeen due to the US regulations concerning mandatory accounting disclosures.

The authors acknowledge theirs was a ‘broad brush’ survey, and their sample was restricted to public sector entitiesfrom only one Australian state however, they did acknowledge that further research is needed in the areas of environmentaldisclosure practices in the public sector.

Burritt and Welsh (1997a) examined environmental disclosures by Australian Commonwealth entities (budget and non-budget) over a ten-year period from 1984 to 1993 and analysed contextual factors. It was found that total environmentaldisclosures increased over the period and that budget entities reported a greater volume of environmental disclosures thannon-budget entities. Four main reasons were put forward for the increase. These were (a) the Commonwealth government’ssigning of international environmental treaties, (b) the development of a National Strategy for Ecologically SustainableDevelopment, (c) the increased ‘public concern about the state of the environment’ (Commonwealth of Australia, 1992:55)and (d) the introduction of energy efficiency measures for buildings (Commonwealth of Australia, 1992:55). The observationof a greater volume of environmental disclosures by budget entities was linked to the higher level of dependency of the budgetsector for future appropriations and the need to be seen to be implementing government policies (Burritt & Welsh, 1997a).

Consistent with Deegan and Gordon (1996) and Deegan and Rankin (1996), who found little or no negative disclosuresin private sector annual reports, Burritt and Welsh (1997a) also found a similar process operated in the public sector. Theyfound that environmental accountability was poor and did not provide information in a form which enabled the assessmentof comparative environmental performance over time.

More recently, Frost and Seamer (2002) examined the annual reports of a sample of New South Wales public sectorentities to determine whether there was an association between the development of internal environmental managementpractices and the level of environmental disclosure in annual reports. The authors also tested whether the legitimisationprocess was influenced by the political visibility of the entity. They concluded that further analysis was required to determinewhether environmental reporting was used to ‘educate and inform’ or was used to manipulate the readers’ perception ofthe environmental performance of the entity.

Ball and Grubnic (2007:244) argue that the public sector has much to offer society as these organisations translate ‘theheroic demands of the environmental agenda into tangible policies and programmes, and thus giving substance to the ideaof living sustainably on the planet’. They also highlight the public sector’s role in public policy that set it apart from theprivate sector.

2.2. The Global Reporting Initiative

According to Adams and Frost (2007), the international guidelines for sustainability performance measures most com-monly used by Australian companies are specified in the Global Reporting Initiative. The GRI, the global standard for triplebottom line (TBL) reporting, provides a framework for sustainability reporting. According to the GRI guidelines, ‘sustain-ability reporting is an organisation’s public account of its economic, environmental and social performance in relation to itsoperations, products and services’ (Global Reporting Initiative, 2002).

The GRI’s mission is to ‘develop and disseminate globally applicable Sustainability Reporting Guidelines (‘Guidelines’).The voluntary nature of the Guidelines means that organisations have flexibility in deciding what non-financial informationto disclose. The Guidelines are designed to be suitable for reporting organisations with varying degrees of complexity.Because of this flexibility, it can be expected that there will be considerable diversity of reporting practices and this canhamper comparability. As it is a practice that is developing and evolving, sustainability reporting does not have established,generally accepted rules and regulations. Over time, however, there should be progress towards acceptable sustainabilityreporting practices.

The GRI seeks to elevate sustainability reporting to the same level of rigour, comparability, credibility and verifiabilityexpected of financial reporting (GRI, 2002:1). The financial reporting principle of capital maintenance is an example of thelink between traditional financial reporting principles and those of environmental accounting, that is, the recognition of theneed to maintain the stock of natural capital for future generations (Lamberton, 2005).

The Guidelines contain core indicators5 and additional indicators. Indicators are grouped under three sections covering theeconomic, environmental and social dimensions of sustainability. The environmental performance indicators have been usedto supplement the Environmental Disclosure Index (EDI) used in this study and cover materials, energy, water, biodiversity,emissions, effluents and waste, suppliers, products and services and compliance.

Acceptance of the GRI as a guide for sustainability reporting is now quite widespread. However the GRI performanceindicators which are used in this study’s EDI have been described as onerous and overly burdensome. SustainAbility (2002,p. 16)6 states that collecting and reporting on some indicators such as total materials used, may outweigh any obvious

5 Core indicators are relevant to most reporting organisations and are of interest to most stakeholders.6 SustainAbility is a consultancy which focuses on sustainable development.

36 B. Lynch / Accounting Forum 34 (2010) 32–45

benefit. On the other hand, it can be argued that the stakeholders’ needs for information would outweigh any burden for thereporting entity. (Guthrie & Farneti, 2008) are critical of the GRI guidelines and Sector Supplement for Public Agencies andstate they are too generic for all public sector organisations. However, the GRI acknowledges that sustainability reporting isstill in the early stages in the public agency context and should continue to evolve.

Ball and Grubnic (2007) expect the GRI Sector Supplement for Public Agencies (GRI, 2005) to be an influence on the UKpublic sector. It might also be expected to influence the Australian public sector. Whilst Ball and Grubnic acknowledge thepositive influence of the GRI Supplement, they also argue that the Supplement does not give enough attention to the issueof policy responsibilities and impacts.

Public sector organisations would be expected to face greater pressure to disclose information than private sector organ-isations. This is due to their larger, more diverse groups of stakeholders. The GRI Supplement encourages public sectorstakeholder engagement and therefore the challenge is to identify the information required by different stakeholders andthen comprehensively report that information. Frost and Seamer (2002) argued that a public sector entity that is politicallyvisible (or politically sensitive) will attract a disproportionate share of scrutiny from their stakeholders.

The informal nature of the Guidelines whereby an incremental implementation of the Guidelines is allowed, means thatreporting entities can select which information they wish to disclose. This could lead to an inaccurate representation of theorganisation’s activities. For example, Moneva, Archel, and Correa (2006) state that some organisations that label themselvesas GRI reporters do not behave in a responsible way. Guthrie and Farneti (2008) also found that organisations ‘cherry-picked’the GRI indicators they wished to disclose in their annual report. Therefore, there is potential for the Guidelines to be usedin a biased way. This would contradict any obligations to meet stakeholders’ information needs.

The GRI has attempted to address some of the limitations associated with the Guidelines. New Guidelines, ‘G3’ werereleased in late 2006.7 The main goal of the G3 is to make reporting routine and comparable (GRI, 2006). However, given thediversity of reporting entities, perhaps there will always be potential problems associated with a generic set of Guidelines.

There is no regulation in Australia stating that government departments must report according to the GRI, however, in2003 the Australian Government Department of the Environment and Heritage produced a document providing a guide toreporting against environmental indicators which is aligned to the GRI.

3. Research method

An environmental disclosure index developed by Frost (1999) was used as a framework to develop the EDI for this study.8

In order to develop a more extensive research instrument that was more appropriate for the study, the EDI was supplementedwith environmental disclosure indicators from the GRI9 and indicators produced by the Australian Government Departmentof Environment and Heritage (2003) well as a Natural Heritage Trust publication.10 The EDI is presented in Appendix A.

The choice of the time frame 2000-1 to 2007-8 was motivated by the following factors:

1. The collection of annual reports of the departments was mostly obtained via the departments’ web sites.11 Obtainingreports prior to 2000 for all departments proved difficult as some departments did not provided them.

2. The introduction of the GRI guidelines in 2000, a second version in 200212 and a further version in 200613 coveredthe period of investigation, and would therefore perhaps be expected to have influenced the level of environmentaldisclosures.

Annual reports from an eight-year period, 2000-1 to 2007-8, were obtained from 18 departments. Hence, the studycomprised a total of 324 annual reports. This study examines the government departments’ annual reports for a number ofreasons. First, the annual report is a consistent source document from which data can be gathered. Second, in developing adisclosure index for content analysis, it is important to have a measure that is comparable between the departments. All thedepartments produce an annual report which is of a relatively homogenous format and therefore suitable for comparison.14

Third, it was found by Deegan and Rankin (1997) that the annual report was significantly more important than any othersource of information concerning an organisation’s interaction with the environment.

Tilt (1994) found that annual reports were the most commonly used medium for corporate social information. Guthrieand Parker (1989) argued that the annual report is not subject to misrepresentation; it is the one means of com-munication to outside parties over which management has control. Several prior researchers have used the annual

7 New GRI Guidelines released in late 2006 have a reduced number of indicators from the previous Guidelines ‘G2’.8 Frost’s EDI comprised 50 information categories, this study’s index comprised 85 information categories.9 27 environmental performance indicators from the GRI Guidelines were used in this study.

10 ‘Public Environmental Reporting: An Australian Approach’ (2000).11 Those departments who did not provide annual reports on their web sites were contacted and hard copies were requested.12 This version provided 35 environmental performance indicators.13 This version contained 30 environmental performance indicators. The main changes from the previous version was a streamlining of the biodiversity

indicators from 9 to 5 and one less water indicator.14 The departments also provide various other disclosures such as sustainability action statements and also environmental disclosures on their websites.

B. Lynch / Accounting Forum 34 (2010) 32–45 37

Table 1Level of environmental disclosures by individual departments.

Department Number of information items per year

2000-1 2001-2 2002-3 2003-4 2004-5 2005-6 2006-7 2007-8

Victoria (DSE) 35 40 44 51 50 53 58 56Victoria (DHS) – – 5 17 20 18 18 17Western Australia (DF) 25 23 28 24 33 30 29 25Western Australia (DAg) 13 16 21 24 25 34 26 28Western Australia (DoW) 25 28 35 34 33 31 23 25Western Australia (DEC) 28 30 34 34 38 37 (40) 37 (44) 40Western Australia (DTF) – 1 3 6 7 11 7 6Tasmania (DPIW) 39 41 41 42 40 40 38 35Tasmania (DIER) 14 14 12 11 14 15 15 16Tasmania (DTF) – 1 – – – – 4 6South Australia (DEH) 41 42 44 42 66 50 34 35South Australia (PIRSA) 38 41 42 38 35 29 29 26South Australia (DTF) – 1 1 2 3 2 7 9New South Wales (DWE) 12 17 17 22 27 27 (34) 26 (31) 23New South Wales (DH) 5 7 7 7 10 10 9 9Queensland (DME) (22) 20 (20) 19 (23) 21 (28) 24 (28) 24 (35) 29 18 23Queensland (EPA) 36 37 (49) 48 (51) 50 (55) 54 (60) 59 54 50Queensland (DE) 5 9 14 16 19 16 17 20

Total 336 367 417 441 498 491 449 449

report to examine corporate social reporting and environmental reporting.15 Chalmers and Godfrey (2004) refer to dan-gers in using annual reports because of the limit to the amount of information that can be provided and also thatinformation can be released beyond the annual report domain. However, Australian legislation requires government organ-isations to include environmental disclosures in their annual reports and therefore, for this study, annual reports wereexamined.

Content analysis of the departments’ annual report was undertaken. The use of an EDI permits a comparison of thedepartments’ reporting practices. For the purposes of this study, a disclosure is defined as passage of text within the annualreport. If there is a disclosure in a particular category then a score of 1 is given. If there is no disclosure, a score of 0 is given.

Reliability was assured in this study by the identification of 85 specific environmental disclosure categories which pro-vided considerable disclosure content. Well specified definitions in each category improved reliability. According to Gibsonand Guthrie (1995) there are inherent weaknesses in content analysis. However the use of one coder provided consistencyand is consistent with prior studies.16

Four departments in this study underwent structural change over the time period examined resulting in either increasedresponsibility for environmental issues,17 increased responsibility for water related functions18 or a decrease in waterresponsibilities.19 Therefore in order to present a meaningful comparison, disclosures were adjusted accordingly. For exam-ple, those departments with increased responsibility over the time period, such as the New South Wales Department ofWater and Energy which was given water related functions in 2007 had subsequent disclosures related to water removed.For those departments with a decrease in responsibilities over the time period, past disclosures in these responsibility areaswere removed. Therefore two Queensland departments no longer responsible for water management as a result of govern-ment changes in 2006, had disclosures related to water management prior to 2006 removed. In Table 1, raw (unadjusted)disclosure figures are enclosed in parenthesis.

4. Results

Using the EDI, the annual reports of 18 Australian state government departments were analysed over the period from2000-1 to 2007-8 inclusive. Total disclosures (using adjusted disclosure figures) over the period increased from 336 to 449over the period examined.

Table 1 presents the number of information items in the EDI disclosed by each department in their annual reports. Intotal, disclosures increased up until the 2005-6 reporting period. From Table 1 it is clear that the trend for environmentalreporting was increasing from 2000-1 until 2004-5. Disclosures in 2005-6 then declined from a total of 498 in 2004-5 to 491in 2005-6 and further declined in 2007-8 and 2007-8 to 449.

15 Studies include Cormier and Gordon (2001), Deegan and Gordon (1996), Deegan and Rankin (1996), Deegan et al. (2002), Deegan et al. (2000), Gibsonand Guthrie (1995), Gray et al. (1995), Guthrie and Parker (1989) Harte and Owen (1991) Patten (1992).

16 See Guthrie and Parker (1989) and Zeghal and Ahmed (1990).17 The Western Australian Department of Environment and Conservation.18 The New South Wales Department of Water and Energy.19 Both the Queensland Environmental Protection Authority and the Queensland Department of Mines and Energy.

38 B. Lynch / Accounting Forum 34 (2010) 32–45

The time period of the study saw total environmental disclosures increase from 336 to 449, representing around a 33%increase. Disclosures from the environmental departments increased from 326 to 382 representing around a 15% increase.A much larger percentage increase was observed from the non-environmental departments which increased disclosuresfrom 10 to 67, representing a 570% increase. Overall, the level of disclosures is much greater for environmental departmentsthan for other government departments and this is to be expected given these departments are responsible for manyenvironmentally sensitive areas. Similar results were found by the Environmental Audit Committee of the House of Commonsin Britain in their review of government department reporting where it was found that departments with a substantialenvironmental component in their portfolios were more adept at reporting than other departments (Environmental AuditCommittee, 2006).

4.1. Discussion of results

The Victorian Department of Sustainability and Environment increased disclosures from 35 in the first year to 56 in theeighth year of the study. The Victorian Department of Human Services also increased disclosures from 0 to 17 over the timeperiod of the study. From Table 1, for both Victorian departments, the largest increase of disclosures occurred from 2002-3to 2003-4, this is probably attributable to the introduction of Financial Reporting Directive 24A in 2003 which required thatVictorian government entities measure and report on environmental performance indicators and these indicators must bereported via the annual report (Department of Treasury & Finance, 2006).20 Disclosures have remained relatively stable sincethen.

Reductions in disclosures from 4 of the 5 Western Australian departments in the 2006-7 period could be attributedto the Western Australian Government review of public sector reporting in February 2007. This review advised agenciesthat several reporting requirements were not longer required to be reported. These included waste paper recycling andenergy consumption.21 Therefore these departments reduced their disclosures when they were no longer required. Theonly Western Australian department to increase disclosure practices in that period, the Department of Environment andConservation, has probably done so because of its increased responsibility for environmental issues due to its amalgamationof two other departments.22

Two of the Tasmanian departments, the Department of Primary Industries and Water and the Department of Infras-tructure Energy and Resources, reported a relatively stable amount of disclosures over the seven-year period of the study.The non-environmental Tasmanian department included in this study, the Department of Treasury and Finance, increaseddisclosures from 0 to 6 over the time period of the study. In the absence of government regulations requiring envi-ronmental disclosures in that state, it is interesting to note the extensive environmental disclosures provided in HydroTasmania’s23 annual report for 2007-8. An independent assurance statement was provided by a sustainability assuranceand advice company on Hydro Tasmania’s material sustainability performance areas as well as a validation against the GRIguidelines.

The two South Australian departments, responsible for environmentally sensitive areas, the Department of Environmentand Heritage and Department of Primary Industries and Resources, provided a reduced number of disclosures over the timeperiod of the study. The other South Australian department, the Department of Treasury and Finance increased disclosuresfrom 0 to 9 over the time period.

Disclosures from the two New South Wales departments, the Department of Water and Energy and Department of Health,increased over the period of analysis. The Department of Water and Energy increased disclosures from 12 in the first year to31 in the eighth year. Some of these increased disclosure practices can be linked to the transfer of water related functionsof the former Department of Natural Resources in to the DWE April 2007.

Reduction in disclosures from both Queensland departments, responsible for environmentally sensitive areas, the Envi-ronmental Protection Agency (EPA) and Department of Mines and Energy, from 2006 onwards can partly be related tothe transfer of water responsibilities from both departments after machinery of government changes in 2006. Waterrecycling which had previously been managed by the EPA, was transferred to the Department of Natural Resources andWater.

The Queensland Department of Mines and Energy, a new department formed in 2006-7, was a result of the merger ofthe former Department of Energy and the Mineral and Petroleum Resource Services of the former Department of NaturalResources, Mines and Water. So the new department did not have the focus on natural resources and water that the formerDepartment of Natural Resources, Mines and Water24 had. The other Queensland department in this study, the Departmentof Education, increased disclosures from 5 to 20 over the period of the study.

20 These indicators were updated with FRD24B and FRD24C which will apply from 1 July 2007.21 However a different approach is proposed for the 2007-8 reporting period where agencies will be required to report on sustainability issues and

achievements.22 The DEC was formed in 1 July 2006 from the amalgamation of the Department of Environment and the Department of Conservation and Land

Management.23 Hydro Tasmania is a Government Business Enterprise owned by the state of Tasmania.24 The Queensland Department of Natural Resources and Water did not have annual reports available for the first two years of this study and was therefore

not included. However if these reports had been available, it probably would have provided a better comparison over time.

B. Lynch / Accounting Forum 34 (2010) 32–45 39

Table 2Level of GRI reporting for individual departments.

Department Number of GRI information items per year

2000-1 2001-2 2002-3 2003-4 2004-5 2005-6 2006-7 2007-8

Victoria (DSE) 1 1 2 7 7 8 10 10Victoria (DHE) – – – 8 8 8 8 9Western Australia (DF) – – 2 2 2 2 – –Western Australia (DAg) – – 2 1 1 1 – –Western Australia (DoW) – – 2 2 2 1 – –Western Australia (DEC) – – 2 2 2 2 – 1Western Australia (DTF) – – 2 2 2 2 – –Tasmania (DPIWE) – 1 3 2 2 3 4 3Tasmania (DIER) – – – – – – – –Tasmania (DTF) – – – – – – – –South Australia (DEH) 1 5 4 6 18 9 4 5South Australia (PIRSA) – 2 2 2 2 2 2 3South Australia (DTF) – 1 1 1 1 1 1 2New South Wales (DWE) – – – 1 1 2 – 1New South Wales (DH) 1 1 1 1 1 – – –Queensland (DME) – – – – – – – 4Queensland (EPA) – – 4 5 7 9 4 4Queensland (DE) – 1 1 2 2 3 3 3

Total 3 12 28 44 58 53 36 45

4.2. GRI adoption

Table 2 presents the number of GRI indicators disclosed by each department in their annual reports. In total, disclosuresincreased up until the 2005-6 reporting period. Disclosures then declined in 2005-6 and further declined in 2006-7. Thetotal disclosures were greater for the environmental departments than for other departments.

The South Australian Department of Primary Industries and Resources, (PIRSA) was the only department to disclose itsconsideration of the adoption of the GRI guidelines in the first two years of this study.25 In 2000-1, the department stated:

PIRSA will consider the use of the Global Reporting Initiative guidelines . . . and will adapt that framework to ensure thatPIRSA’s approach is appropriate for a State Government agency in South Australia with responsibilities for natural resourcesdevelopment. (PIRSA, 2000-1:19)

However, in subsequent years there were no such disclosures and no explanation provided for their omission.The South Australian Department of Environment and Heritage disclosed the adoption of GRI guidelines as a framework

for sustainability reporting in the 2004-5 reporting period. However, the department’s annual report from 2007-8 does notinclude reference to the GRI. This is in contrast to the 2005-6 report which stated:

‘the . . . (GRI) framework and principles have guided DEH’s approach to sustainability reporting. Throughout this docu-ment, references to GRI indicators relevant to the reported performance are included’ (South Australian Department ofEnvironment and Heritage, 2005:19).

In the 2005-6 reporting period, the Queensland Environmental Protection Agency announced its adoption of the GRI andstated:

‘in line with global trends, a guide to the Charter’s (the Department’s Sustainability Charter) achievements against the GlobalReporting Initiative (GRI) is included for the first time in this report to allow comparisons with other organisations that haveset sustainability targets’ (Queensland Environmental Protection Agency, 2005:20).

However, the 2007-8 annual report does not include any mention of the GRI. This lack of information provided bythe Queensland Environmental Protection Agency and two South Australian departments above prevents a comparativeassessment over time and between departments. It also seems unusual that departments which reported that they wereadopting the GRI guidelines suddenly appeared to reduce disclosures. It also appears to be out of step with corporatereporting with a 2005 Commonwealth Government report finding that the number of companies using the GRI guidelineshad increased substantially (AGDEH, 2005).

The Victorian Department of Sustainability and Environment disclosed its adoption of the GRI guidelines in the 2004-5 period, however, in contrast to the above departments, continued reporting on this adoption of the GRI guidelines insubsequent years.

25 Although the Victorian Department of Environment and Heritage reported one GRI information item in the first two years it did not provide a statementthat it had adopted GRI reporting guidelines until 2004. The New South Wales Health Department also reported one GRI information item in the earlieryears of this study but did not provide a statement that it had adopted GRI reporting guidelines.

40 B. Lynch / Accounting Forum 34 (2010) 32–45

There is considerable variation in the number of GRI information items disclosed in the annual reports. For example inthe 2004-5 reporting period, the South Australian Department of Environment and Heritage reported on a possible 18 of thepossible 27 GRI information items utilised in this study. In contrast, some Departments such as the Tasmanian Departmentof Infrastructure Energy and Resources and Tasmanian Department of Treasury and Finance reported no GRI informa-tion items in any year of the study. This low level of disclosure limits comparison between departments on sustainabilityissues.

In the 2007-8 reporting period, the Victorian Department of Sustainability and Environment was the only department inthis study to include a GRI content index which allows readers to cross-reference reports to the GRI guidelines. The inclusionof this index is one of five criteria reports must meet to be able to state that reports are prepared ‘in accordance’ with GRIguidelines. This finding is low in comparison to a 2005 finding which reported that about 20% of Australian companies reportin accordance with the GRI (AGDEH, 2005).

5. Review and discussion of disclosures

Due to the significant decrease in environmental disclosures provided by the South Australian Department ofEnvironment and Heritage, some discussion will focus on that particular department. In 2004-5, this Department’senvironmental report (which was contained within the annual report) numbered 20 pages while the next year, 2005-6, the environmental report was only 6 pages in length. The 2004-5 environmental report contained the followingheadings: 1. Energy management/energy efficiency action plan, 2. water conservation and wastewater management,3. waste management, 4. built facilities (green building) management, 5. travel and fleet management and 6. greenprocurement. The 2005-6 environmental report was confined to two areas: energy efficiency action plan and waste man-agement.

The Department was contacted by email in January 2007 to enquire why the 2006 report did not contain information ontravel and fleet management, and green procurement, which had previously been provided. Resource constraints were putforward by a Department spokesperson as the reason. The spokesperson also stated that the report uses the GRI to providea focus on sustainability reporting and it hopes to build on this in future reports. This was an interesting comment given thesignificant reduction in environmental reporting from the previous year.

The Department spokesperson was contacted by telephone in February 2007 and a discussion took place. The spokesper-son indicated that resources had contracted throughout the government and quite significant spending cuts had taken place.This had resulted in the Department allocating less staff to data collecting and reporting. One staff member had previouslybeen employed full time in that area and the removal of that staff member to another area had resulted in the reduction ofreporting within the environmental report. That particular staff member had a passion for sustainability reporting which waslost after her departure. Farneti and Guthrie (2009) found in their study also, that one key individual within an organisationpioneered and championed the process of sustainability reporting.

Another contributing factor put forward for the reduction in environmental reporting by the South Australian Depart-ment of Environment and Heritage was that the Office of Sustainability had been moved to the Department of the Premierand Cabinet on 1 April 2006. This meant that around the executive table there was no longer a director with a focus onsustainability issues; the focus had diminished.

The reduction in environmental disclosures may be due to the reasons put forward by the Department spokesperson. Itmay also be a response to the very limited feedback the Department receives on its annual report. Very few stakeholderscomment on the report and only occasional enquires are received. It can be argued that given resource constraints andlimited stakeholder attention, continuing to report on some environmental impacts is not cost effective.

It is of interest to note the opening sentence in the chief executive’s statement in the 2006-7 annual report; ‘The aspirationthat is central to our new Corporate Plan is prosperity for South Australians’. This appears to be a shift in focus from previousyears and seems a bizarre (or perhaps disappointing) aspiration for the Department of Environment and Heritage. It alsodiffers to statements made in previous years by the same chief executive. In the 2007-8 annual report the chief executive’sstatement again mentions ‘prosperity’ however, it is linked with sustainable economic development as one might expectfor such a department.

There have been calls for improvements in sustainability reporting practices. A wide range of sustainability report-ing practices exists in Australia according to a recent CPA Australia research project (Rice, 2004). That study found thatwhile the majority of corporations did make some social and/or environmental disclosures within their annual report, theygenerally represented policy statements of limited scope. The information was overwhelmingly positive and any negativeinformation was couched in positive terms. Reporting frameworks and standards were not typically employed and verifi-cation of the stand alone reporting was inconsistent (Rice, 2004). The study suggests there is scope for improving reportingpractices.

This study also found disclosures to be predominantly positive, however some departments acknowledged the negativeimpact society has on the environment.

Our rapidly growing population has rising living standards, but we are consuming more land, more energy and more water,while generating more waste and adversely affecting the natural systems that support life (Queensland EnvironmentProtection Authority, 2007-8:4)

B. Lynch / Accounting Forum 34 (2010) 32–45 41

Another department acknowledged the negative impact it could have on the environment.

As a Victorian Government organisation, DSE is also a consumer of resources and had a physical presence that potentiallyimpacts negatively on the environment (Victorian Department of Sustainability and Environment, 2007-8:10)

Gibson and Guthrie (1995) found that the amount of environmental information provided in annual reports is limitedand improvements need to be made before there is any useful common meaningful reporting practise by organisations.Burritt and Welsh (1997a) found that environmental disclosures by Commonwealth public sector entities did not provideinformation in a form which was able to assist with comparative assessment over time. They also called for improvementsto environmental reporting.

This study also found the lack of information provided in the annual report to not only hamper comparison, but also tobe alarming if the omission of information is also an indicator of a lack of policy in some areas. For example, the TasmanianDPIW (a department with responsibility for water) does not disclose any information about water conservation, insteadthe Department reports, ‘more water being available for agriculture and other water dependent industries’ (Department ofPrimary Industries and Water, 2007-8:20).

It is also of interest to note that the Tasmanian Department of Treasury and Finance provided only one environmentaldisclosure in 2001 and then no disclosures in the four years after that until 2006. Given that Section 516A of the EnvironmentalProtection and Biodiversity Conservation Act 1999 had been in place for some years, it is surprising this Department does notprovide disclosures during this period. Whilst it might be argued that this department does not operate in an environmentallysensitive area, the operations of the organisation (such as water, paper and energy usage) have an environmental impactand should be reported.

6. Summary and conclusions

As found by Bebbington et al. (2009), various influences contribute to sustainable reporting. Regulative influences such asincreased environmental reporting regulations in Victoria were responsible for increased disclosures from the two depart-ments in that state. Decreased reporting regulations in Western Australia resulted in a decrease in disclosures from 4 outof 5 departments in that state. This might be partly a result of what Bebbington et al. (2009) identify as mimetic pressurewhereby organisations are highly sensitive to what they peers are doing. Carpenter and Feroz (2001) and Chalmers andGodfrey (2004) also refer to conformity to peer practices being associated with reporting practices. Normative and cognitiveinfluences are not so easily identified and further analysis would be required to determine their effect.

Structural changes also influenced reporting practices. The transfer of water responsibilities from both Queenslanddepartments meant these departments no longer had a focus on water disclosures as they had previously and thereforeresulted in reduced disclosures in this area. Increases in disclosures can also be attributed to structural changes betweendepartments giving increased responsibility for environmental issues.26

Reduction in disclosures by some departments may be due to a lack of external pressure from stakeholders. Unless thisexternal pressure exists, the departments may not view the benefits of reporting exceed the costs of doing so. The reporting ofsome indicators such as energy consumption and greenhouse gas emissions may be a complex and costly exercise involvingdata gathering from many different locations and departments are unlikely to report unless there is some real benefit indoing so. Institutional theory suggests that an organisation tends to conform with society’s expectations, traditions andnorms and unless pressure to report is significant there is no compelling reason to do so.

It is hoped that the reduction in some environmental reporting practices does not continue. It is of concern that somedepartments are providing less information about activities which are not always observable. For example, the WesternAustralian Department of Agriculture provided no energy consumption disclosures in 2006-7 despite providing disclosuresin previous years. This reduction in disclosures may be consistent with the predictions of institutional theory.

Community expectations change over time and the departments who provided reduced disclosures may have done soin line with a lack of threats to the department’s legitimacy. Department managers are aware of community expectationsand change their disclosures accordingly. According to Carpenter and Feroz (2001) successful governments are those thatgain support and legitimacy by conforming to social pressures. More interview data would enhance analysis of reportingpractices and perhaps, provide more support for legitimacy and institutional theory.

This study has shown that although environmental reporting by government departments has increased, reporting isnot consistent over time and there are variations in the standard of reporting between departments responsible for similarareas. If environmental disclosures are to be useful, these issues need to be resolved. The lack of uniform reporting regula-tions between states hampers comparison. Whilst there is Commonwealth Government legislation in place requiring theprovision of environmental performance information in annual reports, legislation differs between states and this results ininconsistencies in reporting practices.

It is disappointing to note the low level of reporting on GRI guidelines. Only one department in this study provideda GRI content index enabling cross referencing with the guidelines. Ball and Grubnic (2007) believe that public sector

26 The Western Australian Department of Energy and Conservation and New South Wales Department of Water and Energy were both given increasedresponsibility for environmental issues.

42 B. Lynch / Accounting Forum 34 (2010) 32–45

organisations have a role to play in moving the sustainable development agenda forward and help set new terms by whichthe next generation live. Part of this involves reporting publicly and transparently on how they are promoting sustainability.This study has demonstrated that some departments do not appear to be leading ‘by example in reporting publicly andtransparently on their activities to promote sustainability’ (GRI, 2005:7–8).

Given calls for improvements in environmental reporting, it is recommended that mandatory GRI adoption be introducedfor all government departments. The Commonwealth Department of Environment and Heritage has already produced a guidewhich aims to assist Australian organisations by providing background and methodologies to enable reporting against theGRI indicators. Use of the GRI would provide a uniform set of environmental disclosure indicators which would enablecomparison both over time and between departments. The use of the GRI would also enhance efficiency in the reportingprocess by providing a standard set of indicators which could provide the basis for sustainable reporting.

7. Limitations

As with most research, this study has limitations. First, the departments in this study had different areas of responsibility.Also, several departments underwent name or structural change over the period examined.27 Therefore, the comparison oftheir reporting practices may have been affected by their changed structure.

Another limitation relates to the Environmental Disclosure Index developed for purposes of the study. Not all departmentswere responsible for exactly the same areas. Therefore, the reasons for non-disclosure in some particular categories may havebeen their irrelevance. For example, the Tasmanian Department of Primary Industries and Water and Western AustralianDepartment of Agriculture were the only departments in this study responsible for primary industries and therefore theonly departments likely to disclose effluent management practices. In another example, in several categories under thebiodiversity aspect, it was assumed that the New South Wales Department of Water and Energy did not have disclosures toreport as it did not have direct responsibility for some biodiversity categories. Therefore, the coverage of the EDI requiredresearcher judgement. However the final number of categories was based on prior literature28 and the GRI.

8. Further research

In providing an insight into the nature and extent of environmental reporting within the annual reports of a sample ofAustralian state government departments, this study highlights areas for further research.

The EDI developed in this study could be used to determine the nature and extent of environmental reporting in otherAustralian Commonwealth, state and territory government departments. The EDI could also be used to analyse other meansof environmental reporting disclosures, such as disclosures provided in stand alone environmental reports.

The reporting practices of Australian government departments could be compared to those of international governmentdepartments. Such a comparison would provide insight into international environmental reporting practices.

As mentioned previously, more insights into the factors influencing disclosure practices could be discovered throughmore interview data.

Appendix A. Environmental disclosure index

Focus areas Aspect Information category

1. External focus 1. Commitment 1. Statement of environmental concern2. Involvement with external(environmental)organisations3. Stakeholder acknowledgement

2. Influences 4. Environmental awards5. Recognition of government legislation

2. Internal focus 1. Profile 6. Goals/aims/objectives7. Values8. Mission statement9. Image

2. Sustainability reporting 10. Environmental sustainability framework11. Adoption of GRI indicators

3. Environmental programs 1. Research and development 12. Research and development internal13. Research and development: external

27 An attempt to mitigate against these changes was made by providing two sets of data for these departments.28 See Frost (1999).

B. Lynch / Accounting Forum 34 (2010) 32–45 43

Appendix A (Continued )

Focus areas Aspect Information category

2. Materials 14. Green procurement15. Green building16. Paper management17. Supply chain

3. Energy 18. Resource consumption/conservation19. Green power

4. Water 20. Water conservation21. Water monitoring22. Water reporting23. Water quality24. Water recycling

5. Biodiversity 25. Precautionary principle26. Restoration/rehabilitation27. Flora/fauna protection/conservation28. Pest/weed/disease management29. Tree planting30. Forest report31. GMO moratorium32. Ecological footprint33. Fire management34. Ecologically sensitive fire regime35. Soil36. Freshwater ecosystem conservation37. Marine and fish management38. Biosecurity39. Biological inventory

6. Emissions, effluents and waste 40. Air quality41. Kyoto target42. Greenhouse gas emission43. Climate change44. Effluent management45. Recycling/waste utilisation/waste disposal46. Hazardous waste management

7. Social environmental programs 47. Heritage projects48. Heritage strategy49. Community projects50. Community feedback/consultation51. School program52. Awards53. Awareness and training54. Policy advice

8. Compliance 55. Prosecution and enforcement56. Regulation/legislation

9. Transport 57. Vehicle travel58. Alternative forms

4. Environmental performance indicators 1. Materials 59. Total used other than water, by type60. Percentage used that are wastes (from externalsources)

2. Energy 61. Direct energy use by primary source (report injoules)62. Indirect energy use (report in joules)63. Energy consumption footprint (report in joules)

3. Water 64. Total water use65. Annual withdrawals of ground and surfacewater66. Total recycling and reuse of water

4. Biodiversity 67. Location and size of land owned, leased, ormanaged in biodiversity rich habitats68. Total amount of land owned, leased ormanaged for production activities or extractive use69. Amount of impermeable surface as apercentage of land purchased or leased

44 B. Lynch / Accounting Forum 34 (2010) 32–45

Appendix A (Continued )

Focus areas Aspect Information category

70. Changes to natural habitats resulting fromactivities and operations and percentage of habitatprotected or restored71. Number of endangered species with habitats inareas affected by operations72. Major impacts on biodiversity73. Impacts on protected and sensitive areas

5. Emissions, effluents and waste 74. Greenhouse gas emissions (separate subtotalsfor each gas in tonnes)75. Use and emissions of ozone-depletingsubstances (report each figure separately)76. NOx , SOx and other significant air emissions bytype77. Total amounts of waste by type and destination78. All production, transport, import or export ofany waste deemed “hazardous” under the terms ofthe Basel Convention Annex I, II, III and VIII.79. Significant spills of chemicals, oils and fuels80. Significant discharges to water by type81. Other relevant indirect greenhouse gasemissions

6. Suppliers 82. Performance of suppliers relative toenvironmental components of programs andprocedures

7. Products and services 83. Significant environmental impacts of principalproducts and services

8. Compliance 84. Incidents of and fines for non-compliance9. Transport 85. Environmental impacts

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