Environmental accounting for local government waste management : an assessment of institutional and contingency theory explanations

Abstract

Over the past 10 years, with Australia's urban population ,growth there has been an increasing pressure on land, resource and waste management throughout the States and Territories. Local government, one of the public sectors traditionally responsible for waste services, is being required to take more environmental issues into account in order to develop a sustainable community. The purpose of this study is to investigate current practices of environmental accounting for local government waste management and to explore possible explanations for these environmental accounting practices. This study applies a mixed method design to achieve the research objectives, starting with the case studies of 12 local councils in New South Wales (NSW) Australia, and extending them to a mail survey of all councils in NSW. The case studies allow the researcher to explore the practices of environmental accounting for waste management in a real-life context. The case study findings indicate that contingency theory and institutional theory are most likely to provide insightful explanations for current environmental accounting practices in local government waste management. Contingency theory views organisations as technically devised instruments aiming for effective and efficient control of their work processes. Based on this theory, environmental uncertainty, environmental strategy and task complexity are proposed as explanatory variables. Institutional theory views organisations as social actors and the "carriers" of social structures aiming for legitimacy from a wide range of social institutions. Based on this theory, regulatory pressures, cognitive pressures, community expectations, and inter-professional communication, are proposed as explanatory variables. The mail survey assesses the effectiveness of the two theoretical explanations. The results reveal that the use of environmental accounting in local government waste management is generally moderate rather than little or none as previously suggested. However, the variance in environmental accounting practices in local government waste management is significant. When the scope of environmental accounting information becomes broader, from direct to indirect, from internal to external, lower levels of accounting are found. Among the local councils investigated, accounting for external environmental costs and impacts in waste management has always drawn the least attention. The assessment of theoretical explanations reveals that current environmental accounting practices in local government waste management arc significantly driven by proactive environmental strategics, complex waste operation tasks, a high level of interprofessional communication, and uncertain waste management environments. Task complexity, inter-professional communication, environmental uncertainty, community expectations and environmental strategy are all significantly associated with the level of direct waste flow and activity accounting. However, only environmental strategy, task complexity and inter-professional communication, play a significant role in explaining the levels of accounting for indirect/hidden and external costs and impacts in waste management. It appears that community's environmental expectations and uncertain waste management environments cannot provide a significant incentive for local government to account for indirect/hidden and external environmental costs and impacts. Two institutional factors, regulatory pressures and environmental cognitive pressures do not significantly contribute to any aspect of environmental accounting practices in local government waste management. When testing the effects of type and size of local councils, it is found that urban councils have a significantly higher level of direct waste flow and activity accounting than rural councils, but the differences in the levels of indirect/hidden and external cost and impact accounting are not statistically significant. Size of local councils does not explain any aspect of environmental accounting practices in local government waste management. The results of this thesis indicate that contingency theory provides better explanations for environmental accounting practices in local government waste management than institutional theory. The weaker role of institutional theory explanations implies that the development and institutionalisation of environmental accounting for local government waste management may take a longer time than expected. The explanations for current development of environmental accounting are mainly related to pursuing efficiency and effectiveness of working processes.