Information costs, quality of information and stakeholder involvement – the necessity of international standards of ecological accounting
✍ Scribed by Stefan Schaltegger
- Publisher
- John Wiley and Sons
- Year
- 1997
- Weight
- 132 KB
- Volume
- 4
- Category
- Article
- ISSN
- 0968-9427
No coin nor oath required. For personal study only.
✦ Synopsis
Apart from some intrinsic motivation of management, environmental protection by companies requires external incentives and the involvement of stakeholders, who need accurate information if their involvement is to be ef®cient and bene®cial for the environment. However, they will only be accurately informed if the bene®ts are higher than the costs for the recipients of information.
This article investigates how regulations to report environmental impacts, such as those de®ned by the European Environmental Management and Eco-Audit System, the Danish regulations on Green Accounting or the US Toxic Release Inventory, in¯uence the costs and quality of information for external stakeholders.
These regulations reduce the cost of information for the recipients, but neglect the aspect of information quality. As the provision of high quality information is expensive and because the recipients cannot accurately assess the quality (information asymmetry), bad quality information tends to drive out good. This may result in distorted ®gures impeding accurate cross-company comparisons and time-series studies, reducing the bene®ts for the recipients. Consequently, stakeholders are still not able to effectively discriminate environmental laggards.
The main conclusion of this analysis is that international standards of ecological accounting are necessary to guarantee a minimal level of information quality and to reduce uncertainty about the provided information quality.