Social and Environmental Accounting the Expanded Value Added Statement

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SOCIAL AND ENVIRONMENTAL ACCOUNTING: THE

EXPANDED VALUE ADDED STATEMENT

by

Laurie Ingrid Mook

A thesis submitted in conformity with the requirementsfor the degree of Doctor of Philosophy

Department of Adult Education and Counselling Psychologyntario Institute for !tudies in Education of the

"ni#ersity of $oronto

% Copyright by Laurie Ingrid Mook &'(()*


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Social and Environmenal Acco!nin": T#e E$%anded Val!e Added

SaemenDocor o& P#ilo'o%#( )*++,-

La!rie In"rid Moo.

De%armen o& Ad!l Ed!caion and Co!n'ellin" P'(c#olo"(

Univer'i( o& Torono

A/'rac

$he E+panded ,alue Added !tatement &E,A!* makes a significant contribution to

the field of accounting by highlighting hitherto in#isible dimensions and integrating them

into a single accounting statement- $his. in turn. helps to tell a much richer performance

story of organi/ations and opens up new possibilities for organi/ational and social

change- $he E,A! recogni/es established traditions in the field of accounting. but at the

same time pushes the en#elope aiming at #iable changes in accounting practices that

nurture a more sustainable society- It pro#ides a considerable ad#ance in social

accounting by integrating economic. social and en#ironmental factors in a format that is

applicable to different organi/ation types. time dimensions. and conte+ts-

$he E,A! has four main influences0 mainstream accounting. critical accounting.

social accounting. and sustainability- Mainstream accounting. particularly the progressi#e

practice of #alue added accounting. highlights the wealth created &or destroyed* and

distributed through the results of labour and capital in transforming e+ternal goods and

ser#ices- Critical accounting contributed with two insights0 that accounting is not a

neutral acti#ity. and that accounting practices are shaped by and can in turn can shape

social reality- !ocial accounting. especially the subfield of integrated social accounting.

has pro#ided a significant precedent for the E,A! by broadening the range of items

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included in accounting statements to take into account e+ternalities- 1inally. the concept

of sustainability pro#ided the conceptual and normati#e framework that guided the

selection of #ariables included in the E,A!-

In this manuscript2based dissertation. the E,A! is applied to three case studies-

$he first looked at the #alue added of #olunteer work and un2reimbursed out2of2pocket

e+penses in A34,A. a non2profit scholarly association- $he second case study. a

construct of 55 sustainable buildings in the "!A. shows the costs and benefits of building

in sustainable ways #ersus using traditional building techniques- $he third case. based on

a master2planned community in ,ancou#er. includes an economically targeted

in#estment. a non2profit community police centre. a non2profit neighbourhood house. and

municipal go#ernment agencies. and shows how the E,A! can integrate economic. social

and en#ironmental impacts and help to make in#estment decisions that support

sustainability-

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Ac.no0led"emen'

I am indebted to many friends and colleagues who ha#e inspired and supported me while

undertaking this graduate work- 1irst and foremost. I would like to thank my super#isor.

6ack 7uarter. who pro#ided unfailing support and guidance throughout the entire process-

As a mentor. colleague and friend. he is unparalled- I would also like to thank the

members of my committee- 6oel Amernic. 8renda 9ainer. and 1emida :andy pro#ided

#aluable feedback and support- My e+ternal e+aminer. $ed 6ackson. pro#ided a thorough

e#aluation of the thesis and raised #ery thoughtful questions at my defence- ;our

insightful comments helped to enrich my understanding of this work from different

disciplinary backgrounds. and I would like to thank you all for your helpful suggestions

to mo#e this work forward-

At the ntario Institute for !tudies in Education. I was lucky to be part of 6ack 7uarterunle Akingbola.

8renda Elias. !u/anne Cook. Clement 6umbe. and 4ancy Linley for their friendship.

ad#ice and encouragement- $hank you also to the administrati#e and technical staff at

I!E. for pro#iding an en#ironment that encourages and facilitates inno#ati#e and

important work- I would wish to thank my friend and colleague 8etty 6ane 3ichmond for

her pioneering work in this area- It was through her that I was first introduced to social

accounting-

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I would also like to e+press my sincere gratitude to all of the organi/ations and people

who participated in this research- =ithout your belief in the importance of this work. this

dissertation could not ha#e been written- I would also like to acknowledge the financial

support I recei#ed from the !ocial !ciences and :umanities 3esearch Council and the

"ni#ersity of $oronto-

My most heartfelt thanks go to my husband Daniel. who pro#ided incredible support and

feedback throughout the years. and my children Ale?andro and Ana. who were almost as

e+cited as I that I am now Dr- Mook- Last but not least. I thank my parents. Leo &@5'2

@'*. and :enny Mook. for their lo#e and encouragement. and for being en#ironmental

acti#ists since before I was born-

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Ta/le o& Conen'

Abstract iiAcknowledgements iv$able of Contents viC#a%er One:

Inrod!cion 1

8ackground @3ationale for the !tudy 5Purpose of the !tudy and 3esearch 7uestions B3esearch Design and Methodology 3ationale for Case !election Data Collection rgani/ation of the Dissertation @@C#a%er T0o:

Liera!re Revie0 and Conce%!al De/ae' 12

Introduction @5Approaches to Accounting @Progressi#e Mainstream Accounting0 $he ,alue Added !tatement @!ocial Accounting Models '' Integrated !ocial Accounting0 $wo =a#es '' $he 1irst =a#e of Integrated !ocial Accounting '5 $he !econd =a#e of Integrated !ocial Accounting 'Accounting Education 5Adoption of Alternati#e Accounting Models 5

3ationale for an E+panded ,alue Added Approach B($he E+panded ,alue Added Model B@C#a%er T#ree: Ca'e 31

T#e Val!e o& Vol!neerin" &or a Non4%ro&i Mem/er'#i% A''ociaion:

T#e Ca'e o& ARNOVA

56

Abstract BIntroduction Brgani/ation0 Choice and 8ackground B)Data Collection0 $he A34,A !ur#ey B

1indings0 ,olunteers at A34,A (A34,A0 ,alue Added by ,olunteers @E+panded ,alue Added !tatement &E,A!*0 Introducing the Model 'Estimating the ,alue Added by ,olunteers in A34,A BDistribution of ,alue Added @!ummary of the E+panded ,alue Added !tatement &E,A!* 'Additional bser#ations BDiscussion of 1indings )

#i


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C#a%er 7o!r: Ca'e 3*

Ine"rain" and Re%orin" an Or"ani8aion9' Economic Social and

Environmenal Per&ormance: T#e E$%anded Val!e Added Saemen

,1

Abstract )@Introduction )@$he Main Assumption0 Accounting as a Change Agent )'!ocial Accounting )B$he E+panded ,alue Added !tatement )!ustainable 8uilding E+ample ) Income !tatement 5 $he E+panded ,alue Added !tatement &E,A!* ,alue of utputs !ubtracting E+ternal Purchases ) ,alue Added

3atio of ,alue Added to Purchases Distribution of ,alue Added ( Employees ( Customers ( !ociety ( rgani/ation @!ummary of E,A! @Discussion 'C#a%er 7ive: Ca'e 32

Social Acco!nin" and Re%orin" &or Economicall( Tar"eed

Inve'men': T#e E$%anded Val!e Added Saemen

B

Introduction BEconomically $argeted In#estments and 1iduciary 3esponsibility An Introduction to !ocial Accounting $he E+panded ,alue Added Model @(@An Economically $argeted In#estment0 Collingwood ,illage @(4eighbourhood Amenities @@@ Collingwood Community 4eighbourhood :ouse @@@ Collingwood Community Policing Centre @()Case E+ample0 Community ,illage @@' Construction @@B perations @@B 3ental Management @@B Condominium Management @@ Community Centre @@ Community Policing Centre @@ $a+ation @@) !tatement of perations @@)

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,alue Added !tatement @@ Identifying !ocial and En#ironmental Impacts @'( $ransit2oriented De#elopment @'@ Acti#e Lifestyle @'B Crime Pre#ention @'

Impact of Purchasing Decisions @' Putting it All $ogether @'Discussion @'

C#a%er Si$:

Com%araive Cro''4ca'e Anal('i' Recommendaion' and

Concl!'ion'

12*

3e#isiting the 3esearch 7uestions @5'

7uestion ne0 $he E,A! in the Accounting Conte+t @55 7uestion $wo0 Comparing the $hree Cases @5B Common Elements across the Case !tudies @5 ,arying Elements across the Case !tudies @5) 3edefining =ealth0 Items Included3ecommendations for Accounting Education and Policy @B53ecommendations for 1urther 3esearch @BEpilogue0 $he Model in "se @BConclusions and Limitations @BRe&erence' @@A%%endi$ A: Val!aion Me#od' @)B

Li' o& Ta/le'

$able '-@ $he ,alue Added !tatement '($able '-' $he E+panded ,alue Added !tatement in the Conte+t of

Integrated !ocial Accounting

'B

$able '-5 Elements of the E+panded ,alue Added !tatement B'$able 5-@ Calculation of ,olunteer 4on2reimbursed ut2of2pocket

E+penses

)

$able 5-' E+panded ,alue Added !tatement for A34,A $able 5-5 3econciliation of E+penditures on Audited 1inancial

!tatements to Purchases of E+ternal 9oods and !er#ices on ,alue Added

!tatement

@

$able B-@ 1inancial 8enefits of 9reen 8uildings &per ft' * @

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$able B-' Income !tatement 5$able B-5 1inancial 8enefits of !8C Pro?ect A &@). (( ft'F@'-) m'* B$able B-B E+panded ,alue Added !tatement G !ustainable 8uilding Co-

&!8C*

$able -@ 3ates of 3eturn. Mortgage 1und ne. @2'((B &H* @($able -' 8reakdown by Percentage of E+penses of 3ental 8uildings @@$able -5 8reakdown by Percentage of E+penses of Condominiums @@$able -B !tatement of perations @@$able - ,alue Added !tatement for Community ,illage. for the $en

;ears Ending December 5@. '((B

@'(

$able -0 $ransportation Cost 1actors &in @ "! dollars* @''$able -) A#erage Cost of Property Crime to ,ictims. by $ype of Crime

&@*

@'

$able - Comparison of E4E39; !$A3 and 4on2E4E39; !$A3 @')$able - E+panded ,alue Added !tatement for Community ,illage @5($able -@ !ummary of E+panding the 8oundaries Common to all Cases @5$able -' !ummary of E+panding the 8oundaries !pecific to each Case @B(2B@

Li' o& 7i"!re'

1igure @-@ Case !tudy Methodology @(1igure '-@ E+panded ,alue Added !tatement in Conte+t @B1igure '-' 9raphical 3epresentation of Inflows and utflows of

3esources of the !ocioeconomic Impact !tatement

5

1igure 5-@ Monetary and 4on2monetary Contributions 51igure 5-' Proportion of $otal Acti#ity :ours by ,olunteers and !taff B1igure B-@ 9raphic Depiction of ,alue Added !howing $raditional and

!ustainable 8uilding Methods

@

1igure -@ A 9raphic Illustration of Profit @('1igure -' A 9raphic Illustration of ,alue Added @(51igure -50 Distribution of ,alue Added @'(

i+


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CHAPTER ONE

INTRODUCTION

;ac."ro!nd

$he purpose of this thesis is to e+amine the limits of traditional accounting and to

de#elop and apply an alternati#e accounting framework called the E+panded ,alue Added

!tatement &E,A!*- $his framework allows organi/ations to estimate their economic.

social and en#ironmental #alue added- I locate the E+panded ,alue Added !tatement in

accounting theory. and particularly reformist accounting theory- I intend to demonstrate

that the E+panded ,alue Added !tatement can be effecti#ely applied to non2profit. for2

profit and public2sector organi/ations to signal an organi/ation


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what e+tent the =aterloo Co2operati#e 3esidences Inc- contributed to the social and

economic life of its community- In one of my literature searches I came across an article

e+plaining the ,alue Added !tatement &Meek J 9ray. @*. and was intrigued by its

possibilities as a social accounting statement- :owe#er. the traditional ,alue Added

!tatement only included financial items. and I was interested in the possibility of showing

both social and economic impacts- I then modified the statement to report both financial

and social #alue added by the co2operati#e. and named it the E+panded ,alue Added

!tatement- $he primary inno#ations of that model were to include an estimated #alue for

social labour

@

contributed by resident2members to the co2operati#e as part of the #alue

added as well as a #alue for secondary outputs'such as the skills learned by resident2

members in running a multi2million dollar organi/ation &3ichmond J Mook. '((@*-

After completion of the pro?ect with the student co2operati#e. I applied the

E+panded ,alue Added Model to four Canadian non2profit organi/ations0 the Canadian

3ed Cross. $oronto 3egionK the Canadian 8reast Cancer 1oundation. ntario ChapterK

Canadian Crossroads InternationalK and the 6aneF1inch Community and 1amily Centre-

$his pro?ect made it possible to address more specifically the challenges in attributing a

comparati#e market #alue to #olunteer contributions and in including them in the

E+panded ,alue Added !tatement-

I continued this line of research with 6unior Achie#ement of 3ochester in the

!tate of 4ew ;ork. applying the E+panded ,alue Added !tatement to that organi/ation-

Alongside that work I also created two additional social accounting statements- ne of

them was the !ocioeconomic Impact !tatement. which highlights the flow of monetary

@!ocial labour0 =ork duties required as a condition of membership in a co2operati#e'!econdary outputs0 the indirect effects of an organi/ation


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and social resources to and from stakeholders- $he other was the !ocioeconomic

3esource !tatement. which reports an organi/ation


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Raionale &or #e S!d(

In Canada and throughout the world. there is a myriad of organi/ations that ha#e

both social and economic ob?ecti#es- Among them are non2profit organi/ations. co2

operati#es. social enterprises. other for2profits with en#ironmental and social mandates.

and public sector enterprises- All these entities can be grouped under the umbrella

concept of socially minded organi/ations- $he main impetus for this dissertation was that

the traditional accounting statements that these organi/ations prepare fall short in

showing their social and en#ironmental side- Indeed. traditional accounting statements

were de#eloped to measure success in terms of profit and shareholder returns- =hile the

logic of traditional accounting does not reflect the broader ob?ecti#es of socially minded

organi/ations. traditional accounting also falls short because non2monetary resources are

e+cluded from consideration- $his can be especially significant for those organi/ations

that rely hea#ily on #olunteer labour-

$hus. traditional accounting for socially minded organi/ations falls short in two

important areas- 1irst. traditional accounting is incomplete as it ignores a significant

source of inputs. in particular. #olunteer labour- !econd. it is incomplete as it ignores a

significant part of its outputs. particularly social and en#ironmental outputs- 8ecause of

these two features. traditional accounting lea#es much to be desired in helping socially

minded organi/ations measure their performance according to their combined social and

economic ob?ecti#es-

B


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P!r%o'e o& #e S!d( and Re'earc#

$he purpose of this study is to e+plore the relationships between accounting and

sustainability by broadening the boundaries of accounting- 1or this. it aims at de#eloping

a holistic social accounting model that integrates economic. social and en#ironmental

#ariables- $he focus of this work is on socially minded organi/ations. that is.

organi/ations that e+plicitly ha#e more than an economic purpose as their primary reason

of being- $his thesis pays specific attention to two related questions0

@* Can the economic. social and en#ironmental impacts of an organi/ation be

quantified to be included in an accounting model If so. how


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'* Can an organi/ation


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multiple sources of e#idence are used &;in. '((5*- In this study. the focus is on making

#isible economic. social and en#ironmental factors that relate to the wider concept of

sustainability. in other words. quality of life and the en#ironment-

Each case study in this dissertation is a whole study on its own. and each follows

the same conceptual model and asks the same general research questions- $he differences

between the cases are in the organi/ational type. unit of analysis. and mi+ of research

methods used to collect data- $he lessons from each case informed the ne+t iteration of

the model-

Raionale &or Ca'e Selecion

$he three cases were selected in order to pro#ide differing organi/ational conte+ts

&non2profit. for2profit and public sector* in which to test the model. and to further the

de#elopment of the model by including a different array of social and en#ironmental

#ariables- $he intent was not to e#aluate the contribution to or detraction from

sustainability of each organi/ation. but to test the fle+ibility and #iability of the E+panded

,alue Added !tatement-

$he first case study in#ol#es a membership non2profit organi/ation- It consists of

an e+ploratory analysis of how the #olunteer work of members and their unreimbursed

out2of2pocket e+penses can be #alued and presented within the E+panded ,alue Added

!tatement- $he study is based on the Association for 3esearch on 4onprofits

rgani/ations and ,oluntary Action &A34,A*. an international organi/ation that brings

together academics and practitioners in#ol#ed in research on non2profit organi/ations and

#oluntary action- Although research indicates that #olunteer labour is of significant #alue

to many non2profit organi/ations and to society. this #alue is generally not included in the

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organi/ations< financial accounting statements- $he first case utili/es the E+panded ,alue

Added !tatement to demonstrate how this could be done-

$o e+plore how the model could be used in a for2profit setting. I created an entity

called !ustainable 8uilding. which is presented. in the second case- In this case. a #ariety

of social and en#ironmental impacts attributed to sustainable building are included in the

E+panded ,alue Added !tatement- $he original data informing this case study come from

>ats et al-


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1igure @-@ shows how the multi2case study e#ol#ed- $he de#elopment of the three

cases o#erlapped. with the first two cases pro#iding the necessary insights to complete

the third case- Indeed. the A34,A case pro#ided the background to include #olunteer

contributions. and the !ustainable 8uilding case pro#ided the basis for including social

and en#ironmental factors o#er a long term- 8ringing all three cases together pro#ided an

opportunity to reflect on the model and implications for further research- I will address

those issues in the final chapter-

Daa Collecion

Data were collected through re#iews of documents and archi#al records.

inter#iews. and an online sur#ey- $he aim of data collection was to gather information

about the organi/ations< impacts to enable the estimation of their comparati#e market

#alue so they could be included in the E+panded ,alue Added !tatement-

In the A34,A case. data were collected through document re#iews and an

online sur#ey with members of the association- Documents included financial reports.

annual reports. #olunteer tracking reports and internal communications-

$he !ustainable 8uilding case relied on secondary data collected by >ats et al-

&'((5* from a study of 55 green buildings- $hese data were used to pro#ide in the model

the financial #aluations relating to the en#ironmental and health benefits of green

building-

$he Community ,illage case in#ol#ed collecting data from a #ariety of

organi/ations0 a for2profit real estate de#elopment company. a non2profit community

policing office. a non2profit neighbourhood center. and the municipal go#ernment-


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Inter#iews were conducted with two top management persons and two staff of the real

estate de#elopment company. the e+ecuti#e director of a community policing centre. and

a researcher who had done pre#ious research on this community- $he real estate

de#elopment company pro#ided selected financial data. and other financial documents

were obtained from go#ernment Internet sites- ther documents re#iewed included

minutes from go#ernment meetings. internal newsletters and communications.

organi/ation pamphlets and reports. personal correspondence. and go#ernment reports-

In order to e+pand the boundaries of traditional accounting. suitable #aluation

methods had to be selected- E#en though there may be disagreement on the specifics of

assigning a #alue to social and en#ironmental outputs. placing a #alue on them recogni/es

their presence and their relati#e importance to economic performance. and documenting

the assumptions behind these calculations enables readers to assess the basis of these

#aluations-

@(


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7IGURE 1=1: Ca'e S!d( Me#odolo"(=

Adapted from ;in &'((5*-

@@


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Or"ani8aion o& #e Di''eraion

$his dissertation follows the manuscript2based approach- $he first chapter pro#ides the

background and rationale for the proposed study and outlined the methodology used- Chapter

two elaborates upon the critique of traditional accounting initiated in this first chapter and

re#iews alternati#e accounting models &e-g-. #alue added accounting. social accounting.

sustainability accounting*- It also outlines the conceptual model that guided the data collection

and analysis-

Chapters three. four and fi#e consist of manuscripts of the three case studies- $he first

manuscript. $he ,alue of ,olunteering for a 4onprofit Membership Association0 $he Case of

A34,A


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$his manuscript applies the model to a master planned community de#eloped as an economically

targeted in#estment &E$I* by a real estate owned by union and management pension plans-

1inally. chapter si+ pro#ides a cross2case analysis and outlines the limitations and

significance of the work- It then discusses some implications for policy. and for education and

makes suggestions for further research-

@5


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CHAPTER T>O

LITERATURE REVIE> AND CONCEPTUAL DE;ATES

Inrod!cion

As mentioned in chapter one. the main contribution of this work to the field of accounting

is the de#elopment of a conceptual tool called the E+panded ,alue Added !tatement &E,A!*- I

pro#ide the larger conte+t of the E,A! in 1igure '-@-

As shown in the diagram. the E+panded ,alue Added !tatement has four main influences0

progressi#e mainstream accounting. critical accounting. sustainability. and social accounting

&1igure '-@*- $he first influence that informed the de#elopment of the E,A! is mainstream

accounting. particularly the progressi#e practice of #alue added accounting- ,alue added

accounting highlights the wealth created &or destroyed* and distributed through the results of

labour and capital in transforming e+ternal goods and ser#ices into something else- A second

influence is critical accounting. an academic subfield of the accounting discipline that pro#ides

two main insights for the conceptuali/ation of the E,A!0 namely. that accounting is not a neutral

acti#ity and that accounting practices play a role in shaping social reality- A third influence

comes from the field of sustainability. which pro#ides the #alue system and principles &e-g-. a

focus on quality of life and on the en#ironment* that guide the selection of #ariables in the

E,A!- 1inally. the E,A! is highly influenced by the field of social accounting. especially by the

subfield of integrated social accounting-

@B


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7IGURE *=1: E$%anded Val!e Added Saemen in Cone$

In the remainder of this chapter. I outline the main approaches that can be found in the

field of accounting0 traditional accounting. critical accounting. and social accounting- In this

section I also address the main critiques raised to these approaches- In the ne+t section. I describe

the ,alue Added !tatement. and a subset of social accounting models that I call integrated social

@


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accounting- In that part. I will distinguish between the first wa#e of integrated social accounting

that emerged in the @)(s and the second wa#e that emerged in the @(s and still continues-

Afterwards. I discuss some of the obstacles that ha#e precluded the adoption of these alternati#e

models by the accounting profession- Lastly. I ad#ance the rationale for utili/ing a #alue added

approach and describe in greater detail the model proposed in this dissertation. the E+panded

,alue Added !tatement-

A%%roac#e' o Acco!nin"

$he pre#ailing approach to traditional accounting consists of identifying. gathering.

measuring. summari/ing and analy/ing financial data in order to support economic decision2

making &American Accounting Association. @(. @'*- $raditional accounting follows a

positi#istic interpretation of the world &Chua. @K Lodh J 9affikin. @)*- $his understanding

of accounting is based on the assumption that people are not acti#e in the construction of their

social reality &Chua. @*- People are treated as resources used to generate profits. as opposed to

the organi/ation being treated as a resource for people &Cherns. @)*- $he main raison d


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$his traditional approach to accounting is reflected in teaching and professional

de#elopment. which tend to focus on technique acquisition &9ray. 8ebbington J McPhail. @BK

3oslender J Dillard. '((5*- Moreo#er. students are often taught that accounting decisions in

businesses are made in order to ma+imi/e shareholder wealth &1erguson et al-. '((. '((*-

#erall. accounting education treats the discipline as a neutral. technical. and #alue2free acti#ity

&:opwood. @(K Lewis. :umphrey J wen. @'*-

$he sustained criticisms to traditional accounting that emerged in the @(s and @)(s

ga#e birth to a second approach known as critical accounting- Critical accounting scholars began

to systematically question the assumptions underlying traditional accounting. arguing that

accounting practices are neither ob?ecti#e. neutral. nor #alue2free. and that they create. sustain

and change social reality &Cooper J 4eu. @)K Craig J Amernic. '((BK 9ray. '(('K :ines.

@K :opper. !torey J =illmott. @)K Llewellyn. @BK Lodh J 9affikin. @)K Mathews.

@)K Morgan. @K $inker. @*- 1or instance. critical accountants argue that. by the #ery act

of counting certain things and e+cluding others. accounting shapes a particular interpretation of

social reality- $his interpretation. which corresponds to particular assumptions about how society

functions and should function. has in turn implications for decision2making and policy &:ines.

@K $inker. Merino. J 4eimark. @'*-

Critical accounting also urges us to reflect upon the conditions and consequences of

accounting. especially as they lead to alienation. oppression and emancipation. and to consider

accounting within a broad. societal conte+t &Lodh J 9affikin. @)K 3oslender J Dillard. '((5*-

Critical accounting asserts that organi/ations ha#e an impact on a wide group of stakeholders and

that accountability to these groups as a democratic mechanism is desirable &9ray et- al-. @)*-

@)


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$he range of contributions to the scholarship on critical accounting is di#erse &Cooper J

:opper. @)*- $here is a wide #ariety of theoretical and methodological underpinnings in

critical accounting research including symbolic interactionism and ethnomethodology. political

economy. :abermassian critical theory. 1oucauldian approaches. 9iddens< structuration theory.

9ramsci


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!ocial accountinghas been critici/ed in both traditional accounting and in critical

accounting- $he traditional response relates to 1riedman


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Moreo#er. social accounting can be applied to any social system and is not strictly a

capitalist pro?ect- $he idea of looking at three bottom lines through a stakeholder perspecti#e is a

useful way of understanding the interconnections between the economic. social and

en#ironmental dimensions of any society- Indeed. it pro#ides processes necessary to understand

and take simultaneous action on economic. social and ecological ?ustice issues-

In the ne+t two sections. I describe the main actual working models that ha#e come out of

the progressi#e mainstream accounting and integrated social accounting literatures- In reference

to progressi#e mainstream accounting. I focus on the ,alue Added !tatement- 3egarding

integrated social accounting. I discuss a #ariety of models that bring together economic. social

and en#ironmental factors into a single statement-

Pro"re''ive Main'ream Acco!nin": T#e Val!e Added Saemen

$o de#elop the model in my dissertation. I chose to start with a progressi#e practice &still

marginal* of mainstream accounting called the ,alue Added !tatement- As 8urchell et al- &@.

p- 5* state0

#alue added has the property of re#ealing &or representing* something about the social

character of production. something which is occluded by traditional profit and loss

accounting- ,alue added re#eals that the wealth created in production is the consequence

of the combined effort of a number of agents who together form the co2operating team-

$he ,alue Added !tatement was proposed by =aino !uo?anen in @B- !uo?anen based

his ideas on the concept of #alue added de#eloped by the "nited !tates Department of

Commerce in the late @B(s for national income analysis- :e recommended the ,alue Added

!tatement as a supplemental report. which analyses Nthe #alue added in production and its source

'(


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or distribution among the organi/ation participantsO &!uo?anen. @B. p- 5*- $he format of the

statement is shown in $able '-@. and is similar to the one used today-

Making the assumption that an enterprise is responsible to all participants and not only to

its stockholders. !uo?anen argues that the concept of income as it appears on the traditional

income statement is deficient as it pro?ects the idea that the sole purpose of the organi/ation is to

pro#ide income to its owners- $hrough the ,alue Added !tatement. which he also called a new

form of enterprise accounting. !uo?anen &@B* hoped to shift the conceptual basis of accounting

from the primacy of accounting for profit to the wider representation of #alue added- In this new

frame of reference. it is recogni/ed that the organi/ation


31/187

&the findings of a committee that was re2e+amining Nthe scope and aims of published financial

reports in the light of modern needs and conditionsO*. argued for a much wider #iew of

accountability and recommended that a ,alue Added !tatement be considered for new statutory

disclosure requirements in the "nited >ingdom &Accounting !tandards !teering Committee.

@). p- B*- $he ,alue Added !tatement became so popular in the "nited >ingdom that in the

@)(s. one third of the largest companies included it in their corporate reports &Morley. @@. as

cited in 3oslender. @'*-

:owe#er. attention gi#en to #alue added in the "nited >ingdom declined during the early

@(s as the political climate became more conser#ati#e- $he election of Margaret $hatcher as

prime minister resulted in a focus on free markets. competition. increased in#estment in

technology. and reductions by corporations in their labour force- $his political climate differed

from the pre#ious decade-. a ma?or emphasis on #alue added re2appeared in

'(('. when the Department of $rade and Industry Inno#ation "nit published its first ,alue

Added !coreboard.< which show the top (( "->- and top 5(( European companies in terms of

#alue added= 8y '((). (( "->- and )( European companies were included in the scoreboard

&D$I. '(()*-

''


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Social Acco!nin" Model'

It is pertinent to note that social accounting pro?ects can fall into two broad categories-

ne of them. which I call supplemental social accounting


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As can be seen in $able '-'. there ha#e been two wa#es of integrated social accounting-

$he first was in the @)(s. and was characteri/ed by bold e+perimentation with alternati#e

accounting models for for2profit organi/ations. and bold claims about what they could measure

and represent- $his e+perimentation all but disappeared in the @(s. and a second wa#e re2

emerged in the @(s. albeit a more cautious approach that was more realistic about what these

models could measure &9ray. @. '((@*- $his second wa#e also saw se#eral models applied to

organi/ations outside the for2profit sector. for instance. to non2profits and co2operati#es-

T#e 7ir' >ave o& Ine"raed Social Acco!nin"

$he @)(s saw a growing public demand for information related to e+penditures and

associated social impacts &Dilley J =eygandt. @)5*- E+perimentation also grew with different

accounting statements to reflect this information demand- Predictions were made that social

audits would be required for business organi/ations within the ne+t ten years &Linowes. @)'*-

:owe#er. as we know now. this was not to be-

It was in this period that Da#id Linowes &@)'* created the !ocioeconomic perating

!tatement. designed to include Ne+penditures made #oluntarily by a business aimed at the

impro#ement of the welfare of the employees and public. safety of the product. andFor conditions

of the en#ironmentO &Linowes. @)5. p- B(*- In this statement. Linowes highlighted

impro#ements and detriments. and the difference between the two was the total socio2economic

contribution or deficit for the year- E+amples of impro#ements were the cost of pollution

abatement equipment required by lawK tangible benefits for employees not specified in collecti#e

agreementsK and cash and in2kind donations made by the organi/ation- Detriments were those

items that had been brought to the attention of management but which were not acted upon.

e+amples being neglecting to install safety de#ices or pollution reduction de#ices-

'B


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TA;LE *=* T#e E$%anded Val!e Added Saemen in #e Cone$ o& Ine"raed Social

Acco!nin"

INTEGRATED SOCIAL ACCOUNTING

7ir' >ave )1?,+'-

8old e+perimentation

8old e+pectations

Second >ave )1??+' on-

Cautious e+perimentation

More realistic e+pectations

Applied to for2profit

organi/ations

Applied to other

organi/ations

Applied to for2profit

organi/ations

Applied to other

organi/ations

!ocial and 1inancial

Income !tatement

&Abt J Associates.

@)@*

$riple 8ottom Line

&Elkington. @B*

!ocial Impact

!tatement &Land.

@*

!ocioeconomic

perating !tatement

&Linowes. @)'*

8ottomline5

&=eidmann J

Len/en. '((*

Co2operati#e !ocial

8alance &,accari.

@)*

!tatement of 1und

1lows for !ocially

3ele#ant Acti#ities

&Dilley J

=eygandt. @)5*

!ustainable Cost

Calculation

&8ebbington J

9ray. @(s*

Community !ocial

3eturn on

In#estment

&3ichmond. @*

!ocial Impact

!tatement &Estes.

@)*

!ustainability

Assessment Model

&8a+ter.

8ebbington. J

Cutteridge. late

@(s*

1irst and second

iterations of the

E+panded ,alue

Added !tatement

&Mook. @. '(('*

9oal oriented profit2 1inancial !ocioeconomic

'


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and2loss statement

&9rT?er J !tark.

@))*

!ustainability

Accounting &8ent J

3ichardson. '(('*

Impact !tatement

&Mook. '(('*

!ocioeconomic

3esource !tatement

&Mook. '(('*

$hird iteration of the

E+panded ,alue

Added !tatement

&Mook. '(()*

Linowes< call to identify and include elements brought to the attention of management

but ignored. or Nsocial nonactions.O was contro#ersial &8urton. @)5K Linowes. @)5. p- B@K

Mobley. @)5*. as was the moneti/ation of social actions &8auer. @)5K 8urton. @)5K Lewis.

@)5K Mobley. @)5*- Linowes


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promising. they proposed the cost outlay approach as a first step because of the difficulty in

measuring benefits- $he Dilley and =eygandt statement highlighted e+penditures related to

en#ironmental and social acti#ities. and also showed these e+penditures as a percentage of

operating re#enues to indicate the portion of sales re#enues applied to social concerns- It also

showed en#ironmental and social e+penditures as a percentage of ad#ertising e+penses to

illustrate Nthe emphasis placed on sol#ing social problems #ersus creating future salesO &p- )(*-

Items under the category en#ironmental< related to pollution control and en#ironmental

research- $he category social< included items such as charitable contributions and employee

educational and recreational e+penditures- $he !tatement of 1unds 1low highlighted the

additional e+penditures that the company incurred by taking social and en#ironmental

considerations into account-

$he Abt model was another early attempt at social accounting &Abt J Associates. @)@.

as cited in 8utcher. @)5*- "nlike other accounting inno#ators of this period who created new

statements to supplement traditional accounting statements. the Abt model attempted to modify

e+isting statements by rearranging them and adding items that broadened the issues included- 1or

e+ample. the Abt group produced a balance sheet that attempted to estimate an organi/ation


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non2minority or male staff member- !taff o#ertime worked but not paid< was considered a

subsidy to society and clients. and en#ironmental resources used through pollution were treated

as a cost to society because these are effects of production for which the company does not pay-

:owe#er. Abt


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howe#er. practically the model pro#ided a surrogate measure rather than a real measure of

welfare- 4e#ertheless. the researchers felt this was still better than the measure of performance

e+pressed through traditional financial statements-

T#e Second >ave o& Ine"raed Social Acco!nin"

Integrated approaches to social accounting all but disappeared for a decade and then

reappeared with the triple bottom line approach proposed by Elkington in the early @(s

&Elkington. '((B*- $he three bottoms lines he was referring to were people &social equity*. planet

&en#ironmental quality*. and profit &economic prosperity* &Elkington. '((B*- In @). ?ust before

the 8rundtland 3eport was released. Elkington and :ailes co2founded !ustainAbility. an

organi/ation that ad#ises its clients on the risks and opportunities associated with sustainable

de#elopment and corporate responsibility &!ustainAbility. '(()*- In the early @(s. discussions

about the direction of the organi/ation in e+panding its en#ironmental agenda to include social

and economic dimensions led to emergence of the now commonly used term. triple bottom line

or $8L- $here was a conscious effort to de#elop language that would resonate with business. as

business organi/ations were their main clients &Elkington. '((B*- And resonate it did-

3esearchers at the "ni#ersity of !ydney in the Centre for Integrated !ustainability

Analysis &out of the !chool of Physics* used the triple bottom line concept to de#elop a

framework to measures corporate performance against economic. social and en#ironmental

sector benchmarks &=eidmann J Len/en. '((*- $hey applied the framework to do/ens of

organi/ations including companies. go#ernment departments and non2profits- ne clear finding

of applying the model was that the data collection burden had to be small- As a result. they

de#eloped a software tool called 8ottomline5that would create a comprehensi#e sustainability

report based on e+isting financial information only- An interesting output of this program is the

'


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generation of a benchmark spider. which shows the key financial. social and en#ironmental

indicators of the organi/ation being measured against the a#erage triple2bottom2line performance

of the sector that the organi/ation is based in-

$he second wa#e of integrated social accounting also saw a deri#ati#e of social and

en#ironmental accounting emerge called sustainability accounting- !ustainability is a term that

has a long history and many definitions. but its public and policy consciousness is most often

linked to the @) "nited 4ations report. $ur Co!!on #uture% also known as the 8rundtland

3eport &8ebbington J 9ray. '((*- $he report calls for Na form of sustainable de#elopment

which meets the needs of the present without compromising the ability of future generations to

meet their own needsO &"4=CED. @). p- *- In other words. there was a call for both inter2

and intra2generational equity and de#elopment that is not about increasing profits and the

standard of li#ing for a few. but about efficient. profitable and fair production that makes life

better for e#eryone while also protecting our en#ironment- As such. sustainability is primarily a

global concept &9ray J Milne. '((B*-

!ustainability accounting supports and monitors an organi/ation


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organi/ations- $hus. it is a systems concept. rather than an organi/ational concept &9ray J

Milne. '((B*-

In the @(s. 8ebbington and 9ray &'((@* attempted to de#elop a sustainable cost

calculation< for a 4ew Sealand company that speciali/es in conducting research to de#elop

knowledge about how land eco2systems can be sustainably managed- Although the researchers

and the organi/ation did not ha#e any detailed idea about how to put together a sustainable cost

calculation. they did initially ha#e some e+pectations about the magnitude of the figures that

would be produced- As a first stage. they set out to get an idea of the organi/ation


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In the late @(s. 8ritish Petroleum. in collaboration with the "ni#ersity of Aberdeen and

9enesis il and 9as Consultants. took the concept of sustainability accounting and de#eloped

the !ustainability Assessment Model &!AM*- $his model quantifies the social. en#ironmental.

economic. and resource usage impacts of infrastructure pro?ects o#er their full life cycle. from

cradle to gra#e< &8a+ter. 8ebbington. J Cutteridge. '((BK 8rown J 1rame. '((*- $hese

impacts are measured through '' performance indicators and then moneti/ed- $he result is a

pro?ect2specific. graphical !AM signature< showing both the positi#e and negati#e impacts of

changes in economic. en#ironmental and social capital- $he !AM signature presents

performance in four categories0 social impacts &positi#e and negati#e*. en#ironmental impacts

&primarily damage*. resource usages. and financial flows to the economic entity and its

stakeholders &e-g-. shareholders. employees. suppliers. go#ernment*- $he de#elopers of the

!ustainability Assessment Model e+plicitly maintain that the !AM does not make a definiti#e

statement of an organi/ation


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en#ironment. society and the economy- $hey also proposed an e+tended balance sheet to include

a fuller account of the range of assets &manufacturing. financial. human. social. and natural

capital*. and shadow< liabilities &liabilities relating to sustainability risks* of an organi/ation-

$he second wa#e of integrated social accounting also saw the beginning of

e+perimentation with integrated social accounting for organi/ations outside of the for2profit

sector. although these models are far fewer in number- rgani/ations within the social economy

&for instance. non2profits. co2operati#es and social enterprises* ha#e unique characteristics. yet

traditional accounting procedures are designed for pri#ate2sector organi/ations that e+change

their goods and ser#ices in the market and do not reflect this uniqueness- !ocial accounting

seems particularly appropriate for these organi/ations-

1or non2profits. Land &@* de#eloped a social impact statement that distinguished

between three components0 output. outcome. and side2effect indicators- :e used the e+ample of a

Meals on =heels< program to show how these indicators could be measured- 1or instance.

output indicators included the number of meals deli#ered and people ser#edK outcome indicators

focused on the client satisfactionK and side2effect indicators looked at the impact of the deli#ery

of meals on the client


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,accari &@)* de#eloped a Co2operati#e !ocial 8alance statement to reflect the e+tent to

which co2operati#es achie#e their social mission- It is organi/ed by stakeholder groups0

members. consumers. employees. ci#il society. and the co2operati#e mo#ement- ne unique

feature of this statement is a section that highlights the co2operati#e


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1amily Centre in &igure 2$2 shows, there is " l"rge inow 'rom the org"ni"tion

to the recipients in the communit*, "nd this inow is "chie+ed prim"ril*

bec"use o' the outow to the org"ni"tion 'rom go+ernment, emplo*ees,

'ound"tions "nd +olunteers$ he gure "lso shows how ."ne/&inch supports

the pri+"te "nd public sectors$ he Socioeconomic Imp"ct St"tement

emph"sies this tr"ns'er, where"s the St"tement o' cti+ities, or "n*

tr"dition"l income st"tement, would not$ &or " non-prot lie ."ne/&inch, not

including the p"ttern o' inows "nd outows misses the essence o' the

org"ni"tions contribution to societ*$

In the same year. and also based on the work with 6unior Achie#ement of 3ochester. I

de#eloped the !ocioeconomic 3esource !tatement. analogous to the balance sheet- $his work

was inspired by Abt and AssociatesU &@)@* !ocial and 1inancial 8alance !heet. but mo#ed it in a

somewhat different direction by integrating economic capital &financial and physical capital*

with intellectual capital &human. organi/ational and relational capital*- $he resulting statement

presents a more complete story of the resources a#ailable to create future #alue than does the

traditional balance sheet-

5


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7IGURE *=*: Gra%#ical Re%re'enaion o& In&lo0' and O!&lo0' o& Re'o!rce' o& #e

Socioeconomic Im%ac Saemen

5


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V $he number and quality of students electing to ma?or in accounting is decreasing

rapidly- !tudents are telling us by their choice of ma?or that they do not percei#e an

accounting degree to be as #aluable as it used to be or as #aluable as other business

degrees-

V 8oth practicing accountants and accounting educators. most of whom ha#e accounting

degrees. would not ma?or in accounting if pursuing their education o#er again-

V Accounting leaders and practicing accountants are telling us that accounting education.

as currently structured. is outdated. broken. and needs to be modified significantly-

&Albrecht J !ack. '(((. p-@*

$hese three findings apply mostly to the business world- $o them we can add that current

accounting practices are not always rele#ant to reflect the realities of socially minded

organi/ations- 1or instance. in relation to non2profit organi/ations. a study by Mook et al- &'((*

sur#eyed a sample of B non2profit accountants and financial officers about their #iews on

whether traditional accounting captures the performance of non2profit organi/ations in

accordance with their missions- $he study also included questions about the appropriateness and

#iability of including #olunteer contributions in accounting statements-

Although they were a self2selected group with an interest in measuring #olunteer

contributions. the perceptions of the accountants and financial officers are still insightful- Less

than one2third of the respondents felt that traditional financial statements appropriately reflected

the performance of non2profits. and the ma?ority did not feel that their accounting education was

adequate for preparing financial statements that reflect the performance of non2profit

organi/ations-

5)


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ne of the features of non2profit organi/ations that is often e+cluded from accounting

statements is #olunteer contributions- nly percent felt that it was a bad idea to quantify

#olunteer contributions. and only percent felt it was impossible- $he ma?ority of these

accountants and financial officers felt that it was a good idea and that it was possible to include

#olunteer contributions in accounting statements. but at the same time they felt that they lacked

the technical competencies to do so- $hey suggested that it was important to create spaces for

e+ecuti#e directors. accountants and #olunteer managers to discuss these issues- Additionally.

they identified education and awareness of social accounting for all stakeholders as crucial in

order for it to become accepted and implemented on a wider scale-

In relation to the criticism that accounting education lacks critical reflection and analysis.

Amernic and Craig &'((B. p- 5B5* point out that it is important for accounting educators and

students to recogni/e that accounting is Nidiosyncratic. political. rhetorical. ideological and non2

ob?ecti#e-O As they elaborate a few pages later.

8y ignoring the social perspecti#e of accounting we are not playing fair< with the

students who learn< accounting. and with the future generations of people who will bear

the consequences of ill2informed accounting beha#iour by those students when they enter

practice- &Amernic J Craig. '((B. p- 5@*-

8ased on this assessment. Amernic and Craig make three recommendations to accounting

educators in order to promote independent thought in the field of accounting0 curricular reform.

engaging students with critical theory. and e+posing students to the history of the field-

3egarding curricular reform. they suggest incorporating four themes into first2year and

subsequent accounting courses- $he first one is acknowledging that accounting is a language.

5


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which influences how we see and think about the world- $he second is recogni/ing that the

results of accounting are embedded within many other aspects of business and the world2at2largeK

for instance. accounting feeds into economics. finance. marketing. human resource management

and go#ernance- $he third is acknowledging from the beginning that accounting is comple+ and

messy. and the last one includes an understanding of the metaphorical aspects of accounting and

business education-

In relation to the second recommendation. Amernic and Craig &'((B* point out that

accounting education suffers from a Npo#erty of accounting discourseO &p- 5B'*- $o address this.

they suggest that accounting educators engage students with theory. critical analysis and

ideology- $heir third recommendation is to e+pose students to accounting history. including

reading the works of the great minds of the discipline and understanding the criticisms of

accounting standards o#er the years-

Ado%ion o& Alernaive Acco!nin" Model'

Although there ha#e been many attempts to e+periment with accounting statements that

reflect economic. social and en#ironmental issues. their take2up has been slow or non2e+istent-

utside of the ,alue Added !tatement. the accounting profession has not supported any of these

de#elopments- !ome possible reasons for this were e+plored with policy makers and accounting

bodies in Europe by 8ebbingtonet al- &'((@*- 1rom their inter#iews and sur#ey. they identified

fi#e e+planatory factors to e+plain why accounting bodies ha#e not initiated change in this area-

1irst. they found that the separation of financial and management accounting bodies meant that

many accounting bodies did not feel that these issues &characteri/ed as management accounting

issues* were within their mandate- !econd. respondents suggested that there first had to be

5


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industry demand. and as such industry interest would dri#e the accounting profession


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factors of the traditional #alue2added model. its limitations. and propose an e+panded #alue

added approach-

As mentioned at the beginning of this chapter. the conceptual model guiding the

de#elopment of the E+panded ,alue Added !tatement &E,A!* has four main influences0 the

progressi#e practices of mainstream accounting &,alue Added !tatement*. the lens of critical

accounting. the principles of sustainability. and the contributions of integrated social accounting-

1irstly. I chose to start the de#elopment of my model with the ,alue Added !tatement

because. in contrast to profit. which is the wealth created for only one groupowners or

shareholders#alue added represents the wealth created for a larger group of stakeholders

including employees. in#estors. go#ernment and the organi/ation itself &3iahi28elkaoui. @*-

$hus. the ,alue Added !tatement focuses on the wider implications of an organi/ation


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performance in terms of efficiency &doing more with less*. the E+panded ,alue Added !tatement

also seeks to promote beha#iours of effecti#eness &doing the right thing in terms of economic.

social and en#ironmental impacts*-

1inally. integrated social accounting informed the E+panded ,alue Added !tatement by

pro#iding working models that synthesi/e economic. social and en#ironmental factors into one

statement and by de#eloping methodologies to estimate a monetary #alue for non2monetary

acti#ities-

In the ne+t section I describe in more detail the different elements that make up the

E+panded ,alue Added !tatement-

T#e E$%anded Val!e Added Saemen

$he E+panded ,alue Added !tatement consists of two sections0 #alue added created and

#alue added distributed &$able '-5*- $he first section estimates the #alue added created by the

organi/ation. and the second shows the distribution of the #alue added to the key stakeholders

associated with the organi/ation- 1or the analysis of the #alue added that is created by the

organi/ation. the table is di#ided into three columns0 a* financial &information from audited

financial statements*K b* social and en#ironmental contributions for which a market2comparison

monetary #alue is estimatedK and c* combined &the addition of the first two columns*- A

monetary #alue is estimated for social and en#ironmental outputs. as accounting practice

requires. using a common language as a basis for dialogue-

In closing.this chapter noted the main influences that informed the de#elopment of the

E+panded ,alue Added !tatement- It also pro#ided an o#er#iew of traditional. critical. and social

accounting. and their critiques- It described the ,alue Added !tatement and two wa#es of

B'


52/187

integrated social accounting. and acknowledged some of the challenges faced by the accounting

profession in adopting alternati#e accounting models- 1inally. it pro#ided the rationale and the

description of the E+panded ,alue Added !tatement-

In the ne+t three chapters. as noted in chapter @. the E+panded ,alue Added !tatement

will be applied in differing conte+ts- In Chapter 5. it is applied to a scholarly association. the

Association for 3esearch on 4onprofit rgani/ations and ,oluntary Action. to show how

members. pre#iously in#isible in terms of traditional accounting. create significant #alue added-

In Chapter B. it is applied to a sustainable building pro?ect. to show how a minimal increase in

spending to sustainable building creates a significant increase in social and en#ironmental #alue

added- In Chapter . it is applied to a real estate de#elopment created as an economically targeted

in#estment. to show how a master planned community can create significant #alue added o#er

the long term- 1ollowing that. a cross2case analysis will be done-

TA;LE *=2: Elemen' o& #e E$%anded Val!e Added Saemen

A;C Or"ani8aion

E$%anded Val!e Added Saemen

7inancial

Social and

Environmenal Com/inedDirect outputs

Indirect outputs

$otal outputs

Less0 E+ternal 9oods J !er#ices

Val!e Added Creaed

3atio of ,alue Added to E+t 9oods J!er#ices

Di'ri/!ion o& Val!e

B5


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Added

Pro#iders of labour

Employees =agesFbenefits

,olunteers !kills de#elopment

Pro#iders of capital Interest on Long term debt

!ociety $a+es

Emissions

:ealth

rgani/ation Depreciation

Profit

Val!e Added Di'ri/!ed

Ine#itably. in a manuscript2based thesis. there is some repetition of the research literature

referred to in the case studies and also in these introductory chapters in so far as all of the

chapters or manuscripts in#ol#e some critique of traditional accounting and all of the chapters

in#ol#e a rationale for the E+panded ,alue Added !tatement- I ha#e attempted to limit the

o#erlap to some degree. but I highlight it in ad#ance so that the readers can understand why it

has occurred-

BB


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CHAPTER THREE

T#e Val!e o& Vol!neerin" &or a Non4%ro&i Mem/er'#i%

A''ociaion: T#e Ca'e o& ARNOVA6

A/'rac

Although research indicates that #olunteer labour is of significant #alue to many non2

profit organi/ations. this #alue is generally not included in the organi/ation


55/187

4on2profit organi/ations can be classified along a spectrum- At one end. there are

organi/ations producing benefits largely geared towards its members such as professional

associations. sports associations. labour unions. recreational and sport clubs. religious

congregations. and ethno2cultural associations- n the other end of the spectrum are those

organi/ations producing benefits to third parties. such as hospitals. shelters. food pantries.

schools. and en#ironmental organi/ations- 8etween the two ends are non2profit organi/ations

such as ad#ocacy groups. museums. and some religious groupsForgani/ations. producing benefits

to their members as well as to third parties-

In this e+ploratory study we focus on #olunteering at an organi/ation that is close to one

end of the spectrum and produces benefits largely for its membership- As there is little literature

that deals with #olunteering that is e+clusi#e to professional membership organi/ations. this

study speaks to fill this gap-

E+tensi#e debate e+ists in the literature on the methodology used to capture the monetary

#alue of #olunteer labour. a ser#ice not e+changed in the marketplace &8rown. @K :andy J

!rini#asan. '((BK :odgkinson J =eit/man. @*- Alongside there is a growing literature that

suggests that #aluation of unpaid labour should be part of financial statements of organi/ations

that utili/e #olunteer labour &Macintosh. @B. @K Macintosh. 8artel. J !now. @K 3a/ek.

:osch. J I#es. '(((*- $his paper embraces the latter #iewpoint and specifically builds upon the

work de#eloped by Mook and her colleagues &Mook. 7uarter. J 3ichmond. '(()K 7uarter.

Mook. J 3ichmond. '((5*- In this work. it is argued that e+cluding #olunteer labour in non2

profit accounting statements under#alues a key and #aluable resource upon which many non2

profits rely- A more complete accounting that includes these contributions reflects more

accurately the #alue of the organi/ation to the community- In addition. this information can be

B


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useful to funders and policymakers. who want to understand the full impact of their in#estment

in a non2profit-

$hus. the primary ob?ecti#es of this paper are to discuss #olunteering of members in the

conte+t of a membership organi/ation. illustrate a series of methods that can be utili/ed to

measure the impact of member participation in a professional society. and present this impact in

part within a social accounting framework-

A question raised about member2based non2profits is whether members are becoming

more passi#e &Putnam. @. '(((K !kocpol. @*- !kocpol &@* focuses this discussion

around ad#ocacy organi/ations. and suggests that they ha#e been transformed from broad forms

of member participation to organi/ations operated by professional management often with a

large membership that does not participate acti#ely but gi#es tacit consent to management


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the field. it was reasonable that A34,A should undertake such social accounting itself- "pon

gaining appro#al from the board. this research pro?ect commenced-

A34,A is a relati#ely young non2profit membership organi/ation@that relies on

#olunteer labour for carrying out many of its functions- $he mission of the organi/ation states0

NA34,A is a community of people dedicated to fostering through research the creation.

application. and dissemination of knowledge on #oluntary action. non2profit organi/ations and

philanthropy-O &www-arno#a-org*- As a non2profit membership association. A34,A brings

together both academic and applied research. helping scholars and practitioners gain insight into

the day2to2day concerns of non2profit organi/ations- Principal acti#ities of A34,A include an

annual conference. publications. electronic discussions. and special interest groups-

Members pay fees to ?oin the organi/ation and some #olunteer their time or make

monetary donations- $hese #olunteer contributions are an important part of the organi/ation


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1urthermore. A34,A has paid staff of four persons &full2time and part2time*. including an

E+ecuti#e Director-

9i#en its mission and its principal acti#ities. it is reasonable to assume that A34,A has

a membership that is highly educated and cogni/ant of the importance of #olunteering- After all.

many of its members speciali/e in studying either this phenomenon or organi/ations that utili/e

#olunteer labour. or at the meta2le#el. they study a sector that relies on #olunteer labour- 1or

many members. especially those employed in institutions of higher learning. acti#ely

participating in A34,A and holding an official position often carries benefits in their

workplace- $hus. the usual benefits of #olunteering are highly augmented by the role they may

play in the ad#ancing a #olunteer


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7indin"': Vol!neer' a ARNOVA

f those @ reporting that they had #olunteered. @B responded to the question of how

many hours and they reported contributing ).'@@ hours for the fiscal year ending 6une 5(. '((-

$his finding can be broken down as0 core members reporting a total of 5.5' hours #olunteered.

an a#erage of hours each &nY*.) and other &non2core* members #olunteered a total of 5.')

hours. an a#erage of ' hours each &nY@'*- #er percent of this group also #olunteered for

other organi/ations &nY@)*. suggesting that #olunteering for A34,A did not preclude other

#olunteering-

$he ma?ority of respondents &nY(* were women &H*. B years of age and older

&H* from the "-!- &'H*. either faculty or students from academic institutions &)H*. and with

at least 5 years of membership at A34,A &H*- 3elati#e to the o#erall pool of respondents.

A34,A


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reported were Enhancement to my personal reputation &@H*. !ocial interaction &@H*. and

!trengthening of e+isting skills &(H*-

3espondents who had ne#er #olunteered for A34,A &nY'))* reported three ma?or

constraints for their lack of #olunteering0 :a#e not been personally asked &H*. Do not know

how to get in#ol#ed &@H*. and Do not ha#e e+tra time &B@H*- Members who had #olunteered

pre#iously but do not currently #olunteer for A34,A &nY)* indicated similar constraints0

:a#e not been personally asked &H* and Do not ha#e e+tra time &B'H*. although as opposed

to those who had ne#er #olunteered for A34,A. they did know how to become in#ol#ed- f

these two groups. only @ &BH* indicated they had no interest in #olunteering for A34,A-

Current A34,A #olunteers who responded to the sur#ey reported high le#els of

satisfaction with their #olunteer role- Eighty2si+ percent indicated that they were either satisfiedats et al- &'((5* will be applied- $he intent of this e+ercise is to show how the E,A!

can incorporate social and en#ironmental information. thereby presenting a fuller picture

of the organi/ation than the one based on traditional accounting statements- Identifying

and monetising e+ternalities are complicated matters that are currently under much

discussion- Probably >ats et al- could ha#e used different or additional indicators. but this

discussion is beyond the scope of this paper- $he purpose of this e+ample is to present an

alternati#e accounting model which could reflect e+ternalities howe#er they are selected-

$he data for the e+ample are as follows0

@- 8uilding si/e0 @).(( ft'&@'-) m'*

'- $raditional building cost per ft'0 '

5- $otal traditional building cost0 'Fft'[ @).(( ft'Y 5.((.(((

B- $he cost of raising the standard of a building up to the LEEDs standard of

en#ironmental performance Y Fft'

- !ustainable building cost per ft'0 'Fft' \ Fft' Y '@ &item 5 plus item B*

- $otal sustainable building cost0 '@Fft'[ @).(( ft' Y 5.)((.(((

)- $otal '(2year 4P, En#ironmental 8enefits0 @- [ @).(( ft'Y ').( &from

$able B-@*

- $otal '(2year 4P, Producti#ity J :ealth 8enefits0 5- [ @).(( ft'Y

B.) &from $able B-@*

Income Saemen

'


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$he income statement based on these data is shown first for a traditional building

pro?ect. and then for the same pro?ect built to sustainable building standards- In this

e+ample. the assumption is that the increased cost &deri#ed from >ats et al- '((5* of

using sustainable building materials and techniques &@((.((( plus profit margin* is

passed along to the customer- According to the income statement. the bottom line< for the

$raditional 8uilding Co- is '(.((( and for the !ustainable 8uilding Co- '.((

&$able B-'*-

TA;LE 5=*: Income Saemen

Tradiional

;!ildin" Co=

)T;C-

S!'aina/le

;!ildin" Co=

)S;C-

3e#enues .'(.((( .5.((E+penses MaterialsFutside ser#ices 5.((.((( 5.)((.((( =agesFbenefits @.'(.((( @.'(.((( Depreciation @((.((( @((.(((

B.(.((( .((.(((

Earnin"' /e&ore a$e' 5((.((( 5(.(( $a+es (.((( @.(((

Earnin"' a&er a$e' '(.((( '.((

:owe#er. this statement does not show the social and en#ironmental impact of

sustainable building practices- It reflects the additional cost of materials to create a more

sustainable building &@((.(((*. but it does not reflect social and en#ironmental benefits

&a '(2year 4P, of '.''* &$able B-5*-

TA;LE 5=2: 7inancial ;ene&i' o& S;C Pro@ec A )1, 6++ & *1B*6=,6 m*-

Cae"or( *+4(ear

5


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NPV&*

*+4(ear

NPV

Poenial /ene&i' o c!'omer'

Energy #alue -) @(@.5'

=ater #alue (-@ .'Commissioning operations J maintenance #alue -B) @B.''Producti#ity J health #alue &Certified and !il#er* 5- B.)

(B.((

Poenial /ene&i' o lar"er 'ocie(environmen

=aste #alue &construction only* G @ year (-(5 'Emissions #alue @-@ '(.(

!ub2total '@.@)

$otal '-) '.''

As we can see by comparing the last two tables. table B-' indicates that the

additional cost of materials to create a more sustainable building is @((.(((. yet table

B-5 informs us that the '(2year net present #alue of pro?ected social and en#ironmental

benefits is '.''-

T#e E$%anded Val!e Added Saemen )EVAS-

$o prepare an E+panded ,alue Added !tatement for !8C. we need to consider

both direct and indirect outputs and subsequent impacts of its acti#ities- Direct outputs

refer to the direct effects of the organi/ation


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As noted. there are two parts to an E+panded ,alue Added !tatement0 &@* the

calculation of #alue added by an organi/ationK and &'* its distribution to the stakeholders-

4ote that the definition of #alue added is broadened from considering only financial

transactions &that are part of the financial statements*. to take into account monetised

social and en#ironmental impacts- $able B-B. which presents the #alue added by !8C. has

si+ columns that refer to different sources of #alue added0

1inancial @ &1@*0 information from audited financial statements but does not

include e+penditures or re#enues related to changing social andFor en#ironmental

performanceK

1inancial ' &1'*0 information from audited financial statements related to

#oluntaryFproacti#e e+penditures or re#enues related to changing social andFor

en#ironmental performanceK

1inancial $otal &1 $$L*0 adds together 1@ and 1'

!ocialFEn#ironmental &!CE4,@*0 information about non2monetised

contributions and outputs for which market comparisons are estimated0 potential benefits

to customers

!ocialFEn#ironmental &!CE4,'*0 information about non2monetised

contributions and outputs for which market comparisons are estimated0 potential benefits

to larger society

Combined $$AL &C $$L*0 total of 1 $$L and !CE4,@ and !CE4,'

Val!e o& O!%!'

In order to calculate the amount of #alue added. the first step is to assess the total

outputs of the organi/ation and assign a comparati#e #alue to them- In the first column.


95/187

1@. the amount indicated as direct #alue< is re#enue that would be recei#ed for the

building had it been constructed under traditional building standards &.'(.(((*- In the

second column. 1'. the amount of additional re#enue recei#ed as a result of co#ering the

increased costs to construct the building according to sustainable building standards is

shown &@(.((*- $he third column. 1 $$L. adds these two figures together to total a

direct< #alue of .5.((- $he fourth and fifth columns. !CE4,@ and !CE4,'.

include the #alues that were calculated by >ats et al- for the social and en#ironmental

benefits of building to sustainable standards &$able B-5*- !CE4,@ refers to the potential

benefits that would go directly to the customers. while !CE4,' includes an estimate of

potential #alue that would be gained by larger society- $he final column &C $$L* adds

together the financial. social and en#ironmental #alues to end up with .'@.')-

S!/racin" E$ernal P!rc#a'e'

3eturning to our earlier definition. #alue added is a measure of wealth that an

organi/ation creates by Nadding #alueO to the raw materials. products. and ser#ices

through the use of labour and capital- $he total outputs &combined* represent the #alue

placed on the organi/ation


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TA;LE 5=5: E$%anded Val!e Added Saemen S!'aina/le ;!ildin" Co= )S;C-

1 2 3 ! 5 6

SUSTAINABLE BUILDING CO. Traditional Sustainable

Exanded !alue Added State"ent F1 F$ F TT% SOCEN!1 SOCEN!2 & TT%#or $ro%e&t ABC $otential

bene'its to&usto"ers

$otentialbene'its to

so&iet( Co"bined

'irect outputs (ales )5*$5+*+++ ) 1+6*+5+ )5*356*+5+ )5*356*+5+

,ndirect outputs Ener-y .alue ) 1+1*3$5 ) 1+1*3$5/ater .alue ) 0*9$5 ) 0*9$5&oissionin- .alue ) 1!0*$$5 ) 1!0*$$5"roducti.ity 2 ealt .alue ) 6!5*55 ) 6!5*55/aste .alue ) 5$5 ) 5$5Eissions .alue ) $+*65+ ) $+*65+

Total outputs )5*$5+*+++ ) 1+6*+5+ )5*356*+5+ ) $1*15 )6*$01*$5

E4ternal oods 2 (er.ices )3*6++*+++ ) 1++*+++ )3*++*+++ )3*++*+++

!alue Added Created )1*65+*+++ ) 6*+5+ )1*656*+5+ ) 9+!*+5+ ) $1*15 )$*501*$5

Ratio o# VA to E4t 2( +!6 +!5 +$! ++1 ++

Eployees /a-es7bene#its )1*$5+*+++ )1*$5+*+++ )1*$5+*+++

&ustoers ) 9+!*+5+ ) 9+!*+5+

(ociety Reduction in 8aste andeissions ) $1*15 ) $1*15

Ta4es ) 5+*+++ ) 1*+++ ) 51*+++ ) 51*+++

Or-aniation 'epreciation ) 1++*+++ ) 1++*+++ ) 1++*+++

"ro#it ) $5+*+++ ) 5*+5+ ) $55*+5+ ) $55*+5+

!alue Added Distributed )1*65+*+++ ) 6*+5+ )1*656*+5+ ) 9+!*+5+ ) $1*15 )$*501*$5

)


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the amount e+pended e+ternally on goods and ser#ices. the costs related to capital and

labour ha#e to be subtracted from the total- $herefore. .@(@.((( is reduced by the

employee wages and benefits &@.'(.(((*. the amorti/ation of capital assets &@((.(((*

and ta+es &@.(((* and the resulting amount is the cost of e+ternally purchased goods

and ser#ices &5.)((.(((*- $he e+ternally purchased goods and ser#ices as they relates to

what would ha#e been spent to construct a traditional building is shown in 1@

&5.((.(((*. and the additional costs to make the building sustainable are shown in 1'

&@((.(((*-

Val!e Added

$he amount of #alue added is calculated by subtracting the amount of e+ternally

purchased goods and ser#ices from the #alue of the goods and ser#ices produced-

Raio o& Val!e Added o P!rc#a'e'

$he ratio of #alue added to purchases. indicated in $able B-B. is calculated by

di#iding the #alue added by the cost of e+ternal goods and ser#ices- $his ratio indicates

that. for e#ery dollar e+pended on goods and ser#ices the organi/ation generated (-)( in

#alue added- As noted. the E+panded ,alue Added !tatement includes an estimate of the

future #alue of items such as reduced energy use. water use. and emissions le#elsK

decreased operating and maintenance e+pensesK increased occupant healthK and increased

worker producti#ity- If those items had not been included. the ratio of #alue added to

purchases would ha#e been (-B indicated in the NfinancialO column- $herefore. the

inclusion of non2moneti/ed items increases this ratio by o#er percent-


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Di'ri/!ion o& Val!e Added

$he stakeholder2based approach of the ,alue Added !tatement differentiates it

from most other forms of financial statements that are oriented toward shareholders- 1or

the statement of distribution. the #alue added created by the organi/ation is distributed to

the stakeholders in its entirety- !takeholders are selected on the basis of their contribution

to the #iability of the organi/ation and its #alues- 1or a ,alue Added !tatement. the

stakeholders suggested by accounting regulatory bodies normally are employees.

go#ernment. in#estors. and the organi/ation itself- 1or purposes of the E+panded ,alue

Added !tatement of !8C. one additional stakeholder was identifiedcustomersK and one

was modifiedthe stakeholdergovern!entwas changed to the stakeholdersociety-

$able B-B presents the distribution of #alue added for these fi#e stakeholders and

also lists the items associated with each stakeholder-

Em%lo(ee'

$he #alue added distributed to the stakeholder employees lists their wages and

benefits at @.'(.(((-

C!'omer'

$he building owner or lessee recei#ed a portion of the #alue added created

through financial benefits to be recei#ed o#er the life of the building &(B.((*- $hese

include reduced energy and water costs. reduced operating and maintenance e+penses

&'.B)*K and increased producti#ity of employees &B.)*-

Socie(

$he stakeholder referred to as society recei#ed a portion of the #alue added

created through the reduction of emissions into the en#ironment estimated according to


99/187

the research done by >ats et al- &'((5* to be '@.@)- $he stakeholder !ociety also

recei#ed #alue added from payments made to the public sector through ta+es &@.(((*-

Or"ani8aion

,alue added distributed to the stakeholder organi/ation was for @((.((( for the

depreciation of capital assets and '.(( from an operating surplus-

S!mmar( o& EVAS

In total. the #alue added distributed corresponds to the #alue added created-

=here the items were limited to those on audited financial statements. that amount was

@..((K where the items were e+panded to include non2moneti/ed social and

en#ironmental impacts. the amount was '.@.')- 1igure B-@ shows this in graphic

form-

7IGURE 5=1: Gra%#ic De%icion o& Val!e Added S#o0in" Tradiional and

S!'aina/le ;!ildin" Me#od'


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$raditional accounting does not show the impressi#e additional social and

en#ironmental benefits &nearly @ million* gained from a mere two percent increase in

costs &@((.(((* in order to make the building sustainable- $he E,A! reflects these

figures. and hence shows a much broader picture of the organi/ation


101/187

difficulties to assign a #alue to comple+ #ariables- Another challenge is to assess not only

#alue added but also #alue subtracted. as it is important for accounting statements to

illuminate both positi#e and negati#e impacts on sustainability- $hese are areas that

require continued de#elopment and discussion &see 8ennett et al-. '(('K 8ennett et al -.

'((5K 3ikhardsson et al-. '((K !chaltegger J 8urritt '(((*-

$he strengths of the E+panded ,alue Added !tatement lie in its ability to take a

broader look at the organi/ation and the role of stakeholders to put this into a larger

socio2economic perspecti#e- 8y including non2monetary items. the E,A! presents a

fuller picture of an organi/ation


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CHAPTER 7IVE

!ocial Accounting and 3eporting&or Economicall( Tar"eed

Inve'men': T#e E$%anded Val!e Added Saemen16

Inrod!cion

$his chapter presents a social accounting model called the E+panded ,alue Added

!tatement for reporting the economic. social and en#ironmental impact of an organi/ation

in order to assist with economically targeted in#estment decisions- After pro#iding an

introduction to economically targeted in#estments and social accounting. the chapter

outlines the E+panded ,alue Added !tatement. which is applied subsequently to an

economically targeted in#estment based on a real estate de#elopment undertaken by

Concert Properties Inc-. unique because it is owned e+clusi#ely by union and

management pension pla