related documents
RR78 - Sustainability Accounting in UK Local Government - An Agenda for Research
Ball, 2002
Executive summary
What is sustainability accounting?
In this report the term 'sustainability accounting' encompasses a range of new accounting and reporting tools and approaches which are part of a transition towards a different kind of organisational decision-making focused not just on economic rationality, but consistent with ecological and social sustainability.
Why local government?
The report emphasises the idea of sustainable communities. Most of us (80% of us in Europe) live in urban settlements. It is these settlements that have been the engine of economic growth, but this has depended on massive throughputs of fossil fuel and other natural resources taken from an ever-expanding geographical area. At the same time, many are excluded from the benefits of the economic wealth we have created. This report is about finding a new lens through which to focus on issues of sustainability and the necessity of a community-level response.
The introduction of policies for Well-being and Community Strategy under the Local Government Act 2000 provide a new focus for local government authorities as community leaders. 'Well-being' is a discretionary power to promote the economic, social and environmental well-being of communities; and 'Community Strategies' are plans for local well-being. Government guidance on Community Strategies makes explicit links between the development of these local strategies and local, regional, and national sustainability objectives, and refers to the idea of building on progress under Local Agenda 21. Sustainability accounting offers a tool kit for exploring where communities are in terms of their well-being or sustainability.
Why do we need sustainability accounting for local government authorities?
The development of these tools and approaches in local government authorities is needed for several reasons.
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Tools provide a focus for practical action in the face of the amount of change implied by sustainability.
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To help build an understanding of what sustainability means. Many local authorities are developing 'quality of life indicators' (a term often used synonymously with sustainability) as a means of understanding and getting some sort of measure of the social, economic and environmental well-being of an area. An understanding of well-being and the idea of a better quality of life may be necessary steps in understanding what a sustainable community might be.
- To begin to assess at a local level the cumulative
social and environmental impacts of firms' and other organisations' activities
on an area and its ecology, and to co-ordinate business practices in better
ways for social sustainability.
- To provide an antidote to the increasing commercialisation of the local authority sector and accounting tools and language. These emphasise the business agenda, reform and rationalisation at the expense of the real outcomes of services and the real experiences of those delivering and receiving services.
An agenda for action
The report examines in detail the possibilities for accounting for sustainability in a way that is sensitive to the current policy and fiscal regimes in local government.
Some authorities have been using quality of life indicators to measure the economic, social and environmental sustainability of their communities for several years. The objectives of the Community Strategy, which reflect the long-term aspirations of the community, are intended to sit at the apex of an authority's framework for performance management. If an authority uses quality of life indicators as the primary tool for Community Strategy, quality of life indicators could be embedded at the heart of the performance management system. Service targets, and ultimately, budgets could then be determined by these aspirations for the community, with objectives for the authority set with the long-haul, rather than the short-haul, in mind.
For other authorities, Well-being and Community Strategy may provide an impetus for beginning to experiment with quality of life or other sustainability indicators (the European Common Indicators, for example) as a means of thinking about what sustainability means for the community. For authorities that are already using environmental management systems approaches, it may be possible to complement this approach to internal management with an approach that looks beyond the organisational boundary.
More generally, the layering of Best Value (the main focus for performance indicators and performance monitoring in local government) and Community Strategy/Well-being provides a window for thinking about what 'performance' means in the context of local government. Part of this responsibility lies with the Audit Commission. To date, very few required performance targets for local government are linked to sustainability (exceptions are targets for waste management and property performance). There is a need, however, to think about how the hierarchy of performance indicators can be linked more closely to sustainable development, natural resource efficiency and social equity.
Some authorities have been experimenting with measuring or accounting for sustainability in other ways. One way of avoiding the difficulties associated with arriving prematurely at the solution to sustainability accounting for the sector (i.e. Quality of Life accounting and reporting) may be a period of parallel experiments with different tools. For example, the local 'ecological footprint' measures the land areas needed to supply a local population with food, materials, energy etc, and the land area to absorb the corresponding output of waste. The result is an assessment of the sustainability of our communities. The ecological footprint is emerging as a shared language for sustainability – a kind of ecological equivalent of the Council Tax. Experiments are, however, expensive and require support. These sorts of initiative, however, may need more robust political and financial backing from central government.
A number of local authorities of diverse political persuasions have committed to the Improvement and Development Agency/International Council for Local Environmental Initiatives 'Councils for Climate Protection' (CCP) project. This entails accounting for and reducing the locality's greenhouse gas emissions, which are linked to climate change. This initiative needs greater recognition and funding to secure its future.
The letting of Private Finance Initiative (PFI) contracts has also provided an opportunity for introducing sustainability accounting. One authority has required its contractor to develop a system of accounting and reporting on sustainability accounting. Sustainability accounting in this context can provide a basis for managing complex stakeholder relations and moving towards more sustainable operations, for instance in the field of waste management. Further work is needed to develop tools for use in the PFI context.
Conclusions
Local government and the wider public sector have roles and responsibilities that are more directly linked to the sustainability agenda than those of business. The public sector agenda must be one that is centred on advancing accounting practice, and ultimately our understanding of a way forward where local governance and accountability acknowledge and embrace the demands of sustainability.