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Journal of Education for Business

ISSN: 0883-2323 (Print) 1940-3356 (Online) Journal homepage: http://www.tandfonline.com/loi/vjeb20

Environmental Accounting Coverage in the

Accounting Curriculum: A Survey of U.S.

Universities and Colleges

Mehenna Yakhou & Vernon P. Dorweiler

To cite this article: Mehenna Yakhou & Vernon P. Dorweiler (2002) Environmental Accounting

Coverage in the Accounting Curriculum: A Survey of U.S. Universities and Colleges, Journal of Education for Business, 78:1, 23-27, DOI: 10.1080/08832320209599693

To link to this article: http://dx.doi.org/10.1080/08832320209599693

Published online: 31 Mar 2010.

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Environmental Accounting

Coverage in the Accounting

Curriculum: A Survey of

U.S.

Universities and Colleges

MEHENNA YAKHOU

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Georgia College

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& State University

Milledgeville, Georgia

VERNON P. DORWEILER

Michigan Technological

University

Houghton, Michigan alls to reform business and ac-

C

counting education date back more than a decade and emanate from both academics and professionals (AACSB -The International Association for Management Education, 1999; The American Institute of Certified Public Accountants [AICPA], 2000; Byrne, 1993; The Institute of Management Accountants [IMA], 1999; Porter &

McKibbin, 1998). One recommendation common to all these calls has been the need to broaden students' skills and to integrate curriculum content. With respect to accounting, Sefcik, Sode- stron, and Stinson (1997) suggested that one way of broadening the scope of accounting education is by integrating environmental accounting into existing accounting courses. More recently, Grinnell and Hunt (2000) showed how environmental issues can be integrated into accounting.

In this article, we examine methods and current deployment of environmen- tal topics and issues in the undergradu- ate accounting curriculum of U.S. col- leges and universities. There appears to be little information available on the environmental accounting component of accounting curricula. One previous study has inquired about the environ- mental courses offered at selected busi- ness schools in the United States (Dor- weiler & Yakhou, 1995). However, that

ABSTRACT. Environmental consid- erations have attracted national atten-

tion and are becoming a strategic

focus at many companies. Accoun-

tants and the accounting profession have contributed much to this environ-

mental challenge (KF'MG Peat Mar-

wick,

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1996). As a consequence of this focus, schools, colleges, and universi-

ties are becoming proactive in incor- porating environmental issues into the accounting curriculum. In this article, the authors provide evidence on the

extent of integration of environmental issues into the undergraduate account-

ing curriculum at U.S. colleges and

universities.

study offered very little information on the specific environmental topics cov- ered. In this study, we explored the envi- ronmental accounting content of under- graduate accounting programs in the United States.

In December 1993, a national work- shop of experts drawn from various pro- fessional and academic groups pro- posed an agenda to encourage and motivate businesses to produce new accounting practices dealing specifical-

ly with environmental issues

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(US.

Environmental Protection Agency [EPA], 1995). The agenda identified four interrelated accounting environ- mental issues:

1. better understanding of terms and concepts;

2. creation of internal and external 3. education, guidance, and outreach:

4.

development and dissemination of management incentives;

and

analytical tools, methods, and systems. Since then, many studies have addressed the first three issues (Ditz, Ranganathan, & Banks, 1995; U.S. EPA, 1995; Epstein, 1995; Gray, Beb- bington, & Walters, 1993). However, the academic issues with respect to accounting have not been researched.

This study is important for many rea- sons. First, it responds to previous edu- cational research that has emphasized the importance of understanding com- petencies demanded by employers for ensuring innovative, creative coverage in the curriculum. Second, the study provides useful information to assist institutions in their curriculum revision efforts. Third, the study results offer support to prior research claims that corporate accountants lack expertise and understanding of environmental accounting (Bebbington & Gray, 1996). What Is Environmental

Accounting?

Depending on the context in which the term is used, environmental

accounting takes on different meanings.

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September/October 2002 23

The U.S. EPA (1995) defines environ- mental accounting as follows:

Environmental accounting in the context of national income accounting refers to natural resource accounting, which can entail statistics about a nation’s or region’s consumption, extent, quality, and value of natural resources, both renewable and non-renewable. Environ- mental accounting in the context of financial accounting usually refers to preparation of financial reports for exter- nal audiences using Generally Accepted Accounting Principles. Environmental accounting as an aspect of management accounting serves business managers in making capital investment decisions, costing determinations, process/product design decisions, performance evalua- tions, and a host of other forward-look- ing business decisions.

Sefcik et al. (1997) made a clear distinction between environmental ac- counting and the classical concept of natural resource accounting together with its macroeconomic perspective. Environmental accounting is defined as a course (or subject) on how environ- mental issues affect traditional accounting subdisciplines. In this sense, environmental issues are inte- grated not only into managerial and financial accounting but also into auditing, tax, and accounting informa- tion systems. The U.S. EPA (1995), for instance, provides clear examples on how environmental issues can be integrated into managerial accounting. Specifically, it provides examples of environmental costs incurred by firms and types of management decisions that would benefit from the environ-

mental cost information.

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Need for Environmental Accounting

Despite the importance accorded to environmental information in business financial reporting and decisionmaking in the literature, in a comprehensive study Epstein (1995) concluded that most companies do not know the scope of their environmental costs. As a result, they do not know what causes those costs. It is generally agreed that, decades ago, the lack of understanding of the eventual environmental impacts of products and services together with the related liabilities caused companies

to ignore the consideration of those

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24 Journal

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of Education for Business

impacts in their calculation of product costs. One of the barriers to improving the management of environmental impacts is the lack of accurate measure- ment and reporting. We sought to describe efforts for improvement of these deficiencies.

Status

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of Environmental Accounting

Grinnell

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& Hunt (2000) proposed a course design with the primary objec-

tive of providing students with an understanding of (a) the role of account- ing in supporting corporate environ- mental strategy and (b) how various accounting subdisciplines relate to envi- ronmental issues. Accounting issues related to the environment, with empha- sis on top-level corporate strategy, illus- trate the advantages of and incentives for managing firms in an environmen- tally sound manner.

Sefcik et al. (1997) related environ- mental issues to the traditional account- ing subdisciplines of financial account- ing, managerial accounting, accounting information systems, auditing, and tax. Their study, in which they sought to show environmental linkages among the subdisciplines, showed that environ- mental accounting affects all of the tra- ditional accounting subdisciplines and that environmental accounting can be enhanced through is an integrative accounting course offering.

An extensive study of transnational corporations by Bebbington and Gray (1996, p. 137) concluded that “ac- counting functions are more usually passive with regard to environmental considerations, and often await direc- tion from other areas of business.” Bebbington and Gray summarized their findings in support of that conclu- sion. Bebbington, Gray, Thomson, and Walters (1 994) reported that accoun- tants have low levels of involvement in their company’s environmental activi- ties, which explains the absence of environmental reporting in practice. They argued that the reason for this sit- uation is that “the present education and training programs inadequately prepare accountants for the (associated work) environment they will face with- in organizations” (p. 11 8).

In this study, we investigated how

academic institutions in the United States are responding to these concerns. Method

We developed a survey instrument to gather information on the environmen- tal accounting component of the under- graduate accounting programs in U.S. colleges and universities. The instru- ment explored a broad range of environ- mental accounting issues, including the following:

1. information on how environmental accounting is integrated into the accounting programs,

2. the specific environmental account- ing topics covered, and

3. the importance of environmental accounting topics.

The specific environmental topics cov- ered comprised all of the possible ele- ments of environmental accounting pro- posed by Bebbington (1994).

We mailed the survey instrument, which took into account comments from faculty colleagues, to the chair- persons of 660 accounting departments in the United States. A personalized cover letter described the purpose of our research and instructed the chair- persons to either complete the survey or forward it to the most appropriate

faculty member.

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A response of 122 usable instruments

was returned, for a 19% response rate. The response rate is comparable to those reported in previous, similar studies (Bryan & Smith, 1997 [30.3%, auditing]; Cargile & Bublitz, 1986 [24.8%, accounting publications]; Ketz & Kuni- tatke, 1985, [28%, SEC-related courses];

McCambridge & Thornton, 1994

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[35%, MBA education]; Morris, Cudd, &

Crain, 1990 [23%, accounting journals]). The first section of the questionnaire dealt with issues related to the most appropriate approaches for integration of environmental issues into the accounting program. The second sec- tion provided a list of a select number of environmental topics and invited the respondents to indicate which ones were taught as a course(s) and which ones were being integrated into the tra- ditional accounting subdisciplines. A blank line was provided in the question-

naire for addition of any topics not included in the list.

We also asked respondents to indicate the degree of importance of each topic on

a scale ranging from 1

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(least important) to 5 (most important). Further, we invit-

ed them to rank the perceived benefits of environmental accounting education with regard to the following factors:

1. broadening the scope and impact of accounting education,

2. providing multidisciplinary think- ing,

3. making students more desirable in the market place, and

4. meeting accreditation education requirements (e.g., AACSB).

Other factors were listed as well. Respondents ranked benefits on a scale ranging from 1 (no importance) to 5

(extreme importance).

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Results

We asked respondents to answer the fol- lowing two central questions:

Question 1: How do you think environ- mental accounting should be integrated into the accounting curriculum?

(a) It should be offered as a separate environmental accounting course(s).

(b) It should be integrated through other courses.

Question

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2: Do you offer a separate course(s) in environmental accounting at

your institution?

Only 1 1 %

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of the respondents held the view that environmental accounting

should be offered as a separate, “stand- alone “ course. The rest of the respon- dents stated that the topic should be integrated into a wide range of subdisci- plines. In order of preference, the select-

ed subdisciplines were accounting

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(65%), managementkost accounting

(73%), accounting information systems (13%), auditing (42%), tax (21%), and “other” (7%). The “other” subdisci- plines included internal auditing, accounting theory, accounting policy, environmental issues/special topics, macroeconomics, and senior seminars. Nine percent believed the topic should not be integrated.

Responses to the second question of

the study were even more discourag- ing. Only a small number of account- ing programs (4 schools, or 3%) cov- ered environmental accounting as a separate, stand-alone course. The schools reported the following related courses: Environmental Accounting, Government & Business and Natural Resources, Process of Environmental Accounting, and Advanced Topics in Environmental Accounting. Such pro- grams would tend to treat environmen- tal accounting as a separate subdisci- pline and as a subject for linking to other accounting subdisciplines.

In the Appendix, we provide informa- tion about the topics covered in the stand-alone courses that were reported by four schools. Those topics represent the broad range of accounting topics for environmental reporting (Grinnell &

Hunt, 2000; Sefcik et al., 1997). Our results clearly show that the majority of the respondents viewed environmental accounting as the investigation of how environmental issues affect traditional accounting subdisciplines (Sefcik,

1997). With respect to managerial ac- counting, for instance, environmental accounting may entail a new way of looking at a company’s environmental costs, performance, and decisions. The U.S. EPA (1995) provided a detailed list of environmental costs and suggested ways of applying environmental ac- counting to cost allocation, capital bud- geting, and process and product design.

Level of Importance

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of

Environmental Topics

Respondents were asked to indicate the importance of covering the various environmental topics included in the survey. In Table 1, we present the per- ceived importance of topics on a scale ranging from 1 (least important) to 5

(most important). Within each area, the items are sorted in descending order of importance. Managerial and cost accounting (overall mean of 3.47) and external reporting and auditing (overall mean 3.58) received the highest rank. The overall mean rating for the general

TABLE 1. Respondents’ Perceptions of Importance of Environmental Accounting Topics

Topic M SD

I. General

1. Involvement with environmental audit review

2. Involvement with environmental impact assessments

3. Involvement with the development and monitoring of 4. Involvement with environmental policy

5. Assessment of sustainability

11. Management and cost accounting

1 . Accounting for waste, pollution, and disposal

2. Budgeting and performance appraisal

3. Investment and investment appraisal

4. Accounting for recycling, packaging, and containers

5. R & D, forecasting, and design

6. Involvement with life-cycle assessment

7. Merger acquisition activity

1 . Contingent liabilities, remediation, and provisions

2. Environmental reporting in financial statements

3. Assets (e.g., land and inventory) valuation

4. Statutory audit implications

5. Environmental spending and commitments

6. Lending, insurance, and shareholders

7. Separate environmental reporting

environmental systems

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III. External reporting and auditing

3.05

3.40 1.114

3.17 1.154

3.05 1.133

2.87 1.202

2.78 I .087

3.4

3.94 0.957*

3.82 1.015*

3.63 1.050

3.62 1.002

3.24 1.117

3.13 1.037

2.92 1.196

3.58

4.16 0.858*

3.85 1.045*

3.74 0.899*

3.60 1.010

3.57 1.006

3.19 1.014

2.96 1.098

Note. Topic importance was ranked on a scale ranging from 1 (no importance) to 5 (extreme impor- tance). Ho: Mean versus neutral importance (3 on a scale of 1 to 5).

*Significant importance at 90% confidence level.

SeptembedOctober 2002

25

topics was 3.05, well below that of the other two areas.

Four areas of management accounting and costing were rated 3.6 and above. TWO of these areas (11-1 and 11-4) were traditional managerialkost accounting topics; the others (11-2 and 11-3) were

more recent developments

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(US.

EPA, 1995). Five topics in the external report-

ing and auditing areas received ratings of nearly 3.6 or above. Less considera- tion was given to issues such as separate environmental reporting. It is likely that in the future these issues will be accord- ed more importance as a result of pres- sures from various stockholders for more environmental disclosures and reporting.

Within the general topic area, “in- volvement with environmental audit review” received a score of 3.40, and “assessment of sustainability” was ranked last, with a score of 2.78. Topics in this category appear to be primary to the roles of the environmental sciences.

We applied a statistical test to the mean importance of topics to determine the significance of each topic. We found two topics in management and cost accounting, and three in external report- ing and auditing, to be significant at the

90% confidence level (see Table 1).

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Perceived Benefits

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of Environmental

Accounting

We asked respondents to rank the perceived benefits of environmental accounting education on a scale rang- ing from 1 (no importance) to 5

(extreme importance). The highest ranked benefit was “broaden the scope and impact of accounting education”

(M

=

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3.52), followed by “provide mul-

tidisciplinary thinking”

(M

= 3 . 4 3 , “make students more desirable in the marketplace”

(M

= 2.85), and “meet accreditation education (e.g., AACSB)”

(M

= 2.36). Respondents clearly believed that covering environmental accounting in their courses accom-

plished these four objectives.

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Conclusion

The results of our study support previ- ous research indicating that environmen-

tal issues can be incorporated into the 26 Journal of Education for Business

accounting curriculum rather than placed in separate, stand-alone courses. We found that integration of environ- mental topics into existing courses is the predominant approach and that very few schools are offering a stand-alone course in the topic. Educators apparently con- sider the topic beneficial to students because it enhances multidisciplinary thinking and provides them with experi- ence in the challenge of environmental accounting cost analysis and reporting.

Mathews (1997, p. 500) concluded that “much research by accountants will need to be of an interdisciplinary nature, developments which will provide chal- lenges and opportunities different from those of the past, but also lead to a much richer set of data, or more comprehen- sive models for the solution of problems of social disclosures. The contribution from strategic management specialists and the technical expertise required to address the technical problems of recy- cling and re-engineering will be neces- sary in the development of strategies for reducing impacts on the environment.”

Bebbington (1997) stated that envi- ronmental accounting is the enabling vehicle for reporting environmental costs and transforming the accounting profession and practice. Our results in- dicate that faculty members recognize the importance of reflecting costs of environmental impacts. Bebbington and

Gray

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(1 996) concluded that, to enable students to become effective practi-

cioners, accounting programs must in- crease instruction in the use of ap- proaches that reflect environmental accounting’s role in translating impacts to costs. Further, innovative accounting curricula are needed to link environ- mental research with teaching, and teaching with practice. This will provide the critical skills needed to manage organizations in the 21st century.

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tants (AICPA). (2000). AICPA core competen- cies framework for entry into the accounting profession. Retrieved from http//www.aicpa.org Bebbington, J. R., Gray, R H., Thomson, I., &

Walters, D. (1994). Accountants’ attitudes and environmentally senstive accounting. Account- ing and Business Research, 204(4), 109-120. Bebbington, J., & Gray. R. H. (1996). Sustainable

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zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

APPENDIX

ENVIRONMENTAL TOPICS COVERED BY STAND-ALONE COURSES

General

Involvement with environmental pol- icy

Involvement with environmental auditheview

Involvement with the development and monitoring of environmental systems Involvement with environmental impact assessments

Assessment of sustainability

Management accounting and costing

Accounting for energy use and costs Accounting for waste, pollution, and

Accounting for recycling, packaging,

Budgeting and performance

R&D, forecasting, and design Involvement with life-cycle

Merger and acquisition activity disposal

and containers

appraisal

assessment

External reporting and auditing

Lending, insurance, and shareholders Contingent liabilities, remediation,

Asset valuation land inventory Environmental spending and commit-

Statutory audit implications

Environmental reporting in financial

Separate environmental reporting

Others

Federal tax provisions State tax provisions

Theory of market-based incentives International issues, including policy and provisions

ments

statements

settings

September/October 2002 27