Corporate reporting and accounting for externalities
Open accessAbstract
Externalities comprise economic, social and/or environmental impacts arising from the activities of an entity that are borne by others, at least in the short term. As they do not feedback directly into immediate financial consequences for the entity, they tend to be outside the remit of financial reporting. A dispersed academic accounting literature on externalities has hitherto developed separately from concerns about what information is appropriate to report on corporate performance. This paper develops insights into accounting for, and reporting of, externalities that are intended to improve the use of externalities information in breaking down silos between the traditionally discrete domains of financial reporting and sustainability reporting, and between silos within sustainability reporting. Challenges in such use of externalities information are explored, including difficulties inherent in the quantification of externalities. The paper also highlights ways in which externalities can progressively become internalised, thereby bringing them more readily within the domain of economically focused financial reporting practices. An agenda for further research to help enhance the accounting for, and reporting of, externalities is also proposed.
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Market prices do not factor in true environmental costs, as these and other externalities are elusive, hard to identify and quantify and therefore perennially ignored in corporate strategy.
“Yet, market prices do not factor in true environmental costs, as these and other externalities are elusive, hard to identify and quantify and therefore perennially ignored in corporate strategy (Unerman et al., 2018).”
From Designed to break: planned obsolescence as corporate environmental crime (2022) · cites this paper as Unerman et al., 2018
The paper says externalities are absent from observable market-derived prices and can be elusive to identify and difficult to quantify (passages [1], [4]; pages not indexed). But its Summary (section 7, p. 18) says markets ignore them only in some cases, while passage [2] describes their rapidly growing relevance to corporate strategy. The claim that they are perennially ignored in strategy overstates the source. (LLM, conf=0.88)
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References 78 · Cited by 220
- Authors
- Unerman, J., Bebbington, J., & O’dwyer, B.
- Affiliations
- University of London (GB)
- University of St Andrews (GB)
- University of Manchester (GB)
- Corresponding author
- Unerman, Jeffrey
- Venue
- Accounting and Business Research
- Publisher
- Informa UK Limited
- Published
- 2018-06-04
- Volume
- 48
- Issue
- 5
- Pages
- 497-522
- ISSN
- 0001-4788 (ISSN-L)
- 2159-4260
- OpenAlex
- W2804292613
- Cited by
- 220
- References
- 78
- Citations by year
- 2026: 26 · 2025: 31 · 2024: 27 · 2023: 36 · 2022: 28 · 2021: 37 · 2020: 21 · 2019: 11 · 2018: 2 · 2014: 1
- FWCI
- 29.60
- Type
- journal article
- Language
- en
- Open access
- hybrid
- doi.org
- Licence
- Locations
- Accounting and Business Research (publishedVersion, cc-by-nc-nd)
- UvA-DARE (University of Amsterdam) (publishedVersion, cc-by-nc-nd)
- Research Explorer (The University of Manchester) (publishedVersion, other-oa)
- Lancaster EPrints (Lancaster University) (submittedVersion, public-domain)
- RePEc: Research Papers in Economics (submittedVersion)
- University of Birmingham Research Portal (University of Birmingham) (submittedVersion, other-oa)
- St Andrews Research Repository (St Andrews Research Repository) (submittedVersion)
- Funders
- ICAEW Charitable Trusts
- Topics
- Social Sciences › Business, Management and Accounting › Strategy and Management › Corporate Social Responsibility Reporting
- Social Sciences › Business, Management and Accounting › Accounting › Accounting and Financial Management
- Social Sciences › Business, Management and Accounting › Accounting › Accounting Theory and Financial Reporting
- Keywords
- externalities, corporate reporting, sustainability reporting, financial reporting, internalization of externalities, environmental externalities, social externalities
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